Premier Foods Plc · LSE:PFD
Premier Foods — FY2021 Earnings Presentation
54 slides from Premier Foods's earnings presentation, May 19, 2021
Slide 1: Preliminary results for 53 weeks ended 3 April 2021
Preliminary results for 53 weeks ended 3 April 2021 19 May 2021
Slide 2: Alex Whitehouse, Chief Executive Officer
Alex Whitehouse Chief Executive Officer
Slide 3: Headline full year results
HEADLINE FULL YEAR RESULTS Exceptionally strong year of trading driving substantial debt reduction 10.3% +13.6% £148m £115m ↓£94m +4.0% +7.0% +12% +23% 1.9x FY & Q4 FY & Q4 branded Net debt2 reduction FY Trading profit1 FY Adjusted PBT Revenue growth1 Revenue growth1 & Net debt2/EBITDA Dividend rein
Slide 4: Strongly positioned with our branded growth model
STRONGLY POSITIONED WITH OUR BRANDED GROWTH MODEL Market share and household penetration gains, exceptional online growth +128bps Grocery share gain +32bps 4,500,000 Sweet Treats +113bps PF Market 1 2 3 Market share growth1 Online growth +104%2 New households3 1 – IRI, 52 weeks 27 March 2021; 2 – Ka
Slide 5: Demonstrable track record over the last 4 years
DEMONSTRABLE TRACK RECORD OVER THE LAST 4 YEARS Trading profit (£m)1 Adjusted PBT (£m)1 115 148 93 133 88 129 123 79 74 117 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 Net debt (£m)2 Net debt/EBITDA2 523 496 3.93 470 3.56 3.23 408 2.72 1.90 314 FY16/17 FY17/18 FY1
Slide 6: Duncan Leggett, Chief Financial Officer
Duncan Leggett Chief Financial Officer
Slide 7: Financial progress in FY20/21
FINANCIAL PROGRESS IN FY20/21 Lower interest costs, pensions agreement, reduced leverage and proposed dividend 1 Substantial interest cost reduction 2 Transformative pensions agreement 39 33 27 ? 3 Reduced leverage 4 Proposed dividend FY19/20 FY20/21 FY20/21 pro forma Post Bond re-fi ▪ Progressive n
Slide 8: Full year net debt progression since FY16/17
FULL YEAR NET DEBT PROGRESSION SINCE FY16/17 Accelerating debt reduction Net debt /EBITDA 3.93x 3.56x 3.23x 2.72x 1.90x 550 523 £m 27 496 500 26 470 450 62 408 400 94 350 314 300 250 Net debt Debt Net debt Debt Net debt Debt Net debt Debt Net debt FY16/17 reduction FY17/18 reduction FY18/19 reductio
Slide 9: Net debt reduction of £94m
NET DEBT REDUCTION OF £94m Lowest ever recorded Net debt/EBITDA of 1.9x £m 450 408 170 400 350 33 2 5 30 314 23 300 47 250 200 Net debt FY19/20 EBITDA Pensions Capex Interest Working capital / Restructuring Hovis disposal Net debt pre-IFRS Other 16 ▪ Completed redemptions of £190m Floating Rate Note
Slide 10: Refinancing announced today
REFINANCING ANNOUNCED TODAY New RCF bank facility of £175m and proposed issue of new £300m bond Extends tenor of facilities, supportive and refreshed bank group and expectation of substantially reduced future interest costs Revolving Credit Facility Senior Secured Fixed Rate Notes 1 New £175m facili
Slide 11: Dividend reinstated for first time in 13 years
DIVIDEND REINSTATED FOR FIRST TIME IN 13 YEARS Final dividend proposed of 1.0 pence per share 1 A final dividend of 1.0p is proposed in respect of FY20/21 Net debt/EBITDA 2 First dividend paid to shareholders since July 2008 3.93 3.56 3.23 1. With leverage now significantly reduced, the Board is pro
Slide 12: Headline group results - 52 vs 53 week reporting
HEADLINE GROUP RESULTS - 52 vs 53 WEEK REPORTING Adjusted PBT growth of +23.5% and adjusted eps up +22.8% on 52 week basis FY20/21 FY20/21 FY19/20 Q4 Change % £m Change % 53 week 52 week 52 week 13 week Branded revenue 813 802 706 +13.6% +7.0% Non-branded revenue 134 133 141 (6.3%) (15.8%) Total rev
Slide 13: Grocery
GROCERY Exceptional branded revenue growth through the year FY20/21 FY20/21 FY19/20 Q4 Change £m Change (%) 53 week 52 week 52 week 13 week Branded sales 610 602 515 +16.9% +6.8% Non-branded sales 93 91 97 (5.3%) (15.3%) Total sales 703 693 612 +13.4% +3.6% Divisional contribution 175 173 148 +16.4%
Slide 14: Sweet Treats
SWEET TREATS Excellent branded revenue growth, +4.7% in a category which declined (2%) FY20/21 FY20/21 FY19/20 Q4 Change £m Change (%) 53 week 52 week 52 week 13 week Branded revenue 203 200 191 +4.7% +7.7% Non-branded revenue 41 41 45 (8.4%) (18.4%) Total revenue 244 241 236 +2.2% +5.4% Divisional
Slide 15: Strong statutory & headline metrics in the year
STRONG STATUTORY & HEADLINE METRICS IN THE YEAR Profit before tax up + £69m or +129% £153m £123m 12.5p £115m 11.0p +£57m +£69m +7.0p +23.5% +22.8% Operating Statutory PBT Basic EPS Adjusted PBT Adjusted EPS profit ▪ Statutory PBT and eps ahead of adjusted measures reflecting profit on disposal of Ho
Slide 16: Combined pension schemes – surplus of £540m
COMBINED PENSION SCHEMES – SURPLUS OF £540m Reduction in surplus due to discount rate assumption and lower RHM assets 3 April 2021 28 March 2020 30 March 2019 IAS19 Accounting valuation (£m) Premier Premier Premier RHM Combined RHM Combined RHM Combined Foods Foods Foods Assets 4,459 793 5,252 4,745
Slide 17: Capital allocation principles
CAPITAL ALLOCATION PRINCIPLES Context A cash generative business with leading sector margins • Maintenance of Trading profit margins with progressive investment in consumer Margins & 1 marketing PBT • Trading profit and adjusted PBT of equal importance in monitoring future progress • Accelerated cap
Slide 18: Alex Whitehouse, Chief Executive Officer – Agenda
Alex Whitehouse Chief Executive Officer Agenda: 1. Response to Covid 2. Progress vs strategy FY20/21 3. Plans for FY21/22 4. ESG & Healthier choices 5. Summary & outlook
Slide 19: Our approach to Covid-19
1 Covid OUR APPROACH TO COVID-19 Health & wellbeing of colleagues has been paramount as we helped feed the nation 1 Protecting colleagues health and wellbeing - Early implementation of additional, enhanced hygiene protocols - Social distancing measures implemented per Government and WHO guidelines F
Slide 20: Our branded growth model strategy is delivering
2 Strategy OUR BRANDED GROWTH MODEL STRATEGY IS DELIVERING A combination of agility, pace and scale £ Sustainable Cost control Cash & profitable & efficiency generation revenue growth • Leading brand positions • Disciplined working capital • Lean SG&A cost base • Insight driven innovation management
Slide 21: The branded growth model
2 Strategy THE BRANDED GROWTH MODEL Underpins business growth and cash generation 1 Leading brand positions 2 Insight driven new products • Our brands are leaders in their categories • Launch new product development linked to key • High household penetration consumer trends • Major focus on health &
Slide 22: UK revenue performance
2 Strategy UK REVENUE PERFORMANCE Established track record of delivering sustainable, profitable revenue growth Quarterly UK revenue growth % movement year on year 22.9% 7.3% 7.8% 7.4% 4.4% 4.4% 4.8% 4.0% 3.6% 3.4% 3.0% 2.6% 1.2% 1.6% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY17/18 FY18/19 FY19
Slide 23: Revenue from new products ahead of last year
2 Strategy REVENUE FROM NEW PRODUCTS AHEAD OF LAST YEAR Extensive TV advertising across six major brands New product ranges including better for you Sharwood’s 6 key brands supported with TV advertising New New Another year of increased revenue from new products 23
Slide 24: Growing ahead of the market + more households
2 Strategy GROWING AHEAD OF THE MARKET + MORE HOUSEHOLDS Reflect leading market positions, product innovation and investment Markets/categories New households gained in year Share +32bps +113bps +1.2million +1.1million 13.6% 12.3% PF growth YoY Market growth growth +1.1million 2.4% +1.0million +0.7m
Slide 25: Exceptionally high online growth
2 Strategy EXCEPTIONALLY HIGH ONLINE GROWTH Consistently grown faster than the channel in all categories Online growth vs market Online growth x category 140% 120.0% 120% 100.0% 100% 80.0% 80% 60.0% 60% 40.0% 40% 20.0% 20% 0.0% 0% Cake Desserts Flavourings Cooking QMS Total & Sauces & Seasonings Acc
Slide 26: New international strategy delivering consistent growth
2 Strategy NEW INTERNATIONAL STRATEGY DELIVERING CONSISTENT GROWTH Revenue up +23%1 with double digit growth in each quarter FY20/21 progress vs strategy FY20/21 quarterly revenue growth profile 1 Implemented change from New leadership functional to country structure leadership 43% 2 Small teams now
Slide 27: Application of branded growth model overseas
2 Strategy APPLICATION OF BRANDED GROWTH MODEL OVERSEAS Replicating the successful sustainable UK model in Ireland and Australia Ireland Australia Consumer marketing New product launches 1. Replicating UK branded growth model 1. FY21 revenue growth strong in Sharwood’s; 2. Mr Kipling advertising in
Slide 28: FY21/22 new product development & brand investment
3 FY21/22 FY21/22 NEW PRODUCT DEVELOPMENT & BRAND INVESTMENT Strong pipeline of new products across the portfolio & further TV advertising New product launches Brand investment Cooking sauces Bisto Nissin Soba New advert for FY21/22 New advert for FY21/22 Better for you options Cape Herb & Spice Amb
Slide 29: Acceleration of branded growth model rollout overseas
3 FY21/22 ACCELERATION OF BRANDED GROWTH MODEL ROLLOUT OVERSEAS New product launches in Australia, USA, Canada and Europe New product launches • Mr Kipling to launch in US through Weston Foods agreement and rollout in Canada • Low fat cooking sauces launch in USA, Canada, Ireland and Australia • Sha
Slide 30: Healthier for you choices are core to innovation agenda
4 ESG & Health HEALTHIER FOR YOU CHOICES ARE CORE TO INNOVATION AGENDA Supported by three key strategies 1 Enhance ▪ Targeting reduction in salt, sugar and calories nutrition profile ▪ Stealth reduction across categories of existing core ▪ So far, removed over 1,100 tonnes of sugar across our cake a
Slide 31: Our ESG strategy
4 ESG & Health OUR ESG STRATEGY Five pillars which stretch across our business • Enhance nutrition profile of existing range Encourage • Extend our range of healthier foods healthier • Educate consumers & colleagues on healthier choices choices Realise • Attract talent & developing skills people’s •
Slide 32: ESG
4 ESG & Health ESG Healthier choices Realise people’s potential Drive ethical sourcing 100% certified sustainable palm oil 100% certified 1. Top 100 apprenticeship employer (direct) for 4th year ↓ soya, up 2. 550 leaders and managers from 89% undertaken I&D programme in PY • 17 new better for you ra
Slide 33: ESG
4 ESG & Health ESG Supporting our communities Reducing our environmental footprint 1 • Reduced CO2 emissions by 5.8% last year 550,000 meals1 donated to and by 43% since 20082 550,000 those in need via Fareshare Climate during Covid pandemic • Maintain zero waste to landfill record action • Water us
Slide 34: The business is now in a materially stronger position
5 Summary & outlook THE BUSINESS IS NOW IN A MATERIALLY STRONGER POSITION Operational Financial 1 1 Exceptionally strong year for business Trading profit +12%, adjusted PBT +24% 2 Focus has been on ensuring colleague safety, 2 Net debt/EBITDA of 1.9x, lowest ever leverage, including keeping operatio
Slide 35: Further rollout of brand building strategy
5 Summary & outlook FURTHER ROLLOUT OF BRAND BUILDING STRATEGY Capturing category and overseas opportunities based on established foundations £ Phase 1 Sustainable Branded growth Cost Branded growth Cash model delivered & profitable control & model & generation leverage below 2.0x revenue growth eff
Slide 36: Well positioned for the year ahead
5 Summary & outlook WELL POSITIONED FOR THE YEAR AHEAD Strategic & Operational Outlook Household Penetration millions Continued Many more households 91% of consumers intend to Strong NPD pipeline and employment purchased our brands six major brands on TV cook the same, or more during past year of
Slide 37: FY21/22 outlook
5 Summary & outlook FY21/22 OUTLOOK 1 FY21/22 Revenue growth to be measured on two year growth rate; strong prior year comparatives 2 Confident in profit expectations for FY21/22 Adjusted PBT expected to benefit from lower financing costs 3 FY21/22 interest costs substantially lower than two years a
Slide 38: Q&A
Q&A
Slide 39: Appendix
Appendix 39
Slide 40: Cautionary statement
CAUTIONARY STATEMENT This presentation may contain "forward-looking statements" that are based on estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements are all statements other than statements of historical fact or statements in the present tense, and can b
Slide 41: Definitions
DEFINITIONS ▪ The period ‘FY20/21’ refers to the 52 weeks ended 27 March 2021, unless where otherwise stated. The period ‘FY19/20’ refers to the 52 weeks ended 28 March 2020. ▪ The period ‘Q4’ refers to the thirteen weeks ended 27 March 2021, unless where otherwise stated and the comparative period
Slide 42: Strong brand equity
STRONG BRAND EQUITY Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 44% 73% Quick Meals, Snacks & Soups 1 33% 45% Ambient Desserts 1 37% 59% Cooking Sauces & Accompaniments 1 16% 54% Ambient Cakes 1 25% 65% Sources: Category
Slide 43: UK grocery market
UK GROCERY MARKET Ambient grocery shows lowest prevalence of retailer brand in UK grocery 18% 34% Chilled 46% Ambient Frozen & Fresh 54% 66% 82% Branded Non-branded Branded Non-branded Branded Non-branded Market size £37bn £52bn £7bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desser
Slide 44: Non-branded plays an important and supportive role in our business
NON-BRANDED PLAYS AN IMPORTANT AND SUPPORTIVE ROLE IN OUR BUSINESS Non-branded revenue by type Key principles & criteria • Application of a Capex light approach Knighton B2B & flour • To play an important & incremental role • Assists in supporting Manufacturing overhead recoveries • Strict financial
Slide 45: Cost savings programme on track to beat target
COST SAVINGS PROGRAMME ON TRACK TO BEAT TARGET Target of £5m additional cost savings by FY21/22 for brand re-investment Savings by type Savings by year 10% 10% 26% 20% £5m £5m Cost Cost savings savings 70% 64% Supply chain International SG&A Corporate restructuring FY19/20 FY20/21 FY21/22 Supply Cha
Slide 46: Operating profit increased 60%
OPERATING PROFIT INCREASED 60% Trading profit growth and Hovis investment disposal £m – 53 weeks basis FY20/21 FY19/20 Change Trading profit 151 133 18 Amortisation of intangible assets (31) (30) (1) Foreign exchange fair value movements (2) 2 (4) Reversal of impairment loss of Loan receivable 16 -
Slide 47: Interest & taxation
INTEREST & TAXATION FY20/21 FY20/21 £m FY19/20 53 week basis 52 week basis Senior secured notes interest 26 26 31 Interest Bank debt interest 4 4 5 30 30 36 Amortisation of debt issuance costs 3 3 3 Net regular interest 33 33 39 ▪ Tax charge of £17m in FY20/21, due to movements in deferred tax ▪ Not
Slide 48: Adjusted earnings per share growth +22.8%
ADJUSTED EARNINGS PER SHARE GROWTH +22.8% £m FY20/21 FY19/20 Change (%) Trading profit 148 133 +11.9% Net regular interest (33) (39) +15.9% Adjusted PBT 115 94 +23.5% Notional tax @ 19% (22) (18) (23.5%) Adjusted earnings 93 76 +23.5% Weighted average shares in issue (million) 851.3 846.6 +0.6% Adju
Slide 49: Capital structure overview
CAPITAL STRUCTURE OVERVIEW Fixed Rate Notes pricing subject to execution Year ago Pro forma1 £m £m 350 350 300 300 300 300 RCF Fixed notes 250 210 250 200 177 200 175 150 150 100 100 50 50 0 0 2020 2021 July 2022 Dec 2022 Oct 2023 2021 2022 2023 2024 2025 2026 RCF Fixed notes Floating notes Ratchet
Slide 50: Pensions – combined schemes
PENSIONS – COMBINED SCHEMES £m 3 April 2021 28 March 2020 Scheme Assets (£m) 3 April 2021 28 March 2020 Assets 5,252 5,520 Equities 15 12 Liabilities (4,712) (4,290) Government bonds 1,625 1,803 Surplus 540 1,230 Corporate bonds 1 25 Surplus net of deferred 437 997 Property 468 445 tax @ 19.0% Absol
Slide 51: Combined pension schemes
COMBINED PENSION SCHEMES Accounting combined surplus £540m; Triennial combined valuation £214m Accounting Valuation trend (£m) Actuarial Triennial Valuation (£m) 2,000 1,500 RHM Premier Foods Surplus/(Deficit) 2019 2016 2013 1,000 RHM 338 135 (504) 923 Premier Foods (552) (551) (538) 500 Ireland 0 0
Slide 52: Dividend matching arrangement
DIVIDEND MATCHING ARRANGEMENT Reduced payments to pension schemes compared to previous 1:1 plan Matching payment to pension scheme (£m) 25 20 Previous Revised 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Dividend paid (£m) ▪ Up to £5m of cash dividend - for every £1 paid as dividend,
Slide 53: FY21/22 guidance
FY21/22 GUIDANCE FY21/22 guidance £m Working capital Slightly negative Depreciation c.£20m Capital expenditure £25-30m Interest – cash Lower than £30m Interest – P&L Lower than £30m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £38m Pension administrative & PPF levy cash
Slide 54: Summarised balance sheet
SUMMARISED BALANCE SHEET £m 3 April 2021 28 March 2020 Property, plant & equipment 192 194 Intangibles / Goodwill 963 987 Deferred tax asset 29 - Retirement benefit assets 935 1,512 Non-current Assets 2,119 2,693 Working Capital - Stock 69 68 - Debtors 83 89 - Creditors (250) (250) Total Working Cap