Premier’s pre-Christmas prospects ‘look good’

By Michael Stones contact

- Last updated on GMT

Premier Foods's NPD promised to pep up pre-Christmas sales
Premier Foods's NPD promised to pep up pre-Christmas sales

Related tags: New product development, Premier

Premier Foods’s pre-Christmas prospects look good, despite the firm posting falling first-quarter sales results yesterday, according to City analyst Shore Capital.

Group sales fell by 1.6% to £166.2M during the quarter, while branded sales were down by 1.4%.

But the manufacturer was likely to benefit from rising grocery sales in the run up to Christmas, predicted Shore Capital. “We believe that they will see a further step-up in the self-help initiatives of the British superstore groups, embracing additional pricing activity still alongside range and category reviews,” ​said analysts Clive Black and Darren Shirley.

‘Boosted by creeping growth in NPD’

“Within these contexts we believe that Premier is reasonably soundly positioned boosted by the creeping growth in NPD​ [new product development] and marketing activity. The input environment remains reasonably benign and whilst comparatives toughen, self-help initiatives should increasingly kick-in to our minds.”

Premier’s pipeline of forthcoming product launches promised to boost both top-line progress and margins, with three product categories particularly set to benefit. Those were: gel pot technology deployed in the new Oxo stock pots, Cadbury hot cakes and Amaze bites and NPD for Ambrosia, Batchelor and Sharwood’s brands in due course.

Shore Capital left its forecasts for the business unchanged after the manufacturer’s latest update. Total sales for financial year 2016 were predicted to be £776M, a 1.1% increase that required an moderate improvement in top-line momentum in order to be met.

‘Battered and bruised’

Premier’s NPD pipeline

  • Gel pot technology, new Oxo stock pots
  • Cadbury hot cakes and Amaze bites
  • Ambrosia, Batchelor and Sharwood’s brands in due course

“Whilst battered and bruised by a litany of past experiences, we harbour cautious optimism that our expectations can be achieved,”​ said Black and Shirley.

Trading profit expectations also remained unchanged at £132.4M, delivering a predicted pre-tax profit of £87.4M.

Net debt was estimated to fall by £65M from about £585M to £519M.

They noted that Premier appeared to be “a business that has seemingly been in perpetual re-organisation”,​ after its restructured reporting lines into divisions; Grocery and Sweet Treats. See box below.

But after the re-financing of this year, Premier was now focused on improving its product portfolio, a task that was being assisted by the gradual expansion of its senior management team and enhanced production processes and marketing activities, said Black and Shirley.

Shore Capital repeated its ‘buy’ advice on Premier’s stock.

Read more about Premier’s first quarter results here​ and what conclusions the analysts drew from an investors’ tour of its Carlton Sweet Treats facility in Barnsley earlier this month here​.

The business is due to post its financial year 2016 interim results to October 3 on November 10.

Premier Foods’s business structure

Two divisions

• Grocery: about 72% of revenues

• Sweet Treats: about 28% of sales

Own-label

• Own-label accounted for  about 8.5% of Grocery sales and nearly 19% of Sweet Treat sales in the 52-weeks to April 4

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