First-half profits surge 50pc at Premier Foods
Premier Foods said it expected full-year results to be at the top end of forecasts after cost cuts helped the group to report a 50pc leap in first-half trading profit.
The British food producer, , the maker of Mr Kipling cakes and Hovis bread, also said it expected full-year free cash flow to be between £50m and £70m, slightly higher than earlier estimates, which would help reduce year-end net debt to £840-860m from £890m at the end of June.
Shares in the firm rose 6.5pc to 90.7 pence in early trading.
"This is a great result for Premier, make no mistake," Investec analyst Martin Deboo said, describing the first-half result as very strong.
After refinancing and selling assets last year to help reduce debt built up before the financial crisis, Premier Foods is stepping up marketing for its eight best-selling brands, such as Batchelors, Ambrosia and Bisto gravy. It is also shaking up its bread unit to improve profitability.
"A 50pc increase in trading profit is a very encouraging result given the highly competitive environment," Chief Executive Gavin Darby said.
The group said the restructuring of its bread division was ahead of plan. At a cost of £28m, the shake-up includes bakery closures and job cuts to reduce capacity.
Group underlying trading profit jumped to £47.4m in the six months to June 30, Premier Foods said, benefiting from cost savings made last year and another £20m worth delivered in the period.
The firm said plans to halve its 3,299 suppliers would deliver a further £10m of savings in the second half of the year and help push annual trading profit to around £146m - the top of market expectations.
Total underlying sales fell 0.9pc, with a 3.2pc rise in best-selling brands offset by a 5.1pc fall in lower-margin products.
Premier sold the last of its Irish business in 2001 when it offloaded its brands here to Boyne Valley for €41m.