Premier Foods (LON:PFD) said full-year trading profit rose ahead of its upgraded expectations, helped by stronger branded sales in the second half, market share gains and continued growth from its acquired brands.
Speaking on the company’s results call for the 52 weeks ended March 28, Chief Executive Alex Whitehouse said U.K. branded revenue growth accelerated through the second half, including 5.1% growth in the fourth quarter. He said a strong Christmas performance carried into the final quarter, helped by an early, cold Easter that supported sales of products used in roast dinners.
Revenue and Profit Rise as Branded Sales Lead Growth
Premier Foods reported revenue of £1.175 billion, up 2.5% from the prior year. Branded revenue was £1.042 billion, up 3.4%, with second-half branded revenue increasing 4.7%.
Whitehouse said the company increased market share in both grocery and sweet treats in the U.K., as well as in Australia, which he described as the company’s largest market outside the U.K. and the only other market where Premier Foods has reliable market data.
Trading profit rose 6.7% to more than £200 million. Adjusted earnings per share increased 8.7% to 15.8 pence, supported in part by lower interest costs. Free cash flow rose 9.1% to £153 million, while net debt fell by £48 million and leverage declined to 0.4 times net debt to EBITDA.
Chief Financial Officer Duncan Leggett said cash generation had historically gone toward servicing the pension scheme and debt, but the company can now deploy more cash back into the business. “The good news is now we can invest it back behind the business,” he said.
Dividend Increase and Interim Dividend Planned
The company proposed a 20% increase in its final dividend for the last financial year. Whitehouse said the board is also planning to introduce an interim dividend beginning with the current financial year, with further details expected after half-year results in November.
Leggett said the proposed final dividend would be more than triple the level at which the company started paying dividends. He also said the planned interim dividend could be viewed as partly funded by savings from the pension scheme, after the company agreed with trustees that it no longer needs to fund the scheme’s administration costs.
Leggett said that change will save £5 million in cash annually. He said that, together with the earlier removal of deficit contribution payments and the dividend match to pensions, Premier Foods is no longer paying close to £50 million annually into the schemes that it otherwise would have paid.
The CFO also said the pension scheme now shows a small surplus on a buy-in basis, earlier than expected. He cautioned that it remains “early days” and declined to quantify the surplus during the question-and-answer session.
Grocery and Sweet Treats Both Contribute
In the grocery division, branded revenue rose 2.3%, with a stronger second half up 4.3%. Leggett said acquired brands The Spice Tailor, FUEL10K and Merchant Gourmet all grew in strong double digits. Non-branded grocery revenue continued to decline as the company “right-sizes” that business, but Leggett said the non-branded business is about 25% smaller by revenue over five years and twice as profitable.
Sweet treats delivered what Leggett called “another fantastic year,” with branded revenue up more than 7% for the second consecutive year. Total sweet treats revenue rose 5.5% to £315 million, while divisional contribution increased 18% to £42 million. Leggett said branded mix, higher factory volumes and efficiency gains supported margin improvement.
Whitehouse said innovation drove much of the sweet treats growth, citing Mr. Kipling Breakfast Bakes, Birthday Cake Tarts and Cake Bites. He said the company also saw success from Oxo bone broth and Angel Delight Bubble Jelly, both examples of applying new consumer trends to established brands.
Investment, Acquisitions and International Expansion
Premier Foods invested £52 million in capital expenditures during the year, up 25% from the prior year. Leggett said the company expects capital expenditures of about £55 million to £60 million in the coming year, tied to investments at its Worksop, Carlton and Lifton sites, along with cost and efficiency projects.
Whitehouse highlighted a new manufacturing line at the Carlton cake factory for Mr. Kipling fruit pies, boiler upgrades at Lifton and Worksop, and a solar farm at Worksop with 3,500 panels that can supply up to 70% of the site’s energy needs on sunny days.
The company’s new category sales rose 37%, with Whitehouse pointing to Ambrosia porridge, Cape Herb & Spice and FUEL10K protein yogurts as examples. Ambrosia porridge grew 19%, while Cape Herb & Spice rose 23%.
International revenue fell 1.8%, which Whitehouse attributed to reduced cake stock holdings in Australia. He said underlying in-market performance remained strong, with Mr. Kipling retail till-scan growth of 10% in Australia and New Zealand and record household penetration of 21.3%. Outside that stock effect, he said the rest of the international businesses grew 10% in aggregate.
In the U.S., sales rose 17% as Mr. Kipling apple and cherry pies were introduced into a Kroger region. Whitehouse said the company has also started selling slices in Kroger and is testing lemon and chocolate slices in 560 Walmart stores. In Europe, revenue rose 9%, supported by FUEL10K launches in the Netherlands and Belgium and increased Sharwood’s distribution in France.
Outlook Unchanged as Company Monitors Costs
Whitehouse said Premier Foods remains on track for the current year and that expectations are unchanged. He said the company plans further branded revenue growth, continued product innovation, more brand support and additional work to develop Merchant Gourmet following its acquisition.
During the Q&A session, analysts asked about consumer demand and cost inflation. Whitehouse said he was not seeing a dramatic change in consumer habits affecting the company, citing the resilience of its portfolio. On costs, he said Premier Foods has contracts and hedges in place that provide time to monitor developments, including geopolitical events, and would take pricing action if needed.
Leggett said the company had amended and upsized its revolving credit facility to £367.5 million and extended the maturity from 2029 to 2031. He said the company will update interest guidance after refinancing its bond.
Whitehouse also addressed questions about GLP-1 weight-loss medications, saying Premier Foods currently sees them as a “net opportunity rather than a net risk.” He said company research indicates consumers using the drugs are eating out less and preparing more food at home, while seeking more fiber and protein—areas where he said FUEL10K and Merchant Gourmet are well positioned.
“We’re exactly where we expected to be,” Whitehouse said of the current year. “We’re on track.”
About Premier Foods (LON:PFD)
Premier Foods plc, together with its subsidiaries, manufactures and distributes branded and own label food products in the United Kingdom, other European countries, and internationally. The company operates through Grocery, Sweet Treats, and international segments. It offers a portfolio of product categories, including flavorings and seasonings under the Bisto, OXO, Paxo, and Saxa brands; cooking sauces and accompaniments under the Sharwood's, Loyd Grossman, Spice Tailor and Homepride brands; quick meals, snacks, and soups under the Batchelors and Smash brands; ambient desserts under the Ambrosia, Bird's, and Angel Delight brands; and ambient cakes under the Mr Kipling and Cadbury brands.
