Trading profit climbed by 2.1% to reach £48.1M for the period.
City analyst Investec judged the result “a solid 1H [first half] trading profit performance, despite a weaker revenue backdrop”.
Analyst Nicola Mallard noted Premier pinned its hopes for a better second half on new product development and advertising spending. Actual performance would become clear only later in the calendar year – given the weighting of the business to second half and the fourth quarter in particular.
“Premier has delivered slightly better 1H trading profit than we were expecting,” said Mallard. “The group had already flagged the difficult revenue background and we had assumed a small decline in 1H trading profit – of £47.1M last year – but the group delivered £48.1M. This showed a 1% increase in margins, to 13.1%, as cost savings were delivered.”
Fall in Power brands sales
The 4.9% fall in power brands sales reflected the warm weather, the growth of the discounters – with their predominantlyown-label sales – and a fall in deep discount promotions, said Mallard.
Non branded sales fell by 6% in the first half.
Premier Foods predicted 2–3% growth in power brands for the full year, which Mallard said should be supported by more favourable weather for the firm’s products, plus new product development and advertising. New product launches planned for the second half included: Oxo Herbs & More, Bisto gravy pastes and Sharwoods’ Mini Popadoms.
Investec trimmed its full year trading profit forecast for Premier last month to £140M. “The group is nudging up its interest guidance – previously £45–50M; now a minimum of £50M – so we will look to reflect this in our profit before tax calculations,” said Mallard.
Investec repeated its ‘hold’ advice on Premier’s stock but planned to review its advice in the light of updated debt and pension figures.
Premier Foods reported the UK ambient grocery market had fallen in value by 1.3% in the first half of this year, while target categories for the firm had fallen by 4%.
‘New product introductions’
Gavin Darby, ceo, said: “We are adapting quickly to the changing external environment through retaining a tight control of costs and margins and have a strong programme of consumer marketing and new product introductions planned for the second half of the year.”
Darby predicted, assuming normal weather patterns, an improved second-half branded sales performance with trading profit expectations for the year unchanged.
“Following an update of our category plans, we remain convinced of the medium and long-term potential for our brands to deliver profitable growth,” said Darby. “We plan to continue investing in innovation, marketing, our supply chain capabilities and our people to create long-term shareholder value.”
Last month, City analyst Panmure Gordon warned Premier remained vulnerable to take over unless it grew its core brands. Commenting on Premier’s focus on second half innovation, analyst Graham Jones said: “This has got to be the last time you have the excuse that results will be second-half weighted or that you have phasing of innovation. Innovation has got to be constant.”