FTSE 250 shares round-up: Premier Foods, Serco, ITV
A massive dividend increase, £1 billion contract and reassuring trading updates are among the drivers of this mid-cap trio. Graeme Evans has the details.
15th May 2025 15:12
by Graeme Evans from interactive investor
A 62% dividend hike crowned a “top notch” performance by Premier Foods (LSE:PFD) today as the Mr Kipling firm joined Serco Group (LSE:SRP) in giving FTSE 250 shareholders something to cheer.
The distribution of 2.8p a share planned for 25 July comes after the food manufacturer was freed from a requirement to match the dividend payment with one to its pension scheme.
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The change follows last year’s suspension of deficit contribution payments and the recent merger of the RHM and Premier Foods sections of the pension scheme.
Having rebased the award with today’s results, the highly cash generative business said it expects to pay a progressive dividend that sees growth ahead of earnings.
In terms of 2024/25 trading, market share gains boosted branded sales to more than £1 billion while overall revenues of £1.15 billion rose 3.5% against strong comparatives a year earlier.
Chief executive Alex Whitehouse highlighted the impact of the company’s premiumisation strategy, which has seen consumers trade up and treat themselves to ranges such as Ambrosia Deluxe and Mr Kipling Signature Bites.
He added: “As we look ahead to the coming year, we expect revenue growth to be supported by a strong product innovation programme and our expectations for trading profit growth are unchanged.”
Premier Foods has reduced leverage to well below its ongoing ratio target of 1.5 times net debt/earnings, which house broker Shore Capital said implied notable fuel for positive shareholder optionality including M&A.
It added following today’s results: “Alex Whitehouse et al take a bow, a top-notch performance, with much more to go for.”
The shares remained near 200p today, having risen from 157p since the start of July. Peel Hunt has reiterated a Buy recommendation and 230p target price, noting that shares continue to offer value at 13.2 times 2025/26 forecast earnings.
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Serco shares were among the best performing in the FTSE 250 after the provider of government services secured three Royal Navy contracts with a combined value of over £1 billion.
The awards by the Ministry of Defence included one valued at £850 million over ten years for the delivery of in-port services for the naval bases at Devonport, Portsmouth and the Clyde.
The contracts replace existing work but with some additional capabilities.
RBC Capital Markets said: “This continues the strong rebid track record and is the latest in a series of defence wins on both sides of the pond. It also shows that the MoD is committed to private sector outsourcing.”
Shares rose 6.7p to 181.7p, leaving the stock up by about 18% this year. However, RBC has a price target of 230p.
The City firm added: “We continue to see Serco as materially undervalued given its defensive characteristics, strong visibility and excellent free cash flow generation and capital return metrics. We believe its defence credentials especially are under-appreciated by the market.”
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Elsewhere in the FTSE 250, a reassuring first-quarter update by ITV (LSE:ITV) helped its shares to consolidate their 25% recovery of the past six months.
Stronger demand from streaming platforms meant ITV Studios returned to growth after the disruption of US writers’ and actors’ strike, with revenues up 1% to £386 million.
The division’s top-line and profit performance is expected to improve as the year progresses due to the timing of cost savings and higher-margin deliveries.
Media & Entertainment division revenues fell 3% to £489 million, which included an expected 2% drop in total advertising revenues (TAR) and a 15% rise in digital advertising revenue.
TAR is expected to be down around 14% in the second quarter and by 8% in the first half due to comparisons with last year’s Euro 2024 football tournament.
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