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Branded sales bolster Premier Foods first quarter results
The group reported a 5.3% increase in sales (£239.3m) compared with the previous year, with branded sales up 7.3% (£213.8m) across the business in its 2024/25 Q1 financial results.
Grocery continued to be Premier’s most lucrative category, raking in £179.4m in sales over the quarter (up 7.1%) – once again driven by branded sales, which grew 8.6% to £161.9m. A similar pattern could be found across the group’s sweet treats segment.
However, non-branded sales continued to decline during the reported period, grocery and sweet treats reporting a 5.1% and 16% decline respectively. Premier said the decline reflected the movement of customers to brands and the impact of contract exits.
Overseas sales grew 24% compared with the prior year, with North America in particular reporting 21% sales growth – largely thanks to the rollout of Mr Kipling cake across 800 stores in Canada and the first sales of The Spice Tailor in the US.
‘Strength of our portfolio’
Commenting on the results, chief executive Alex Whitehouse said: “We’ve delivered another quarter of strong branded sales growth, yet again demonstrating the strength of our portfolio and the effectiveness of our branded growth model.
“As we look forward to the rest of the year, we have a strong set of marketing and product innovation plans for our brands in the UK and Ireland, while we continue to build distribution internationally. We expect to see more volume led branded sales growth in the coming quarters, further progress overseas and our expectations for the full year remain unchanged.”
The group also recently completed the signing of a new five year £227.5m revolving credit facility, replacing previous £175m facility. Effective July 2024, the new facility was agreed on improved terms with a margin of 2% above SONIA (Sterling Overnight Index Average).
Clive Black, research analyst at Shore Capital, said: “Premier Foods has delivered yet another strong period of trading, with sales up across the entire business. Guidance is unchanged at first base, which is sensible, noting ‘sharper promotional investment’ but also positive operational gearing which may assist in building investment ambitions.
More to do
“Premier’s equity has started to respond to its positively transformed balance sheet, earnings base, cash flow and prospects but on an FY25 PER of just 12.5%, it has a lot further still to beneficially travel.”
Andrew Wade, equity analyst at Jefferies, questioned whether Premier were playing it too safe with its outlook for the rest of the year and beyond.
“After a strong start to the year, the company states that its expectations for FY25 are unchanged,” Wade added. “However, we think numbers are looking increasingly conservatively-struck given the impressive volume growth, demonstrable strategic delivery and a price headwind that will wane through the year.
“Despite the positive run in the shares (+25% over 6m), we believe Premier Foods' visible growth algorithm and potential for M&A is not fully reflected in the current valuation of just 12x PE.”
Premier posted a 14% growth in trading profit, which was ahead of expectations, and a profit after tax figure for the fiscal year of £112.5m in its full-year results for 2023/24.
