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magazinePremier Foods is bringing in the dough
PREMIER FOODS (PFD) 97.65p
Gain to date: 135.6%
Original entry point: Buy at 41.45p, 23 April 2020
Our bullish April call on Mr Kipling cakes-to-Bisto gravy maker Premier Foods (PFD) is now a tasty 136% in the money, with the balance sheet-boosting sale of its stake in bread brand Hovis and an upgrade to its full-year trading profit outlook following tasty first-half results providing the latest positive morsels of news.
Results for six months to 26 September showed strong sales growth amid market share gains in all categories. It delivered excellent cash generation with net debt falling by £88 million year-on-year to £383 million, as increased marketing investment behind its brands and more meals being consumed at home drove sales.
Following progress in accelerating leverage reduction along with proceeds received from the Hovis deal, Premier Foods also announced a new medium-term net debt-to-EBITDA target of approximately 1.5 times.
Shore Capital reiterated its ‘buy’ rating and upgraded its full year 2021 forecasts to pre-tax profit of £110.2 million and earnings per share of 10.4p. Those estimates look conservative, as Premier Foods should thrive during ‘lockdown 2’ and the important winter period ahead as the virus stokes supermarket spend, and leave the shares looking modestly valued on a prospective price to earnings multiple of 9.4.
SHARES SAYS: The shares suffered from profit taking on results day (10 Nov), yet we see no reason to sell. Stick with Premier Foods.
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