Premier Foods – why I bought

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