An encouraging update from Premier Foods (PFD) nonetheless prompted profit taking after a stunning run for the shares which have gained 157% in the last 12 months

The shares were down 3.7% to 104p as the Mr Kipling cakes and Bisto gravy maker said it expected to post higher annual earnings but also saw a slight deceleration in sales growth.

Sales jumped 9% in the third quarter, as people bought more groceries during lockdown. In the year to date as a whole sales were up 12.5%.

Trading profit for the year through March was now expected at between £145 million and £150 million, up from £132.6 million year-on-year, the company said in an update.

Premier Foods, which had been plagued by a heavy debt load, said it expected its net debt to EBITDA (earnings before interest, tax, depreciation and amortisation) ratio to fall below two times by year end.

Shore Capital analyst Clive Black commented: ‘Hereon, sales comparatives notably tighten for the best part of a year, but Premier faces into these forthcoming times with a much stronger financial constitution, elevated cash flows to support marketing breadth and depth and the self-help to emerge from its international activities.’

AJ Bell investment director Russ Mould commented: ‘Premier Foods will be hoping that some of the home cooking habits will remain for a lifetime, yet it is hard to see a permanent structural shift in how people source meals.

‘By spending money on marketing now, all Premier Foods can do is make its products front of mind when consumers shop so post-lockdown people still recall its brands when they are deciding whether to cook themselves or go for the ready-meal option which was so popular before Covid-19 struck.’

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Issue Date: 19 Jan 2021