Premier Foods – why I bought

Monday, Nov 05 2012 by
5

Premier Foods (LON:PFD) is a food producer owning such brands as Ambrosia, Bachelors, Bisto, Hovis, Lloyd Grossman, Mr Kipling, OXO ans Sharwoods (the real money-earning “power brands”), and a “bunch of other stuff”.

Over-expansion over a number of years has left PFD in a perilous debt situation. The old guard was kicked out, and Michael Clarke was appointed new CEO in July 2011. The strategy is to concentrate and build the power brands, run the whole operations more efficiently, sell non-core brands, and reduce debt,

Clarke is delivering on his plan, and disposals are ahead of the schedule required by new banking agreements. Food Manufacturer reported that grocery and Power Brands were up 4.1%, and there have been cost reductions of £20m. ThisIsMoney also reported that PFD is in talks to break into the US market.

Although the debt situation has improved since the last reported accounts, at the interim stage net debt to market cap is about 5:1 – so clearly a high-risk, high-reward play. The company operates in a fairly defensive business line though, debt is being reduced, and the turnaround is beginning to bear fruit.

I’m sticking my neck out on this one.

104p

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Premier Foods plc is a United Kingdom-based food company. The Company is engaged in food manufacturing and distribution. The Company operates in two segments: Grocery and Sweet Treats. The Company's Grocery segment primarily sells savory ambient food products. The Company's Sweet Treats segment sells sweet ambient food products. The Company's brands include Ambrosia, Batchelors, Bisto, OXO, Sharwood's, Paul Hollywood and Homepride. Its Strategic Business Units (SBUs) include Grocery, Sweet Treats and International. Its Grocery SBU includes cooking sauces and accompaniments, flavors and seasonings, light meals and soups, and ambient desserts. Its Sweet Treats SBU includes the Company's cake brands, such as Mr. Kipling, Cadbury and Lyons. Its International SBU is focused on new markets around the world. The Company operates in approximately 10 locations. Knighton Foods Limited is a subsidiary of the Company. more »

LSE Price
42.32p
Change
2.6%
Mkt Cap (£m)
341
P/E (fwd)
4.9
Yield (fwd)
n/a



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About Mark Carter

Mark Carter

I am a private investor living in Scotland. I am a computer programmer by trade.

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