Premier Foods gets a roasting from the Sunday Times
19 Feb 2013

Danny Fortson’s “Inside The City” column in yesterday’s Sunday Times turned the heat up on Premier Foods stating it was “about as worthless as it gets for a public company” ahead of the release on Thursday 21st Feb of Premier’s latest trading figures.

OK, Inside The City is about investor return and shareholder value, but there are other stakeholders who will view Premier’s situation from a different standpoint – employees and creditors to name two.

The credit insurance market has been cautious about Premier Foods for some time, though Mike Clarke’s helmsman ship seems to have been highly regarded and the view seems to have been that Premier had a viable strategy

• To concentrate on a few key “Power Brands”
• To dispose of non-core brands
• Use the disposal income to pay down debt
• Agree a structured payment plan with Pension Trustees to repay / plug the pension deficit

There was also an openness about the company and a (new) willingness to share information that gave the credit insurance market greater confidence in Premier’s ability to trade through from their debt burdened acquisitive period under Bob Schofield.

The availability of trade credit insurance remains a sensitive issue for suppliers to Premier Foods – credit insurers already have high exposures to Premier Foods and are not keen to add to that exposure, though they are (generally) sticking with the cover that is already in place.

The same questions remain for suppliers to Premier Foods (or any other customer) whether credit insured or not

• How dependent is my business on Premier Foods?
• What is my strategy if that relationship changes?

For investors and shareholders it may be a simple financial decision to cash in or stay in – but for many suppliers to a major customer (such as Premier Foods) simple enough questions just don’t have simple answers.

Tom Rolfe

18th February 2013