Premier Foods leave sour taste with declining revenues
Premier Foods has suffered a decline in revenue and operating profit in its half-year results.
The owner of beloved household brands such as Mr Kipling, Ambrosia, Angel Delight, Sharwoods, and Oxo has left investors with a sour taste in their mouths as earnings per share have halved since the previous year.
In its half-year report, Premier Foods’ year-on-year revenue has fallen 6.5 per cent to £394.1m, its operating profit has declined 21.3 per cent to £51.3m, while earnings per share have dropped from a healthy 5.1p to a miserly 2.5p.
There were a few spoonfuls of sugar such as net debt decreasing 14.4 per cent from £403.1m to £345.0m, while its pension plans have enjoyed a £67.8m boost and now total £607.7m.
However, the group has faced declining sales after a stellar year characterised by a boom in home-cooking.
Following the results, its shares on the FTSE 100 have dropped 2.45 per cent since markets opened.
Despite the disappointment of the top-line figures, Premier Foods has sought to paint the results as a consolidation of strong growth during the pandemic, comparing its results positively to two years ago.
Alex Whitehouse, chief executive officer, argued revenues and the growth of its food brands remained well ahead of schedule compared to 2019’s results.
The CEO also spoke positively about how the food giant had successfully navigated difficult supply chain issues in the industry and a tough macro-economic climate.
He said: “I am particularly pleased with how well the business is successfully navigating the widely reported industry wide challenges including logistics, labour shortages and input cost inflation to deliver such a strong set of results, which again underlines the robustness of our operating capabilities.
The CEO believes the company is entering the second half of the year with “strong momentum”, with lower interest costs on its earnings and hefty expansion plans underway including rolling out Mr Kipling in the US.
Whitehouse added: “We enter the second half of the year with strong momentum, and with a series of exciting plans in place for our brands, we remain firmly on track to deliver on our profit expectations for the full year.”
This perspective was echoed by investment bank advisory group Peel Hunt, who continue to recommend buying the stock.
It argued that profits and sales being behind last year’s total was “unsurprising”.
They said: “The company has a busy six months ahead, with six of the key brands being advertised and a number of new product launches, including entry into the ice cream category and Mr Kipling biscuits. The shares continue to look excellent value to us given the strong underlying revenue and margin performance, combined with healthy cash generation.”
Premier Foods is fully on track to deliver full-year profit expectations and to pay dividends on a full year basis.
Alongside the results, Premier Foods unveiled its ‘Enriching Life Strategy’ last month ahead of COP26 in Glasgow.
The ESG plan includes not just environmental targets but for its products to meet high nutritional standards amid government crackdowns on sugary goods.