Premier Foods lifted by key brands

Loss-making Premier Foods – home to brands such as Bisto and Mr Kipling – today insisted that it was on track for a better-than-expected year as its turnaround continues

Cost savings and a sixth consecutive quarter of growth for its frontline brands, which also include Ambrosia and Batchelors, meant losses for the six months to 30 June were cut by around half to £23.5 million.

Shares in the group jumped more than 6 per cent in early trading after it said profits at a trading level should be around the top of City expectations for the whole of 2013.

Chief executive Gavin Darby described the company’s half-year performance as “very encouraging” given the level of competition.

Trading profits rose by 50 per cent to £47.4m, with sales of its key brands up by 4 per cent.

Bread sales reduced by 0.7 per cent to £240.6m, and the Hovis-branded division is set to lose £75m in annual sales after opting not to renew a low-margin contract with the Co-operative supermarket chain in late April.

The firm is restructuring the operation, including through the loss of around 900 jobs by closing bakery sites at Greenford and Birmingham.

Overall, cost savings worth £20m have been delivered but Premier said it expects an additional £10m will be achieved through a drive to reduce complexity across the organisation.

St Albans-based Premier, which has debts of £890m following a spending spree that included Mr Kipling owner RHM, has sold a number of businesses in the last year, including Sarson’s vinegar and Haywards pickles.

Analysts at Shore Capital said: “Premier does not have a sustainable balance sheet and the big event for us is the ‘when not if’ of a capital restructuring, which may involve an amalgam of equity and corporate bond financing.”