Martin Deboo, analyst with Investec Securities, said in a statement Premier: “Still [faced] death or glory by 2014. After a post-refinancing bump in March, the shares are heading back to their pre-refinancing trough of 34p. But much has changed since then.”
The disposal valuations of Premier’s business sales this year have disappointed, while the firm’s leverage – or the amount of debt used to finance assets – remains “epic”, he added.
Premier’s management had delivered 75% of its promised disposals with two years to spare. “But the average exit valuation was 5.3x EBITDA [earnings before interest, tax, depreciation and amortisation], below our expectation of 6−7x,” said Deboo.
On the positive side, Deboo noted the business was now “simpler and more focused” and cost savings were ahead of Investec’s expectations. “We see potential to surprise on the upside, not least in H2 [the second half of the year].”
“If the leaky bucket of input under-recovery can be even half plugged, that would deliver performance ahead of our numbers.”
Covenant breach
Deboo said a cautious forecast might imply a covenant breach next year. But he noted management clearly believed it could avoid that problem.
“If growth can be revived and the shares made to recover to, say, 150p, we think PFD [Premier Foods directors] could contemplate an equity raise in 12−18 months’ time that could put its balance sheet problems behind it once and for all. We vote for that.”
Meanwhile, Premier yesterday (September 4) announced two key appointments.
Claire Harrison-Church joined the company in the newly created role of director of strategic marketing. She previously worked at Sainsbury as director of brand communications.
Under her leadership, the retailer delivered the ‘Live Well for Less’ brand positioning and updated its digital marketing strategy.
Digital marketing
Harrison-Church will have responsibility for the optimisation of marketing investment, media effectiveness, consumer PR and developing other areas of marketing capability. She will also support the brand teams to identify new growth opportunities.
Helen Warren-Piper will join Premier on October 23 as business unit director − savoury brands.
Warren-Piper comes from United Biscuits, where she worked as marketing director UK snacks and, most recently, as business transformation director.
Before United Biscuits, she worked in senior marketing and sales roles for Procter & Gamble.
Iwan Williams, Premier's md, said: “These new appointments come at an exciting time for Premier Foods as our strategy on focusing on our Power Brands is starting to gain traction and our portfolio is consistently gaining market share.”
Premier’s consumer marketing had increased by over 40% in the first half of 2012 – mainly due to increased TV advertising campaigns on seven of the company’s power brands, he added.