Premier Foods Reveals Slight Improvement In Performance

After a difficult few months which saw it spurn a takeover attempt by US group McCormick, Premier Foods has reported a slight uptick in performance.

For the year to 2 April 2016, group sales edged up 0.6% to £771.7m with adjusted pre-tax profits increasing 3.5% to £86.1m. Sales in its core branded division were flat at £683.4m, whilst non-branded sales rose 5.5% to £88.3m.

The group said that while branded sales were unchanged, six of its eight largest brands (Bisto, Oxo, Loyd Grossman, Sharwood’s, Mr Kipling and Cadbury cake) delivered average sales growth of 3.4% during the year. It added that these six brands had received more focus on innovation and marketing investment over the last two years, demonstrating that its strategy was working.

Ambrosia and Batchelors, its other two major brands, saw sales decline by 2.9% in the year. These two brands will now receive higher levels of marketing investment and are also expected to benefit from new products which the group said will align to current consumer trends such as Ambrosia Deluxe custard, Ambrosia Frozen Custard ice cream and Batchelors High Protein and High Veg pots.

Despite deflation persisting in the grocery sector, Premier’s performance improved slightly in its fourth quarter with branded sales up 1% and non-branded growing 6.5%. The group said that it remained focused on capitalising on the significant growth channels of discounters and online via its non-branded offering and tailoring its approach for online opportunities.

Premier increased its investment in consumer marketing in the year to approximately £36m, an increase of nearly 10% on the prior year. The group said it was committed to progressively increasing its consumer marketing investment over the medium term. In the year ahead, the group plans to spend £42-£44m on consumer marketing, increasing its expenditure on media advertising and preparing the foundations for the launch of certain grocery brands in the chilled arena. Consequently, nine of its brands are planned to benefit from TV advertising this year.

Earlier this year, Premier rejected three takeover offers from McCormick which irked some shareholders who said the group appeared to favour the strategic tie-up with Nissin Foods. The Japanese firm bought a 19.9% stake in Premier with the two firms planning to work together to distribute each other’s products in their respective markets.

Premier announced today the appointment of Tsunao Kijima as a Non-executive director as part of its agreement with Nissin. Mr Kijima is Managing Director of Nissin, with responsibility for the USA business. He has also had responsibility for Nissin’s corporate functions including strategy and M&A, business process optimisation, corporate infrastructure and innovation.

Commenting on today results, Gavin Darby, Premier’s Chief Executive Officer, said: “We are very pleased to report sales growth both in the year and the fourth quarter in what continues to be a deflationary market. Our strategy of investing behind our brands and bringing new innovative products to market continues to deliver very positive results.”

He added: “We recently set out some additional strategic initiatives which we believe will further accelerate our growth and now expect to deliver sales growth of 2-4% in both FY16/17 and the medium term. The potential opportunities presented by our partnership with Nissin are also very exciting. The Board is focused on delivering shareholder value and we see a strong future for Premier Foods with its leading category positions, great brands and strong operational cash flows.”