Premier Foods PLC raises full-year profit expectations after tasty first half

Premier Foods PLC () said full-year trading profit will be ahead of current market expectations as it expects continued revenue growth and high demand.

The Mr Kipling and Bird’s Custard owner said higher sales will be driven by further new product innovation, strong commercial plans and increased marketing support, with six major brands planned to be advertised on TV.

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The firm said it includes its main dessert brand Ambrosia, which will be on air for the first time in many years.

Demand is expected to rise due to the impact of recently increased government restrictions on eating out, though its duration will be based on how long the measures will last.

In the 26 weeks to September 26, revenue jumped 15% to £421mln while profit before tax climbed 70% to £50mln. Net debt was cut by 18% to £403mln while there was no mention of dividends.

The FTSE 250 company benefitted from the lockdown as people stuck at home spent more on groceries than on eating out.

Analysts at Peel Hunt bumped up the target price to 125p from 120p after the results.

“The strong performance is providing additional resources to invest in marketing and new product development, which should ensure that the flywheel of improving sales and margins continues to translate into higher cash generation and ability to pay down debt as well as invest in the business,” they commented.

“The renewed lockdown is likely to extend the positive performance in the short-term, but we see potential for some of the themes to be longer lasting, with more people working from home, increase in cooking from scratch, greater online penetration and a stronger base for growing International.”

Shares jumped 5% to 108p on Tuesday at the opening bell.