Source: Premier Foods

Premier Foods shares were on the up again on Thursday as it upgraded profit expectations after maintaining bumper growth in its second quarter.

The listed ambient supplier posted quarterly sales growth of 19.2% to £484.4m (not including Knighton Foods) in the first half of its financial year to 30 September.

Branded revenues were up 15.8% with branded revenue growth overall but were marginally lower at 14.3% in the second quarter; non-branded sales were up 28.7%.

Total grocery sales (including acquisitions) were up 24.6% in the first half, with major brands such as Ambrosia, Batchelors and Oxo benefiting from increased marketing support. Its sweet treats division was up a more modest 5.4%, with branded revenue down 2.6% as the Mr Kipling brand saw lower volumes owing to price elasticity.

However, Premier said it continued to grow faster than the wider market, gaining 113 basis points of share in its grocery categories. And it noted that grocery volume trends improved in the second quarter, as promotions increased and it has promised to “start reducing average prices across a number of major brands” through “lower promotional pricing”.

Trading profit increased by 19% to £67.5m as it held margin in line with last year at 13.9%. Adjusted pre-tax profit increased 21.2% to £56.9m.

Premier also said it had made a “good” start to its third quarter, as it continues to implement its programme of brand investment, new product launches and in-store execution.

Given the robust first-half trading and solid start to the second half, the group raised its profit expectations and now expects full-year trading profit to be 10% ahead of last year.

Broker Jefferies said the results showed Premier was “firing on all cylinders”, noting: “Q2 saw a part-annualisation of the first 2023 price increase, such that volumes must have trended positively through the period… Premier is clearly delivering on each of its strategic growth pillars [and] this is driving trading momentum, share gains, and earnings upgrades.”

Shore Capital commented: “In a UK grocery market where private label continues to gain market share, we see proprietary brand dominant Premier’s grocery performance as commendable.

“We believe that the Group’s equity quite simply does not reflect the progress, current momentum, or prospects for Premier Foods, believing there to be at least 50% upside in its equity valuation.”

Premier Foods shares rose a further 1.5% on Thursday to 132.9p and are up by more than 16% in the past month, and 21.5% year to date.