Premier Foods third quarter sales fall 2.2%

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Premier Foods (PFD) has reported a 2.2% drop in third quarter sales due to a plunge in revenues from its private label cakes and international business.

Total group sales fell £5.8m to £255.6m in the 13 weeks to 29 December, primarily due to lower sales of lower margin non-branded products in its sweet treats range.

Branded sales were 0.2% higher in the quarter to take growth to 0.4% in the year to date.

Third quarter UK grocery sales excluding international were up 2.7% in the period with its largest three brands, Mr Kipling, Bisto and Batchelors all notably delivering both volume and value share gains in the period.

In particular Batchelors sales were ahead of the same period last year and have now recorded eight consecutive quarters of growth while Nissin Soba noodles grew by over 40% in the quarter.

Mr. Kipling sales continued their strong momentum from previous quarters following the brand relaunch earlier in the year, reporting sales growth of 5% in the quarter and 10% on a year to date basis.

However, non-branded sales were 10.3% lower in the period as non-branded sweet treats sales slumped 20.7% year on year. This drop was due to the business experiencing lower sales volumes as a result of “implementation challenges associated with its logistics programme”, although Premier said customer service levels improved steadily during the quarter. Additionally, the Sweet Treats business exited a number of lower margin seasonal and non-seasonal CAKE contracts.

International sales decreased by 27% in the quarter, as it continued to work through the effects of high stocks of Cadbury cake in its Australian supply chain. Premier also implemented price rises to export wholesalers to ensure competitive product pricing across all markets but which resulted in “significantly” lower volumes in this customer group in the quarter.

Excluding these two factors, International sales would have risen 5% in the year to date.

Premier reassured the market that trading profit and adjusted earnings per share expectations for the year remain unchanged and net debt at the year end is expected to be lower than the prior year.

Departing CEO Gavin Darby commented: “”Our third quarter of the year saw resilient trading through the key Christmas period in UK Grocery and Branded Sweet Treats with our top 5 brands all growing market share.

“Our Batchelors brand has now delivered eight consecutive quarters of sales growth and we saw another good performance from Mr Kipling. We faced into two sets of challenges in the quarter - lower International sales and our logistics programme, which as expected, affected cake sales volumes early in the quarter.

“As we look to the fourth quarter, we expect to see a good performance from Branded Sweet Treats, we have a good innovation plan lined up and our expectations for Trading profit and adjusted eps for the full year are unchanged.”

Darby will leave the group on 31 January 2019 and will be replaced in the interim by CFO Alastair on a temporary basis while the search for a permanent successor continues.

Premier shares are flat at 34.1p so far this morning.

Morning update

Associated British Foods (ABF) grew group sales from continuing operations for 2% in the 16 weeks to 5 January as growth in grocery and Primark was again held back by plunging sugar division sales.

Sales at Primark were 4% ahead of last year, at both constant currency and actual exchange rates, and with a higher operating profit margin, profit was well ahead. Sales growth was driven by increased retail selling space partially offset by a modest decline in like-for-like sales, but UK sales over the Christmas period “exceeded expectations”.

Sales for Grocery were 3% ahead at constant currency, 2% ahead of last year at actual exchange rates and operating profit margins on an underlying basis improved.

Progress continued at Twinings Ovaltine, with good growth in Twinings which benefitted from recent new product launches

However, AB Sugar revenues from continuing operations were 12% behind last year at constant currency and 14% behind at actual exchange rates.

Lower sales in its UK and Spanish businesses in the period were the result of the lower EU sugar prices for contracts negotiated at the end of last financial year. However ABF said the development of its sales book for this year has indicated early signs of recovery in EU sugar prices.

ABF said its UK campaign is progressing well and production will now be 1.15 million tonnes as a result of higher sugar content in the beet. Beet yields this year are lower than the record level last

AB Agri revenue was 5% ahead of last year at constant currency and actual exchange rates, while ingredients sales are 6% ahead of last year at constant currency and 1% ahead at actual exchange rates.

Elsewhere, travel food to go specialist SSP Group (SSPG) has had a “good” start to the financial year, with group revenues up 7.6% on a constant currency basis in the first quarter.

This represents like for like group of 2.5% in the period from 1 October to 31 December 2018, while net contract gains added 3.8% and the acquisition of Stockheim adding a further 1.3% to sales.

SSP said the trends in like-for-like sales growth in the first quarter of the year were similar to those seen last year in the UK, North America and the Rest of the World.

However, like-for-like sales growth in Continental Europe was impacted by the recent protests in France towards the end of the quarter and by redevelopment activity at some of our sites.

Looking forward to the full year, SSP Group’s expectation for like-for-like sales growth for the group remains unchanged, at between 2% and 3%.

Net contract gains at 3.8% were slightly ahead of our expectations and were driven by significant contributions from North America and the Rest of the World. Contract gains are expected to be slightly ahead of the guided 3% for the full year largely as a result of the strong first quarter.

SSP Group stated: “The new financial year has started well and the pipeline of new contracts is encouraging. Whilst a degree of uncertainty always exists around passenger numbers in the short term, we continue to be well placed to benefit from the structural growth opportunities in our markets.”

Leisure group Whitbread has announced the commencement of a £500m share buyback programme following the “much sooner than expected” 3 January 2019 completion of the £3.9bn sales of Costa Coffee to Coca-Cola.

Further details about its plans to return a “significant majority” of the net cash proceeds to shareholders at its capital markets day on 13 February.

The hotel and restaurant group announced total sales growth of 2.5% in the 13-week period ended 29 November 2018, though UK like for like sales were down 0.6% in the period.

On the markets this morning, the FTSE 100 is down another 0.3% to 6,843.4pts.

ABF shares have jumped 5.2% to 2,292p this morning on its trading update, while SSP Group is up 0.8% to 684.9p.

Other risers include Just Eat (JE), up 4% to 656.6p, Carr’s Group (CARR), up 2.3% to 161.9p and PayPoint (PAY), up 1.5% to 832p.

Fallers so far today include Whitbread (WTB), down 2.2% to 4,669p, Compass Group (CPG), down 1.8% to 1,601.5p and DS Smith (SMDS), down 1.6% to 323.8p.

Yesterday in the City

The FTSE 100 dropped 0.5% to 6,862.7pts on another day of political chaos in the UK.

Reckitt Benckiser (RB) plunged 4.2% back to 5990p on the day it announced the departure of long-time CEO Rakesh Kapoor.

Finsbury Food Group slumped 10.5% back to 83.2p after revealing a drop in quarterly like for like sales yesterday.

Associated British Foods slid 2.4% to 2,178p ahead of this morning’s trading update, while SSP Group fell 1.8% to 679.3p ahead of its own market update this morning.

Other FTSE 100 fallers yesterday included Unilever (ULVR), down 2% to 3999p, Compass Group (CPG), down 1.5% to 1,631p, British American Tobacco (BATS), down 1.3% to 2,472p and Diageo (DGE), down 1.3% to 2,718.5p.

Risers included Marks & Spencer (MKS), with the City shrugging off news of 17 more store closures as the shares rose 4% to 287p.

Premier Foods was up 1.6% to 34.1p ahead of its quarterly results this morning.

Other risers included Nochols (NICL) up 4.8% to 1,582.5p, FeverTree (FEVR), up 4.3% to 2,576p, B&M European Value Retail (BME), up 1.2% to 314.3p and Tesco (TSCO), up 1.1% to 220.4p.