Blog: Life not a cakewalk for Premier
Dean Best | 19 November 2008
The fact that Premier Foods could afford to turn down an offer for Mr Kipling, one of UK grocery's household names, suggests that the company's financial problems aren't as bleak as some have suggested.
However, life is hardly a cakewalk for the UK's largest food manufacturer at the the moment.
Premier has won some breathing room from its lenders with the news that a key covenant test has been pushed back from December to March.
However, the company has been forced to scrap plans for an interim dividend to reduce the pressure on its debt levels, which stand at around GBP1.8bn.
Also, any plans that Premier has to sell off non-core assets are being hit by the turmoil in the financial markets.
Nevertheless, Premier insists the business is robust and is trying to clam nerves overt the its financial health. It claims it would have passed that covenant test if it had been held next month, while it points to an 8% rise in sales for its fiscal year so far. Profits, the company says, are in line with expectations as cost-savings from the groups' programme to rationalise its manufacturing base flow through the business.
However, uncertainty surrounds Premier at the moment., Shares in the company were down over 5% to 26.5p at 15:41 GMT this afternoon (19 November). The road to recovery, it seems, will be a long one.
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