Premier Foods strikes pension deal as sales surge

Premier Foods shares jumped after the maker of Mr Kipling cakes struck a deal with its pension trustees and posted a surge in demand for its products during the Covid-19 crisis.

The company said it had agreed a "segregated merger" of its three pension schemes that could reduce the net present value of pension deficit contributions by about 45% to £175m-£185m. The company's RHM scheme is moving closer to a buyout by an insurer, which would leave a surplus for strengthening the remaining deficit schemes.

The agreement would reduce Premier's annual pension deficit contributions of £38m to as little as £17m with a maximum of £30m subject to discussions, the company said. Premier shares surged 18.4% to 38.73p at 09:11 BST.

Colin Day, Premier's chairman, said: "The segregated merger of the company's pensions schemes we are announcing today represents a ground-breaking agreement which is set to unlock benefits and value for all stakeholders in the company, leveraging the strength of the RHM scheme and substantially improving the position of the Premier Foods schemes."

Premier, which also makes Bisto gravy and Angel Delight, said trading for the year to the end of March was at the top end of expectations after an estimated 10.5% sales spurt in March as shoppers stocked during the Covid-19 crisis. In the UK, sales rose 15.1% in March. Premier said it expected further benefits to trading during the crisis.

"Volumes have started to reduce from the exceptional levels seen in March, although are still expected to continue to be higher than average patterns of demand," Premier said. "This reflects more meals being eaten at home than usual due to recent measures set out by HM Government and hence increased demand for the group's product ranges."

Premier said it expected to report £90m of cash from operating activities at the end of March. It has drawn £85m of its £176.6m revolving credit facility leaving it with more than £175m of cash and a further £96.1m to draw on if needed.