Premier Foods (PFD) said it was starting to see the benefits of the brutal grocery price war as the supermarkets fight back against the growth of the German discounters.

The group added there was evidence the growth of Aldi and Lidl was starting to slow and volume was returning to the big supermarkets.

The owner of Mr Kipling, Bisto and Ambrosia reported a fourth successive quarter of improvement in its sales as its power brands slipped 1.6% to £124.9m in the three months to 4 April – better than the 3.5% of the previous period and 5.1% before that.

However, overall full-year revenues fell 4.5% as the tough market conditions persisted. Pro forma total sales (stripping out Premier’s accounting period change and business disposals) for the 52 weeks ended 4 April 2015 were £767.4m compared to £803.3m for the prior year.

In its final quarter, total sales were 0.6% lower than the comparative period at £186m, while branded sales were broadly flat.

Trading profit for the year was in line with expectations at £131m, though it recorded a £135.6m pre-tax loss thanks to exceptional costs – notably an impairment of goodwill of £67.9m in respect of its Sweet Treats business.

Shares in the group were 2.4% down to 45.9p by the end of the day.

“The UK grocery market remains highly competitive,” Premier said. “Previous quarters have been characterised by the well documented growth of the discounter, convenience and online channels, and while there was a broad continuation of these growth trends in the quarter, there is increasing evidence that the growth in the discounter channel in particular is slowing. With a degree of momentum building in the traditional supermarket channel, the growth profile of the different sub-channels is displaying signs of converging.”

Investment bank Jefferies said there was “plenty to applaud” in the preliminary results. Analyst Martin Deboo added: “The top line is improving. Profit expectations are now being delivered against, after increased marketing. Debt is falling. The pension deficit is a reducing burden, at least in accounting terms, and now rising discount rates should assist further.

“Offsetting worries are the risk that the focus of fresh retailer pricing investment shifts from fresh and own label categories to brands; the tougher comps to come in H2 and what looks like tough trading in wet sauces. The work continues.”

Premier also revealed it had improved position on its pension deficit, which reduced to £211.8m from £603.3m last year. And its net debt sat at £584.9m at the year end, significantly lower after the £1.1bn refinancing last year.

CEO Gavin Darby said: “Across our branded portfolio, we have delivered volume and value share gains, while we have driven growth in our cake and flavourings and seasonings categories.

“Over the last twelve months, six of our major brands have benefitted from TV advertising and we have launched a number of new products to market, with more to come this year. We have also made good progress with our major customers and we now hold significantly more category captaincy roles than we did three years ago.

“While it is encouraging to note the return of volume growth to both our categories and the wider grocery market, we expect the near term trading environment to be challenging, and our expectations for the year are unchanged.”

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