Tuesday 15 November 2016 2:58 pm

Not all gravy: Profits melted away in hot weather at Oxo and Bisto owner Premier Foods

Shares in the owner of Bisto gravy steamed in four per cent higher today as a result of good news on its pension schemes, this was despite the summer's weather hitting profits.

Premier Foods revealed half-year earnings had fallen by over four per cent in the six months to the end of September. Meanwhile, underlying revenues fell by 1.8 per cent to £348m.

In the wake of the Brexit-vote and weakening pound, some of Britain's favourite corporate excuses for falling financials have been popped onto the backburner. However, the owner of Be-Ro flour rolled out an old classic – warmer weather has hampered the performance of its grocery division.

While profits melted away in the sheer heat of the summer, chief executive Gavin Darby was grateful for a strong performance from the group's sweet treats division, which includes Cadbury's and Mr Kipling cakes. The division grew four per cent.

Nevertheless, the increase in the share price was due to Premier Foods' ability to get its pension schemes under control.

Martin Deboo, an analyst at Jefferies, highlighted that it had cut one of its two pension schemes from a deficit of over £1bn in 2013 to £416m in 2016.

Its other scheme, taken on following the purchase of the Hovis brand, had moved from a deficit to a surplus. Trustees said that it would no longer require any cash top-ups from 2019. Deboo estimated that the associated reduction in cash contributions would save the company approximately 12p per share.

Despite the share price movement, the firm's equities are still trading considerably lower than the 65p offered by American flavourings giant McCormick earlier this year.

Premier rebuffed three higher approaches (52p, 60p and 65p) from McCormick. The decision angered a number of key institutional shareholders including Paulson and Standard Life, especially when a 17 per cent slice of Premier's shares were sold to Japanese firm Nissin Foods at 63p per share.

Analysts at Shore Capital called the Spring debacle "the potential bid that was not" and concluded:

Sadly, our scepticism on the stock has risen this year.

We struggle to fault the management's strategy… however, the inability to avoid weather related trip-ups – late summer 2016 was not the first time that warm temperatures de-railed the investment narrative – means that we must still be patient for the company to sustainably deliver on its own investment narrative.