Premier Foods, the Mr Kipling cakes to Campbell's soup maker, said it expected its struggling Hovis bread business to start winning back market share in the second half of the year after spending £15 million improving the quality of its loaves.

In a first-half trading update, the heavily indebted company this morning said that sales volumes of Hovis had stabilised, albeit at lower levels than for the same period last year, and it expected a £10 million-plus relaunch of the brand in September to help it return to growth.

Premier, which has seen Hovis lose ground to Warburtons and Kingsmill, wants to hark back to the success of the classic 'Bike Ride' advert of 1973, in which a small boy pushed a bike laden with bread up a cobbled street.

The ad was directed by Sir Ridley Scott, who went on to fame and fortune in Hollywood with blockbusters including Alien and Blade Runner, and there are rumours in the advertising industry that he has been approached by Premier about becoming involved in September's relaunch.

Premier has spent £15 million attempting to restore Hovis's credentials, removing all additives and increasing the bake time. It is also planning to reintroduce the 'Little Brown' Hovis loaf, which it had stopped making.

Robert Schofield, the Premier chief executive, said: "We've now got the Hovis brand back to where we want it and we're now ready to relaunch it."

He said the average cost of a loaf had risen an all-time high of £1.23, which was "pretty much in line with Warburtons and Kingsmill".

Premier said this morning that first-half sales for the group as a whole had risen by 7 per cent, as it pushed through price rises to recover input cost inflation. Trading profit had been "in line with the same period last year".

Mr Schofield said he was pleased with the performance given the disruption caused by the integration of Campbell's and RHM, and he was confident about the rest of the year "as we put our foot on the promotional gas pedal".

He said the integration was "proceeding ahead of its original schedule", with five out of nine factory closures now completed and the rest scheduled to take place in the second half. It is also consulting with staff on the proposed closure of its Rotherham mill.

The company said it was on track to deliver the £113 million of cost savings identified when it acquired the RHM and Campbell's businesses although the programme of asset disposals was being hamepered by the collapse of the property market.

The group admitted that, as a result of the property problem, its net debt of £1.8 billion, which has been a concern to investors, would not fall as far or fast as it had hoped.

Paul Thomas, finance director, said the company had met its financial covenant test at the end of June. The covenants were renegotiated in March when Premier sought new credit and cut its dividend.

Asked whether Premier would consider making disposals, Mr Thomas said: "We would not rule anything out, but we're not saying anything today."

On a divisional basis, grocery and chilled sales were both up 2 per cent in the first half, while baking and milling was up 16 per cent as the group pushed through price increases to mitigate soaring wheat and other imput costs.

Mr Schofield said its portfolio of staple brands such as Sarson's vinegar and Homepride flour "puts us in a strong position as consumer tighten their belts".

He said that whereas last year it had been taken somewhat by surprise by the "wall of inflation", this year it had "good forward sight of inflationary pressures" and had plans in place to mitigate them.

Shares of Premier, which have fallen by more than 70 per cent over the past year amid rampant food inflation and fears over its debt burden, were unchanged at 76p in morning trading.

Graham Jones, an analyst at Panmure, described the debt increase as worrying and warned that, if it did not fall by the year end, banking covenants will be breached.

“This statement won’t alleviate fears about the company’s desperately over-stretched balance sheet,” he said

Times Recommends

• US stocks fall below 9,000 mark
• House price fall smallest in seven months
• Wary investors opt to keep cash in safes