Shares in Premier Foods (PFD) improved 6.4% to 117p after the Bisto gravy-to-Mr Kipling cake maker upgraded its annual profit outlook following better-than-expected growth in the third quarter to 1 January 2022 including Christmas.

Trading profit for the year to March 2022 is now expected to be ‘at least £145 million’, comfortably ahead of Shore Capital’s £141 million forecast, while adjusted profit before tax should be ‘at least £125 million’, comfortably ahead of the £119.3 million consensus estimate.

The latest ‘beat’ follows the delivery of three strong quarters of trading from the British food producer, which insisted it is taking ‘good momentum’ into the final quarter.

SWEET TREATS SUCCESS

Group sales were up 7% on a two-year basis, before the pandemic struck, with Premier Foods cooking up market share gains across the board.

And the reinvigorated food producer, which secured a larger customer base during the pandemic and has returned to the dividend list, said deleveraging is expected to continue this year.

‘The strong momentum from the first half of the year continued into the key Q3 trading period, with our brands growing by 11.3% compared to two years ago,’ explained CEO Alex Whitehouse.

‘This was well ahead of the market across all our categories and resulted in very encouraging share gains.’

Premier Foods reported an especially strong showing from its Sweet Treats business. ‘This was Mr Kipling’s biggest Christmas ever’, said Whitehouse, ‘as our Sweet Treats brands outperformed the market, growing 6.3% compared to last year and 11.6% versus two years ago, helped by an increased number of family gatherings over the festive period.’

OVERSEAS PROGRESS

Within the Grocery business, sales were down 3.3% on a one-year basis, but up 9.1% versus two years ago, with Premier Foods calling out exceptional two-year growth from Nissin noodles as well as tasty performances from the Bisto and Sharwood’s brands.

Whitehouse also highlighted a positive performance from Premier Foods’ overseas businesses, focused upon Australia, North America and selective EU markets, with international sales up 33% versus two years ago.

‘All of our strategic international markets saw growth, with sales of Sharwood’s and Mr Kipling both well ahead of the same period two years ago’, continued Whitehouse.

Following a successful trial in Canada, the first shipments of a Mr Kipling cake test in the US have now been made and these treats will go in store during the fourth quarter.

THE SHORE CAPITAL VIEW

House broker Shore Capital believes there is ‘a whole lot more to come’ from Premier Foods. ‘We sense that the magnitude of the (share price) appreciation has meant some shareholders feel that the equity story has travelled and arrived.

‘However, we beg to differ. Rarely have we seen a Premier Foods’ management team so confident in its capabilities – it continues to self-improve in operations and maintains high service levels – and is excited about its prospects.’

The broker added: ‘With scope for bolt-on acquisition, Premier Foods is demonstrating that its performance is not a one-off function of coronavirus lockdowns and so it is a group with multi-year growth prospects.’

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Issue Date: 20 Jan 2022