Premier Foods shares climb as profits beat expectations

The company behind Angel Delight and Loyd Grossman sauces was the top riser on the FTSE 350 on Wednesday after its profits came in ahead of expectations. 

Premier Foods shares climbed 13.5 per cent to £1.21 as the firm proposed a 1.2p dividend per share payout, a 20 per cent increase on last year when the food manufacturer paid out its first dividend in 13 years.

This followed another robust set of full-year results, with trading profit in the 52 weeks to early April level on last year at £148.3million – £3.3million more than forecast back in January.

Adjusted pre-tax profits and earnings per share also exceeded expectations, with the former boosted by a halving of interest costs over the past two years and the pandemic-induced boom in sales.

Covid-related restrictions on eating out for much of 2020 and 2021 led to people eating at home more often, raising demand for the company’s grocery and confectionery ranges.

Among the goods that Premier Foods has seen grow significantly in popularity since the Covid-19 pandemic started have been sauces brands Sharwood’s and Bisto and powdered dessert product Angel Delight.

Another ‘major success’ the business has noted has been the Japanese noodle range Nissin, which has tripled its share of the authentic snack pot market since 2017, thanks to sales jumping 130 per cent in the last two years.

Sales of grocery products have slid as restrictions have loosened, and pubs and restaurants have reopened, causing the firm’s total revenue to drop by £33.7million in the 2021/22 financial year.

Yet they remain 5.9 per cent up on two years ago, while sales of confectionary items rose 7.3 per cent last year due to branded products like Cadbury cake and Deluxe Millionaire Whirls from Mr Kipling’s signature collection performing very well.

Sweet treats: Among the goods that Premier Foods has seen grow significantly in popularity since the Covid-19 pandemic started have powdered dessert product Angel Delight

In fact, the Mr Kipling brand had a record year of sales thanks to demand surging in Australia and Ireland, which helped its international revenues at constant currency levels soar by 25 per cent on a two-year basis.

The brand is set to launch a Deliciously Good cakes range later this year, having recently launched its 30 per cent less sugar Viennese Whirls and joining the biscuit category for the first time.

Chief executive Alex Whitehouse said: ‘As we look to expand beyond our core UK business, we have made great initial progress leveraging the strength of our leading brands by entering a number of adjacent new categories.’

However, the company warned that price increases are likely to happen due to the escalation of the Russo-Ukrainian War and supply chain issues.

These could comprise higher costs for commodities such as wheat and dairy, energy prices and changes in the long-term growth of the UK economy.

Russ Mould, an investment analyst at AJ Bell, said: ‘While the Mr Kipling range has just enjoyed its best year ever, Premier Foods faces the risk that shoppers will trade down to cheaper, own-brand alternatives amid big pressure on household budgets.

‘This will be a good test of its brand appeal, including products such as OXO cubes and Bisto gravy granules. Many are store-cupboard essentials, but will consumers be prepared to pay more for the tastes they know and love?’