(Alliance News) - Premier Foods PLC on Monday proposed a capital reduction in order to create additional distributable reserves for the FTSE 250 food producer.
Since its strategic turnaround programme, the group has been able to trade strongly, allowing for the repayment of GBP120 million of its floating rate notes due July 2022, and the reduction of net debt to GBP382.8 million as at September 26 from GBP403.1 million the year before.
As a result, the company's financial position has improved, with a profit and loss account deficit at GBP460.3 million as at October 24, and a share premium account with a positive balance of GBP1.41 billion.
However, the share premium account is an undistributable reserve, meaning the purposes for which it can be used are "extremely restricted".
The proposed capital reduction is to cancel the amount standing to the credit of the share premium account and transfer it to Premier's profit and loss account, which will eliminate the profit and loss deficit.
The capital reduction will provide greater flexibility in how the company manages its capital resources, such as the ability to pay dividends, should Premier find it appropriate to do so, it said.
However, the capital reduction itself will not involve any distribution or repayment of capital.
The capital reduction is conditional on shareholder approval at a general meeting which will take place on January 11.
Shares in Premier Foods were up 0.4% at 93.60 pence on Monday in London.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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Premier Foods (PFD)