Premier Foods plc today (5 March) posted a 13.5% rise in annual profits as turnover grew during a year in which the UK food group undertook an overhaul of its business.

The company, which makes a range of foods including Hovis bread and Bisto gravy, booked underlying pre-tax profits of GBP193.8m (US$274.2m) for the year to 31 December.

Turnover jumped 22.5% to GBP2.6bn, driven by rising sales of Hovis, which was relaunched during the year.

Chief executive Robert Schofield said Premier, which has faced questions over the future of the business and over debts of GBP1.8bn, had made "significant progress" during the year.

"We are pleased by the trading performance of the business which has demonstrated resilience against the backdrop of a challenging economic environment," Schofield said.

This morning, Premier also unveiled its long-awaited plan to reduce its hefty debts. Premier announced plans to raise around GBP379m through a share offer. The company plans to issue over 1.55bn new shares at an issue price of GBP0.26 a share.

The company also said private equity firm Warburg Pincus had agreed to buy up to 246m shares in the business, equating to a 10% stake.

Under the proposals, Premier has also struck a fresh agreement with its lenders, a deal dependent on the completion of the share offer.

The financing plans came after rumours of a possible private equity cash injection and asset sell-offs had been mooted. Earlier this week Premier said it had completed the sale of a clutch of French businesses.

During 2008, Premier streamlined its manufacturing base with the closure of nine sites and the company said it had finished the year with "significant momentum" as volumes from its Hovis and its grocery businesses rose.

Turnover from the Hovis division rose from GBP534.9m in 2007 to GBP756.3m in 2008. The rise in sales was driven by price increases to offset higher raw material costs and helped grow trading profits from GBP17.4m in 2007 to GBP20.9 in 2008.

Premier's grocery portfolio weighed in with a 15.1% rise in sales to GBP1.42bn thanks in part to contributions from the RHM business in late 2006.

The RHM acquisition, as well as savings from Premier's integration programme, meant trading profits from grocery rose from GBP214.1m to GBP239.2m in 2008.

Elsewhere, Premier's chilled and Irish businesses posted a 19.8% rise in turnover to GBP428.3m, thanks in part to the RHM takeover but also to the company's meat-free business. Trading profit from the division rose from GBP40.4m to GBP50.1m.

"Current trading is in line with our expectations and we believe that our brands will continue to be resilient in the difficult economic environment," Premier said. "Food inflation, although at lower levels than in 2007 and 2008 remains a concern, particularly due to the effect of the weakening of sterling."

Shares in Premier were up 23.7% to 35.25p at 15:49 GMT today.