The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Blimey, PFD at the top of my board - not sure that's ever happened before! I'm going to need to lie down.
At the risk of sounding like Mr Grumpy, I'm curious to see some reporting on who the likely buyers might be. ABF and Warburtons must be out due to competition issues.
But good move by Gores, this is definitely the time to strike. That's a nice chunk of change for PFD and at 7-10 times earnings is certainly deleveraging.
Fingers crossed.
Safy
I just popped over to the CARD board and nothing but green boxes. So I think yes.
"if you want the rainbow, you gotta put up with the rain"
Dolly Parton
Ageens,
Fair enough - if you mean day traders looking to make a few quick points then PFD definitely isn't the stock for them.
As long as Premier can keep its supply chain intact and factories open then it can be considered a solid defensive stock, certainly not sexy enough for day traders.
Ps. I'm expecting more then 47-48 on the results though. With the evidence we're seeing of the effects of lockdown easing (eg. South Korea today), and general fear around, I suspect PFD will continue to reap the benefits. Such a shame we needed a global catastrophe for Premier Foods to finally pay off! Kinda depressing really.
Hi Ageens,
Have you had a look at PFD's share register to ascertain whether the "big players" (I assume you mean II's) are missing? I ask because I would argue that the opposite of your statement is true.
To a casual observer, one would expect a small-cap to have small-cap like shareholder profile. However, because of PFD's legacy of prior 250 (nearly 100) status, and history of equity raises, it has a standard large-cap profile in my opinion. Mainly institutional investors and hedge funds, and very low owner-managed. The main recent exception being that Nissin (large Japanese listed company) replaced a previous cornerstone hedge fund investor. Not sure they, or Paulson, would consider themselves low quality!
The good news for us little PI minnows though, is that these types of investors tend to trade in large chunks, and they tend to buy and sell on facts/data rather than rumour/gossip. Hence the current low volume, I'm sure they're also waiting for the results announcement.
And because of that and the small PI proportion PFD isn't a share that therefore can be ramped or deramped.
I actually kinda like the coldness of the reply. Suggests they're happy with what they're doing.
lol.
PFD has got years and years of disappointment to overcome.
Getting good news from PFD is a bit like waking up one morning to hear Trump say something intelligent. You rub your eyes, clean out your ears, and scrutinise it over and over again to make sure you're hearing it correctly. You hope desperately it's real but will need a consistent pattern before truly believing he's really had that brain transplant.
I think we're just going to have to patient and wait for the results. That way it's there in black and white.
Poor Mr King, bless him. Some Investor Relations training needed I think.
Surely there's no need for a speeding ticket - CEO went on TV to tell the world we're hoping to do nearly £500m worth of business from a company that had total revenue of under £10m for the whole of last year. If that's not enough for the regulators then nothing is.
Hi Tommyman,
The reduction in pension contributions is an estimate right now. My reading of the situation is that the reductions to cash contributions for the schemes that are in deficit will only happen one they're "allowed" to use any unused surplus from the RHM scheme. But that can't happen until the RHM scheme is put to bed, eg. by selling it to an insurer, to effectively guarantee its members their pensions now and in the future. So I think there's still a little way to go before that happens.
Hence the £80m is (amazingly) spare cash. The company have stated that the interest saving is over £4m. The floating notes are at L+500 which suggests that the repayment translates to reduced overall debt, ie. They aren't drawing down on the RCF (L+225-375) to repay any of it and simply switching from expensive debt to cheaper debt.
It's a good sign.
They've picked up the 2019 AGM date.
Bisto - thanks, I take your point regarding FCF, however I won't take the reported number as is - I guarantee you it's had more than a dash of thousand island sprinkled over it.
And hope you're right re EBITDA, It looks like it should be on the higher end of expectations.
And I've been a little miserly with the multiple (I can't help myself, this is Premier Foods after all).
The real mover though will be how much of that pesky pension deficit can be removed from the equation. Excited to see how that plays out.
I've also been looking at the value of this old dog, but from a different approach.
PFD makes somewhere in the region of £150m EBITDA. Using a conservative multiple for what is effectively a boring but stable food company of say 10 times? gives us an enterprise value of circa £1.5bn.
Debt we'll say is around £600m (assume the £500m quoted has been dressed a little).
The pensions are £1bn surplus for the RHM scheme and £500m deficit for the others (as at Sept 2019). I'm not 100% clear on this but I think the issue PFD have had in the past is that the schemes' assets and liabilities are separately ringfenced with no cross-subsidisation. Bear in mind though that these are accounting valuations which aren't the same as technical valuations. (and certainly not the same as a DCF on the cash contributions).
But let's say, £1.5bn less £600m debt less £500m pension liability, leaves circa £400m for equity, slightly north of today's mkt cap of £350m. Any hidden liabilities? Don't seem to be any leases or onerous contracts.
So in theory, there's a potential £500m up for grabs if the pensions are fixed. That's around 58p per share over and above the current price!?!
Couple of big caveats though:
- how do technical and dcf valuations compare to accounting valuation?
- what's happened to those valuations since Sept? Asset values must be down and with bond rates down, liabilities must be up.
- even if RHM surplus is still a billion, insurance buy-out must be well short of that number, so the £500m hole in the other schemes won't be completely plugged (company have stated that the benefit in cash contributions would be in the region of £140m though).
Still, with potential pension scheme upside, trading forecast to be at the upper end of forecasts, and potentially even a higher multiple if the top line starts to move, for possibly the first time in 12 long and painful years, I'm struggling to see the downside to this right now.
I feel almost dirty saying that so if anyone disagrees, I'm all ears.
Try watching it for 20 years!
Great science but struggling to commercialise it.
I think a hostile take-over is a non starter. With 40% of the share cap Mr Cerrone would have to be on board with any approach.
The split is a hugely positive sign. It is geared towards a sale of one slice of the business in a ready-to-go package with its own IP. Will be interesting to see how it's structured. Personally I'd like to see TILS the parent company keep hold of some of Newco to realise funds and re-invest in the other projects.
Also avidly waiting for the Dec19 accounts to see an updated balance sheet and the latest state re options and warrants. I'm hoping the only reason other management haven't bought recently because they're in a close period? Otherwise that's just weird, options or no options!
My only gripe is that I'm still struggling to find independent verification of Stemprinter separate to the company's own announcements. Those "powderpuff" Proactive interviews are really just marketing exercises if we're really honest with ourselves.
Still, all very exciting.........
The delay is probably because of logistics due to distance working I imagine. Usually at this time you'd have an army of external auditors wandering around the offices and leafing through docs. Doing everything remotely must be more time consuming.
Certainly doesn't hurt to have more visibility of Q1 though.
My only concern is what's happening with the pension schemes. Merging the schemes and utilising/locking in the RHM surplus is a game-changer, and would translate directly to equity. But with current market volatility the asset values must be all over the place. This might not be the best time for an insurance buy-out. Fingers crossed I'm wrong and we get something definitive.
Good point. I also bought TW. (at 5.8p) precisely for the same reason, Net Asset Value per Share was lovely (even after expected write-downs of the land bank).
That's very helpful, thanks.