Premier Foods (PFD, 32.25p) share price has been in turmoil recently, over concerns that the group  ‘faces challenges over reducing its £1.8 billion of debt’  (Telegraph article October 18th). 

The group on Friday October 17th issued a statement aimed to calm concerns over the balance sheet:

Premier anticipates meeting its financial covenants at 31 December 2008. In current market conditions the Board is not pursuing any current plans to issue equity or equity linked products.’

Directors across the board followed up on the statement with share purchases (see regulatory announcement here) thereby sending a signal to the market that they meant what they said, and were prepared to commit their own funds to buy shares.

Directors and non execs bought 862,000 shares at around 32p, committing GBP 275k.

Are these purchases of value in stock selection?

Yes:  

  • 7 directors and 4 PDMRs have bought shares,
  • Management have committed GBP 275k of their own cash
  • Management have increased shareholdings by between 12% and 600%

No:  

  • The directors have a poor track record. They have been buying shares all the way down from 247p in September 2007.

I’m afraid the poor track record means that the share purchases do not warrant a ‘STRONG signal’ on the followthedirectors ‘significance of directors dealing’ scale.

View on Premier Foods: Positive- Directors buying

Significance of signal: MEDIUM strength.