Experts said that Premier can expect an improved first quarter compared with last year. But they stressed that the struggling firm’s road to recovery will be a lot clearer following the results of its refinancing agreement with its lenders.
Premier’s covenants test, which was originally due in December last year, are now due in March and will be the key factor in the restoration of the business under md Michael Clarke, experts revealed.
Clive Black, analyst at Shore Capital told FoodManufacture.co.uk that the firm was still in a transitional phase, with much hinging on the results of its refinancing agreements.
A state of flux
He said: “Premier is still in a state of flux as we continue to wait for the results of the refinancing agreement. Once we see those, it will give us a clearer picture of where the company is heading.”
One analyst, who asked not to be named, echoed Black’s thoughts. He told FoodManufacture.co.uk that the banks will need to relax the terms of the agreements in order for the firm to reach a successful outcome.
He said: “I think as it is, the banks will need to relax the covenants test so that Premier can pass. But more of an issue is the firm’s need to refinance its debt facilities. As it stands, the firm has bank debt facilities that come to an end at the end of 2013. This is worrying as they still have a lot of debt.
“However, trading is important as well. The more profit warnings they have, the more difficult it will be to come to an agreement with the banks.”
Analysts have praised Premier’s recovery under Clarke as it continues to battle a large debt pile, including soaring pension liabilities.
The firm has recently successfully completed a number of disposals, including the £30M sale of its Brookes Avana business to Ranjit Boparan’s 2 Sisters Food, as it continues its plan to focus on its eight Power Brands.
Refinancing agreement
Experts predict that, subject to the results of the all-important refinancing agreement, the firm is likely to see an improvement in its first quarter results compared with last year.
Although this was attributed largely to the fact that the firm saw a slump in sales for the same period last year as a result of the extreme weather conditions that hit the UK in December 2010.
Jeff Stent, an analyst at Exane BMP Paribas, told FoodManufacture.co.uk that, despite the likelihood of a happy Easter at the firm, the end of the year is likely to be a more significant period for Premier.
He said: “I think the first quarter of the year is relatively unimportant for Premier. It is a very back-ended business and they tend to do enormous amounts of trade in the latter part of the year.
“As a result I don’t think Easter will be that significant. Also, Premier will be lapping a very easy comparison. The firm saw exceptional sales in December 2010 following the extreme weather, which saw many people stocking up on products. As a result they sold less food in the first quarter last year as people were had already bought their food.”