Premier Foods has found itself caught between a rock and a hard place this year, facing massive raw material price inflation that it wasn't able to recover from customers quickly enough.
That lag cost the company £15m, while one customer, believed to be Tesco, objected so strongly to Premier's proposed price increases that it delisted a swathe of its products. Although the dispute has been resolved, it cost Premier another £10m.
The company's end customers have been cutting back, too, especially on bread - sales of Hovis were up by 4 per cent, but sales of retailer branded bread slipped 9 per cent, and lower volumes, higher costs and increased promotional activity meant bread profits slumped 47 per cent to £8m. Overall volumes of branded products were 6.4 per cent lower, and the group plans to increase promotional expenditure in the second half to boost trading. Delayed price increases and the loss of a major contract with M&S also saw losses at its private label business Brookes Avana widen from £2m to £13m.
Broker Panmure Gordon expects adjusted full year EPS of 3.49p, down from 4.98p last year.
PREMIER FOODS (PFD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 14.05p | MARKET VALUE: | £337m | |
| TOUCH: | 14-14.1p | 12-MONTH HIGH: | 35p | LOW: 13p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 41p* | NET DEBT: | 117% | |
| Half-year to 25 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.12 | -58.1 | -1.80 | nil |
| 2011 | 1.09 | -3.1 | 0.10 | nil |
| % change | -2 | - | - | - |
*Includes intangible assets of £2.0bn, or 84p a share | ||||
