Premier Foods Share Discussion Threads

[18bt] 10/11/2020 07:32

Complex set of interims but the underlying message is very positive. We now know how the components of the Hovis disposal are reflected with £15.7m included in trading profit for the reversal of the loan note write-off and then, seemingly another £4.6m of loan note interest up to the date of completion most of which will be in these figures. The equity was sold for £17m, which will be accounted for as a gain (less disposal costs) in the finals.

Loking forward to to the 9am presentatio with interest - a lots of in and outs, with Hovis, pensions, loans repaid etc. It does feel as though they have put a few other one-offs through at the half year.

This now looks like a senisbly leveraged growth food company on a PER of around 10x March 2021. Probably won't show much if any growth in 2022 as lockdown effects reduce, but has significant tailwinds in new customers and market share, further gains to come from refinancing expensive debt and restarting of dividends.

[isis] 10/11/2020 07:26

"Looking to the second half of the financial year, we expect to see continued revenue growth driven by further new product innovation, strong commercial plans and increased marketing investment for our brands, with six major brands planned to be advertised on TV. We also now expect to see an increase in demand for our brands due to the impact of recently increased government restrictions on eating out. The longevity of this increased demand is likely to be linked to the duration of these new measures, and although we have tougher comparatives in the fourth quarter, we anticipate that Trading profit for the full year will be ahead of current market expectations. Additionally, following both our recent progress in accelerating leverage reduction along with proceeds received from the Hovis transaction, we are today announcing a new medium-term target for Net debt/EBITDA of approximately 1.5x."

[shanklin] 09/11/2020 09:47

H1 results webcast tomorrow at 9 a.m., register here:



Not sure if we will have the option of asking questions as per IMC.

[shanklin] 09/11/2020 09:46

thirty fifty twenty

I did not realise/think PFD would be receiving £8.5m on top of the £37m.

[thirty fifty twenty] 06/11/2020 13:26

just to clarify re Hovis....

my understanding, given that Hovis is a 49% associate that PFD had no influence of control in , means that it did not show at all in PFD balance sheet. PFD accounted for it as an investment and adjusted the value of that every year (if needed). it had not seen the need to adjust from zero value up to the latest accounts.

so the benefit for PFD will be 37m CASH + c.7.5m loan repaid + c.1m interest

yes Shanklin, i agree, as well as paying a big chunk of debt it will then be able to refinance much lower. e.g. note the recent loans refinanced this year... the interest saving there was c.5% a year i believe

All IMHO, DYOR BoL
PFD is in my top5 hldgs

[prokartace] 06/11/2020 12:29

Seems unlikely that Hovis would have moved into profit this year as it would seem that many customers decided to make their own bread during the lockdown thus causing a bread flour shortage

[shanklin] 06/11/2020 08:32

Good point 18BT

[18bt] 06/11/2020 08:23

Shanklin, that is true provided that Hovis was itself not going to make pre-tax profits, which PFD would have accounted for its share of. It has made losses in the past, but seemed to have moved close to breakeven.

[shanklin] 06/11/2020 08:16

Per PFD are paying 5% interest on the debt they most recently chose to redeem. So, in due course, I presume the £37m will increase PBT by circa £1.85 p.a.

Further deleveraging may also enable them to renegotiate lower interest rates on their debt at some point.

[shanklin] 06/11/2020 08:01

3520

Thank you for the information on the nature/direction of the loan note.

Based on that, and the RNS, I think the £37m includes the loan note being paid off and accrued interest on the loan. But as the loan note had already been written down to zero (per your comments), this is a total of £37m cash in which was previously on the B/S as zero.

[qs99] 06/11/2020 07:50

AND further lockdown may boost trading again IMO like 1st time DYOR

[thirty fifty twenty] 06/11/2020 07:49

Shaklin.. i think that when originally disposed there was c.15m was deferred. after a few years this was written off in PFD books as they saw it was unlikely this deferred money would get paid. It was thus a very pleasant surprise when in last year's results PFD said that Hovis had actually re-paid (i think) half of this deferred amount as Hovis was now profitable. it showed as an exceptional gain of £7m in the results.
So, if my recall of numbers accurate, there was a further 7.5m of loan notes outstanding - these were on the balance zero at zero value.
regardless however these are amounts owed FROM the business, the disposal is about the price FOR the business. I am surprised that figure is only 37m when figures of 100m and even 150m had been circulating. Hovis as we know is trading very very strongly in current times. Still in the scheme of an 800m MV and 400m of debt whether PFD gets 37m or 50m for Hovis is not really that material.

We do know that the disposal will reduce debt by 37m + [7.5m] deferred loan repaid + interest thereon [my est 1m+]. So that is >10% of there debt paid off from a business that did not contribute to profits and had zero value balance sheet.

All IMHO, DYOR + BoL
PFD is in my top5 hldgs

[18bt] 06/11/2020 07:40

Seems that they have rushed something out, so suspect it completed v late. At first sight it is a slightly disappointing price. They need to provide a bit more information in a follow up RNS. But it does probably boost the NAV as well as the debt position.

[shanklin] 06/11/2020 07:36

Wish it was clear how much of the £37m was already owed to them in the form of the loan notes and accrued interest... ...assuming I am reading this correctly. Whatever, it means, I don't fully understand the RNS.

[bigbigdave] 06/11/2020 07:06

6 November 2020



Premier Foods plc ("Premier Foods" or the "Group")



Disposal of Hovis joint venture



Premier Foods plc today announces that it has agreed to the disposal of its interest in Hovis Holdings Limited ("Hovis") to Endless LLP. Alongside its joint venture partner, The Gores Group LLC ("Gores"), the Group has held a 49% minority interest in Hovis since April 2014. Under Gores and Premier Foods' ownership, Hovis has undergone major supply chain restructuring. Hovis, which now focuses on bread baking following the disposal of its milling business, is commercially well positioned to grow under new ownership.



The transaction closed and completed late on 5 November 2020; proceeds of £37m due to the Group include the repayment of outstanding loan notes and accrued interest.



The Group's investment in Hovis was fully written down in 2016. This transaction strengthens the Group's financial position as it continues to improve its leverage profile.

[shanklin] 05/11/2020 07:02

Snippet re Hovis

[18bt] 04/11/2020 15:47

Interims next Tuesday - perhaps the Hovis deal will be done by then.

[18bt] 04/11/2020 15:46

This seems to be what they were responding to:

And this from Sky:
A leading private equity investor is close to clinching a takeover of Hovis that will return the bread-maker to British ownership.

Sky News has learnt that Endless is in advanced talks to buy Hovis after a bidding war against Newlat Food, an Italian food producer.

Sources said that a deal could be confirmed as soon as this week, although it has yet to be finalised.

On Wednesday morning, Newlat issued a statement to the stock exchange in Milan in which it said it had pulled out of the race to buy Hovis and wanted exclusive access to the bread-maker in order to resume talks.

Endless is understood to have edged ahead of Newlat in recent days.

The price that Hovis will fetch is unclear, although Sky News previously reported that its current shareholders wanted in the region of £100m for it.

[hotdog23] 04/11/2020 15:45

+10% in 2 days... maybe its in the price nowBuy the rumour sell the news?

[prokartace] 04/11/2020 12:44

My Premier lockdown holding!

[qs99] 03/11/2020 09:47

moving up nicely, hope we will have another lockdown boost for PFD

[hotdog23] 02/11/2020 10:45

Interims due out November 10.Q1 sales were up 20%+. Are good results already in the price? We will see.Longer term, strong consumer brands have done well when managed/invested appropriately. Think there's some room to run.

[shaker44] 01/11/2020 03:18

Hmm. You may be right. But I sold out at 97p last month never expecting to make such a good profit after the debacle with the takeover spurned by the previous idiotic ceo.
I think with sport still open in the new lock downs I prefer gambling shares over food, so no plans to buyback. Yet.

[hotdog23] 31/10/2020 20:11

Second lockdown and non-essential stores closed.Not great but PFD will benefit.

[18bt] 21/10/2020 16:29

This is worth a read from yesterday:


And this one bodes well from last week: