Premier Foods facing battle after new bank deal

One Expert described Premier’s financial performance for the period ending March 18 as “truly awful​”. Analysts also predicted a continued uphill struggle for the firm before it can complete its recovery from a difficult 2011.

Premier today (March 19) confirmed that profit had fallen to £173.7M, compared with £245.7M the previous year. It also revealed a net debt of £995.1M for the period.

Clive Black, an analyst at Shore Capital, said: “Premier Foods’ trading results were billed by management as coming in at the lower end of market expectations. So, headline trading profits from the on-going business were £173.7M.Year-end net debt was higher than we anticipated at a smidgeon under £1bn and as expected there is no dividend.​

Tomorrow’s chip paper​

“While the headline numbers may provide a little comfort, it is hard not to come to the conclusion that these are truly awful results that thankfully will be soon be written up in tomorrow’s chip paper as management focuses on stabilisation of trading and fulfilment of its new financing arrangements​.”

Black also highlighted the need to stabilise the firm’s trading performance and warned that only this could break Premier out of its “debt-bind​”.

Graham Jones, an analyst at Panmure Gordon, claimed that Premier had “cleared the first hurdle​” following its bank deal. But he worried that the conditions of the agreement could stifle the firm’s recovery.

He said: “Premier may have cleared the first hurdle of securing new debt facilities, but it seems that there is a long way to go before the group can start to generate cash for its shareholders.​

“The debt facilities include onerous conditions of £330M worth of disposal proceeds and any excess cash (above plan) also to be returned to creditors every year from the end of 2013.”​

Disposals programme​

Jones also described the firm’s performance last year as “messy even by Premier’s standards​”. He expressed concern that its disposals programme could further shrink the cash base of the business.

Premier is currently battling to recover from a trouble-laden 2011, which included a profit warning at the firm, soaring debt and a serious botulism health scare.

Chief executive officer, Michael Clarke stressed the importance of the key re-financing package and reaffirmed the firm’s focus on recovery for 2012.

He said: “We intend to draw a line under the performance of 2011.  Having put the financing and strategic building blocks in place, our immediate priorities are to implement this re-financing package, continue stabilising the business, re-focus the portfolio and invest in our future growth.​

“Whilst we recognise that the consumer environment remains challenging, our performance thus far in 2012 is in line with our expectations. I’m convinced we have the right team to turn this business around and I am very positive about​ our future​.”