UK: Premier sales slide but trading profit improves
Power brand sales under pressure but profits up at Premier
Premier Foods plc booked a drop in first-half underlying sales this morning (22 July) but higher trading profit enabled the group to reaffirm its expectations for that metric.
The UK food maker said trading profit increased 2.1% in the six months to 30 June, climbing to GBP48.1m (US$82.1m). The company has sold control of a number of under-performing units, including the formation of a JV with Gores Group to run its Hovis bread business. When adjusted for the sale of these lower-margin units, trading profit from continuing operations edged up just 0.1%, Premier revealed.
CEO Gavin Darby stressed the firm was able to report this increase despite a 6.1% drop in underlying sales.
As Premier has shifted its sales mix to focus on brands that offer higher returns, it has increased its focus on brands including Ambrosia, Oxo and Mr Kipling. However, the firm's so-called power brand sales were down 4.1% in the period.
"We are adapting quickly to the changing external environment through retaining a tight control of costs and margins and have a strong programme of consumer marketing and new product introductions planned for the second half of the year.
"Assuming normal weather patterns, we expect an improved second half branded sales performance and our trading profit expectations for the year remain unchanged," Darby said.
Premier also posted an operating loss of GBP10.1m amid charges including a jump in impairment costs. It booked a net loss of GBP51.9m, against GBP9.3m a year earlier, thanks to an increase in finance costs.
Trading profit increased 2.1% in challenging markets
· Underlying business Trading profit up 2.1% to £48.1m
· Sales 6.1% lower due to challenging market conditions in our categories
· Strong second half programme of consumer marketing and new product introductions
· Continued progress on cost reduction and business simplification
· Trading profit expectations for the Full Year unchanged
· Category review confirms long-term potential for value creation through investment in brands, innovation, supply chain and people
Premier Foods today announces its Half Year results to 30 June 2014.
Gavin Darby, Chief Executive Officer, said:
"I'm pleased to report a modest increase in Trading profit in the first half of the year, despite a fall in sales volumes which reflects the challenging market conditions in our categories.
"We are adapting quickly to the changing external environment through retaining a tight control of costs and margins and have a strong programme of consumer marketing and new product introductions planned for the second half of the year. Assuming normal weather patterns, we expect an improved second half branded sales performance and our Trading profit expectations for the year remain unchanged.
"Following an update of our category plans, we remain convinced of the medium and long-term potential for our brands to deliver profitable growth. We plan to continue investing in innovation, marketing, our supply chain capabilities and our people to create long-term shareholder value."
Original source: Premier Foods
Companies: Premier Foods plc
- Comment: Premier has more to ponder than Brexit
- 2017: three major drivers of M&A strategy
- The food market in 2017 - consumer trends and M&A
- Trump seen as negative for global food trade
- Analysis: B&G Foods balancing growth and decline
- Nestle mum on Mead Johnson takeover talk
- Premier Foods issues profit warning
- Unilever rebrands I Can't Believe It's Not Butter
- Mondelez sells Vegemite to Bega
- Kellogg to slash 250 jobs