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UK's Premier Foods flags steady results

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Premier Foods, the UK-based food processing group, this morning announced its preliminary results for the year ended 2 April 2016, showing group sales up by 0.6% at £771.7m and trading profit unchanged at £131.0m.

The company's share price had endured a volatile year following the rebuffed takeover advances from US spice maker McCormick & Co earlier this year and Japanese-based multinational food company, Nissin Foods, taking a 19.9% stake in the company.

Premier Foods produces a range of well-known branded food products including Mr Kipling cakes, Bisto, Oxo, Cadbury cakes and Loyd Grossman.

In today's results, the British company flagged adjusted profit before tax increased by £2.9m to £86.1 million and adjusted earnings per share increased 4.6% to 8.3 pence.

Premier Foods spurned takeover advances from US spice maker McCormick & Co, preferring to form an alliance and deepen its relationship with Japan's Nissin Foods instead.

It believes the deal with Nissin Foods, announced on 23 March, will enable it to accelerate the growth of its products in key overseas markets, as well as giving it access to Nissin's intellectual property and look at potential joint manufacturing.

As Gavin Darby, Chief Executive Officer, stated in today's results "We are very pleased to report sales growth both in the year and the fourth quarter in what continues to be a deflationary market," and in particular he defended the company's strategy of spurning their US suitor "The potential opportunities presented by our partnership with Nissin are also very exciting".

Investors initially welcomed the earnings announcement this morning, with the stock trading as much as 4.5% higher to 41 pence. However, after the dust had settled the share price was sold off and closed down 3.2%, at 38 pence, for the day's trade.

This number is a far cry from the 60 pence price the stock was trading during the McCormack courtship earlier this year. However, investors will take heart from sales growth that was flagged across the company 'with six of our major brands growing on average 3.4% in the year', especially taking into account the broader weak environment that the company is trading in.

Looking ahead, the company raised its financial year 2016/17 sales growth guidance raised to 2-4%

Certainly, the future will have to be bright for the company's share price to reach its previous lofty levels seen earlier this year.

By Chris Lyddon

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