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 an United Kingdom-based company engaged in food manufacturing, processing and distribution. The Company operates in three segments: Grocery, Bread and Disposed of Canning Operations. The Grocery segment sells ambient food products. The Bread segment sells bread, morning goods, flour products and frozen pizza bases. The Disposed of Canning Operations segment sold canned goods. The Company’s subsidiaries include Premier Foods Group Limited, Premier Foods Group Services Limited and Premier Foods Investments Limited. more »

Share Price (Full)
37.5p
Change
1.0  2.7%
P/E (fwd)
4.3
Yield (fwd)
n/a
Mkt Cap (£m)
300.7



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About Mark Carter

Mark Carter

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



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