10th Jan 2008 07:01
Premier Foods plc10 January 2008 Premier Foods plc ("Premier") Trading update for the year ended 31 December 2007 Premier, the UK's leading supplier of grocery products, is providing thefollowing trading update for the year ended 31 December 2007. Highlights • Second half pro forma sales1 up 3% • Full year pro forma sales up 1.4% • Bread price rises achieved to offset wheat price inflation and shelf price differentials restored in mid-December • Transformation of the business continues apace: integration and synergies continue being delivered to plan Pro forma sales Full year Group +1.4% Second half Group +3% Core Premier2 0% Branded +3% Retailer brand -8% Culinary Brands +2% Cakes +7% Customer Partnerships +4% Bread Bakeries +6% We expect total reported sales for continuing operations for the year to be upby approximately 165% reflecting the acquisitions of Campbell's in August 2006and RHM in March 2007. Pro forma sales growth over the second half of the yearwas approximately 3% resulting in pro forma sales growth for the year ofapproximately 1.4%. Christmas trading was satisfactory across the Group with theCakes and Customer Partnerships businesses performing well, offset by adisappointing result from the core Premier business, where although brandedsales grew by approximately 3% in the second half retailer branded salesdeclined by 8%. As we have previously indicated, we have experienced significant cost pressuresacross the business this year, particularly wheat. Despite these cost pressuresand reduced branded bread volumes we anticipate full year Trading Profit willstill be within the range of market expectations. Robert Schofield, Premier Foods plc CEO, said: "After a slow first half, we have seen sales growth improve during the secondhalf, although this has been held back by the decline in retailer branded salesin the core Premier business. We mentioned earlier in the year that we foresawconsiderable raw material and packaging inflation led by wheat but alsoaffecting dairy, fruits and vegetables in particular. Whilst these additionalcosts have had an impact in the second half of 2007 we have now recovered alarge proportion of these cost increases through pricing and cost savings, whichshould provide a solid platform for the development of the business in 2008. "We are delighted by the progress we have made in the transformation of Premierin 2007. The integration of the Campbell's business was completed in March 2007and the integration of the RHM Culinary Brands division was completed in October2007. We have also made significant progress on the manufacturingrationalisation plan with the closure of two factories in 2007 and seven moreplanned for 2008/9." Premier Foods, Campbell's and Culinary Brands The integration of the Campbell's and Culinary Brands businesses into the corePremier business has proceeded smoothly with the combined business under asingle management structure since August. Overall, pro forma sales during thesecond half of the year for Premier Foods, Campbell's and Culinary Brandscombined were in line with the second half of 2006. Within this branded saleswere approximately 3% ahead of 2006 and retailer branded sales were downapproximately 8%. Cakes The Cakes business has continued to make good progress with sales for the yearto 31 December 2007 approximately 7% ahead of 2006. The integration of thedivision into the core Premier business has now commenced with the transfer ofthe Cakes head office to St Albans. Customer Partnerships The Customer Partnerships business has seen continued strong sales growth withsales for the year to 31 December 2007 approximately 6% ahead of 2006. Wecompleted the disposal of the loss-making RHM Frozen Foods business in thesecond half. Bread Bakeries The bread category has seen unprecedented change in 2007 with the price ofmilling wheat more than doubling and a brand relaunch by one of our majorcompetitors. We recovered the increase in the cost of wheat through priceincreases at the start of September and end of October. We finally saw similarincreases in the retail prices for all our major competitors in early December.Consequently, we experienced lower branded bread volumes whilst the materialdifferential in on-shelf prices persisted, which led to a significant reductionin profitability. Sales value in the second half of 2007, however, wasapproximately 6% ahead of the same period in 2006 due to the increased pricespartly offset by the reduced branded bread volumes. Financial matters We anticipate our underlying interest charge will be approximately £110m,comprising £106m of cash interest costs and £4m of amortisation of debt issuancecosts. This charge reflects a higher average level of debt through the latterpart of the year reflecting the phasing of capital expenditure and restructuringcosts coupled with the effect of recent higher short-term interest rates. We have recently concluded a debtors securitisation which, combined with assetdisposals, has realised cash proceeds of approximately £100m. Subject to the finalisation of asset impairments associated with the closure ofsites as part of our integration programme, exceptional costs are expected to bein the range of £120-£130m for 2007. Full provision has been taken for allclosures announced to date, although the cash costs will not be incurred untillater this year. The total cash costs of the RHM and Campbell's integrationsremain in line with our plans. 2008 Outlook We expect the market to remain highly competitive in 2008 with input costinflation continuing to be a factor. However, we believe our extensiveportfolio of good value food and great brands will stand us in good stead. A conference call will be held for analysts and investors today at 8:30am. Conference call details: Telephone number +44 20 8322 3331 Preliminary results for the year ended 31 December 2007 are scheduled to beannounced on 4 March 2008. We will host a presentation to analysts at 9am atABN AMRO, 250 Bishopsgate, London, EC2M 4AA. 1. Pro forma sales represents sales as if all acquisitions and disposals madesince 1 January 2006 had been made on that date and adjusts the Cadbury hotbeverages licence which ended in May 2006. All figures are unaudited andprovisional. 2. Core Premier comprises the continuing operations of Premier Foods prior tothe acquisition of RHM and therefore includes the Campbell's business acquiredin August 2006. Enquiries: Paul Thomas, Finance DirectorGwyn Tyley, Director of Investor RelationsRichard Godden, Investor Relations ManagerPremier Foods plc Tel: 01727 815 850 Michael BerkeleyAngharad CouchNicola SmithCitigate Dewe Rogerson Tel: 020 7638 9571 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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