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Premier Foods (PFD) recovery came to a halt in the first half as sales stalled and profits fell as unseasonably warm weather turned customers away from its gravy, stocks and puddings.

Group sales for the 26 weeks ended 1 October decreased 1.8% to £348m as a result of a slump in the second quarter after encouraging growth in the first quarter.

Branded sales were down 3.7% for the half to £295.4m, with a 5.9% decline in branded grocery sales partly offset by a good performance in the sweet treats, which grew sales 4.1% thanks to its Cadbury cake ranges and non-branded expansion.

Underlying trading profit was £2m lower than a year ago at £48m as a result of the fall in sales and increased marketing investment.

Pre-tax losses extended from £5.1m in the first half of 2014/15 to £8.7m as finance costs increased.

CEO Gavin Darby said: “Following a good first quarter where we saw a number of our brands in growth, the second quarter was much weaker in our grocery business due to warmer weather which resulted in lower sales in the first half overall. However, our sweet treats and international businesses continued to demonstrate their strong momentum, delivering against our strategic priorities and growing over 4% and 9% respectively.”

He added he was confident in the ongoing strategy and expected sales to grow by 2-4% in the second half, with profit expectations for the year unchanged at the expense of the planned £8m increase in marketing.

Premier’s net debt was £29m lower at the period end at £556m, with the pension deficit standing at £228.8m.

The sales slump had already been priced into Premier’s stock back in October when the shares slumped after the gloomy second quarter update. The shares opened 4.4% higher this morning at 47.1p as the supplier said its main exposure was to the euro rather than the US dollar and it expected to be able to fight off any cost price inflation in the rest of the year.

Morning update

Growth at Aldi and Lidl has slowed to the lowest level since the end of 2011 as Tesco and Morrisons have started to make steady recoveries, according to Nielsen retail performance data. During the 12 weeks ending 5 November 2016, Aldi’s year-on-year sales revenue increased 11.3% – whilst Lidl’s increased 5.2%. The combined figure across the two discounters is the lowest for five years. However, Nielsen said the current growth still far outstripped the 1.4% rate across the overall UK grocery market.

“It’s inevitable that a time would come when the discounters experienced a slowing growth rate, and three factors have combined to see this happen,” added Mike Watkins, Nielsen’s UK head of retailer and business insight. “Firstly, the growth rates a year ago were particularly high due to a period of new store openings, so it’s always harder to maintain growth against that. Secondly, the supermarkets have had more time to alter strategies to fend off the discounters, particularly Tesco whose recovery continues apace – its 2.3% growth was the strongest in over three years.

“Finally, shoppers are still spending freely and we’ve seen a return of sustainable growth in the volume of items people are buying, helped by industry-wide price cuts, so one of the discounters’ USPs is less pronounced in shoppers’ minds.”

Revenues were up 1.1% at the supermarkets in the four weeks to 5 November year on year, which is the highest figure, excluding Easter-inflated periods, since the end of 2013 the fourth consecutive month of growth in money taken at the till and volume of goods sold.

Meanwhile, the latest figures from Kantar Worldpanel for the 12 weeks to 6 November 2016 revealed that Tesco has grown at its fastest rate in three years, with sales increasing by 2.2%. Iceland also recorded strong growth with sales up 8.3% as it looks to move its product range upmarket. Overall supermarket sales increased 0.8% year-on-year, the second consecutive month of growth. Sales at Sainsbury’s declined by 0.7%, contributing to a 0.3 percentage point fall in market share to 16.3%. Asda’s rate of decline slowed slightly to 5.0%, though increased sales in its premium own-label lines were a bright spot this period. Morrisons too saw a boost in premium own-label thanks to its ‘The Best’ line, though total sales fell by 2.4% in line with the context of a smaller store estate.

Grocery deflation now stands at 0.5%, though prices could start to rise in the coming months, Kantar said.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel,added: “Tesco’s 2.2% growth is a considerable improvement on the numbers it was delivering this time last year, and indeed in 2014. Branded sales did see an increase but most of the gains were made through its own-label products, both at the cheaper and more premium ends of the price spectrum. Tesco’s Farm Brands continue to benefit from sales growth in fruit and vegetables, while the premium Tesco Finest range has grown by 6% in the past 12 weeks, notably in crisps, fresh meat and chilled convenience. Much of Tesco’s growth has come from more affluent shoppers returning to the store, and average spend per trip is up by 2.1% to £20.69.”

Tesco has made strong gains this morning, with shares up 3.4% to 212.7p. Sainsbury’s was up 1.8% to 240.8p and Morrisons benefitted from investors buying into the sector, with shares up 3% to 218.9p. Ocado climbed 2.6% to 279.5p on sector confidence.

Sales at discount chain B&M European Value Retail (BME) soared 19% to £1.1bn in the first half as the business opened 20 net new stores in the UK, including its 500th shop in April. It is on track to open at least 50 new outlets this financial year.

However, like-for-like sales were almost flat for the 26 weeks to 24 September, with growth of 0.2%, as a result of cannibalisation of the new stores. The business said underlying like-for-like sales were up 1.9% when this effect was stripped out.

B&M has a total of 585 stores, with 519 in the UK and 66 in Germany under the Jawoll fascia.

Adjusted EBITDA jumped 15% to £99.2m and adjusted pre-tax profits climbed 17% to £77.9m.

Chairman Sir Terry Leahy said: “With our strong value proposition, unique sourcing model, financial strength and well-invested store network and infrastructure, B&M is equipped to prosper in a challenging and uncertain retail environment. B&M has a proven strategy for growth with plenty of opportunity for high returning store expansion in our chosen markets, and we can fund that investment comfortably from our internal cash resources. These characteristics are rare in modern retailing.”

Shares in B&M climed 4% this morning to 248.1p on the growth.

Yesterday in the City

Greencore (GNC) shares soared 9.5% to 319.7p after it announced the $747.5m acquisition of US convenience food supplier Peacock. The food-to-go and ready meal specialist said the deal had the potential to transform its market and channel position in the US.

A note from David McCarthy at HSBC upgrading Tesco (TSCO) to a buy sent the stock up another 3.9% to 206.2p. The retail analyst said the supermarket’s recovery was gathering pace. “Volumes, cash sales and market share are all improving,” McCarthy added. “At the same time, the company is keeping a tight control on costs to ensure the high contribution margin of extra sales falls through to the bottom line, allowing further investment in price. This momentum gives Tesco firepower to defend against Asda or to fund its own pricing initiatives.”

CARR’s (CARR) also had a good day, up 3.3% to 143p, after it increased EBITDA by 6.6% to £16.5m, despite sales falling 4.9% to £314.9m.

The FTSE 100 nudged up 0.3% to 6,753.18 points thanks to banking and mining stocks rallying. However, falls in utility companies offset the gains.

Associated British Foods (ABF) closed down 3% to 2,526p after some good gains last week following a positive set of full-year results.

TATE & Lyle (TATE), SSP Group (SSPG) and Reckitt Benckiser (RB) all finished in the red, down 1.7% to 667.5p, 1.2% to 325.5p and 1.1% to 6,795p.