Bisto gravy-to-Mr Kipling cake-maker Premier Foods (PFD) has reported a ‘very encouraging’ start to the year with first quarter sales up 6.3% on the same period of 2019, at the top end of its expectations, led by branded goods sales with 9.3% growth.
The food producer’s expansion into new product ranges using well-known brands is bearing fruit and the firm now expects full year pre-tax profits to be at the top end of estimates, news that sent the shares up 3.2% to 108.4p on Friday.
For the first quarter ended 3 July, total sales over a two year basis grew by 6.3%, at the top end of Premier Foods’ 5-to-6% expected range.
Branded sales increased by 9.3%, which Premier Foods said demonstrates ‘further evidence that the group’s brand building model is delivering consistent growth’.
Turned around by chief executive Alex Whitehouse, Premier Foods has come a long way since its days as a zombie company where all the cash it generated was gobbled up in debt repayments, leaving nothing to put back into the business.
Now that situation has been resolved, the company is investing behind its brands, bringing new products to market and seeing strong growth across brands including Mr Kipling, Ambrosia, Bisto, Oxo, Sharwood’s and Paxo.
As expected, total sales were 13.2% down compared to the same quarter a year ago, when the company saw exceptionally high grocery volumes during the first national lockdown.
Encouragingly, online sales were similar to last year’s elevated levels and nearly double those of two years ago.
While Premier Foods is encountering higher prices for raw materials and ingredients, adjusted pre-tax profit for the year to March 20022 is now expected to be at the top end of management’s expectations.
Shore Capital reiterated its ‘top of consensus’ full year 2022 pre-tax profit forecast of £119.6 million on the news, but the broker believes ‘we could see bottom-end upgrades coming through’.
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Mr Kipling has long been a favourite with shoppers across the country, but pre-pandemic had faded slightly in terms of popularity. The brand has now bounced back with aplomb, helping act as a key sales driver for the group.
‘Extending brands through product innovation such as Mr Kipling baking mixes and Oxo marinade is a clever move, giving Premier Foods more avenues by which to make money and also take up additional shelf space so its brands are front and centre when shoppers browse the aisles of a supermarket.
‘And as the nation has been forced to rediscover home cooking as many pubs and restaurants were shut during lockdown, the Sharwood’s cooking sauce brand has also had a new lease of life.’
Mould believes Premier Foods is ‘a perfect example of a business that has regained focus and is now enjoying momentum as its growth plan is rolled out.’