Premier Foods’ continued recovery looks to have assured investors it is fighting fit as markets increasingly back the group’s roster of brands.
The FTSE 250 company this week reported sales of £360m for the three months to 28 December, up 3% on the year before. The group said it expected full-year profits to be at the upper end of expectations following the festive period.
The strong growth was driven by a 7% volume rise in branded products, which helped offset a 4% decline in revenues for non-branded products.
Premier shares jumped 6% to 189.3p following the update on Tuesday morning, building on a 30% rise over the past 12 months. The share price has seen a dramatic revival since Alex Whitehouse took over as CEO in August 2019 and is up five-fold since the pandemic began. Still, it remains some way off its peak of 1,800p in 2007.
Clive Black at Shore Capital called its latest results a “very good out-turn”, especially given several years of sequential market share growth resulting in some tough comparatives.
The group’s sweet treats division performed especially strongly, with sales up 9% thanks to Cadbury and Mr Kipling products outpacing the market. Mr Kipling sold 20% more mince pies this year, its biggest-ever quarter.
The question facing investors is what levels of revenue can be expected after several tumultuous years. Premier has often played down expectations but recognised this week it was a different and better business than before Covid, which should be capable of a faster rate of growth, said Matthew Webb at Investec.
Webb highlighted a more successful innovation programme, a larger and more diverse international business, and growth-enhancing acquisitions as reasons to consider re-rating its shares.
Furthermore, as RBC Europe analyst James Edwardes Jones pointed out, “the last remaining historical sink-hole – an underfunded pension scheme – has been plugged and so this is a competently managed food producer with robust competitive positions at an attractive valuation”.
Russ Mould, investment director at AJ Bell, summed up the sentiment in the market: “Premier Foods is a textbook example of a recovery story and, for now, it continues to make impressive progress despite an uncertain consumer backdrop.”
No comments yet