Premier Foods Set to Meet Sales Goal This Year After Nissin Pactby
Shares gain, still far below McCormick’s failed bid proposal
Company pension programs now reporting combined surplus
Premier Foods Plc, the U.K. food company that rebuffed advances from U.S. spice maker McCormick & Co., said it should achieve its medium-term sales growth target this fiscal year as it spends more on marketing brands like Bisto gravies and Oxo bouillon cubes.
The maker of Mr Kipling cakes said revenue will increase in a range of 2 percent to 4 percent, a pace that matches the medium-term growth forecast it gave March 23. Sales rose 1.4 percent in the fourth quarter of the last financial year amid a deflationary U.K. food climate that’s weighed on both food makers and retailers such as Tesco Plc.
McCormick abandoned takeover talks with Premier last month, saying the U.K. target was asking too high a price. Premier forged an alliance with Japan’s Nissin Foods Holdings Co. instead, which will allow the British company to distribute its brands overseas. Some shareholders objected to the move, increasing the pressure on Premier Foods Chief Executive Officer Gavin Darby to deliver growth.
“Gavin Darby and company inherited a really tough set of cards,” Shore Capital analyst Clive Black said in a note. “To be fair to him and his colleagues, the deck is now in better shape.”
Premier Foods shares rose as much as 4.5 percent to 41 pence in early London trading. That’s still far below McCormick’s final takeover proposal of 65 pence a share, or 1.5 billion pounds ($2.2 billion), including debt.
Premier boosted its marketing spending 10 percent to 36 million pounds last year, and it said it will spend as much as 44 million pounds this year to support key brands, which also include Sharwood’s curry pastes and Loyd Grossman’s pasta sauces.
The company also said its two employee pension programs, which have run deficits in previous years, are now reporting a combined pretax surplus of 131 million pounds.