12th Nov 2007 07:01
Premier Foods plc12 November 2007 Premier Foods plc On course to meet market expectations for the full year Premier Foods plc ("Premier") announces its Trading Update covering trading forthe four months to the end of October 2007. Highlights • Pro forma Group sales up 3%; core Premier sales up 3% • Challenging conditions for Bread Bakeries division remain, but further price increases achieved • Integration synergies on track • On course to meet market expectations for the full year 2007 Trading performance Sales for the Group for the four months to October 2007 were significantly aheadof the same period in 2006 as a result of the acquisitions of Campbell's and RHMin August 2006 and March 2007, respectively. Pro forma sales for the Group1 forthe four months to October 2007 were approximately 3% ahead of the same periodin 2006. Sales for the core Premier business for the four months to October 2007 wereahead of the same period in 2006 by approximately 3%. Within core Premier, theSpreads and Desserts businesses saw improved branded sales growth and, althoughthe Meat-free business also saw improved sales growth, costs are running aheadof normal levels whilst we improve the efficiency of the Methwold factory. Weare pleased with the performance of the Campbell's business which moved intogood growth, although we have yet to see an improvement in the core ConvenienceFoods business. Sales for the Culinary Brands business for the four months to October 2007 wereapproximately 3% ahead of the same period in 2006, where strong summer saleshave been partly offset by reduced promotional activity in September andOctober. This is in line with our strategy of reducing promotional activity,but increasing advertising, on these acquired brands. Sales for the Cakesbusiness for the four months to October were approximately 3% ahead of the sameperiod in 2006. We announced at the time of our Interim Results the exit fromthe Cake van sales operation, which has now been completed and will start todeliver a positive contribution in 2008. The Customer Partnerships businesscontinued to perform well with sales increasing by approximately 3% in the fourmonths to October 2007 compared to the same period in 2006. Sales by the Bread Bakeries division for the four months to October 2007 werealso moderately ahead of last year due to the price rises we have achievedduring 2007, partly offset by reduced volumes. At the time of announcing thebread price increase in September, we cautioned that a further increase would benecessary if the cost of wheat remained high. As a result of this continuingcost pressure, it became necessary to implement a further price increase in thelast week in October to mitigate the margin impact of the unprecedented increasein wheat costs seen during the summer. Whilst the retail price of our bread hasrisen, we have only recently started to see similar increases in the retailprice of other bread brands. Consequently, we have seen lower volumes and,combined with the impact of the higher wheat prices, trading profit for thedivision has been significantly lower during September and October than the sameperiod last year. We indicated at the time of our Interim Results that we would seek to addressthe high level of fixed costs in the Bread Bakeries Division, as part of whichwe have rationalised of the Bradford bakery and Telford distribution depot, bothof which were completed in October. Integration of Acquired Businesses The integration of the RHM businesses continues to move forward at pace andremains on track to achieve the forecast £85m of annual cost synergies. The£28m of annual cost synergies arising from the integration of Campbell's arealso being delivered to plan, which combined with RHM, will deliver £17m ofincremental trading profit in 2007. With regard to the rationalisation of the manufacturing network, the closure ofthe King's Lynn (ex Campbell's) factory is on track for the end of 2007 and wehave completed consultation with employees at the 6 manufacturing sites that weproposed would be closed as part of the RHM integration and the transfer ofproduction has commenced. We have recently announced the closure of ourpreserves factory in Dublin and we have also entered into consultations withemployees on a proposal to close our factory in Thurles, also in the Republic ofIreland. In addition to the closure of the Marlow head office in June, we have completedthe integration of Culinary Brands within 6 months from acquisition, with thetransfer of the business onto Premier's core information systems in October2007. We are also pleased to have completed the disposal of the RHM frozenfoods business2. Trading Outlook We are delighted by the progress we have made on the integration of RHM andexpect that the integration will continue to run to plan. We anticipate sales growth will continue to improve as we enter the importantChristmas trading period. We are pleased to have achieved further bread priceincreases to offset higher wheat costs but we anticipate that our bread volumeswill continue to be affected whilst a disparity in retail prices between themain bread brands remains. As we stated at the time of our Interim Results, raw material and packaginginflation is a significant issue across all parts of the business. We continueto make significant progress in delivering the price increases necessary tomitigate this cost inflation. November and December are important trading months for the Group and weanticipate that we will meet market expectations for 2007. A conference call will be held for analysts and investors today at 8:30am. Conference call details: Telephone number +44 20 8322 3331 Enquiries: Premier Foods plc Tel: 01727 815850Paul Thomas Finance DirectorGwyn Tyley Director of Investor Relations Citigate Dewe Rogerson Tel: 020 7638 9571Michael BerkeleyJustin GriffithsAngharad CouchNicola Smith 1. Pro forma sales for the Group represents the sales of the Group as if allacquisitions and disposals made since 1 January 2006 had been made on that date. 2. The RHM Frozen Foods Desserts business, which had gross assets of £2.6m, wassold to Country Style Foods Limited. The RHM Frozen Foods Pastry business,which had gross assets of £4.5m, was sold to Green Isle Foods Limited. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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