Premier Foods to list on Johannesburg Stock Exchange

Brait, a subsidiary of Brait PLC, is expected to list Premier Foods on the 24^th of March on the Johannesburg Stock Exchange (JSE), with the aim to raise gross proceeds of up to R3.7 billion at an offer price range per offer share between R53.82 and R67.04, equating to an equity valuation range of R6.9 billion to R8.6 billion.

The range represents a 6.0x – 7.0x last twelve months to 30 September 2022 multiple of earnings before interest, tax, depreciation, and amortisation (EBITDA) to enterprise value, and a discount of 10% – 28% to Brait’s latest valuation of Premier. According to Brait, the listing will provide Premier with access to capital markets. This may be utilised to bolster and expand further growth in accordance with its strategic goals, as well as to fund potential acquisitions.

Premier Foods Background

Premier is a leading consumer product goods company in Southern Africa that has expanded its portfolio from a traditional milling and baking business to include a groceries business. The company’s operations can be separated into two divisions: Millbake and Groceries and International. The Millbake business operates bakeries, maize, and wheat mills supported by an extensive distribution capability throughout South Africa, Lesotho, and Eswatini. Premier's Groceries and International business comprise a portfolio of sugar confectionery products, home and personal care products, beverages, and a diversified product portfolio in Mozambique.

Brand Portfolio

Premier produces and markets iconic South African brands such as Snowflake, Blue Ribbon, BB Bakeries, Star, Mister Bread, Iwisa, Nyala, Super Sun, Invicta, Impala, Manhattan, Super C, Mister Sweet, Champion toffee, Rascals, Candy Tops, Frutus, Lil-lets, Vulco, and Dove cotton wool. In Mozambique, Premier's leading brands include CIM, Florbela, Favorito, Polana, Top Score, Celeste, Dourado, Sunblest and Blue Ribbon (imported from Eswatini). In Eswatini, brands include SUB, Mister Bread, Blue Ribbon, Iwisa, Bakers Pride and Ligugu, and Mandla Mageu. Premier operates 30 owned manufacturing sites and 25 distribution depots, spanning South Africa, Eswatini, Lesotho, and Mozambique.

Market Share

According to DataOrbis market share data, Premier has an approximate 24% market share in bread, 32% market share in flour, 20% market share in maize, 18% market share in total sugar-based confectionery, and an 18% market share in feminine care in South Africa. Particularly, Premier held the market-leading position in the Western Cape (37%), and the second-largest market share in KwaZulu-Natal (30%) and the Eastern Cape (34%), respectively. Since 2012, the coastal regions have been a strong focus for Premier's success in the bread market, and Premier's baking business is now on the path to delivering its strategy to expand its inland market share as the Group recently commissioned a new Pretoria-based bakery and mill to better service the inland region.

Tiger Brands, AVI, and RCL Foods are among its primary competitors.

Figure 1: SA Formal Bread Market Share Mix 


Source: Brait Investor Report (Brait website)

Figure 2: Key SA Bread Makers Stats
 

Source: Brait Investor Report (Brait website)

Financial Highlights

For the 2022 financial year, Premier generated revenue of R14.5 billion and adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of R1.5 billion. The Millbake and Groceries and International businesses contributed 82% and 18% respectively to revenue. Over the three-year period, revenue grew by a compound annual growth rate (CAGR) of over 15% driven by volume and market share growth, and adjusted EBITDA grew by a 20% CAGR.

In FY2022, Millbake’s revenue grew by 12.5% to R11.9 billion, comprising volume growth of 6.0% and average price inflation of 6.5%. Additionally, the division's adjusted EBITDA, excluding head office costs, grew by 32% to R1.4 billion, with Adjusted EBITDA margins expanding by 170bps to 11.7%.

The Groceries and International divisional revenue increased by 35% to R2.7 billion. Adjusted EBITDA, excluding head office costs, increased by 24% to R200 million, driven by significant historic capex spend, brand loyalty, and product expansion. In terms of divisional performance, the Sugar confectionery revenue increased by 238% to R763 million with revenue from Mister Sweet contributing R540 million for the 10 months since it was acquired. HPC revenue increased by 6% to R651 million, and CIM, Premier's Mozambique subsidiary increased revenue by 10.4% to R1.2 billion.
For the first half of its 2023 financial year, Premier delivered a positive performance despite high commodity prices, load shedding, and other cost inflationary pressures. The company's revenue grew by 23.9% year-on-year. EBITDA and earnings before interest and taxes (EBIT) increased by 15.7% and 23.0% respectively year-on-year, while finance costs declined by 72.9% to R58 million. In the first half, Millbake’s revenue increased by 24.7% to R 7.2 billion, as the division delivered volume growth in the bread, wheat, and breakfast categories. While revenue for the Groceries and International division increased by 19.8% to R1.5 billion.

Figure 3: Premier Foods Historical Financial Highlights 


Source: Brait Investor Report (Brait website)

Premier has invested R5.2 billion in capital expenditure since 2012, resulting in a robust and technologically advanced operating platform. Capital expenditure of approximately R215 million was incurred in the first half, comprising R66 million of expansionary capital expenditure and R149 million of maintenance capital expenditure.

Conclusion

Premier is a leading CPG company in Southern Africa with an impressive brand portfolio and market share. The company has invested heavily in its infrastructure, resulting in a robust and technologically advanced operating platform. Premier's Millbake business and Groceries and International business are focused on producing high-quality products for the South African market, and the company is well-positioned to continue to expand its market share and customer base. Overall, Premier is a strong investment opportunity for those looking to invest in the CPG industry in Southern Africa.

The food producer will remain partly owned by Brait, with the company retaining a 47.1% stake.