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Premier Foods has announced plans to sell off non-core businesses and cut about 600 staff in an attempt to double cost savings to £40m a year.

The firm behind brands including Paxo and Mr Kipling is to make about 5% of its 12,000 workforce redundant.

Its current cost-saving target of £20m is to be doubled by 2013, as it expects 2011's results to be at the "lower end" of market expectations.

In November, the firm said it agreed breathing space on its debts.

A "covenant test" - used by Premier's lenders to check on its financial health - had been due on 31 December.

It has been delayed until 31 March to allow time to renegotiate its debts.

New chief executive Michael Clarke is focusing the group on eight of its biggest brands.

He said: "Discussions with the company's banks over a re-financing package continue to make progress and it is anticipated that an appropriate agreement will be reached soon.

"While decisions to reduce the workforce are always difficult, I am convinced we are taking the right steps in the long-term interests of the businesses."