Premier Foods reinstates dividend after 13 years
Premier Foods PLC (LON:PFD) has proposed a final dividend of 1p per share, the first time it is reinstated in 13 years.
The FTSE 250 firm said it has made significant progress in delivering its strategy and so, in turn, reducing net debt to a level that would allow to pay distributions under its financing arrangements.
Net debt was £332mln at the end of the 53 weeks to 3 April, down from £408mln the year before.
The combined pensions surplus was £539mln after the food company entered into a new pensions agreement.
The Mr Kipling and Bisto producer said it has gained a significantly larger consumer base during the past year as consumers couldn’t eat out during lockdowns, so it is entering the new period in a strong position.
It plans to launch new products and advertise six of its largest brands on TV, while it continues to expand overseas.
Initial trading this year is in line with expectations, Premier Foods added.
In the period to 3 April, revenue rose by a tenth to £947mln, with adjusted profit before tax up 23% to £117mln.
Analysts at Freetrade noted that the decision to pay a dividend is a sign of “just how far” Premier Foods has come over the past couple of years.
“This is a company that’s been bogged down by mounds of debt and pension liabilities for years,” they noted.
“Remember that at one point it had a market cap of under £200mln versus a pension fund with over £5bn in assets and liabilities. So it’s not surprising lots of investors have been keen to stay far away from the business.”
“Those problems are still there and will still be weighing on shareholders’ minds. But last year’s pension reorganisation should help keep costs down. Combine that with the COVID bump in sales and the group looks like it’s on the path towards running as a sustainable business again.”
Shares rose 2% to 104.12p on Wednesday at the opening bell.