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Premier Foods flexes its brand power

The group has raised its full-year profit guidance, as it expects demand for branded products to pick up during England's second lockdown
Premier Foods flexes its brand power
  • Profits soar as more people consumed meals within the home
  • Branded ranges performed better than non-branded 
IC TIP: Hold at 98p

Premier Foods (PFD) makes some of Britain’s best-loved brands, including Bisto gravy, Mr Kipling cakes and Ambrosia custard. And as coronavirus restrictions press on, it seems that we have been gorging on the stuff. Indeed, stronger demand for the group’s branded product ranges drove pre-tax profits up by more than threefold in the first half. Sales through online channels more than doubled in the period, with market share ticking up 2.6 per cent.  

Meanwhile, the group’s smaller non-branded ranges saw sales dip 5 per cent. But overall growth was led by the grocery division, as coronavirus restrictions pushed more people to stay in for their meals. Management is upbeat on prospects, having bolstered consumer marketing investment for the 2020/21 full year.

But the group has not let costs run away from them: with its savings programme currently on track to deliver £5m ahead of target. That helped management to lower the net debt to cash profits (Ebitda) multiple to 2.3, compared with 2.7 in March. And following a £37m cash injection from the disposal of the Hovis brand earlier this month, management is now targeting a net debt to Ebitda multiple of around 1.5. Some industry analysts believe brand cache is no longer as important as it used to be, but these figures – and the company's firm, slowly growing, market share – would seem to belie that notion. Hold.

Broker Peel Hunt forecasts adjusted pre-tax profits of £100m and EPS of 9.5p in the 2021 full year, compared with £85.3m and 8.1p in 2020. 

PREMIER FOODS (PFD)    
ORD PRICE:98pMARKET VALUE:£835m
TOUCH:97.6-98p12-MONTH HIGH:106pLOW: 18p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:132p*NET DEBT:36%
Half-year to 26 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201936715.01.50nil
202042251.05.10nil
% change+15+240+240-
Ex-div:na   
Payment:na   
*Includes intangible assets of £976m, or 115p a share