Premier rolls out red carpet for jittery City

The £2.6bn turnover company recently posted a 3.1% fall in first-quarter sales, and although its efforts to reduce its debts have been applauded, Premier’s balance sheet is still proving a turn-off for some analysts.

Uncertainty also prevails on the future leadership of the business, with the successor to outgoing chief executive​ Robert Schofield’s still not confirmed.

A Premier Foods spokesman told FoodManufacture.co.uk that the day – hosted at the Royal Bank of Scotland’s offices in London – was an “opportunity to bring investors and analysts together, especially since there’s been a lot of changes at the business recently​".​

Schofield will retire no later than April 2012 after a decade in the role, and chief operating officer Tim Kelly has been tipped as a frontrunner, although chief financial officer Jim Smart’s name is also in the frame.

Mixed set of brands​

Premier plans to refinance itself via a bond issue (possibly as high as £500m) and urgently needs to instil confidence in current and potential investors. Kelly told the Financial Times ahead of the meeting: “My job is basically to grow the business without being encumbered by debt. The starting point is that Premier Foods seems like a new business now.”​

But investment banking group Shore Capital said it was still approaching today’s meeting with a ‘sell’ recommendation on Premier's stock, and in a note this morning analysts Clive Black and Darren Shirley said the firm had a “mixed set of brands from a qualitative perspective, especially having sold its meat-free​ business”.​

“Whilst material progress has been made in de-leveraging the company through disposals and now stable cash generation, for which we believe cfo Jim Smart deserves considerable credit, the business remains highly indebted with material pension liabilities,”​ they said.

“At the heart of the investment valuation of Premier Foods, to our minds, remains its balance sheet, a discount factor.”​

Lukewarm on ambient​

Black and Shirley also based their caution on Premier’s exposure in the ambient foods market, at a time when Sainsbury’s reports that UK consumers are “reducing waste, shopping more frequently and using fresh ingredients over prepared food, so depressing ambient volumes”.​

Premier could “still find meeting trading profit expectations a challenge”​, they predicted.

The analysts said they also hoped to obtain clarity on the future role of the Brookes-Avana​ business (ready meals and cakes) within Premier.

Premier’s brand portfolio includes Hovis, Sharwood’s, Branston, Batchelors and Mr Kipling.