Premier Foods plc · LSE:PFD
Premier Foods — H1 FY18/19 Earnings Presentation
42 slides from Premier Foods's earnings presentation, Nov 13, 2018
Slide 1: Half year results for 26 weeks ended 29 September 2018
Half year results for 26 weeks ended 29 September 2018 13 November 2018
Slide 2: Introduction
INTRODUCTION Good financial performance and innovation continuing to deliver Financial results Strategic & Operational Headlines +1.3% +6.2% H1 Revenue growth H1 Trading profit Mr Kipling relaunch Batchelors £510m +13.8% ↓£26m* H1 Adjusted eps Net debt Strong H2 pipeline Logistics challenges * - Com
Slide 3: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 3
Slide 4: Group Headline Results
GROUP HEADLINE RESULTS 5th consecutive quarter of revenue growth and Trading profit up +6.2% £m FY18/19 H1 FY17/18 H1 Change (%) Q2 Change (%) Branded revenue 297 295 +0.5% 0.0% Non-branded revenue 61 58 +5.5% +6.5% Total revenue 358 353 +1.3% +1.0% Divisional contribution 68 63 +8.4% Group & corpor
Slide 5: Grocery
GROCERY Flat revenue and growth in Divisional contribution £m FY18/19 H1 FY17/18 H1 Change (%) Q2 Change (%) Branded revenue 210 215 (2.1%) (2.7%) Non-branded revenue 46 40 +13.6% +17.8% Total revenue 256 255 +0.4% +0.6% Divisional contribution 57 51 +10.9% Divisional contribution % 22.3% 20.2% +2.1
Slide 6: Sweet Treats
SWEET TREATS Mr Kipling revenue growth of +13% £m FY18/19 H1 FY17/18 H1 Change (%) Q2 Change (%) Branded sales 87 81 +7.4% +7.3% Non-branded sales 15 17 (13.1%) (19.0%) Total sales 102 98 +3.8% +2.1% Divisional contribution 11 12 (1.7%) Divisional contribution % 11.1% 11.7% (0.6ppts) ▪ Excellent per
Slide 7: Operating Profit
OPERATING PROFIT 25.7% ahead of prior year £m FY18/19 H1 FY17/18 H1 Change (%) Trading profit 51 48 6.2% Amortisation of intangible assets (18) (18) 1.1% Foreign exchange fair value movements 1 1 (11.1%) Restructuring costs (5) (3) (64.5%) Net interest on pension and administration expenses (1) (1)
Slide 8: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE 13.8% growth due to Trading profit and lower interest £m FY18/19 H1 FY17/18 H1 Change (%) Trading profit 51 48 +6.2% Net regular interest (21) (22) +3.6% Adjusted PBT 30 26 +14.3% Notional tax @ 19% (6) (5) +14.3% Adjusted earnings 24 21 +14.3% Weighted average shares in
Slide 9: Net debt reduced by £26m compared to a year ago
NET DEBT REDUCED BY £26m COMPARED TO A YEAR AGO £510m at the Half year £m 600 550 5 12 510 496 51 16 500 14 7 8 19 450 400 350 300 Net debt Trading profit Depreciation Pensions Capex Interest Working capital Restructuring Financing fees Net debt FY17/18 / Other FY18/19 H1 ▪ Capital investment weight
Slide 10: We have reduced year end net debt by nearly £90m in last 3 years
WE HAVE REDUCED YEAR END NET DEBT BY NEARLY £90m IN LAST 3 YEARS £89m Organic Net debt reduction over last 3 years Investment over last 3 years More 585 51 ↓£89m +£150m than doubled 534 11 523 27 496 Consumer Innovation marketing + rate Capex Net debt Debt Net debt Debt Net debt Debt Net debt 46 FY1
Slide 11: Combined Pension Schemes – Accounting Basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Combined surplus £34m lower at £283m 29 September 2018 31 March 2018 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,057 668 4,725 4,185 679 4,864 Liabilities (3,341) (1,101) (4,442) (3,431) (1,116) (4,547) Su
Slide 12: Pension Schemes Valuation Evolution
PENSION SCHEMES VALUATION EVOLUTION Position of principal schemes stable and improving Surplus/ (Deficit) £m 1,000 800 716 600 400 200 0 (200) (400) (433) (600) (800) Dec RHM Premier Foods Sept 2013 2018 12
Slide 13: FY18/19 Cash Guidance
FY18/19 CASH GUIDANCE FY18/19 guidance £m Working capital Slightly negative Depreciation £16-£18m Capital expenditure Maximum £22m Interest – cash £30-£34m Interest – P&L £40-£43m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £35m Pension administrative & PPF levy cash c
Slide 14: Capital Structure
CAPITAL STRUCTURE £300m Fixed rate note issued in H1 and RCF extension to December 2022 £m 350 300 300 250 210 200 177 150 100 50 0 2018 2019 2020 2021 June Dec Oct 2023 2022 2022 Floating Notes RCF committed Fixed Notes ▪ Appropriate liquidity and a comfortable maturity profile ▪ First maturity in
Slide 15: Gavin Darby, Chief Executive Officer: Operational review
Gavin Darby Chief Executive Officer Operational review 15
Slide 16: The Board's Strategy: Building Business, Deleveraging and Accelerating Value Creation
THE BOARD’S STRATEGY: BUILDING BUSINESS, DELEVERAGING AND ACCELERATING VALUE CREATION Drive revenue growth Cost control & efficiency £ Cash generation Overlay with actions to Keep building Net debt/EBITDA below accelerate shareholder business 3.0x by March 2020 value creation 16
Slide 17: Strategy & Potential Disposal
STRATEGY & POTENTIAL DISPOSAL There is no certainty that a transaction will complete 1. Accelerated investment of • Consumer marketing • Capital expenditure 2. Meaningful debt reduction £ Options to accelerate Core Plan Potential disposal shareholder value 17
Slide 18: Industry Context
INDUSTRY CONTEXT UK food sales displaying consistent growth as purchasing power returns Food sales vs Non-food sales Average earnings ahead of inflation % % 3.5 6.0 3.0 5.0 2.5 4.0 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 Jan 2016 Jan 2017 Jan 2018 Aug 2018 (1.0) (2.0) Sep Sep 2017 2018 Food sales Food v
Slide 19: Continued Quarterly Revenue Growth
CONTINUED QUARTERLY REVENUE GROWTH Q2 sales growth despite strong prior year comparative and hot summer Quarterly Revenue growth % movement year on year 7.0% 6.2% 4.0% 1.7% 1.0% (3.1%) Q1 Q2 Q3 Q4 Q1 Q2 FY17/18 FY18/19 19
Slide 20: Our business is more resilient than 4 years ago
OUR BUSINESS IS MORE RESILIENT THAN 4 YEARS AGO Innovation strategy insulating against weather fluctuations Temperature Quarterly Average category decline change revenue March ↑4.7OC ↓8% ↓6.2% 2014 Sept ↓5.4% ↑3.2OC ↓9% 2016 July ↑2.3OC ↓6% ↑1.0% 2018 Sources: IRI, Met Office 20
Slide 21: Logistics Update
LOGISTICS UPDATE Final phase of logistics transformation programme experiencing challenges Logistics Transformation Programme stages and overview: • Phase 1 completed end of FY17/18 • Phase 2 completed in Quarter 1 • Phase 3 transition commenced in Quarter 2: – Ramp up to expected operational perfor
Slide 22: Product Innovation Continues to Support Growth
PRODUCT INNOVATION CONTINUES TO SUPPORT GROWTH All our new product innovation is aligned to consumer trends Innovation as % UK branded sales* % of NPD in market after 2 years Targeting 10% of UK branded sales 10.0% 70% 7.1% 6.4% 5.1% 3.6% 25% FY15/16 FY16/17 FY17/18 FY18/19 Target Total market PF F/
Slide 23: Successful Mr Kipling Relaunch in H1
SUCCESSFUL MR KIPLING RELAUNCH IN H1 The Group’s biggest brand delivered double-digit growth FY17/18 Brand Relaunch Ingredients FY18/19 H1 ↓2% ↑13% Revenue Revenue TV advertising NPD ↓3% ↑5% Volume Volume Packaging redesign Instore execution 23
Slide 24: Batchelors & Nissin Retain Category Leadership
BATCHELORS & NISSIN RETAIN CATEGORY LEADERSHIP Batchelors pots range revenues doubled in H1 Batchelors Nissin +7% +63% H1 revenue H1 revenue growth growth Source: IRI, 52 w/e 29 September 2018 24
Slide 25: Health & Nutrition
HEALTH & NUTRITION Better for you choices across the portfolio Health & Nutrition range Lower calories, Lower sugar, Green traffic lights, Gluten free Front of 30% 30% 30% Gluten pack IGD less sugar less fat less sodium free best practice 25
Slide 26: Great Innovation Coming for H2
GREAT INNOVATION COMING FOR H2 Aligned to key consumer trends Loyd Grossman Ambrosia Oxo ‘Pasta Italia’ Sachets ‘Pasta Italia’ Pots Pot desserts Premium stock Angel Delight Sharwood’s Cadbury Layers pots Jelly pots Noodle pots Baking mixes 26
Slide 27: International Highlights
INTERNATIONAL HIGHLIGHTS Australia Cadbury cake in market performance strong; highest ever in H1 Australia Sharwood’s Cake Revenue growth +47% 12.4% Market share progression 9.6% ▪ Sharwood’s revenue 4.3% growth due to increased instore 1.5% feature ▪ Market share gains FY15/16 FY16/17 FY17/18 FY18/
Slide 28: Brexit
BREXIT Scenario planning by cross-functional management committee Scale & context Scenario planning 1. Scenario planning for several months €50m c.£550m 2. Broad range of commodity expenditure, with relatively low single exposure 3. Close collaboration with suppliers & Net annual Euros spend Annual
Slide 29: Corporate & Social Responsibility
CORPORATE & SOCIAL RESPONSIBILITY We are making good progress in a number of areas Sugar Plastics 1,000 Remove 1,000 Tonnes of sugar Recyclable plastics used in our Tonnes from portfolio by end of FY18/19 70% products 240 Tonnes of plastics removed over Tonnes last 3 years Calorie control 80 Further
Slide 30: Summary
SUMMARY Financial results Strategic & Operational Headlines +1.3% +6.2% H1 Revenue growth H1 Trading profit Mr Kipling relaunch Batchelors £510m +13.8% ↓£26m* H1 Adjusted eps Net debt Strong H2 pipeline Logistics challenges * - Compared to FY17/18 H1 30
Slide 31: Outlook
OUTLOOK ▪ Committed to reducing Net debt by £25m per annum ▪ Net debt/EBITDA target of below 3.0x expected by March 2020, excluding any M&A impact ▪ Working in parallel to identify other strategic opportunities to accelerate the Company’s turnaround ▪ Any transaction would aim to provide opportunity
Slide 32: Q&A
Q&A 32
Slide 33: Appendix
Appendix 33
Slide 34: 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 35: Definitions
DEFINITIONS ▪ The period ‘FY18/19 H1’ refers to the 26 weeks ended 29 September 2018. The period ‘FY17/18 H1’ refers to the 26 weeks ended 30 September 2017. ▪ The period ‘Q2’ refers to the thirteen weeks ended 29 September 2018 and the comparative period, the thirteen weeks ended 30 September 2017.
Slide 36: Leading Category Positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 43% 74% Quick Meals, Snacks & Soups 1 31% 46% Ambient Desserts 1 35% 56% Cooking Sauces & Accompaniments 1 16% 52% Ambient Cakes 1 22% 63% Sources: C
Slide 37: Retailer Brand
RETAILER BRAND Ambient grocery shows lowest prevalence of retailer brand in UK grocery 18% 33% Chilled Frozen 45% Ambient & Fresh 55% 67% 82% Branded Non-branded Branded Non-branded Branded Non-branded Market size £29bn £41bn £6bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desserts
Slide 38: Customer & Category Review
CUSTOMER & CATEGORY REVIEW Long term outperformance in range reviews and an agile business model Net category distribution points gain 2018 vs 2013 Why is PF a great partner to UK retailers? 120 115 112 Brand, 108 Manufacturing 110 product & 106 scale & 105 insights 98 capability 100 expertise 95 90
Slide 39: Grocery Non-Branded Growth B2B and Contract Wins
GROCERY NON-BRANDED GROWTH B2B AND CONTRACT WINS Grocery H1 revenue commentary Non-branded revenue by type Grocery Non-branded up +13.6% • Knighton Foods growing and accounts Knighton B2B & flour for half of the growth • Retailer brand contract wins in Desserts, Flour, Stuffings and Noodles 20% 25%
Slide 40: Interest & Taxation
INTEREST & TAXATION Interest £m FY18/19 H1 FY17/18 H1 Senior secured notes interest 16 16 Bank debt interest 3 4 19 20 Amortisation of debt issuance costs 2 2 Net regular interest 21 22 Taxation ▪ Deferred tax liability £3m ▪ Capital allowances in excess of depreciation provide further shield agains
Slide 41: Pensions – Combined Schemes
PENSIONS – COMBINED SCHEMES £m 29 Sept 2018 31 March 2018 Scheme Assets (£m) 29 September 2018 31 March 2018 Assets 4,725 4,864 Equities 192 297 Liabilities (4,442) (4,547) Government bonds 1,022 1,046 Surplus 283 317 Corporate bonds 20 21 Surplus net of deferred 235 263 Property 403 391 tax @ (17.0
Slide 42: Balance Sheet
BALANCE SHEET £m 29 September 2018 31 March 2018 Property, plant & equipment 184 185 Intangibles / Goodwill 1,058 1,075 Retirement benefit assets 716 754 Non-current Assets 1,958 2,014 Working Capital - Stock 100 76 - Debtors 66 75 - Creditors (220) (214) Total Working Capital (54) (63) Net debt Gro