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Mr. Kipling is extremely brave. The 57-year-old British cake brand plans to sell Apple Pie to Americans this year. The homes of Bisto Gravy, Oxo Stock Cubes and Ambrosia Custard also British Staples specialist Premier Foods has transformed from a debt-ridden pudding into a top FTSE 250 performer. As the appetite for acquisitions and international expansion grows, one thing to be aware of is indigestion.
This week’s stock hit a 15-year high as boss Alex White House reported strong income and dividend jumps for the full year. Since 2020, Premier revenue has grown at 22% of compound annually, during which time it has been supported by a combined annual revenue growth of 6%. Liabilities have been reduced and long-term pension deficits have been resolved. Net debt is now just 0.7 times Ebitda after hovering decades between three times to an eye-opening six times following pre-2008 trading.
Finally, we eliminated the dough and refreshed the brand’s stubbornness – think of Sherwood’s new Dragon Kick Sauce in Ambrosia Porridge Pot, Angel Deep Ice Cream, or Karate Kid movie tying in – the acquisition is on the table. The recent deals have been small, with brands involved with clear expansion potential. It suggests a level of discipline that is far from the excessive dulgence of the past that has made it low.
It also has ingredients for overseas expansion. The premier is moving forward in Europe, not cakes and angels, in Australia and New Zealand, with some brands and Europe, with some brands and spices pushing in Europe. However, according to a company’s research, Kipling, known at home for his “very good” sweet treats, can benefit from the US perception that British cakes are supported by the concept of afternoon tea and the TV show “The Great British Bake Off.”
Premier’s growth ambitions are helped by Japan’s Nissin Foods, which owns almost a quarter of its stock, and largely frees it from takeover speculation. Of course, that may be more comforting for the premier manager than for the shareholders. And assuming that the current valuation is 13x forecast revenue, and that it has increased by 6% with the same compounds it manages, it will take 15 years to reach the current minimum member of the FTSE 100 £4 billion market capitalization.
That could potentially expand a combination of new markets, trades, margin growth and multiple expansions if management continues to be implemented. If Premier can sell the Apple Pie to Americans, it has more than a fighting chance.
jennifer.hughes@ft.com
