Date: Tuesday 05 Oct 2010
At the weekend Premier Foods confirmed reports that it had received approaches to buy Quorn and the other component of its meat-free division, Cauldron.
Pretty much everything in the Premier portfolio is up for grabs; in the board’s words, it is “open-minded” about disposals. Speculation has centred around Hovis bread, while United Biscuits nearly walked away with Mr Kipling cakes last year. The worry for the bears is that even if everything is sold, the proceeds may not cover the outgoings. One for gamblers, although it might just come good says the Times.
The Independent adds that Premier Foods is paying for loading up its balance sheet with debt to fund an acquisition binge that in recent years has included the UK and Irish operations of Campbell's Soups, and RHM, the maker of Hovis bread. While Premier Foods now trades on a meagre price-to-earnings ratio of 3.6, it is not out of the woods yet. In addition to all that debt, the company has to reduce its bulging pensions deficit of £431m, and sorting out both will be severely testing. Sell.
Engineering and design outfit WS Atkins became the latest to enter the M&A fray yesterday, confirming that it is spending $280m on its US peer PBSJ – a company that provides a whole host of engineering services. The stock is still inexpensive and the yield of more than 4% is also healthy. Buy says the Independent.
AssetCo supplies equipment for the London and Lincolnshire fire services, including engines, hoses and other paraphernalia required for putting out fires and for rescuing people. It is also mandated to step in and supply staff and equipment in the event of major incidents. On a modest multiple of 7.6 times full-year earnings, with a yield of 4.7%, buy says the Independent.
Waterman Group, an engineering consultant, takes three quarters of its workload from private property development and 70% from Britain. Clearly, the next fear is the public spending cuts. The company helps local authorities on highway projects and the like and has limited exposure to schools and hospitals. It will be a long crawl back and pre-tax profits, £6.9m at their peak a couple of years ago, will struggle to much exceed £1m this year. Hold says the Times.
Brokers are suggesting pub group Enterprise Inns could afford a minimum dividend of 6½p for the next financial year, and at the current share price there is not much point in paying less. This would cost about £33m, out of forecast pre-tax profits of about £170m, and would leave the shares yielding just north of 6%. An interesting punt says the Times.
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