May 15, 2018 / 6:24 AM / 6 months ago

Premier Foods says UK market proving resilient

(Reuters) - Premier Foods (PFD.L), the owner of brands including Mr Kipling cakes, on Tuesday reported a 3.6 percent rise in full-year sales and said its home market was proving resilient in the face of a tough consumer environment.

FILE PHOTO: A Mr Kipling Cherry Bakewell is seen in this illustration taken March 30, 2016. REUTERS/Phil Noble/Illustration/File Photo

The company, which also makes Oxo stock cubes, said growth was also fuelled by higher international sales and partnerships with noodle-maker Nissin Foods (2897.T) and candy maker Mondelez International (MDLZ.O).

Industry data and surveys show UK shoppers spent more on food as they cut back on non-essential items as household finances come under pressure.

“As people tighten their belts, they eat out less and eat more at home, which is good for Premier,” Chief Executive Gavin Darby said.

Shares in the company were trading 3 percent higher at 38.9 pence by 1125 GMT on Tuesday.

Premier Foods has faced pressure from investors after it rejected a twice-improved 65 pence takeover bid from U.S. rival McCormick Foods (MKC.N) in 2016.

The company said in June last year it was exploring options as part of a regular review into maximizing shareholder value.

Earlier this year, the company played down reports that it was in talks to sell its Batchelors brand to Nissin, saying any discussions with third parties were part of its business review.

Darby on Tuesday again dismissed reports of talks to sell Batchelors, while adding that the company was not looking for any other partnerships this year.

Premier, which has struggled with a heavy debt burden, said net debt fell more than 5 percent to 496.4 million pounds.

The company lowered its debt target to under three times EBITDA from the existing three by March 2020.

“With PFD now batting in its much-vilified 2-4 pct growth guidance range and committing to a firmer de-leveraging target, this all feels like decisive step towards rehabilitation,” Jefferies analyst Martin Deboo wrote in a note to clients.

Premier Foods said it expects its international business to deliver strong double-digit growth over the medium term, calling it a “game changer”.

International sales, which accounts for about 7.5 percent of total revenue, jumped 25 percent in the period.

Revenue from Australia, currently Premier’s largest market abroad, grew 81 percent.

Australia is likely to post further growth, Darby said.

Group underlying sales rose to 819.2 million pounds for the year ended March 31, from 790.4 million.

Adjusted profit before tax rose about 6 percent to 78.6 million pounds.

Reporting by Sangameswaran S in Bengaluru; Additional reporting by Rahul B; editing by Jason Neely

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