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Premier Foods has raised its full-year expectations after recording a 50% year-on-year hike in trading profits

Premier Foods, owner of Hovis, Bisto and Ambrosia, has raised its full-year expectations after reporting a 50% year-on-year hike in trading profit in the six months to 30 June.

Half-year trading profit from the company’s underlying business has risen from £31.6m a year ago to £47.4m, boosted by a 4% rise in sales of its grocery ‘power’ brands.

The company announced it had already met its 2013 target of making £20m in cost savings – and said it had identified a further £10m in ‘complexity’ cost savings to be delivered in the second half of this year. Two weeks ago The Grocer revealed Premier was looking to further reduce its supply base – halving it by the end of 2014.

“The second half will see further plans to grow our power brands, in addition to a new £10m of cost savings”

Gavin Darby

“We will continue to drive profitable top-line growth by focusing on growing our categories supported by on-going cost savings,” Premier CEO Gavin Darby said in a statement today. “A 50% increase in trading profit is a very encouraging result given the highly competitive environment. This shows that our turnaround strategy is delivering at the bottom line.”

While total branded sales in the grocery division increased 1.3% - driven by the 4% hike in grocery power brands - total grocery sales fell 1% due to an 18.5% drop in non-branded sales as contracts ended. Premier said branded sales now made up more than 90% of grocery sales, with power brands accounting for two-thirds of sales.

Premier said Ambrosia had benefitted from a new marketing campaign and the launch of the new Devon Dream product, while Bisto and Oxo had performed well. The Deli-Box range, launched last year, contributed to the strong performance of Batchelors, it added.

The company also said it was looking to expand its business in growing sales channels such as the discounter sector, through differentiated pack formats.

Sales of Premier’s branded bread – led by power brand Hovis – grew 1.8% year-on-year to £185.2m, with total bread division sales up 8.2% to £355.9m. The bread and milling business is being restructured following the loss of a £75m Co-operative Group contract last year. Three sites have closed this year, with another set to close next month, and Premier has simplified its logistics network. The company is also reconfiguring its milling business.

“The second half will see further plans to grow our power brands, in addition to a new £10m of cost savings,” added Darby. “As a result, we now expect full-year trading profit to be around the top of market expectations.”