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Mr Kipling is exceedingly brave: the 57-year-old UK cake brand plans to sell apple pie to Americans this year. British staples specialist Premier Foods — home also of Bisto gravy, Oxo stock cubes and Ambrosia custard — has transformed itself from a debt-laden pudding to a top FTSE 250 performer. As its appetite for acquisitions and international expansion grows, the one thing to watch out for is indigestion.
Shares this week hit a 15-year high as boss Alex Whitehouse reported strong full-year earnings and a jump in the dividend. Since 2020, Premier’s bottom line has grown at a compound 22 per cent a year, helped by compound annual revenue growth of 6 per cent over that time. Indebtedness has been cut and a long-running pension deficit has been resolved. Net debt is now just 0.7 times ebitda after decades hovering between three and an eye-popping six times following a pre-2008 deal spree.
With dough to spare at last, and having refreshed its brand stalwarts — think Ambrosia porridge pots, Angel Delight ice cream or Sharwood’s new Dragon Kick Sauce with a Karate Kid movie tie-in — acquisitions are on the table. Recent deals have been small and involved brands with clear expansion potential. That suggests a level of discipline far from the past overindulgence that brought it low.
The ingredients for overseas expansion are also in place. Premier has made headway in Australia and New Zealand with several brands, as well as in Europe, where it is pushing its sauces and spices, not so much cakes or Angel Delight. However, company research suggests Mr Kipling, known at home for “exceedingly good” sweet treats, can benefit from a US perception that British cakes are a premium product, aided by notions of afternoon tea and TV show The Great British Bake Off.
Premier’s growth ambitions are helped by Japan’s Nissin Foods owning almost a quarter of its shares, largely freeing it from takeover speculation. That, of course, might be more reassuring to Premier’s managers than its shareholders. And at its current valuation of 13 times forecast earnings and assuming those grew at the same compound 6 per cent as its top line has managed, it would still take 15 years to reach the £4bn market capitalisation of the FTSE 100’s current smallest member.
That might be sped up with a mix of new markets, deals, margin growth and some multiple expansion if management continues to perform. If Premier can manage to sell apple pie to Americans, it has more than a fighting chance.
jennifer.hughes@ft.com
