Premier Foods restores revenue growth via Cadbury cake partnership

By Gill Hyslop contact

- Last updated on GMT

Premier Foods has renewed its licensing contract with Mondelēz to produce and market Cadbury-branded cakes in 46 countries. Pic: Premier Foods
Premier Foods has renewed its licensing contract with Mondelēz to produce and market Cadbury-branded cakes in 46 countries. Pic: Premier Foods

Mr Kipling maker Premier Foods has posted a strong performance in the second quarter, partly driven by the licence renewal to produce Cadbury-branded cakes.

Premier Foods posted a 1.5% revenue growth of £353m ($464m) in the 26 weeks to September 30, with the strongest growth coming from the second quarter, with revenue jumping 6.2% (versus a 3.1% drop in Q1).

Trading profit was unchanged at £48m ($63m), while operating profit saw a 2.3% increase to £22.5m ($29.6m), compared to the same period last year.

Shares were up more than 6% in early morning trading on the London Stock Exchange (standing at 39.23p (38.48c) at the time of going to print).

Strategic partnership spurt

Gavin Darby, CEO of Premier Foods, reported the company’s international business also continued to grow.

International revenue from brands such as Mr Kipling, Bisto and Loyd Grossman increased by 23% year-on-year in the six-month period.

However the company’s partnerships with Mondelēz International and Nissan really prompted a solid second quarter, delivering over 40% of revenue growth for the period.

Premier renewed its long-standing licence to produce and market Cadbury cakes with Mondelēz International in May this year.

The British food manufacturer also extended the geographic reach of the licensing agreement with Mondelēz to 46 countries, including the UK, Ireland, Australasia, UAE, South Africa, Canada, Japan, China, India, Asia Pacific, Caribbean and countries in the Middle East.

The licence will run until 2022, with an option to extend to 2025.

Convenient snacking packs

This year, Premier made a determined move towards more convenient packaging for many of its products as consumers opt for foods ‘on the go.’

Highlights

  • Half year revenue up +1.5%; Q2 revenue up +6.2%
  • International revenue increased +23%
  • Trading profit of £48m ($63m) in line with comparative period
  • Adjusted profit before tax up 0.5% to £26.4m ($34.7m)
  • Net debt £535.3m ($704.7m) – a £20.7m ($27.2m) improvement on last year

Darby noted: “Batchelors is now the fastest growing major brand in our portfolio following the launch this year of convenient pot format products such as Super Noodle Pots.

“The Batchelors brand has also benefited substantially from the launch of Pasta ’n’ Sauce pots, another range of convenient quick meals perfectly suited to today’s time-conscious consumer,”​ he added.

The company also relaunched an old Brit favorite Angel Delight in ready-to-eat pots, with sales of the milky dessert jumping by whopping 30%.

A treat for investors

“Even though a return to revenue growth had already been forecast, this result is still a treat for investors used to a steady diet of downgrades,”​ Fiona Cincotta, senior market analyst at City Index,​told BakeryandSnacks.

“It’s way too early to suggest that Premier Foods has a new lease on life: The bar was low coming into this result.

“But a return to first-half sales growth indicates investments in product innovation and marketing are reinvigorating the appeal of its brands,” ​she added.

Darby said expectations for the full year remained unchanged.

Committed to health

Premier Foods is focused on delivering better-for-your (BFY) products as consumers increasingly adopt healthier lifestyles. The company has pledged to:

  • Remove 1,000 tons of sugar from its portfolio by 2018, in accordance to the UK government’s Childhood Obesity Strategy published in 2016
  • Introduce calorie caps for individual cakes and desserts
  • Continue expanding the proportion of single portion packs of cake from 40% to 50%
  • Ensure at least three-quarters of new products are BFY choices
  • Launch new products with higher levels of fibre, protein and micro nutrients
  • Reduce salt to meet the Government 2017 salt targets
  • Not advertise or market foods high in sugar, salt or fat to children under the age of 16
  • Continue to champion front of pack labelling

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