Premier Foods' (PFD) custard business, Ambrosia, is up for sale. Chief financial officer Alastair Murray said disposal proceeds would help pay down debt and go towards making the business more efficient, but insisted Premier wasn't a "forced or distressed seller". That's despite continually high leverage, negative free cash flow and a slip in Ambrosia sales during the first half, after Premier cut promotional spending. It was chosen as the ideal business to sell because it's easiest to separate, according to Mr Murray, operating from just one factory in Devon.
Chief executive Gavin Darby is also stepping down from his role at the end of January after six years on the board. Since Mr Darby and Mr Murray began their respective roles at Premier they've halved the significant debt pile they inherited, but it's clear more work needs to be done. Premier wants to pay down at least £25m-worth of debt each year to reach a leverage ratio of three times cash profits by the end of 2020 (FY2018: 3.6 times). And while the Ambrosia sale will likely accelerate this process, Mr Murray believes the goal is still achievable without disposals.
Analysts at Shore Capital expect adjusted pre-tax profits of £82.4m during the year to March 2019, giving adjusted EPS of 8p, up from £78.6m and 7.6p in FY2018.
| PREMIER FOODS (PFD) | ||||
| ORD PRICE: | 39p | MARKET VALUE: | £328m | |
| TOUCH: | 38.8-39p | 12-MONTH HIGH: | 47p | LOW: 36p |
| DIVIDEND YIELD: | NA | PE RATIO: | 49 | |
| NET ASSET VALUE: | 108p* | NET DEBT: | 56% | |
| Half-year to 29 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 353 | -1.2 | 0 | nil |
| 2018 | 358 | -2.2 | -0.1 | nil |
| % change | +1 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £1.06bn, or 126p a share | ||||
