Royal recovery at Premier Foods

Premier Foods, the owners of the Hovis, Mr Kipling and Loyd Grossman brands, cashed in successfully on the Queen's Diamond Jubilee, driving underlying sales and profits in the six months to the end of June.

Sales, which included the "Great British Fancies" range aimed at the Jubilee celebrations, came in at £749.1m, a 1.1% rise on the same period of last year.

Trading profit was £53.2m, a gain of 3.2% on the prior year, while adjusted profits before tax were £10.9m against a loss of £7.8m in 2011.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Premier has has an extremely difficult few years as it struggled with debts of around £1.2bn after a spate of acquisitions, including the purchase of the Mr Kipling brand. Since 2007 the stock has fallen 97% in value

To gain new financing the group needed to restructure, and restructuring is not cheap. On a reported basis, which includes financing and one off costs, the loss before tax was £27.3m - including debt servicing of £60.9m, up from £45.5m in the prior year. In other words, it's not all a bed of roses at Premier Foods, which at the halfway point last year had a reported profit before tax of £11.2m.

Revenue from continuing operations fell, coming in at £852.8m, a decrease of £151.9m compared to the prior year. The major driver of the decline was the disposal of the canned grocery business in July 2011.

Having gone through the pain of restructuring, Premier is asking investors to look at its core business, and that does appear to be doing well. In 2011 the group decided to invest in so-called "power brands" which included Batchelor's, Bisto, Ambrosia, Hovis, Lloyd Grossman, Mr Kipling, Oxo and Sharwood's.

The marketing spend has increased 40%, and power brand sales have grown 2% since last year. The grocery power brands have seen a sales boost of 4.9%. It's this good news which appears to have pushed the shares up 2.8% in Tuesday morning trading.

"I'm pleased with the progress we are making to stabilise the business, re-focus the portfolio and invest in our future growth" said the Chief Executive, Michael Clarke, adding: "Our strategy of focusing on our Power Brands is starting to gain traction."

BS