Premier Foods underlying profit falls on grocery difficulties

Premier Foods posted its half-year results for the 26 weeks to 1 October on Tuesday, with group underlying sales down 1.8% due to a 4% decline in grocery sales, though that was partly offset by good performance in the sweet treats division of 4.1%.

The company said grocery underlying sales were down 9.5% due to warmer weather after a good first quarter, though sweet treats and international were delivering consistently strong quarter-on-quarter growth.

Total reported sales were up 2.0%, which the board said reflected the Knighton Foods consolidation.

Underlying trading profit was £48.0m, £2.0m lower than last year partly due to an increased marketing investment.

Net debt was reported at £556.0m, which was £29m lower than the first half of last year.

Premier’s combined IAS 19 pensions deficit reached £228.8m, which the board put down to a fall in discount rates, adding that the net present value of its pension deficit recovery schedule was expected to reduce by around £100m.

Profit and net debt expectations for the year remained unchanged.

“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,” said chief executive Gavin Darby.

“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.”

Darby said the board remained confident in its strategic progress, customer relationships and product innovation programme.

“We are pleased with the progress that we have made on the 2016 triennial pension scheme valuations, which has resulted in the NPV of the pension deficit recovery plan expected to reduce by £100m.

“We expect group sales to grow between 2-4% in the second half of the year and our profit and net debt expectations for the full year remain unchanged.”