Premier Foods in the Red But Debt Level Reduced
Premier Foods, the UK’s largest food producer, has reported a pre-tax operating loss of £98m, against a profit of £42m in 2009, on a continuing basis for 2010 after a £125m goodwill impairment at its Brookes Avana own label bakery and prepared food business. Group turnover dipped by 3.5% to £ 2.57b due to lower non branded sales. Although volume was up 3.1%, the value of branded sales was relatively flat at £1.67b, down 0.3% on 2009.
Group trading profit edged up 0.6% to £311m, as both the grocery division and the Hovis business recorded improved trading profit but trading profit fell by £15m at Brookes Avana. Indeed, the most dramatic effect of last year’s pricing and commodity inflation was reflected in plunge in profitability at Brookes Avana. Premier is currently talking constructively with UK retailer Marks & Spencer to agree new product ranges and revised pricing and supply arrangements which will be able to return the business to profitability in 2011.
The debt mountain was reduced by £103m to £1.26b during the year but the proceeds from the recently agreed disposals of Premier’s canning and meat-free businesses will further cut pro forma net debt below £900m.
Outlook
Robert Schofield, chief executive of Premier Foods.
Promotional activity in its retail markets increased significantly in 2010 but Premier does not expect it to continue to escalate at the same rate in 2011. Commodity inflation has been running at mid single digit percentages, requiring Premier to increase prices for its products. At this level, the UK food group believes that inflation is manageable.
Premier’s focus in 2011 will be to continue to take branded market volume share, while growing its percentage of grocery branded sales from new and improved products as its innovation pipeline matures. It will also continue to drive for efficiencies; and to generate at least £80m of recurring cash flow.
“Our business has proved resilient, with branded volume market share growth, increased margin from procurement and manufacturing efficiency and lower operating expenses. There is more to do in each of these areas and we have aligned the organisational structure behind the strategy of growing our brands. We would expect our focus to enable the group to show progress from our new base after the disposals without a further deterioration in the consumer environment,” comments Robert Schofield, chief executive of Premier Foods.
