Premier Foods – this foods group’s menu looks even tastier, its shares now 189.50p have been treading water, is it now time to tuck in?

22.08.2025

Yesterday the £1.63bn-capitalised Premier Foods (LON:PFD) announced yet another food sector acquisition which should fit very well into its growing portfolio.

On Monday 1^st September it will be paying £48m cash for Merchant Gourmet, which was set up in 1995.

The new company has around £28m in revenues and has shown double-digit growth over the last couple of years – the deal is stated as being ‘earnings accretive’ for Premier.

MG was created to bring restaurant-quality ingredients into everyday home cooking.

Driven by a passion for extraordinary flavour, quality, and simplicity, the MG mission is to make everyday meals more gourmet.

It declares that it has a healthy range of lentils, wholegrains, chestnuts and mushrooms, while it champions whole foods and real ingredients, offering products which are ready to eat in 90 seconds, or straight from the pouch.

Management Comment

CEO Alex Whitehouse stated that:

"We're very pleased to have agreed the acquisition of Merchant Gourmet, which meets the growing demand for premium, healthy and convenient meal options.

Replicating the success of our previous two acquisitions, The Spice Tailor and FUEL10K, we will be deploying our proven branded growth model; expanding retailer distribution, accelerating new product development, and increasing marketing investment to unlock further profitable growth for the brand.

Merchant Gourmet expands our category presence, complementing our already strong brand portfolio, and we look forward to welcoming the team to Premier Foods."

Recent Trading Update

Just over a month ago Premier Foods issued a Q1 Trading Update for the 13 weeks to 28^th June.

It noted that it expects branded revenue growth to build through this financial year, as strong comparatives ease and further new product development comes to market.

Expectations for Trading profit this year are unchanged, underpinned by delivery of the group's branded growth model and its ongoing cost efficiency programmes.

In the medium-term, the group expects to continue to deliver strong progress against all five pillars of its growth strategy.

The Business

Premier Foods declares that it is passionate about food and that it believes that each and every day that it has the opportunity to enrich life for everyone. 

The group employs over 4,000 people operating from 13 sites across the country, supplying a range of retail, wholesale, foodservice and other customers with its iconic brands which feature in millions of homes every day. 

In around 89% of UK households, you will find Premier Foods products.

The food producer’s brands include Ambrosia, Angel Delight, Atora, Batchelors, Be-Ro, Bird’s, Bisto, FUEL10K, Homepride, Loyd Grossman, Marvel, McDougalls, Mr Kipling, OXO, Paxo, Plantastic, Saxa, Sharwoods, Smash, The Spice Tailor, and also a licence with Cadburys for cakes, home baking and ambient dessert products.

Its various brands achieve #1 status in their key categories.

Some 88% of the group’s total revenues is derived from its own branded products.

The Equity

The group’s largest shareholder is Nissin Foods Holdings, the Japanese-based but totally global noodles and snack pot business, with 24.27% of the equity.

With some 869m shares in issue, other large holders include Van Lanschot Kempen Investment Management (6.96%), JP Morgan Asset Management (5.11%), Brandes Investment Partners (4.86%), M&G Investment Management (4.50%), Dimensional Fund Advisors (3.56%), Paulson & Co (2.94%), BlackRock Investment Management (2.75%), abrdn Investment Management (2.58%), and Fidelity Management & Research (2.35%).

Broker’s Views

Six analysts follow the company, five of whom rate its shares as a Buy, the sixth is Without Opinion.

The consensus average Target Price is 236p, the lowest being 210p, while the highest is 270p.

Prior to the Merchant Gourmet acquisition, analysts Clive Black and Darren Shirley, at Shore Capital Markets, had a positive view of the group and its prospects.

Their estimates for the current year to end-March 2026 are for revenues to rise to £1,182m (£1,148m), with adjusted pre-tax profits increasing to £172.7m (£169.3m), generating earnings of 14.6p (14.3p) and paying a dividend of 3.4p (2.8p) per share.

For the 2027 year they see £1,218m sales, £180.5m profits, 15.2p of earnings and a 4.0p per share dividend.

Going into the 2028 year, the analysts look for £1,255m sales, £189.2m profits, with earnings of 15.2p and paying a 4.8p dividend per share.

My View

Although its shares, now 189.50p. have been treading water for the last three months, I still feel that they are undervalued and more than capable of rising back up to the end-May peak level of 215.50p.

(Profile 29.06.20 @ 67.50p set a Target Price of 101p*)

(Profile 01.11.23 @ 117.50p set a Target Price of 152.75p*)

Asterisks * denote that Target Prices have been achieved since Profile publication.