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Premier Foods expects slower first half after Mr Kipling sales boost 2019 profit

Premier Foods plans to launch new plant-based food products in response to a rise in the number of vegans and vegetarians.

Premier Foods
Premier Foods makes Bisto gravy and OXO stock cubes

Premier Foods PLC (LON:PFD) served up a 12.1% increase in profit for the full year but warned that the first half would be slower.

The food manufacturer, whose brands include Mr Kipling cakes and OXO stock cubes, said adjusted pre-tax profit rose to £88mln in the year to March 30 from £78.6mln the previous year.

READ: Premier Foods approaches former Weetabix boss to become next CEO of Mr Kipling maker

Revenue edged up 0.6% to £824.4mln as growth in its own branded food items offset a decline in non-branded products.

Mr Kipling drives revenue growth 

Mr Kipling was the star performer, delivering a 12% increase in revenue after a brand relaunch in the UK.

However, the international business was down 12.5% due to Cadbury cake overstocks and lower export distributor volumes.

Trading profit was up 4.5% to £128.5mln, led by a strong performance in its grocery division as it reduced the promotional deals it offered on its Ambrosia custard brand.

Earlier this year, Premier Foods ditched a plan to sell Ambrosia after the chief executive who kicked off the disposal process left.  

Gavin Darby put the brand up for sale in November last year after pressure from activist investor Oasis to restructure the business but disappointing talks with potential buyers prompted the company to shelve the plan.

Strategic review ongoing 

Premier Foods is carrying out a strategic review of the business to find ways to improve its performance.

In Tuesday’s full-year results statement, the company said “there remains much work still to do, and the outcome of its strategic review will be outlined in due course”.

In the coming year, the firm plans to increase capital investment and consumer marketing, which will lead to a slower first half.

For the 2020 financial year, it expects its international business to return to double-digit revenue growth and estimates a similar level of debt paydown. Net debt stood at £469.9mln at end of March, some £26.5mln lower than the same time a year ago.

Premier Foods plans to launch a new “Plantastic” brand, using plant-based ingredients, in response to a rise in the number of vegans and vegetarians.

“While the first half of FY19/20 is expected to be slower than last year, reflecting the timing of marketing investment, we expect to make further progress over the next 12 months thanks to our continuing pipeline of new product innovation and strong customer relationships,” said chief executive Alastair Murray. 

Overall mixed performance, says analyst 

Fiona Cincotta, a senior market analyst at cityindex, said Premier Foods has posted a "commendable sales performance" in the fourth quarter but the company's bottom line for the full year has been blighted by write downs in the value of its Sharwoods curry sauce and Saxa salt products, making for an overall mixed performance.

"Premier has continued to chip away at its debt pile, but at around £470m it still looks cumbersome for a company with a £303mln market value that has just posted a £43mln annual loss," she said. 

"Very little has been offered today for investors to sink their teeth into on the company's restructuring efforts, and we still don' t know who will be the new CEO, even though Gavin Darby left back in January.

"With a break-up of the company still very much in play it's perhaps not surprising that Premier Foods is struggling to find a permanent replacement fast."

Quick facts: Premier foods

Price: 78.1 GBX

LSE:PFD
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Market Cap: £663.12 m
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