Analysts from Shore Capital met with the manufacturer this week (3 February) to discuss the future of the business and the steps it was taking to reverse its fortunes.
Head of research Clive Black said: “We do not need to over-chronicle here Premier Foods in what has effectively been a sustained car crash as a listed entity for some years. Suffice to say that the present management team, like several before, still carry the heavy burden of a flawed strategy of expansion of days long gone-by.
Diligence
“What Premier has done since Messrs Schofield & Co., is diligently work with its brand portfolio and the resources at its disposal – building year-on-year – to good effect to sustain and increase what were and are already very healthy category-leading positions and trading margins.”
Sales growth of 2.6% against a grocery market that has seen little to no growth at all has put Premier in good stead.
However, Black retained the view that management did not have enough resources to meet its full marketing aspirations. Until it did, any sales outperformance would need to be recycled into advertising and promotion and not to the bottom line, Black argued.
Shore Capital’s meeting with Premier was punctuated by the manufacturer’s review of its entire business, but little is known about what the outcome of this review will look like.
No second guesses
“We will not try to be too clever and second-guess what will emerge, or not as the case may be,” Black added.
“What we do say, however, is the outcome of this review is key to our ongoing assessment as to whether what is currently a penny stock with low UK institutional investor participation can break out of the share price ‘doldrums’, one of the longest sustained period as a becalmed stock that we can recall.
“At this stage, while we came away from meeting with increased confidence in progress, we can do no more than reiterate our ‘hold’ recommendation.”