Premier Foods plc this morning (23 July) revealed an increase in first-half profits boosted by lower costs. The Hovis and Mr Kipling maker also raised its full-year forecast and said it now expects trading profit to be around the top of market expectations at GBP146m. Analysts largely offered an upbeat view of the results.
Investec analyst Martin Deboo
“We read the H1 as very strong, with trading profits 50% ahead, driven by both realisation and retention of cost savings. Further savings have been identified and the company are guiding to FY13 trading profits in the GBP140m+ range. This is a great result for Premier, make no mistake. Our offsetting concern is around growth, which decelerated in Q2 outside the power brands and where H1 profits benefitted from a reduction in marketing investment. However, viewed in the round, we are happy to remain buyers this morning.”
Shore Capital analyst Clive Black
“Premier Foods’ interim results once again reveal the ongoing engineering that is taking place to deliver a sustainable corporate entity. To be fair to its management, the focus on simplification is bearing fruit within the context that the business currently operates.
“Following these interim results Shore Capital is minded not to change our estimates with respect to our forecast for trading profits for Premier for 2013. Whilst the group has stated that additional cost savings in H2 mean that trading profit can be expected to be around the top-end of market expectations, Shore Capital was already at that point with our pre-restructuring forecast of GBP145m; top of the range was GBP146m.”
Panmure Gordon analyst Graham Jones
“Premier’s H1 results saw EBITA rise by 50.2% to GBP47.4m on an underlying basis (i.e. stripping out all businesses sold), although the continuing basis a fall from GBP72.4m arguably gives a better indication of the shrinking of the group. Premier has very importantly successfully delivered its targeted cost savings to the bottom line and announced a further GBP10m ‘complexity cost savings’ to be delivered in H2. As such we raise our full-year 2013 EBITA forecast from GBP141.6m to GBP146m, our PBT forecast from GBP78.6m to GBP83m and our EPS forecast from 25.2p to 26.6p. That said, we think the key issue for Premier remains its balance sheet and pension fund liabilities and here we still believe a c.GBP200m equity raise is a rational course of action. As such we think the recent share price rally is over-done and reiterate our ‘sell’ and 65p target price.”