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Premier Foods is exceedingly good

Trading is normalising after a pandemic boom, but solid progress is being made
May 19, 2022
  • Market share gains across key categories and online
  • Strong growth against pre-pandemic figures

After raising full-year profit expectations in January and revealing “Mr Kipling’s biggest ever Christmas” (which sounds like he maybe indulged in too much eggnog), food manufacturer Premier Foods (PFD) announced that trading profits and adjusted profit before tax came in ahead of hopes for the year and unveiled strong market share gains against tough comparatives.

Those comparatives boomed at the height of the pandemic as consumers tucked into the company’s products at home, leading to “exceptional patterns of demand” in management’s words. So, it makes more sense to compare these results to pre-pandemic performance. On that basis, clear progress is being made. Sales were up by over 6 per cent, trading profits by 12 per cent, and branded goods (such as Angel Delight and Bisto) revenue by almost 10 per cent against 2019.

Notable market share gains came in the grocery and sweet treat categories. Both outperformed the market, grocery by 52 basis points and sweet treats by 23 basis points. Online market share grew by 111 basis points, with ecommerce sales up by 71 per cent.

Premier Foods is now benefiting from another trend, this time a side-effect of rising inflation rather than a coronavirus. Higher costs are leading consumers to seek out more value, at-home meals. Chief executive Alex Whitehouse said the company is seeing further market share gains in post-period trading “as consumers increasingly look for good value meal solutions”.

Peel Hunt analysts said that “the shares look excellent value given the strong underlying revenue, market share and margin performance”. The house broker has the shares trading at 9.4 times forward 2022 earnings, which it expects to fall to 9 times in 2023. That looks undemanding the strong outlook. Buy.

Last IC View: Buy, 110p, 16 Nov 2021

PREMIER FOODS (PFD)   
ORD PRICE:121.8pMARKET VALUE:£1.05bn
TOUCH:121.6p-122.2p12-MONTH HIGH:128pLOW: 95p
DIVIDEND YIELD:1.0%PE RATIO:14
NET ASSET VALUE:175p*NET DEBT:19%
Year to 02 AprTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
201881920.90.90nil
2019824-42.7-4.00nil
202084753.65.50nil
202194712312.51.00
20229011039.001.20
% change-5-16-28+20
Ex-div:30 Jun   
Payment:29 Jul   
*Includes intangible assets of £940mn, or 109p a share