Premier Foods cooks up capital restructure after promising results

4th Mar 2014 11:59

Premier Foods, owner of brands including Bisto gravy and Mr Kipling cakes, has unveiled encouraging underlying results and a transformational restructuring of its balance sheet.The FTSE SmallCap group saw group revenues and trading profits drop 20.1% and 12.3% to £856m and £55m respectively in 2013.But the underlying grocery business, excluding disposed businesses and sales from the milling business, saw sales slip just 1.1% to £1.28bn, with an adjusted profit before tax of £86.8m, an improvement of 61%.Having already trimmed net debt by £120m during the year, Chief Executive Gavin Darby, who joined in February 2013, announced a "transformational" capital restructuring deal which includes an underwritten equity issue of approximately £353m at 130p per share and 50p per share rights issue, plus a landmark pension schemes agreement, a high-yield bond of £475m and a new, simpler £300m revolving bank lending agreement."This new capital structure will liberate Premier Foods from its past and provides a great platform on which to execute our category based strategy."Analysts at Shore Capital warmly welcomed the deal and said the "somewhat surprising" new cash pension deficit contribution schedule will see cash contributions fall by £161m over the next six years, relative to the former schedule, with a £156m benefit across the next three years. After January's announcement to simplify the group via a Hovis joint venture with Gores Group, Premier will now be focused on growing its branded grocery business, with enjoys strong underlying cash flows from trading margins of 16.4% in 2013. "While consumer spending trends are currently subdued, we are confident in our expectations for 2014," Darby said.OH