Premier Foods confident in brands despite sales fall

Trading profit was 6.4% down at £131M, in line with expectations, while adjusted profit before tax was 11% up at £83.2M.

Revenues rose by 14% to £964.3M during the period.

Overall, the business reported a loss of £92.7M after tax, partly reflecting a £67.9M impairment charge following its business restructure to divert Mr Kipling cakes into a distinct Sweet Treats division. 

‘Improving sales trend’

Premier Foods boss Gavin Darby said: “For the last quarter, I am pleased to again report an improving sales trend, which has benefited from a combination of brand investment, exciting new products and strong retail execution. Across our branded portfolio, we have delivered volume and value share gains, while we have driven growth in our cake and flavourings and seasonings categories.”

Six of Premier’s major brands had benefited from TV advertising over the past year, he added. Marketing investment had risen by more than 80% in the past six months. 

“I remain confident that our strategy of investing in brands, innovation and infrastructure is the right one for Premier Foods, and see increasing evidence that our efforts are starting to pay off,” said Darby. 

Premier Foods believed it saw evidence that the increasing dominance of discount stores Aldi and Lidl was beginning to slow. “Previous quarters have been characterised by the well-documented growth of the discounter, convenience and online channels," according to the firm's financial statement.

‘Growth in discounter channel is slowing ’

“While there was a broad continuation of these trends in the quarter, there is increasing evidence that the growth in the discounter channel, in particular, is slowing.” 

In fact, the different channels were showing signs of converging, as momentum built in the traditional supermarket channel, it argued.

The business planned further new launches this year to complement releases over the past year.

“We have also made good progress with our major customers and we now hold significantly more category captaincy roles than we did three years ago,” said Darby.

But short-term trading will remain challenging despite the return of volume growth in the market, he predicted.

The business reported net debt of £584.9M, in line with expectations and its combined pension deficit fell to £211.8M from £603.3M.

Premier Foods has moved its financial reporting period from a December year end to an early April year end.

Shore Capital analysts Clive Black and Darren Shirley thought the simplified business would enjoy better times ahead, after the “transformational refinancing” of spring 2014. 

“While somewhat battered by the experiences of financial year 2015, we are cautiously optimistic that Premier can benefit from favourable comparatives, improving market volumes, a benign cost of goods evironment, continuing investment in capacity [such as cake snack packs] and more and better marketing.” 

The analysts repeated their ‘buy’ advice on Premier's stock.