Premier Foods may have brought itself some breathing space by renegotiating its loan agreements. However, as it looks to “draw a line” under 2011’s weak trading performance, the embattled food firm has some way to go before City analysts are convinced the Hovis maker is on the right track to recovery.
“Premier may have cleared the first hurdle of securing new debt facilities, but it seems that there is a long way to go before the group can start to generate cash for its shareholders. The debt facilities include onerous conditions of GBP330m worth of disposal proceeds and any excess cash (above plan) also to be returned to creditors every year from the end of 2013. A GBP37m write off of ‘commercial provisions’ also hints, we believe, at how far relationships with UK supermarkets had deteriorated.” – Graham Jones, executive director of equity research at Panmure Gordon
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“Whilst the headline numbers may provide a little comfort, it is hard not to come to the conclusion that these are truly awful results that thankfully will be soon be written up in tomorrow’s chip paper as management focuses on stabilisation of trading and fulfilment of its new financing arrangements…. Trading conditions remain tough and suitably cautious management speak of the priority to ‘stabilise its operational performance’. This is essential because without stable and rising cash profits Premier will still not break-out of its debt-bind” – Clive Black, director, head of research, Shore Capital Stockbrokers
“The saga continues. FY11 trading was below our (low) expectations and the refinancing will be coming at a cost, as we anticipated. After a couple of year’s breathing space, the financing costs start to ratchet up and Premier will be under bank-imposed pressure to realised disposals. So CEO Clarke and his team have precious little time to turn around this business” – Investec Securities analyst Martin Deboo
