Financial Trading Blog
Stock of the day 22/01/2015 – Premier Foods PLC
Premier Foods began 2014 in a relatively strong position, at £1.27, reaching its year high of £1.66 in early March, days after its full year results. However, share prices then suffered a near 40% drop on 24th March following an influx of new shares onto the market as part of a capital restructuring which aimed to raise £353 million. Since then the stock has failed to get anywhere near its 2014 starting point, hitting a low of £0.26 in October before opening 2015 at £0.31. In the build up to its announcement on Friday stocks have crept up to £0.36 in anticipation of the results.
The company made headlines for all the wrong reasons in December, as a Newsnight investigation reported that Premier Foods was asking suppliers to pay the company to ensure its continued business. This ‘pay and stay’ scandal caused share prices to fall 12% from £0.36 to £0.31, and severely damaged the company’s image. The company were forced to ‘reform’ this system, which it called ‘Invest for Growth, in light of the revelations. Since then the company has pledged to forge closer partnerships with suppliers and customers in an attempt to provide greater transparency and avoid another costly public embarrassment.
Elsewhere, the company has appointed chief executive of Pizza Express Richard Hodgson as a non-executive director. Hodgson has previous experience with Morrisons and Waitrose, as well as the pizza-chain, and has been brought in to combat the challenges presenting themselves in the food/supermarket sector, including Premier Food’s ‘pay and stay’ own goal.
Despite all the bad publicity surrounding the company at the end of 2014, analysts have, by and large, responded positively to the moves Premier Foods have made since December, and have an average rating of ‘buy’ with an average target price of £0.63, just less than double its current price.
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