Premier sees trading profit tumble

21 February, 2013

Hovis bread producers Premier reveal financial results.

Premier Foods has announced that trading profit from continuing operations has fallen by 17.8% to £154.7m, in its preliminary results for the year ended 31 December 2012.

Sales in its continuing operations were also down 12.2%, to £1.7bn, while adjusted profit before tax stood at £85.2m, up from £72.6m in 2011. Underlying sales (excluding milling) were up 3.2% to £1.3m.

The company’s bread division saw sales drop 0.7% to £688.5m, from £693.5m in 2011, and its divisional contribution also declined by £24.8m to £26.9m, due to an “adverse customer mix, wheat quality affecting manufacturing efficiencies and higher costs to serve”.

Milling sales dropped 0.8% to £191.4m.

The group said sales of its grocery power brands were up 4%, and had delivered four successive quarters’ growth.

Recently appointed chief executive officer Gavin Darby said the foundations had been laid for future growth. “It’s important now to maintain continuity and focus on executing our existing strategies to build further momentum in grocery while rebuilding value in bread.”

Premier said the the firm would aim to rebuild value in the bread division by reducing costs and targeting capital investment in order to enhance flexibility, efficiency and customer service.

During 2012, Premier Foods announced the disposal of its vinegar and sour pickles, Elephant Atta ethnic flour, sweet spreads and jellies, and sweet pickles and table sauces businesses, in a bid to streamline the company.

Challenging year

Mark Moran, chief financial officer at Premier Foods, revealed the firm experienced a particularly challenging year in 2012 for bread sales.

It comes as Premier Foods’ bread division contribution for the year end to 31 December 2012 was down 48% from £52m to £27m.

In a conference with analysts this morning (21 February), Moran said its Hovis bread brand managed to maintain its market share, but the category remained "highly competitive".

He added that Premier had incurred an impairment charge of £36m against its bread division, due to the restructuring activity at the end of last year, which involved the closure of two bakery sites in Greenford, west London and Birmingham, resulting in 900 job losses.

In terms of the group, Moran said the company "achieved a great deal" in 2012, highlighting a 10.6% improvement for underlying business trading profit to £123m during the financial period.

He added the firm experienced four successive quarterly periods of growth for its grocery power brands, explaining the key drivers included key customer collaboration and significant investment made in marketing activity in the division, with Premier more than doubling spend.

Other highlights revealed by the chief financial officer included the proportion of branded sales in Premier’s grocery division, which stood at 87% for the period.

Moran concluded that the 2013 financial period would be a year of restructuring for its bread division.





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