Premier to cut 600 jobs in bid to double annual cost savings

Premier Foods, maker of Hovis, Bisto, Branston and Oxo, is to shed 600 jobs as new management plans to more than double annual cost savings to £40 million by the end of 2013.

Job cuts are largely expected from administrative posts including at the group's headquarters in St Albans.

Michael Clarke, the former boss of Kraft in the UK who became chief executive last September, said: "Though decisions to reduce the workforce are always difficult, I'm convinced we are taking the right steps in the long-term interests of the business, employees and our stakeholders."

Premier is focusing on eight key brands: Hovis, Ambrosia, Mr Kipling, Sharwood's, Loyd Grossman, Bisto, Oxo and Batchelors. It has already sold Quorn, its East Anglian canning business, its Irish brands and the Marks & Spencer ready-meal maker Brookes Avana. The Hartley's jam and Haywards pickles brands are also up for sale with a likely combined price tag of more than £200 million.

Premier also warned that although sales over the key Christmas period had been in line with expectations, trading profits for the year are now likely to come in at the lower end of current forecasts between £170 million and £198 million.

But the City welcomed today's news; Charlie Mills of Credit Suisse described it as "a message of steely resolve". He has a price target of 8p on the shares which today rose 0.79p to 6.53p.

Premier said it is still in discussions with its banks over a refinancing which it hopes "will be reached soon".

It is to restart TV advertising for its main brands with Sharwood's and Loyd Grossman ads starting next month. Clarke plans to more than double marketing spend from just under £20 million to £41 million this year.