Premier Foods reports 2011 net earnings of £173.7M, down 29% from 2010 amid rising borrowing costs

THE NETHERLANDS , March 19, 2012 (press release) – Premier Foods PLC reported a 29 percent decline in profit in 2011.

The group, which owns some of the UK’s most famous brands such as Sharwood’s, Hovis, Mr Kipling and Batchelors, announced today that it made a trading profit of £173.7 million ($275.2 million) last year, down from £245.7 million the year before.

Premier Foods, which said in January it would axe 600 jobs in Britain, is finding ways to tackle its large debt built up when a series of acquistions became undermined by worsening trading conditions.

The company recently announced a re-financing package which provides the foundation on which the Group’s growth strategies can be implemented.

Commenting on the re-financing package, Michael Clarke, Chief Executive Officer, Premier Foods, said: “I’m delighted that we have been able to reach a positive outcome with our banking and pension scheme partners. The consent for this re-financing package represents a strong sign of confidence and support for the business, its strategies and growth plans. This is great news for our employees and all of our stakeholders.

During the coming year, the Group’s priorities remain to stabilize its operational performance. Premier Food’s net debt stood at £995 million at the end of 2011.

The consumer environment is expected to remain challenging the Group, nevertheless, believes the planned increase in marketing investment, proposed cost reduction programmes, better customer collaboration and renewed focus across the Group will provide the platform to deliver future branded growth. Consequently, over the medium-term, the Group expects a return to sales growth, and higher gross margins.

“We intend to draw a line under the performance of 2011. Having put the financing and strategic building blocks in place, our immediate priorities are to implement this re-financing package, continue stabilizing the business, re-focus the portfolio and invest in our future growth. Whilst we recognise that the consumer environment remains challenging, our performance thus far in 2012 is in line with our expectations. I’m convinced we have the right team to turn this business around and I am very positive about our future.”

The company also announced that it has appointed McCann London and JWT to manage the creative execution of its Power Brand advertising, replacing its current agency roster.

McCann London will oversee creative development for Batchelors, Bisto, Loyd Grossman and Sharwood’s advertising while JWT will manage creative for Ambrosia, Hovis, Mr. Kipling and Oxo.

The appointment will reduce the current agency roster of three - including 101, Dare and McCann London – to two, helping reduce complexity and ensuring further focus and consistency in line with the company’s growth strategies.

The move has been led by the company’s new Managing Director, Grocery and Bakery , Iwan Williams, who commented: “Both 101 and Dare have continued to deliver excellent advertising for our brands and I would like to thank them for their work. As we reviewed our future plans, we decided to focus on a smaller number of agencies that have the breadth, scale and resources to manage our Power Brand portfolio.”

The move follows the company’s announcement in January that it plans to double marketing spend in 2012 to more than £50 million.

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