2013 is the last chance saloon for Premier Foods
After the brief fillip provided by the refinancing of its debts last March, the company's share price declined. Martin Deboo, an analyst with Investec Securities, said Premier needed to convince the markets that its strategy under the leadership of chief executive Michael Clarke was working.
In a statement issued last month Deboo said Premier's disposal valuations to date had proved "disappointing" and its leverage remained "epic". However, he conceded that cost savings were ahead of his expectations.
Premier's management had delivered 75% of its promised disposals with two years to spare, said Deboo. "But the average exit valuation was 5.3x earnings before interest, tax, depreciation and amortisation below our expectation of 67x."
On a more positive note, he said the business was now simpler and more focused. "We see potential to surprise on the upside, not least in H2 [the second half of the year]."
Trefor Griffith, head of food and beverage for accountancy firm Grant Thornton, said: "It would appear that [Michael Clarke] is doing the right thing. I guess the challenge is the size of the challenge in the first place. You can keep doing the right thing but, actually, is it going to be enough to right the ship? Or will they sink with everybody on board?
"I think they have probably got some decent prices for the businesses they have sold but the challenge is so much around the debt pile. They could do a really, really good job but it might still not be enough. That's the challenge."
Griffith said Premier still needed to invest a lot in its eight power brands: Batchelors, Bisto, Ambrosia, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood's, to achieve its ambition. But to do so it needed to raise cash. "They have got to invest in their brands," he said.
He added that there was considerable potential for exports of some of these brands outside Europe. "There is appetite for strong British brands in emerging markets and some of the Premier brands would work there."
