Premier Foods ‘past darkest hour’ – just don’t mention weather

The food manufacturer posted “solid”​ results for the 13 weeks to January 2 2015, with total sales up 0.1% and branded sales down 1.0% to £208M. Non-branded sales were 6.4% higher at £37M.

Given the track record of Premier Foods “under previous regimes of long-term disappointment and volatility”​, the word ‘solid’ was “good to our minds”,​ Shore Capital said.

“We believe that Premier is through its darkest hours, with the 2014 re-financing creating a basis for management to start focusing more demonstrably upon operations rather than firefighting balance sheet matters,” ​its analysts Clive Black and Darren Shirley said.

“Evidence to support this assertion is further provided in this statement with the withdrawal from the £80M debtor securitisation programme, which was unutilised in H1 FY2016, so simplifying the finance functions.” ​

Strong progress ​

Strong progress was made in the Sweet Treats division, with revenues up by 6.5% driven particularly by Cadbury lines although Mr. Kipling’s sales were also ahead year-on-year whilst low based International revenues grew by just under 10.0%.

Branded sweet treat sales grew by 6.0% whilst for non-branded lines such product sales growth was 7.5% higher in the quarter.

However, Premier’s soup and cooking sauces sales was hit by the mild autumn and December.

“Premier is loath to mention the weather with respect to trading momentum, any company is, but the mild climate has taken trade out of sub-categories such as soups, which contracted c10% at a market level, leading us to believe that Batchelor’s had a particularly disappointing time,”​ Black and Shirley said.

Homepride, Lloyd Grossman and Sharwood’s all saw a marginal sales fall, Shore Capital added.

Grocery revenues fell by 2.7% in the quarter with branded sales 3.1% down offset by 4.2% growth in non-branded lines.

Benefits and investment ​

The clearer and better operational focus was evident with the company harvesting the benefit, arguably before the supermarkets, of store keeping units rationalisation, aligning the business well to the evolving programme of mass simplification entered into by the superstore operators in the UK, Shore Capital said.

Premier Foods has invested in marketing, boosting the profile of Mr Kipling, Oxo, Bisto and Cadbury, while capital expenditure has remained glued at £25M.

This includes investment into its Stoke factory.

Struggling Batchelor’s is set to gain much need innovation and marketing support throughout 2016, Shore Capital said. It will also launch an ice cream product which will be co-packed.