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Home » News » Equities » Premier Foods a cautious buy under new management

Premier Foods shares have had a rocky ride over the summer months. They nudged 38p in July before slumping down to almost 32p. The stock is currently trading at 32.50p.

Premier Foods is due to report in November. This is significant because shareholders will get an opportunity to hear from company management for the first time since a shake up at the end of last month. The company has been a little rudderless over the summer, to be honest, but has now named Alex Whitehouse as its UK chief executive.

What’s been changing at Premier Foods?

In addition, Colin Day, who used to head up FTSE 250 group Essentra, is joining at Premier Foods’ new chairman.

Premier Foods has been playing its cards close to its chest recently. Investors in Premier Foods shares will recall that the Canadian spice maker McCormick offered to buy its in 2016 at 60p/share. That was then, this is now. The company has been busy with a strategic review which it has initiated as it comes under pressure from investors to get its act together or sell some businesses to generate cash.

We think it is highly significant that two fund managers – activist investors no less – have secured non executive berths on the Premier Foods board.

Shore Capital has Premier Foods on hold, while Jefferies International issued a buy note on 20 May with a target price at 43p. Jefferies originally upgraded the stock in April.

Premier Foods has substantially under performed a basket of UK food retailers this year. We attribute this largely to a lack of direction at the top.

Premier Foods key takeaways

  • Premier Foods has been treading water over the summer. This has largely been while the market waits to see what happens next with a share price of around the 32p mark seen as fair value.
  • Food retailers have been under pressure generally, partly due to concerns over Brexit. However, Premier Foods shares have underperformed the sector since March.
  • There has been interest in acquiring the group, and it would not surprise us if this interest is reignited in the medium term, as it represents an undervalued play for the right buyer.
  • Much will hinge on the plans that management has for the future of the company – we expect to hear more on that later in the year.
  • The appointment of an insider who knows the business as its new CEO means he will have a head start on the implementation of the firm’s future direction. There is less time going to be burned while he learns the ropes.
  • The presence of activists on the board who will want to see the value of the shares boosted likely means we will see management seeking out some short term quick fixes.

This article is not investment advice. Investors should do their own research or consult a professional advisor.

Stuart Fieldhouse Editor

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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