PFD – Premier Food – the funny thing is

PFD (Premier Food), purveyors of such brands as Mr Kipling (I do like their cherry bakewells, BTW) has basically been an investing disaster for the last decade. It’s amazing for just how long the company has been on life support.

PFD seems to have been a product of financial engineering; buying brands at prices that did not offer decent returns on capital. The shares seemed to have hit a peak in 2005 at ~3400p (split adjusted), and then traded sideways until 2007, when the whole thing collapsed. The beginning of 2009 saw its shares trade at ~332p.

Although the shares did rebound partially, they have suffered a long steady decline since then. The shares now trade at 40.34p.

Here’s the interesting thing: the shares were basically uninvestable even in 2007. How come? The finals issued in March 2007 showed negative free cashflow, profit before tax of 58.1p, and net debt of £645m. The shares were visibly far too risky even at that stage, and investors could have bailed out at 2870p. The shares seem to have traded on a PE of 14: far too high considering the serious risks that investors were taking.

What is also interesting is that over the last few years, net debt has been decreasing, and it is actually generating free cashflow. The debt is still high, but things have been worse, and it has soldiered on regardless.

Will this company finally succumb to the inevitable, or will it produce a spectacular turnaround that will have everyone talking about it? I find PFD to be a fascinating company to follow.

Stay safe out there.


About mcturra2000

Computer programmer living in Scotland.
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