Trading profit in Premier's bread arm nosedives; but firm no longer a basket case, claims analyst

By Jane Byrne

- Last updated on GMT

Related tags Food Finance

Analysts note the ‘truly awful’ financial results for 2011 from Premier Foods as the UK group announced a £259.1m (€312.6) pre-tax loss for the full-year after writing down the value of its bread division.

Premier had scored a profit of £28.5m in 2010. Trading profit in its bread arm dived 90.4% to only £3.4m.

Last week saw the food manufacturer given breathing space by the banks after it gained more time to repay £1bn of loans.

Commenting on the financials, Michael Clarke, CEO of Premier, said the company ​intends to draw a line under the performance of 2011.

“Having put the financing and strategic building blocks in place, our immediate priorities are to implement this re-financing package, continue stabilising the business, re-focus the portfolio and invest in our future growth.

Whilst we recognise that the consumer environment remains challenging, our performance thus far in 2012 is in line with our expectations. I’m convinced we have the right team to turn this business around and I am very positive about our future.”

Clive Black, a food industry analyst at UK firm Shore Capital, in a note on the financials today was somewhat positive: “With some visibility on short-to-medium term financing matters Premier Foods is no longer the ‘basket case’ that it was in prior times.”

But he said that Premier’s year-end net debt was higher than Shore anticipated. 

“While the headline numbers may provide a little comfort, it is hard not to come to the conclusion that these are truly awful results that thankfully will be soon be written up in tomorrow’s chip paper as management focuses on stabilisation of trading and fulfilment of its new financing arrangements,” ​added Black.

He said that Premier’s impairment charge of £282m for its bread division is a“damning indictment of the previous regime’s acquisition strategy.”

The food manufacturer said that turnover in its ‘Power Brands’ fell by 5.6% to £871m. 

Black said the management stated objective of stabilising its operational performance is indeed essential “because without stable and rising cash profits Premier will still not break-out of its debt-bind.”

Management at Premier said they still plan to focus on the eight Power Brands with heightened marketing support, cost reduction and further disposals also key goals.

The company has committed to receive at least £330m from disposals by June 2014.

On Thursday, March 29 2012​, presents the Bakery Formulation​ virtual conference and expo.  Featuring insight from leading voices in the industry, the conference will help formulators, nutritionists, marketers and brand development managers understand what constitutes tomorrow’s value added bakery and cereal lines and how to formulate them.  To register or find out more, go to the virtual conference website​.

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