Shore Capital head of research Clive Black said the highly indebted Premier (£469.9m) was taking steps in the right direction to break the “strategic log jam” hindering the business, but not the leaps it needed to get back on course. The lack of a permanent chief executive since the departure of Gavin Darby last year was also having an impact on the company.
“Within such a context, we are afraid to say that Premier is set to remain something of a zombie company to our minds. Chairman Keith Hamill has not yet been able to mastermind a change in fortunes,” said Black.
‘Ill-advised acquisition spree’
“Indebtedness has been Premier's burden since the ill-advised acquisition spree of more than a decade ago under Schofield et al. We see Premier – which has announced more statutory losses today for the full-year 2019 – remaining in the doldrums, seemingly running up a downward escalator.”
Shore Capital retained its hold stance on Premier Foods’ shares.
Operating profit for the manufacturer dropped 93.5% to £4.5m, thanks to a rise in non-trading items, including restructuring costs (£16.8m), guaranteed minimum pension equalisation (£41.5m) and impairment of goodwill and intangible assets (£30.6m).
Despite its loss, Premier posted sales growth – up 0.6% to £824m – for the full year, with a strong performance from its core brands such as Mr Kipling (up 12%). However, this was countered by a poor performance in non-branded sweet treats, which saw sales fall 20.3%.
Fiona Cincotta, senior market analyst at CityIndex.co.uk, said Premier’s bottom line for the full year had been “blighted” by write-downs in the value of its Sharwoods curry sauce and Saxa salt, making for an “overall mixed performance”.
“Premier has continued to chip away at its debt pile, but at around £470m it still looks cumbersome for a company with a £303m market value that has just posted a £43m annual loss,” said Cincotta.
“Very little has been offered today for investors to sink their teeth into on the company's restructuring efforts and we still don' t know who will be the new [chief executive] – even though Gavin Darby left back in January. With a break-up of the company still very much in play, it's perhaps not surprising that Premier Foods is struggling to find a permanent replacement fast.”