Premier Foods’s sales boost ‘credit to management’
The firm posted a 1.6% increase in branded sales yesterday (November 10). Trading profit rose by 8.4%, with adjusted profit before tax was up by 21.6% in the 26 weeks to October 3 2015.
Shore Capital analysts Clive Black and Darren Shirley judged: “Full credit we say, therefore, to Gavin Darby [ceo] & co, in executing this outcome.” The results were “the output of considerable hard work and execution by the Premier team in our view”, they added.
Increased sales – in a sector still characterised by deflation, price intensity and flat volumes – showed the success of driving sales through new product development (NPD) and growing investment in marketing support.
With price increases difficult to come by in the retail channel, the analysts believed the improved performance to be mainly volume driven.
‘Assertively built its pipeline’
Welcoming Premier’s NPD work, Black and Shirley noted: “From a very constrained start to a new strategy under Mr Darby, embracing sku [stock keeping units] rationalisation, from capability and capital perspectives, Premier has carefully, diligently and assertively built its pipeline and expanded innovation and marketing into its portfolio to good effect.”
While global sales were “relatively small beer” at this stage, the business was gaining traction in international markets, with the support of an expanded team.
International sales grew by 22% at constant currency in the first half of this year and by more than one-third (38%) in the second quarter. The analysts highlighted particular progress in Australasia and Ireland through the Sharwoods and Bisto/Oxo brands respectively.
Hoping for US listing
Premier was hoping for a US listing for Mr Kipling products – including apple, fruit and Mississippi mud pies – in 250 stores this month. But the analysts cautioned: “ … albeit given the track record of disappointment from this group over the years, we are not yet counting any chickens …”.
Shore Capital forecast a combined divisional trading profit of £165M in financial year 2016. Group trading profit was predicted to be £132.4M and current pre-tax profit of £87.4M, with earnings per share of 7.6p.
The analysts repeated their ‘buy’ advice on Premier’s stock.
Martin Lane, spokesman at the website www.money.co.uk, said the business was looking healthier than might be expected. “The Premier Foods pension deficit has been slashed by nearly £180M and other outstanding debts forecast to fall substantially too.
“There’s still work to do though and they’ll be hoping a new range of Paul Hollywood artisan baking mixes will cash in on the success of The Great British Bake Off and bolster sales ahead of the all-important festive period.”
Read more about how innovation and investment contributed to the manufacturer’s gains here.
