Premier Foods’ sales in the first half of the year rose 1.5%  to £353m
Premier Foods’ sales in the first half of the year rose 1.5% to £353m © PA

A new range of Batchelors Super Noodles and the international popularity of Cadbury cakes helped fuel a return to growth for the first time in more than a year at Premier Foods, the UK maker of Mr Kipling cakes and Bisto gravy.

The shares rose 6 per cent in early London trading to 38p after the heavily indebted group reported an unexpectedly strong 6.2 per cent increase in revenues in its second quarter, ending September 30. 

Credit Suisse, joint house broker, said it was: “The best since . . . in truth we can’t think of a quarter close to this before.”

Gavin Darby, chief executive, said: “There’s been a big change in trend with Batchelors, which has become our fastest-growing brand. We’ve done slightly better than we expected in the first half and we see strong momentum. The [upcoming] Christmas quarter is a big one.”

He attributed almost half the growth — 44 per cent — to Premier’s partnership with Japanese noodle maker Nissin, its biggest shareholder with a 19.6 per cent stake, and Cadbury cakes, which it makes under licence from Mondelez International, the US food producer.

He said the Super Noodle Pots were doing well because of the growing snacking trend, while products such as gluten-free Mr Kipling cakes were aimed at more health-conscious shoppers. “The key to success in innovation is to be on-trend,” he added.

Mr Darby has been under pressure from investors to deliver growth after sharp criticism from some shareholders when the board dismissed as “inadequate” a 65p a share informal offer from McCormick, the US spice maker, in April 2016. 

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Nissin took its stake in Premier around the same time as the McCormick approach and Mr Darby promised benefits from a tie-up with Nissin to accelerate sales growth at its brands.

Sales in the first half rose 1.5 per cent to £353m, and interim pre-tax losses of £1.2m were smaller than last year’s £8.7m loss. Operating profit of £48m was flat but above analysts’ expectations. A 23 per cent jump in international revenues was led by stronger sales of Cadbury cakes to Australia and Ireland. International sales are still small, at about 7 per cent of total revenues.

Referring to a tail of smaller and less successful brands, such as Paxo stuffing, Martin Deboo, analyst at Jefferies, joint house broker, said: “The challenge for Premier Foods is to hold on to these gains by plugging the leaky bucket at the bottom end of the business.”

Operating profit margins fell 0.2 of a percentage point in the first half to 13.6 per cent, reflecting the higher costs of commodities such as butter and milk due to the fall in the value of the pound since the UK’s referendum to leave the EU.

However, Mr Darby said the group had gradually clawed back these higher costs, which he put at mid-single digits, from retailers. 

Premier, which has spent 20 tears battling with a debt mountain built up through an acquisition spree, also reported a 4 per cent drop in net debt to £535m in the six months to September 30, compared with the same time last year. The company’s market value is £324m.

Additional reporting by Nicholas Megaw

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