Premier Foods plc CEO Robert Schofield today (15 February) insisted the UK’s largest food group would have a “greater focus on growth” in 2011 after a year in which the company reshaped its structure and sought to improve its financial position.
Speaking to analysts after Premier announced its 2010 financial results, Schofield said the company was, after four years of significant change at the business, “better focused for branded growth”.
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Schofield pointed to Premier‘s new organisational structure, first announced in December, which included the creation of a new position of chief operating officer to drive sales of branded products.
The Premier chief said the company had reverted back to a more “centralised” structure, following four years of operating as separate divisions in the wake of the acquisition of RHM.
Schofield said the change – which he dubbed as a return to “a One Premier approach” – meant the company had “a clear brand focus and a functional alignment across our group”, which, he added had “enabled us to make certain changes to our organisation management-wise to support and emphasise our drive for growth”.
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Alongside these changes, Premier has recently announced the disposals of its meat-free business, including the Quorn brand, and its canned grocery operations. The deals have enabled Premier to lower its debt to under GBP900m (US$1.45bn), compared to GBP1.37bn a year ago, and obtained a credit rating to allow the company to access bond markets.
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By GlobalData“We have spent the best part of the last four years commercially restructuring the business, we then closed 13 factories and changed the distribution, which took us another 18 months and latterly we have been doing financial restructuring and the disposals that have helped in that regard,” Schofield said. “Those things are largely behind us and we’re now moving to a greater focus on growth.”
Schofield put an emphasis on Premier’s plans for consumer marketing and for new products in 2011. “We’re going to see more innovation in 2011 than we’ve managed for the last two to three years,” he said.
Premier’s 2010 results, including an improvement in trading profits, and the positive news on its credit rating helped drive the company’s shares higher today. At 15:25 GMT, Premier’s stock was up 8.1% at 23.9p.
The company received some praise from analysts. Investec‘s Martin Deboo said: “In conjunction with the recent sequence of financing successes in the form of restructuring interest swaps, two material disposals and the achievement of a credit rating, this result has something of a corner-turning quality to it for us.”
However, like many food manufacturers, Premier has faced rising commodity costs and the company, which makes brands including Hovis bread, has seen input prices rise by 5-6% in its categories. Schofield cited the rising price of wheat, oils, cocoa and cartons.
Nevertheless, Schofield insisted Premier had succeeding in raising prices to cover those costs and was confident that the company could manage the pressure on its raw-material bill. “We have a track record, particularly with our branded portfolio as high as it is, of being able to recover the price increases and we say that this situation is manageable,” he said.
One notable challenge that lies ahead for Schofield and Premier’s management is returning the company’s private-label convenience food business Brookes Avana to profit.
The Premier chief said the division had been “our big problem in commercial terms in 2010”. Sales were down 4.7% but Schofield preferred instead to focus on the general over-supply in the UK ready-meals sector, which, he said, was hurting Brookes Avana.
“The ready-meals sector continues to be oversupplied and what we are having to do increasingly is defend the contracts we’ve got pretty ferociously in tender processes and that has taken away our ability in 2010 to get our prices up to cover commodities. That has been what hit us in the main,” Schofield said.
Over 90% of Brookes Avana’s business is with Marks and Spencer. Schofield said Premier was “indulging in quite significant conversations” with M&S and said he was “pleased with the progess” the manufacturer was making to “get the right mix of supply contracts, the innovation they require and the price increases we might need to offset some of those commodity-cost issues”.
He said Premier was looking to “diversify” Brookes Avana’s customer base and secure contracts with more retailers but admitted “that takes a bit of time”. However, he added: “We think that we will make progress in 2011 and return this business to profit.”
