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Premier has more than tripled in value since returning to the JSE as the group continues to close the gap on rival Tiger Brands.The food and consumer goods group, which completed its R6.5bn acquisition of RFG Holdings in March, is valued at just over R31bn, compared with Tiger Brands’ market capitalisation of about R49bn.Premier shares rose 2.9% on Wednesday after the company reported record earnings for the 12 months to end-March. The shares are up 9.3% so far this year and 31% over the past 12 months, supported by investor confidence in the RFG transaction.Premier commercial managing executive Rolf Hartmann said the company’s share price growth came after the business exceeded expectations on its return to the market in March 2023.“Premier’s share price growth has been driven from an abnormally low base when — as a new listing in a market that was sceptical of IPOs — investors ascribed it a low rating,” Hartmann said.“Since then, Premier has exceeded investors’ expectations in terms of earnings growth (headline earnings per share has grown at 28% a year since 2022) and the returns it has generated on its capital,” he said.Premier returned to the JSE after being delisted in 2009. The group said its investment case at relisting was based on its ability to grow as a new business despite its long history as a food producer.New growth potential“The key value proposition was that despite its heritage as an almost 200-year-old company in 2023, Premier had the characteristics of a growth company, with compelling opportunities to invest in its businesses to drive market-leading returns,” Hartmann said.The group’s RFG acquisition was mainly settled through the issue of new Premier shares on a seven-for-one share swap basis.Premier said the deal added established brands and private label products to its portfolio and expanded its exposure across food categories.Hartmann said the acquisition was aimed at continuing Premier’s existing growth strategy rather than changing direction.“We see the RFG acquisition as an opportunity to continue Premier’s growth story by applying the philosophies and practices that have made Premier successful to a new set of product categories and broader manufacturing footprint,” he said.The group said integrating the RFG business, renamed Premier Culinary, is well under way.Hartman said diversification into new fast-moving consumer goods (FMCG) categories has been a long-term strategy, with previous acquisitions in personal care and sugar confectionery before RFG.Premier expects to unlock cost savings from the integration, with some already being realised. It has set a target of achieving planned cost savings by the end of the second year after the acquisition.Avoiding the ABCsHartmann said Premier will continue to focus on operational performance as it seeks to maintain growth.“While Premier has demonstrated that it is able to deliver strong financial performance during various commodity cycles and in a low-growth South African economy, the main risk to the momentum is stalling operational performance,” he said. “We have taken note of Warren Buffet’s warning against the ‘ABCs of business decay’ (arrogance, bureaucracy and complacency) and are focused on avoiding those.”Premier has also invested heavily in manufacturing capacity since its listing, including the Aeroton bakery, which was fully commissioned in March.Hartmann said the company has invested more than R2.9bn in plant and equipment since listing, with the investments aimed at improving efficiency and lowering production costs.The next phase will focus on delivering further earnings growth and returns for shareholders as it integrates RFG into the group.“We are confident that if we can continue with [the] strategy, we can continue to deliver strong earnings growth even if there is no improvement in macroeconomic conditions,” Hartmann said.“By focusing on this and earning a return on capital in excess of our cost of capital, we believe this will create further value for shareholders.”
