Premier Foods will continue to develop its Power Brands and deliver a further £10M of cost savings this year, according to a statement accompanying its half-year results posted today (July 23).
Gavin Darby, chief executive officer, said: "The second half will see further plans to grow our Power Brands, in addition to a new £10M of cost savings that we have now identified from our efforts to reduce complexity."
The firm now expected full-year trading profit to be "around the top" of market expectations.
Its half-year results revealed Power Brand sales up by 4% – registering six successive quarters of growth for the key brands, which were picked out to remedy the firm's plunging profitability.
Darby has backed his predecessor Michael Clarke's plan to stake Premier Food's recovery on the success of the power brands: Hovis, Mr Kipling, Bisto, Oxo, Ambrosia, Batchelors, Sharwood's and Loyd Grossman.
Pre-tax loss of £23.5M
But, Premier Foods made a pre-tax loss of £23.5M, after allowing for restructuring costs and interest payments. The result compared with a losses of £45.8M in the same period of last year.
Underlying business trading profit was up 50% to £47.4M. Recurring cash flow guidance for this year was lifted to between £50M – £70M.
Darby hailed the 50% increase in trading profit is a "very encouraging result" given the highly competitive environment.
"This shows that our turnaround strategy is delivering at the bottom line," he said. "We have now grown sales in our Grocery Power Brands for six consecutive quarters, as we continue to build partnerships with our customers, deepen our understanding of consumers and invest more effectively in supporting our brands."
£20M of overhead cost savings
The firm had completed the actions to deliver the promised £20M of overhead cost savings for 2013 and continue to keep a tight control over costs. "The restructuring of our bread and milling business is ahead of plan and we are taking the decisions necessary to create a more sustainable platform for this business," he added.
Last month, the firm axed 43 jobs at its Barry mill in the Vale of Glamorgan.
The sale, accompanied by plans to restructure the milling business in two parts, positioned it for sale , said Investec analyst Martin Deboo. "Premier could either sell the third-party milling business – which is what ABF did to ADF 15 years ago – or sell the whole milling business," Deboo told FoodManufacture.co.uk last week.
Meanwhile, Darby pledged to continue driving profitable top-line growth, by focusing on growing categories alongside further cost savings generated by reducing complexity.
Disposals this year had allowed the debt-laden firm to cut net debt from £950.7M at the start of the year to £890.4M.
"At the right time, we will address our capital structure – from a position of growing strength given the delivery of our turnaround plan and the performance of our Power Brands," said Darby. "I am excited by the potential offered by Premier Foods in the longer term."
