This saw analysts push through another round of forecast upgrades after the Mr Kipling cakes-to-Bisto gravy maker said its new financial year has also got off to a strong start, with revenue rising 20% since the year end, thanks in part to strong grocery sales.
Shares in the foods group rallied more than 8% in morning trade to 64.4p, their highest in nearly a decade.
Premier Foods, which has de-risked its balance sheet through a recent transformational pensions deal, is reaping the benefits of marketing and innovation spend and has seen a recent boost from lockdown.
Today’s results for the year ended 28 March revealed trading profit at the top end of market expectations as well as a £62m reduction in net debt which lowered Premier Foods’ net debt-to-EBITDA ratio to 2.7 times, ahead of management’s previous 3 times target.
BRITAIN’S ‘GOT COOKING AGAIN’
Chief executive Alex Whitehouse insisted ‘Britain has got cooking again’ during the coronavirus lockdown, with his charge seeing ‘particularly high levels of demand for items relating to meal preparation’ including cooking sauces such as Sharwood’s and Loyd Grossman, as well as gravy and baking ingredients.
Following palate-pleasing growth of 7.3% in the fourth quarter, Premier Foods’ UK business has now delivered 11 consecutive quarters of revenue growth.
Furthermore, sales in the first quarter of the new financial year are expected to be roughly 20% ahead year-on-year amid ‘continued strong demand’ for Premier Foods’ ranges. Despite incurring some extra supply chain costs, the food producer expects to beat this year’s revenue and trading profit estimates.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Pension pressures are easing, trading is strong, and the ratio of net debt to earnings is lower than targeted. It is now in a strong position to invest more in the business such as product innovation, marketing and upgrading its assets.
‘It could get a further financial boost from selling its 49% stake in bread producer Hovis, although Premier Foods has yet to comment on media speculation that the asset is going to be put up for sale.’
Mould added: ‘Premier Foods may look like the cat that got the cream, yet it still needs to deal with competition from private label suppliers and rival brands. There is also the risk that the nation realises it has been over-indulging on sweet treats during lockdown and households cut back on items like Mr Kipling cakes in order to help their waistline.’