Premier Foods, a UK-based company known for brands such as Oxo, Homepride, and Mr Kipling, is set to benefit from a £33m windfall after suspending pension deficit contribution payments. This move comes as a result of an agreement with the RHM Pension Scheme trustees to halt payments from 1 April. The company’s chief financial officer, Duncan Leggett, expressed optimism about the future, stating that this suspension would significantly increase free cash flow and provide enhanced capital allocation options to support growth ambitions.
The strong performance of the pension scheme, following a segregated merger in June 2020, has led to the early suspension of contributions. As a result, Premier Foods anticipates no further payments after the financial year ending 29 March 2025. This development is seen as a crucial step towards the expected full resolution of the scheme by 2026.
Moreover, analysts at Shore Capital have hailed the suspension of pension payments as a significant milestone towards resolving the RHM Pension Scheme. The announcement has already had a positive impact on Premier Foods’ stock price, which jumped 12.54% to a near-13-year high in early trading.
In January, Premier Foods reported its “biggest ever” Christmas performance and expressed confidence in meeting profit expectations. Sales of mince pies contributed to this success, with group sales rising 14.4% year-on-year in the third quarter.
The administration costs of running the pension scheme, approximately £5m per year, and the dividend match mechanism remain unchanged at present. This latest development underscores Premier Foods’ commitment to financial stability and growth in the food and beverage industry.
By suspending pension payments, Premier Foods aims to bolster its financial position and capitalize on future opportunities for expansion and innovation in the food and drink business. This strategic move aligns with the company’s long-term goals and demonstrates its proactive approach to financial management and growth.
