Premier Foods reports sales boost as shoppers stock up in lockdown

(Reuters) - Mr Kipling cakes maker Premier Foods PFD.L on Monday forecast annual trading profit at the top end of market expectations after Britons stocked up on food at the start of the coronavirus lockdown, lifting its shares more than 20%.

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

The company also ended a more than year-long business review instigated after a failed 2016 takeover bid from U.S. food group McCormick MKC.N put it under pressure and led to the ousting of former CEO Gavin Darby.

The British company reported a short-term peak in volumes in March, sending its shares up 22% to 39.9 pence by 1315 GMT, on track for their best day in more than four years.

The announcements bode well for Chief Executive Alex Whitehouse, who took the helm last year and has been credited with turning around Premier’s UK business.

The maker of Bisto gravy and OXO cubes said that volumes have started to reduce from the levels in March but are still expected to exceed usual demand.

“This reflects more meals being eaten at home than usual due to recent measures set out by HM Government and hence increased demand for the group’s product ranges,” the company said.

Total grocery sales in the UK leapt more than a fifth to a record 10.8 billion pounds ($13.4 billion) in the four weeks to March 22 as Britons stocked up on everything from pasta to pet food ahead of a nationwide lockdown to contain the coronavirus outbreak.

Britain is not considering lifting its lockdown any time soon.

Premier Foods’ sales in its financial fourth-quarter to March 28 are expected to have grown about 3.6% year on year, with a 10.5% jump in March, it added.

The company also said it has agreed to a segregated merger of its pensions schemes that would help to save 4 million pounds annually from its 2020 financial year, adding that it is moving closer to a scheme buyout by a specialist insurer.

Peel Hunt analysts said that Premier will now be in a position to pay dividends.

The net value of pension deficit contributions could reduce by about 45% to a range of 175 million pounds to 185 million pounds, the company said.

“All these factors put Premier Foods in a better position to start shaking off its reputation as a zombie company that hasn’t been able to invest much in its business,” said AJ Bell Investment Director Russ Mould.

Reporting by Tanishaa Nadkar and Pushkala Aripaka in Bengaluru; Editing by David Goodman