Premier Foods profits welcomed, sales decline a worry

Premier Foods’ hike in first-half profits has been welcomed by a leading City analyst.

However, Martin Deboo, of Jeffries International, also warned that sales volumes, which have also been hurt by the warm weather, were a worry.

Yesterday the cake-maker, which is led by chief executive Gavin Darby, revealed that trading profit had improved by 2.1% to £48.1m despite ‘challenging markets’. However, Premier also said sales volumes were down by 6.1% - and it revealed plans to relaunch its Mr Kipling brand.

Deboo said: “H1 profit was 7% ahead of our forecast and FY guidance has been reiterated. That this has been delivered hot on the heels of a fresh Tesco warning, and amid some of the toughest conditions in UK grocery for years, is a measure of Premier’s success.

“The bad news is in the weak sales line, which was in similar territory to Q1. This cannot be allowed to persist in 2015. But for now, in a tough 2014, Premier seems to be blocking and tackling with requisite aplomb.”

Commenting on the declining sales, Deboo said: “Premier cited a market decline of 4% in its categories, exacerbated by the hot weather, which has been a verifiably negative influence on sales over the years. While top-line delivery offers little to cheer, management’s commentary around the weather, the weak consumer and channel shift to discounters is consistent with the broader flow or reporting from the Big 4, the British Retail Consortium and elsewhere.”

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