UK food processor Premier Foods has reported that its underlying business sales increased by 1.1% to £757.1 million in the six months to 30 June 2012, an increase of £8.0 million compared to the prior year, and that underlying business trading profit increased by 3.2% to £53.2 million. As Premier Foods is undergoing a period of substantial restructuring and major disposal of assets to reduce debt, the group is focusing on its underlying business performance.
Underlying business excludes the results of completed business disposals as at 30 June 2012, Milling (sales only), and specific material items in 2011 and 2012 including pension credits, commercial adjustments and a non-core, discrete contract loss.
Sales at the Grocery division increased by 2.5% to £504.0 million but fell by 1.7% to £253.1 million at the Bread division.
Grocery divisional contribution to trading profit decreased by £4.4 million to £95.5 million in the first half of the year, owing to an increase in consumer marketing expenditure of £8.0 milion and higher promotional investment. The Bread division contribution declined £8.2 million to £22.5 million due to lower market volumes, increased promotional activity in a competitive environment and higher net costs to serve in the supply chain. The divisional contribution, the measure which the group is now using for reporting divisional performance, strips out all costs previously identified as Group & Corporate costs and other selling, general and administrative costs. The Grocery and Bread divisiional performances were offset by strong progress in the SG&A cost base, as costs reduced by £14.3 million.
“I’m pleased with the progress we are making to stabilise the business, re-focus the portfolio and invest in our future growth. Our strategy of focusing on our Power Brands is starting to gain traction,” comments Michael Clarke, chief executive of Premier Foods. “Power Brand sales were up 2% and sales of Grocery Power Brands increased by a healthy 4.9%, reflecting consistent improvement in market shares. Trading profit increased 3.2%, in line with our expectations.”
Plans to simplify the business and drive further efficiency and effectiveness are proceeding ahead of plan and Premier Foods will now deliver the previously announced £40 million savings by the end of 2012 – a year ahead of schedule. Michael Clarke adds: “As we continue our divestment programme, we plan to take further costs out of the business. We remain cautious given the current economic and trading environment and our full year expectations remain unchanged.”