Source: Premier Foods

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Premier Foods has posted a double-digit rise in sales and profits as it gained market share and volumes returned to growth in its fourth quarter.

The Batchelors and Mr Kipling maker posted headline revenue growth of 15.1% in the year to 30 March to £1.12bn.

UK branded revenue was up 13.6% in the period, supported by increased marketing investment across all major brands.

Grocery revenue increased by 16.7% in the year to £835.5m, with branded revenue up 16.5% to £740.4m. Non-branded revenue increased by 17.8% to £95.1m, largely due to pricing to recover input cost inflation in retailer branded product ranges.

In the fourth quarter, grocery headline revenue increased by 10.3%, with branded growth of 12.4% partly offset by non-branded revenue, which was 5.4% lower.

Grocery volumes returned to growth in the fourth quarter, as elasticity effects of price increases dissipated. In the second half of the year, the group implemented sharper promotional pricing across a number of its products, such as Loyd Grossman cooking sauces and Batchelors Super Noodles, which served to strengthen these volume trends.

Revenue increased by 10.6% in its ‘sweet treats’ division, with branded revenue up 4.2% and non-branded revenue ahead 36.9%.

The growth in non-branded was consistently strong throughout the year and was due to a combination of contract wins in pies and tarts and price increases on existing ranges.

In the fourth quarter of the year, sweet treats revenue increased by 6.3%, with branded revenue up 5% and non-branded revenue ahead 16.7%.

Revenue overseas increased by 12% compared with last year. In-market cake sales in Australia continued to grow, but revenue was impacted by reduced shipping times, which in turn led to lower stock holdings in the supply chain.

Trading profit increased by 14% to £179.5m, lagging the headline growth rate as group and corporate costs were higher in the period due to investment to improve planning systems and support strategic priorities, wage and salary inflation and wider management incentive scheme costs.

Trading profit margins of 16% were broadly in line with the prior year.

Adjusted profit before tax increased by 15.1%, while profit before tax up 34.7% to £151.4m.

CEO Alex Whitehouse commented: “This has been another really strong year for the business with considerable progress across all our key financial metrics and five pillar growth strategy.

“Our brands continue to demonstrate their relevance to consumers, helping them cook and prepare nutritious and affordable meals during what has been a challenging time for many people. All our leading brands benefited from increased marketing investment, as we extended our ‘Best Restaurant in Town’ campaign into its second year.

“We continue to invest in our manufacturing sites, with capex stepping up as planned to £33m, as we invest in driving efficiencies and facilitating growth through product innovation. Our expansion into new categories is proving to be particularly successful with revenue growing by over 70%, led by Ambrosia porridge.

“International sales grew by 12% with The Spice Tailor delivering returns ahead of plan and distribution now available in 10 countries. We were also delighted to acquire Fuel10K, which is now fully integrated into the core business, is performing very well and for which we have exciting future plans.

“We continue to maintain our strong financial discipline; leverage reduced to 1.2x net debt/EBITDA this year, our lowest ever level, and we are proposing another 20% increase in the dividend. We recently announced the suspension of pension deficit contributions, significantly increasing our free cash flow, which enhances our ability to invest in infrastructure and pursue M&A opportunities to deliver future growth.

“We have a strong set of plans for this year, across each of our strategic pillars and with our return to volume growth, we are on track to deliver on full-year expectations.”

Premier Foods shares have opened down 0.7% at 167.3p despite the strong results.

Morning update

UK shoppers spent a more than £50bn on fmcg goods in the first quarter, an uplift of 6.2% as volume growth returned amid easing inflation.

UK consumers spent £50.2bn on fmcg goods in Q1, up 6.2% year on year, according to NIQ.

Although consumer confidence remains cautious, slowing food inflation (down to 3.7% in March) is enabling shoppers to add more items to their shopping basket.

This has helped to drive minor positive volume growth throughout Q1 2024 for the first time since Q1 2021.

This unit growth was driven by fresh and perishable food (up 6.8%), due to its faster drop in inflation. As a result of slowing price increases, despite an improved volume trend, there is a slowdown in value growth from 7.1 in Q4 2023 to 6.2% in Q1 2024.

Private label fmcg growth continues to outpace branded growth and 23.4% of all spend in Q1 2024 was sold on promotion. This is an uplift from 20.1% which was recorded in Q1 2023.

Ben Morrison, retail services director UK & Ireland at NIQ, commented: “It’s clear that there’s been a steady uplift in sales for fmcg, particularly as inflation continues to slow. The prospect for the rest of the year is cautiously optimistic. We see the reduction in inflation continuing to help fuel shopper sentiment. Consumers are still cautious around their spending – particularly on larger, more expensive goods – and this continues to impact T&D.

“Political and economic uncertainty continues to impact bigger ticket spending but we still see products that deliver value and clear benefits are being prioritised – whether it be for niche or specialised use, eg action cams for content creation, enhanced gaming experiences, convenience around the home, or meeting the underlying desire for aspirational and innovative products.

“As the weather, hopefully, improves and we move into an eventful summer that is driven by sporting events such as the Euros and Olympics, we’re optimistic that this will further drive levels of discretionary fmcg and tech & durables sales.”

On the markets this morning, the FTSE 100 has fallen back 0.4% to 8,414pts.

Risers include Glanbia, up 4.5% to €18.44, PZ Cussons, up 1% to 109.3p and THG, up 1% to 71.9p.

Fallers include Nichols, down 2.4% to 1,000p, Tesco, down 2.2% to 303.7p and McBride, down 1.7% to 109.1p.

Yesterday in the City

The FTSE 100 set another closing record of 8,445.8pts yesterday after rising a further 0.2%.

Britvic was a major riser yesterday, rising 11% to 1,018p after rising first half volumes helped the soft drinks giant boost revenues and profits.

Imperial Brands was up 5.8% to 1,986.5p as an 8.6% increase in tobacco pricing helped offset a 6.3% decline in volumes in the first half to 31 March.

Other risers included Virgin Wines, up 4.4% to 48p, THG up 2.5% to 71.2p, Premier Foods, up 2.2% to 168.6p, Coca-Cola HBC, up 2.1% to 2,780p, Greencore, up 1.9% to 139p and Nichols, up 1.5% to 1,025p.

The day’s fallers included Compass Group, down 3% to 2,252p despite raised profit expectations for the year after revenues increased 11.2% in the first half.

Other fallers included B&M Retail Value Retail, down 2.4% to 525.2p, Ocado, down 1.8% to 363.1p, PayPoint, up down 1.5% to 536p, Diageo, down 1.3% to 2,803p and Tesco, down 1% to 310.7p.