Mr Kipling owner Premier foods PLC (LON:PFD) blamed “challenging” trading conditions as it posted a fall in sales and profits last year.
The return of food inflation coupled with “changing retailer promotional strategies” saw adjusted pre-tax profits slump 12% to £74.2mln (2016: £84.2mln) as revenues fell to £790.4mln (2016: £801.3mln).
Premier – which is also the maker of Bisto gravy – had warned earlier this year that profits would likely be down by around 10% as it struggled to negotiate price increases with British retailers.
Given the weaker performance this year, chief executive Gavin Darby unveiled a new strategy that will see the London-listed group focus more on cash generation and cost efficiencies, as opposed to sales growth which it had previously prioritised.
Challenging year for the food industry
“This financial year has been a challenging one for the industry,” said Darby.
“Despite this, we have grown market share in six of our eight largest brands, outperformed many of our peers in the latter part of the year and accelerated International sales growth to 18%.”
He added: “With the industry changing rapidly, we have updated our strategy to give an equal focus to revenue growth, cost efficiencies and cash generation.”
The new strategy is expected to deliver around £20mln in cost savings over the next two years for the firm, which is also behind the Ambrosia, Homepride and OXO brands.
Premier is also targeting a net debt to EBITDA ratio of below three times over the next three to four years.
Under pressure to deliver following takeover rejection
The business is under pressure to deliver decent returns for investors given that it rejected a 65p offer from US food ingredient giant McCormick & Company (NYSE:MKC) this time last year.
That offer valued the company at £537mln, almost 50% more than its current market capitalisation.
After rejecting the advances of McCormick, Premier instead agreed a “co-operation” deal with Japanese noodle maker Nissin, which took a 17.27% stake in the group.
Shares were down 1.2% to 42.5p on Tuesday Morning.