Premier Foods boosted sales in the first half as households turned to home cooking to cut costs, with food prices soaring to 45-year highs.
CEO Alex Whitehouse said Premier’s “broad range of affordable brands” had always played a key role for families when times were tough.
Premier is optimistic this positioning will protect it from trading down to private label. It also launched a ‘Best Restaurant in Town’ marketing campaign to reinforce the message, offering to feed families for less than £1 per portion.
The results were published the same day as the Office for National Statistics revealed food and non-alcoholic beverage prices rose by 16.2% in the 12 months to October – the highest rate on record since 1977.
Premier revenues in the six months to 1 October increased 6.2% to £418.6m, with “particularly strong” year-on-year growth for Batchelors, Loyd Grossman, Sharwood’s, Homepride and Nissin.
Trading profits at the group also jumped 6.2% in the half to £56.7m thanks to the improved performance, with Premier also benefiting from cost-cutting and higher prices.
Whitehouse said Premier was on track to meet full-year expectations but warned of further input cost inflation, which it will attempt to recover through more cost savings and price hikes.
Despite the positive momentum, shares sank 2.5% to 108.2p following the results. The stock is 5.2% down in the year to date but remains well above lows of 19.7p in March 2020.
Shore Capital, house broker for the business, called Premier a “grossly undervalued equity”.
Analyst Darren Shirley said: “It is important to highlight the resilience, nay strength, of the Premier proprietary brand portfolio given the evolving market conditions where private label gains are evident across the board.”
He added Premier had increased its market share in the main, reflecting innovation, brand support and execution.
Martin Deboo of Jefferies called the first-half results “a highly creditable performance and reassuring outlook as the UK contemplates a winter of discontent”.
AJ Bell investment director Russ Mould said Premier was demonstrating genuine pricing power to protect its margins from the impact of rising input costs.
“People are clearly prepared to pay a bit more when it comes to cupboard fillers like Oxo, Bisto, Mr Kipling, Homepride and Paxo rather than trading down to cheaper unbranded alternatives. Premier Foods continues to follow the blueprint established by larger US food producers of innovating within its brands to create spin-off products.
“Premier Foods has benefited from consumers feeling too pinched to eat out or order takeaways as often as they used to. It seems as if there is a tailwind for more meals prepared at home.”
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