Premier Foods ahead of target to save £40M

By Rick Pendrous

- Last updated on GMT

Related tags: Premier foods, Premier

Clarke: 'Plans to simplify the business and drive further efficiency and effectiveness are proceeding ahead of plan'
Clarke: 'Plans to simplify the business and drive further efficiency and effectiveness are proceeding ahead of plan'
Britain’s biggest food manufacturer Premier Foods expects to achieve efficiency savings of £40M earlier than expected as a result of its restructuring plans, it emerged in its half-year results released today.

Premier is now on target to deliver previously announced savings of £40M by the end of 2012 – ahead of the 2013 date expected – while more cost savings will result from further efficiencies and business divestments in the year ahead.

The Group continues to deliver improved manufacturing efficiencies in its supply chain. The Grocery division generated manufacturing controllable cost gross savings of £3.6M in the first half of the year, equivalent to 4% of its manufacturing cost base.

Over the medium-term, Premier continues to target manufacturing controllable cost gross savings of 4% a year.

Power brand sales up 2% to £419M

The troubled group announced top-line results for the six months to June 30 2012, which showed ‘underlying sales’, excluding its milling operations, up 1.1% to £757.1M; sales of its ‘power brands’ up 2.0% to £418.9M – with grocery power brand sales up 4.9% – and underlying trading profit up 3.2% to £53.2M. Adjusted profit before tax was £10.9M, compared with a £7.8M loss in the same period last year.

Premier’s ‘underlying business’ excludes the results of disposals completed by June 30, as well as milling sales and other specific items, which include pension credits, commercial adjustments and a non-core chocolate powder manufacturing contract loss incurred in the first half of 2012.

The group’s move from final salary pension schemes to career average and defined contribution schemes also helped boost its results.

However, Premier’s Grocery divisional contribution decreased by £4.4M to £95.5M in the first half of the year, owing to an increase in consumer marketing expenditure of £8.0M and higher promotional investment.  But these performances were offset by “strong progress”​ in reducing its general cost base by £14.3M.

Bread contribution declines

At the same time, the Bread divisional contribution declined £8.2M to £22.5M due to lower market volumes, increased promotional activity in a competitive environment and higher net costs to serve in the supply chain.  Despite this, Premier’s iconic Hovis brand was reported to have maintained market share.

Premier also reported that marketing investment had increased by 40%, which had helped drive sales of its eight power brand results. These are Ambrosia, Batchelors, Bisto, Hovis, Loyd Grossman, Mr Kipling, Oxo and Sharwood’s. Particularly strong performances were reported for its Loyd Grossman, Batchelors and Mr Kipling brands during the second quarter of the year.

Chief executive Michael Clarke said: “I’m pleased with the progress we are making to stabilise the business, re-focus the portfolio and invest in our future growth.

Our strategy of focusing on our ‘power brands’ is starting to gain traction. Power brand sales were up 2% and sales of grocery power brands increased by a healthy 4.9%, reflecting consistent improvement in market shares. Trading profit increased 3.2%, in line with our expectations.”

Clarke added: “Plans to simplify the business and drive further efficiency and effectiveness are proceeding ahead of plan and we will now deliver the previously announced £40M savings by the end of 2012. As we continue our divestment programme, we plan to take further costs out of the business.”

Related topics: Ambient foods, Bakery

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