Premier Foods has revealed 18% growth in trading profit in full-year results for 2013, alongside a new pensions deal and a much-awaited major capital restructuring plan designed to “liberate the firm from its past”.
The firm reported sales in its underlying business, excluding milling, up by 1.1% to £1,282.5M, while grocery power brands sales climbed by 2% to £543.5M.
Trading profit in the underlying business rose by 17.7% to £145.2M. Adjusted profit before tax rose to £86.8M and net debt was cut by £120M to £831M at the end of last year.
Gavin Darby, the firm’s ceo, said: “I am very pleased to report a strong 18% growth in trading profit and significant underlying earnings progression in 2013. Through our category based strategy, we have delivered grocery power brands sales growth of 2%, some good market share performances and progressively stronger customer partnerships.”
Premier Foods also revealed “a transformational” new refinancing deal, which included: an underwritten equity issue of about £353M, “a landmark” pension schemes agreement, a high-yield bond of £475M and a new lending agreement with a smaller banking group.
‘Liberate Premier Foods from its past’
“This new capital structure will liberate Premier Foods from its past and provides a great platform on which to execute our category-based strategy,” said Darby.
“Following the announcement to simplify the group through the Hovis joint venture , we are now focused on growing a high-quality branded grocery business, with its strong underlying cash flows,” he added. “While consumer spending trends are currently subdued, we are confident in our expectations for 2014.”
Darby said that Premier Foods’s strategy of concentrating on ambient food was paying off. “The group is focused on the largest and fastest growing part of the total food market, ambient food.”
Ambient food grew 2.3% in value last year compared with 1.7% growth in the total food market.
New pension deal
Under the terms of its new pension deal, after the restructuring plan Premier Foods will cut its cash contributions by £161M.
Darby set out seven reasons to invest in the “new Premier Foods”. Those included the firm’s: focus on growth categories, with a strategy targeting ambient foods, broad stable of leading brands driving category growth through marketing and innovation and its wide range of manufacturing processes that provided scope to innovate.
Other reasons to invest, Darby claimed, were: strong capabilities to serve multi-format retail environment, continued cost reduction to support brand investment, strong operational cash flows and the firm’s committed and experienced management team.
Meanwhile, over recent years, Premier Foods has sold a range of businesses in order to concentrate on its key porfolio of grocery power brands. Notable sales included: Branston pickle, Sarson’s vinegar and Hartley’s jam. In January it announced a £87.5M joint venture with the US-based Gores Group to run its Hovis bread and flour business.
City analyst Shore Capital welcomed the restructuring plan, saying its gave the firm “its brightest outlook for a decade”.