Premier Foods, the St Albans-based food group, posted positive Q3 sales growth of 6.5% for its sweet treats division against the backdrop of a virtually static group performance of 0.1% growth.

In a trading statement for the 13 weeks to 2 January, the company said that growth in its sweet treats division, up from £50m to £53m, was driven by new Cadbury cake products, including Amaze Bites and Hot Cakes products, and increased sales of Mr Kipling. Non-branded Sweet Treat products also fuelled growth, primarily through new mince pie contracts with various retailers and discounters.

The grocery division suffered a 2.7% drop in sales from £171.4m to £166.8m, which limited total group sales to only 0.1% growth, at £245m from £244.8m. Branded grocery sales fared particularly poorly, down 3.1%, which the company blamed on the mildest December on record.

Gavin Darby, chief executive at Premier Foods, said: “Our third quarter group sales performance was solid, particularly against the background of a broader food sector where top-line growth was negative. As expected, our sweet treats business performed very well, with sales up 6.5% due to a strong innovation programme, especially in Cadbury cake. In 2015, we sold 185 million mince pies; 8% more than last year, which supported growth in non-branded and reflected a great performance by the team.

“While we are encouraged by the results of our innovation programme to date, grocery sales were held back in the quarter due to an unexpectedly mild December and a decision to reduce promotional activity of Ambrosia. Sales in our International business continued their strong trajectory from Q2, growing by 10% in Q3. We have a strong innovation programme in place for the fourth quarter and our profit and net debt expectations for the full year remain unchanged.”

simplify its capital structure

Premier Foods announced it had decided to withdraw from its £80m debtors securitisation programme in an effort to simplify its capital structure. The company claimed the programme had been unutilised at the end of H1.

The company also said it would release a variety of new products in Q4, including two new Mr Kipling ranges; a range of “deliciously golden oaty snack pack cake slices” designed to capitalise on the ‘better for you’ trend, and a range of premium cupcakes. The grocery division will also be launching a range of artisan home-baking products under the name of Great British Bake Off judge Paul Hollywood.

Nicola Mallard, consumer analyst at financial services provider Investec, said: “Versus our expectations, the group delivered quarterly revenues c. £2.5m lower than anticipated. Against a full-year revenue number of just sub-£780m, this is relatively insignificant and has negligible impact on profit numbers, so we should not put too much weight on individual quarters.”

She said the trading statement gave no cause for Investec to change its forecasts or target prices and gave shares in Premier Foods a recommendation to ‘Buy’.