A leading City analyst has described the turnaround in revenue at Premier Food as “no mean feat” given the challenging FMCG climate.
Investec’s Nicola Mallard said that Premier’s recently revealed first-half results, where group ebitda for was up 9.2% from £53.4m to £58.3m, had “provided evidence that the plan to reinvigorate its brands is starting to bear fruit”.
She said: “Where the group has invested, to date, there was clear evidence of revenue growth. After a better 2Q performance, undistorted by a moving Easter, the group delivered modest (0.4%) 1H top line growth.”
In its recent update Premier said it Sweet Treats division had seen 0.8% growth from £93.1m to £93.8m for the 26 weeks to 3 October 2015. And it revealed that its branded sweet treat sales, which include Mr Kipling ambient cakes, had seen a 54.2% increase in profitability to £7.4m, despite sales being down by 1.3% to £80.4m.
Chief executive Gavin Darby said: “ The industry backdrop remains challenging, but with strategies which are delivering tangible results and significantly higher marketing spend planned for the second half, our profit expectations for the year remain unchanged.“
Mallard added: “It would be dangerous to extrapolate too much from a single quarter, but with plans for further investment in the group’s seasonally important Q3, we expect to see a continuation of this positive trend in 2H. The group is confident enough to reinstate guidance for branded revenue growth of +1-2% for FY17. We anticipate some modest revenue growth in FY16E on a like-for-like basis.”
Investec has a buy recommendation for Premier Foods and a target price of 50p per share.