Premier Foods plc · LSE:PFD
Premier Foods — Investor Presentation (February 2016)
38 slides from Premier Foods's investor presentation, February 2016
Slide 1: Introduction to Premier Foods
Introduction to Premier Foods February 2016
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those sta
Slide 3: Contents
CONTENTS 1 History & introduction 2 Why invest in us? 3 Recent results 4 Capital structure 5 Appendix 3 3
Slide 4: History & Introduction
1 History & Introduction 4
Slide 5: A Brief History
A BRIEF HISTORY Timeline 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ownership Private Public Strategy Building scale Restructuring Category Growth M&A Acquisitions Divestments Organic focus Flavourings & Seasonings No. 1 50% Market Value: £409m 40% 30% 20% 10% 0% PF N
Slide 6: We are one of the UK's leading ambient grocery suppliers
WE ARE ONE OF THE UK’s LEADING AMBIENT GROCERY SUPPLIERS 6.1 5.6 % Share 3.9 3.5 3.4 3.3 3.0 2.9 2.8 2.6 2.4 2.1 1.9 Total UK ambient grocery market: £25bn Source: Kantar Worldpanel, 52 weeks ending 3 January 2016, excludes Foodservice and out of home 6 6
Slide 7: A focused portfolio in an agile organisation
A FOCUSED PORTFOLIO IN AN AGILE ORGANISATION 58% fewer brands than in 2008 Corporate Grocery Sweet Treats International Employees functions Legal Grocery 1,620 IT Procurement Sweet Treats Group finance 2,055 Corporate Affairs Group Central Human Resources 3,675 Sales Marketing Innovation Technical C
Slide 8: Supply Chain Infrastructure
SUPPLY CHAIN INFRASTRUCTURE CARLTON SKELMERSDALE (D) WORKSOP MORETON CHARNWOOD STOKE CORBY (D) RUGBY (D) ASHFORD SWEET TREATS SITES LIFTON ANDOVER GROCERY SITES ‘D’ indicates distribution site 8 8
Slide 9: Why invest in us?
2 Why invest in us? 9
Slide 10: Our Investment Proposition
OUR INVESTMENT PROPOSITION Focused on driving category growth Broad stable of leading brands driving category growth through marketing and innovation Diverse manufacturing processes provide wide scope to innovate Strong capabilities to serve today’s multi-format retail environment Continue
Slide 11: We enjoy leading category positions
WE ENJOY LEADING CATEGORY POSITIONS Flavourings & Seasonings No. 1 Ambient Cakes No. 1 Ambient Desserts No. 1 50% 30% 60% Market Value: £307m Market Value: £414m Market Value: £968m 40% 30% 20% 40% 20% 10% 20% 10% 0% 0% 0% PF No.2 No.3 PF No.2 No.3 PF No.2 No.3 Cooking Sauces & Accompaniments No. 1
Slide 12: We continue to deliver category growth
WE CONTINUE TO DELIVER CATEGORY GROWTH Category Volume Sales Share +8% +5% +0.9ppt Flavourings & Seasonings +1.6% +1% +3% +0.2ppt +15% +9% +1.2ppt Cake +2.0% +14% +11% +0.6ppt Total Categories +1.2% +5% +2% +0.2ppt Source: Kantar Worldpanel, 52 w/e 13 September 2015 12 12
Slide 13: Demonstrable return on marketing & innovation
DEMONSTRABLE RETURN ON MARKETING & INNOVATION FY16 H1 Household Marketing & Innovation Programme Volume & Sales growth penetration1 Bisto +1.7ppts Oxo +0.5ppts Mr. Kipling +4.1ppts Cadbury +4.7ppts Volume Sales 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 1 - Kantar Worldpanel, 52 w/e 13 September 2015 13 13
Slide 14: Innovation and brand investment
INNOVATION AND BRAND INVESTMENT Doubling of innovation rate since FY14; marketing H2 focused Sales from innovation FY16 Consumer marketing £36-38m 36-38 33 25 H2 H1 2013/14 2014/15 2015/16 Source: IRI, 52 w/e 3 October 2015 14 14
Slide 15: Exciting grocery innovation programme for Q4
EXCITING GROCERY INNOVATION PROGRAMME FOR Q4 Rooted in deep consumer insights Ambrosia Paul Hollywood Deluxe Custard and Frozen Custard Baking Mixes Homepride All American Cooking Sauces 15 15
Slide 16: More innovation from Sweet Treats
MORE INNOVATION FROM SWEET TREATS Launching instore in the fourth quarter Exceedingly Good Oaty Slices Mr Kipling Cup cakes 16 16
Slide 17: Premiumisation across the portfolio
PREMIUMISATION ACROSS THE PORTFOLIO Superior products based on consumer needs allows premium pricing Ambrosia Batchelors Mr Kipling Premium /serving +28% +25% +107% % 17 17
Slide 18: Category review dynamics
CATEGORY REVIEW DYNAMICS Our category strategy fosters strong customer partnerships 43% 2012 2014 Market leading positions SKU reduction programme Well placed to work in close partnership with major customers Category captaincy Innovation programme 18 18
Slide 19: Delivering growth in all channels
DELIVERING GROWTH IN ALL CHANNELS 16.4% 13.0% Outgrew market in H1 11.4% Market 8.0% Premier Foods 3.7% 2.5% 0.9% 1.4% (0.3%) (1.7%) Supermarkets Online Convenience Bargain stores Discounters Growth ahead of market Market size 2,214 208 314 176 233 (£m) Source – Kantar Worldpanel, 52 w/e 1
Slide 20: Capital projects returns provide fuel for brand investment
CAPITAL PROJECTS RETURNS PROVIDE FUEL FOR BRAND INVESTMENT Major investment in Stoke cake bakery 25% 39% £7m <3 years >£2m 36% 2015/16 Annual cost Payback Investment release Growth Cost release Infrastructure 2015/16 CAPEX c.£25m Strong pipeline of cost release and growth projects Many with good
Slide 21: People strategy progressing well
PEOPLE STRATEGY PROGRESSING WELL Attracting high calibre senior talent; employee survey results Recent senior management recruits Employee survey Grocery Grocery Sweet Treats International Finance Operations Marketing Sales Director Director Director Director 84% High participation Brand Brand Brand
Slide 22: Sweet Treats - Health & Nutrition
SWEET TREATS - HEALTH & NUTRITION Cake in Context • Consumers view cake as a treat 106 140 230 calories calories calories • Sugar has important structural function as well as sweetness • Sugar replacement technologies at early stage of development Positive Approach • Reformulating to reduce calories
Slide 23: Recent results
3 Recent results 23
Slide 24: Q3 Results Summary
Q3 RESULTS SUMMARY Solid Q3 trading underpinned by strong Sweet Treats performance +0.1% +0.3% Group Q3 sales Sweet Treats International Grocery & Q3 YTD sales +6.5% +9.8% (2.7%) 24
Slide 25: Q3 Highlights
Q3 HIGHLIGHTS Strong execution instore and growing in growth channels +43% +27% Consumer Instore Shipper Discounters Sold 185 million Marketing Displays +over 30% Mince Pies, +8% 25
Slide 26: Group Results
GROUP RESULTS Solid Q3 trading underpinned by strong Sweet Treats performance Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales +1.6% +0.1% (1.0%) (0.4%) Non-branded sales +10.6% 3.7% +6.4% +5.3% Total sales +2.4% +0.4% +0.1% +0.3% Background of a broader food sector where top-line growth was negative
Slide 27: Grocery
GROCERY An unexpectedly mild December and reduced promotional activity of Ambrosia Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales +3.1% +0.6% (3.1%) (1.0%) Non-branded sales +5.6% (2.4%) +4.2% +0.3% Total sales +3.3% +0.3% (2.7%) (0.9%) Mildest December since records began held back Q4 sales Ambros
Slide 28: Sweet Treats
SWEET TREATS Sales up +6.5% due to strong innovation programme Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales (2.6%) (1.3%) +6.0% +1.5% Non-branded sales +18.7% +15.2% +7.5% +10.0% Total sales +0.2% +0.8% +6.5% +3.3% Strong innovation programme, especially Cadbury Amaze Bites and Hot Cakes driving br
Slide 29: Capital structure
4 Capital structure 29
Slide 30: A longer term and diversified capital structure
A LONGER TERM AND DIVERSIFIED CAPITAL STRUCTURE Raised £500m Senior Secured Notes in £m FY14: 350 – £325m Fixed notes @6.5% 300 – £175m Floating notes @5.0%+LIBOR 250 New £272m Revolving Credit Facility 200 – New and streamlined bank syndicate 150 Issued £340m equity in FY14 100 Fixed paymen
Slide 31: Our cash guidance is unchanged
OUR CASH GUIDANCE IS UNCHANGED 2015/16 guidance £m Working capital Neutral to slightly negative Depreciation c.£16m Capital expenditure c.£25m Interest – cash £40-£43m Interest – P&L c.£45m Tax – cash Nil Tax – notional P&L rate 20.0% Pension deficit contributions £6m Pension administrative & PPF le
Slide 32: H1 net debt in line with expectations
H1 NET DEBT IN LINE WITH EXPECTATIONS Stronger cash flows expected in H2 reflecting seasonality £m 600 585 3 1 585 51 14 580 21 560 14 540 8 6 520 500 Net debt Trading profit Depreciation Pensions Capex Interest Working Restructuring Other Net debt 4 April 2015 capital 3 Oct 2015 Net debt in line
Slide 33: Appendix
4 Appendix 33
Slide 34: Industry backdrop is well documented
INDUSTRY BACKDROP IS WELL DOCUMENTED Grocery volume growth momentum while deflation persists Inflation/(Deflation) Volume 3.0 3.0 % % +1.9% 0.0 (1.7%) (3.0) 0.0 Jul 2014 Sep 2015 Jul 2014 Sep 2015 Market volume growth now prevalent for c. twelve months Deflationary environment evident across bro
Slide 35: Improved pension deficit
IMPROVED PENSION DEFICIT Combined schemes includes RHM surplus offset by Premier Foods deficit; lower deficit due to increased discount rate IAS19 Accounting valuation (£m) 3 October 2015 4 April 2015 Assets 4,118 4,248 Liabilities (4,151) (4,460) Deficit (33) (212) Deficit net of deferred tax (Tax
Slide 36: Pensions - combined schemes
PENSIONS – COMBINED SCHEMES £m 3 Oct 2015 4 April 2015 Scheme Assets (£m) 3 Oct 2015 4 April 2015 Assets 4,118 4,248 Equities 379 349 Liabilities (4,151) (4,460) Government bonds 503 547 Deficit (33) (212) Corporate bonds 180 330 Deficit net of deferred tax (26) (167) Property 299 260 Absolute/Targe
Slide 37: Pension deficit schedule contributions
PENSION DEFICIT SCHEDULE CONTRIBUTIONS Restated to reflect financial year end change £m 2015/16 2016/17 2017/18 2018/19 2019/20 Deficit contributions 6 48 49 44 44 Administration costs 8-10 8-10 8-10 8-10 8-10 (including PPF levy) Total cash outflow 14-16 56-58 57-59 52-54 52-54 Table above shows
Slide 38: Pension deficit sensitivities
PENSION DEFICIT SENSITIVITIES Increase/ Increase/ Increase/ Pension sensitivities (reduction) in (reduction) in (reduction) in (IAS 19 basis, £m) assets liabilities deficit 25 basis point decrease in government gilts 165 182 17 25 basis point increase in credit spread - (170) (170) 25 basis point in
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