Wednesday newspaper share tips: Premier Foods, Cerillion

30th Mar 2016 15:02

(ShareCast News) - US outfit McCormick faces a daunting task when trying to weigh up how much to fork out for Premier Foods, the Financial Times´s Lex column said.According to the company´s own figures, its net debt stood at £585m at the end of the first half, but if you throw in its pensions liabilities then the waters are much murkier, its overall financial debt would rise to between £618m and £1.65bn, depending on the valuation method used.That is critical because the UK firm can best be thought of in terms of a £4bn pensions scheme with a £1bn foods business attached to it, the tipster said.When calculated on the basis of the IAS accounting guidelines, as set out under IAS rule 19, Premier´s pensions liabilities come in at £32.8m, whereas the latest triennial valuation yields a shortfall of £1.06bn.That disparity is the result of the different underlying assumptions regarding discount rates and inflation, as the reality has proved far different from what was originally projected when the latter valuation was made.Yes, higher of those two figures is outdated, but it is the basis of a funding plan between the firm and the scheme´s trustees.Alternatively, the net present value of the payments agreed under those plans amounts to £390m, yielding total financial debt of £975m, Lex pointed out. Cerillion shares continue to storm ahead after their successful stockmarket flotation, driven by its ability to generate large amounts of cash and the threat that it will pay a dividend, notwithstanding the fact that it is a tech minnow, The Times´s Tempus said.Over the past seven years, the company - one of the first to be shed from the Logica empire in the late 1990s - generated £8.5m in cash, with sales last year clocking in at £14m.Management has confidence in the company´s growth story thanks to its cloud-based Cerillion Skyline product.So while it is a mature technology business, the firms believes its available market is $7.4bn.Hence, even smaller contracts hold the potential to trigger a dramatic effect on the share price if they land.Indeed, after clinching a $2.4m deal on 29 March its stock rocketed 10.0%."Buy, float success gives it top billing in new UK tech names," Tempus concluded.