Premier Foods plc · LSE:PFD
Premier Foods — FY2007 Earnings Presentation
49 slides from Premier Foods's earnings presentation, Mar 4, 2008
Slide 1: Premier Foods Preliminary Results Year ended 31 December 2007
Premier Foods Preliminary Results Year ended 31 December 2007 Tuesday, 4 March 2008 1
Slide 2: David Kappler, Chairman
David Kappler Chairman Premier Foods plc Full Year Results – Tuesday, 4th March 2008 2
Slide 3: Introduction
Introduction • Our Priorities – Recovering commodity cost increases – Delivering synergies – Investing in brands – Completing investment and restructuring programme • Our Actions – Revised banking covenants – Additional committed facilities – Focus on reducing leverage – Cut dividend Creating financ
Slide 4: Robert Schofield, Chief Executive
Robert Schofield Chief Executive Premier Foods plc Full Year Results – Tuesday, 4th March 2008 4
Slide 5: A recap - What did we buy?
A recap - What did we buy? We had a Grocery business with sales of £720m • We bought Campbell’s with sales of £245m • 8 months later we bought RHM with sales of £1,595m Cakes – sales of £260m • Doing well, No 1 and growing • Kipling and Cadbury Customer Partnerships - sales of £270m • Own label – ma
Slide 6: A recap – what did we buy?
A recap – what did we buy? Campbell’s – sales of £245m • Sales declining at 4% pa • Struggling brands – Batchelors, Oxo, Homepride Culinary Brands – sales of £270m • Struggling brands: Bisto, Sharwoods, Robertson’s • Dropped £6m profit in H1 2007 Bread Bakeries – sales of £800m • Struggling and losi
Slide 7: Where are we now?
Where are we now? • Campbell’s returned to growth • Culinary Brands decline halted • Manor Bakeries continues to grow • Chilled business in good shape • We have integrated very rapidly – Closed 4 offices – Closed 2 factories – Integrated systems – Exited RHM Frozen Foods – Operating in our new struc
Slide 8: We love the brands we have acquired
We love the brands we have acquired • Hovis – great brand – new strategy and investment commenced • Kipling – more innovation on the way • Batchelors – launched Soupfulls • Sharwoods – revamping products and relaunching • Bisto – back on the telly • Oxo – launch into liquid stock • Cadbury – strong
Slide 9: So what happened to the numbers?
So what happened to the numbers? Commodity Inflation Wheat Other £150m* £75m* On raw materials and packaging of £1.2bn • By the end of 2007 we had price increases in place to recover £190m of the £225m – We had not recovered all the costs in the Grocery business • We intend to have them recovered by
Slide 10: Bread business
Bread business • Significant competitor activity throughout 2007 • By the end of October 2007 we had achieved price increases covering 2007 wheat inflation • We lost volume as competitors were slower to achieve increases • Wheat inflation has continued into 2008 • Further price rises inevitable • Th
Slide 11: Summary
Summary • A tempestuous 9 months • Unprecedented commodity inflation • We have remained focused on – Integration – Synergies – Renovating our new brands – Recovering our costs • Our Grocery business is resilient and we intend to recover our costs • Our Bread business will make progress this year – w
Slide 12: Paul Thomas, Finance Director
Paul Thomas Finance Director Premier Foods plc Full Year Results – Tuesday, 4th March 2008 12
Slide 13: Financial Highlights
Financial Highlights Continuing operations (£m) 2007 2006 YoY % Reported sales 2,247.6 840.7 167.3% Reported Trading Profit 280.2 129.4 116.5% Pro forma sales 2,555.2 2,520.4 1.4% Pro forma Trading Profit 303.7 327.5 (7.3%) Operating Profit before exceptional items 234.8 119.9 95.8% Operating Profit
Slide 14: Trading Profit £m
Pro forma Trading Profit 380 360 328 Trading Profit £m 340 22 14 40 32 25 320 17 304 300 280 260 240 220 200 2006 Proforma Grocery Grocery Wheat Inflation Bread Pricing Bread Synergy 2007 Proforma Commodity Pricing Recovery Volumes Benefit Inflation Recovery • Time lag on recovering wheat and other
Slide 15: Exceptional Items
Exceptional Items £m Restructuring Restructuring Asset Impairment 2007 2007 Onerous Leases Total Cash Outflow Provision Pensions RHM integration 47.7 32.7 24.3 104.7 Campbell’s 4.2 4.9 3.3 12.4 integration Methwold 13.9 0.7 0.8 15.4 commissioning Other 20.1 5.2 0.9 26.2 Total 85.9 43.5 29.3 158.7 •
Slide 16: Interest Charges
Interest Charges Summary Profit & Loss (£m) 2007 2006 Net cash interest payable 105.2 43.2 Amortisation of debt issuance costs 4.2 1.4 Regular interest charge 109.4 44.6 Unwind of onerous lease discount 0.8 - IAS 39 – valuation of derivatives 31.0 (7.1) Exceptional amortisation of debt 8.4 4.0 issua
Slide 17: Tax
Tax • P&L credit of £37.7m, made up of following amounts : – £24.9m charge on profit from underlying activities – effective rate 29.2% – Credit of £38.1m on allowable elements of exceptional costs – Credit of £15.3m as a result of restating deferred tax balances at 28% – One off credits of £9.2m – p
Slide 18: Adjusted Earnings
Adjusted Earnings Continuing Operations (£m) 2007 2006 % Trading profit 280.2 129.4 115.8% Regular interest charge (109.4) (44.6) 145.5% Adjusted PBT 170.8 84.8 100.1% Tax at 30% (51.2) (25.4) 101.6% Adjusted Profit after tax 119.6 59.4 101.3% Post tax pension credit 11.3 3.3 251.5% Adjusted profit
Slide 19: Cash Flow
Cash Flow Cash Flow (£m) 2007 2006 Trading Profit 280.2 129.4 Depreciation & other non cash charges 69.2 21.5 Interest (98.0) (39.5) Taxation 8.7 (12.3) Additional pension contributions (49.6) (10.1) Net capital expenditure (75.7) (52.5) Net operating cash generation 134.8 36.5 Dividends (61.1) (23.
Slide 20: Non-recurring Cash Flow
Non-recurring Cash Flow Cash Flow (£m) 2007 2006 Underlying cash flow 73.7 13.0 Exceptional expenditure (105.5) (9.2) Debtors securitisation 67.6 - Other working capital movements 128.8 (26.0) Discontinued operations (14.9) (9.4) Acquisitions & associated costs (1,116.0) (31.7) Other non-cash moveme
Slide 21: Debt
Debt • Premier is in the middle of a major investment programme • 2007 saw an unprecedented level of commodity inflation which has continued into 2008 • Consequently, we consider it prudent to have additional headroom to ensure the investment programme can continue uninterrupted • We have therefore:
Slide 22: Financial Covenants
Financial Covenants June 2008 December 2008 Net debt : EBITDA 5.25:1 4.50:1 EBITDA : Interest 2.75:1 3.00:1 • Tested at end of June and December on LTM basis • Covenants met at 31 December 2007 • Original schedule has been reset to provide additional headroom • Covenant calculations include the foll
Slide 23: Debt Facilities
Debt Facilities Mar - Dec Jan - Dec Jan - Mar Mar – Dec 2008 2009 2010 2010 Available £2,085m £1,940m £1,790m £1,690m Facilities • Banking facilities committed until 2012 • At 31 December 2007 Net Debt was £1,618m • Revised interest costs – Margins increased by c15bps – Estimated cash interest charg
Slide 24: Pension / Post Employment Benefits
Pension / Post Employment Benefits Key IAS 19 Assumptions 2007 2006 Discount rate 5.9% 5.2% Inflation rate 3.3% 3.0% Increase in salaries 3.5% 4.0% Gross deficit £123m £85m Net deficit £88m £60m Current payment schedule (£m) 2008 2009 Regular cost 18 19 Additional payment 55 58 Total 73 77 • Negotia
Slide 25: Robert Schofield, Chief Executive
Robert Schofield Chief Executive Premier Foods plc Full Year Results – Tuesday, 4th March 2008 25
Slide 26: Group Overview
Group Overview £m 2007 2006 2007 vs 2007 vs Pro forma Pro forma 2006 2006 (%) Grocery 1,237.8 1,255.5 (17.8) (1.4%) Bread Bakeries 820.0 799.3 20.7 2.6% Cakes & Customer 497.4 465.6 31.8 6.8% Partnerships Total sales 2,555.2 2,520.4 34.7 1.4% Grocery 211.5 209.4 2.1 1.0% Bread Bakeries 35.1 68.0 (32
Slide 27: Bread Bakeries - 2007
Bread Bakeries - 2007 • Trading profit down £33m to £35m – Business in decline at time of acquisition – £40m impact from wheat costs – Time lag in recovering increased costs – recovered £32m • Total market volume decline of 3.8%, white category down 5.5% – Significant competitor activity – Retail pr
Slide 28: Wheat Dynamics
Wheat Dynamics • £150m annualised cost of 2007 cost increases – 2007 cost increases covered by price rises by December 2007 • Cost pressure assumed to remain for foreseeable future – Significant increase in US/Canadian wheat prices – Premier uses limited quantities – UK wheat prices are also on the
Slide 29: Bread Strategy 2008
Bread Strategy 2008 • New management team in place • We entered 2008 with retail price differentials restored • Hovis white loaf relaunch – New recipe developed – £6m capital investment in new processing equipment • Increase marketing spend • Reduce the cost base – Closed Plymouth bakery and Telford
Slide 30: Grocery
Grocery • Sales down 1.4% – Branded up 0.3%, – Own label down 5.8% – H2 branded growth of 1.9% against (1.5%) in H1 – H2 retailer brands down 5.4% after 6.3% decline in H1 – We have reversed the decline in Campbell’s – We have reversed the decline in Culinary Brands • Trading profit up £2.1m – Tradi
Slide 31: Convenience, Pickles, Sauces & Meat-free
Convenience, Pickles, Sauces & Meat-free Convenience, Pickles, Sauces 2007 2006 YoY % & Meat-free (£m) Sales 442.3 454.5 (2.7%) Trading Profit 43.0 45.7 (5.9%) Branded sales 55.3% 54.4% • Own label sales down 4.6% due to exiting low margin contracts, expected to continue • Relish maintains double di
Slide 32: Campbell's
Campbell’s Campbell’s (£m) 2007 2006 YoY % Sales 250.2 243.8 2.6% Trading Profit 50.8 41.4* 22.7% Branded sales 96.0% 95.5% * An estimated £8.7m pre-acquisition trading distortions have been removed from the Campbell’s 2006 trading profit • 4% sales decline at time of acquisition halted and business
Slide 33: Spreads, Desserts & Beverages
Spreads, Desserts & Beverages Spreads, Desserts & Beverages 2007 2006 YoY % (£m) Sales 251.0 263.5* (4.7%) Trading Profit 60.5 62.5* (3.2%) Branded sales 64.2% 63.7% * 2006 Sales and Trading Profit have been adjusted for the impact of the end of the Cadbury hot beverages licence • Sales decline due
Slide 34: Culinary Brands
Culinary Brands Culinary Brands (£m) 2007 2006 YoY % Pro forma Sales 271.3 270.1 0.4% Pro forma Trading Profit 58.2 59.4 (2.0%) Branded sales 90.5% 90.9% • Business was in decline at acquisition due to lack of investment – H1 sales declined by 3.1%, Trading profit declined by 23.6% – H2 sales up 3.4
Slide 35: Grocery is recovering cost inflation
Grocery • Commodity cost inflation outlook for 2008 – 2007 annualised commodity cost inflation of £75m – By 1 January we had recovered an annualised equivalent of £40m – Additional price increases put through in January and February – We are moving actively to recover the remainder – Time lag on rec
Slide 36: Cakes & Customer Partnerships
Cakes & Customer Partnerships • Sales up 7% • Trading profit up 14% • Strong performance from Manor Bakeries – 6% growth in branded retail sales value, market share up 0.6ppt to 26.3% • Good performance from RF Brookes – Improved listings with M&S • All Irish operations integrated – Delivering syner
Slide 37: Cakes & Customer Partnerships
Cakes & Customer Partnerships Cakes & CP (£m) 2007 2006 YoY % Pro forma Sales 497.4 465.6 6.8% Pro forma Trading Profit 57.1 50.1 14.0% Branded sales 42.3% 43.6% • Continuing good performance from Mr. Kipling on TV in 2008 • Launch of Delightfuls – voted ‘Product of The Year 2008’ in the Healthy Eat
Slide 38: Integration Progress Report
Integration Progress Report • Substantial progress on the integration of Campbell’s and RHM • Manufacturing rationalisation programme well advanced – SAP/Rationalisation will limit our ability to promote during H1 • Synergy delivery in 2007 = £17m • Run rate at December 2007 = £47m – More than 70% o
Slide 39: Trading Outlook
Trading Outlook • H1 2008 – SAP implementation and factory rationalisation will limit promotional activity – Time lag on recovering 2007 Grocery cost inflation estimated at £10m – New strategy and investment in Hovis commences – 2007 wheat costs recovered; 2008 price increases to cover further infla
Slide 40: Transformed Through Integration
Transformed Through Integration • Building a stronger business, competitively advantaged • Deeper, broader, consumer and customer insight • Bigger, better invested factories • Lower cost, more flexible distribution capabilities • Lean admin functions supported by common IT platform Transforming Prem
Slide 41: Summary
Summary • Increased financial headroom to complete transformation • Unprecedented cost inflation continues but being offset by pricing action • Revised bread strategy being implemented • Transformation continues on track Premier Foods plc Full Year Results – Tuesday, 4th March 2008 41
Slide 42: Premier Foods Preliminary Results Year ended 31 December 2007
Premier Foods Preliminary Results Year ended 31 December 2007 Tuesday, 4 March 2008 42
Slide 43: Appendices
Appendices Premier Foods plc Full Year Results – Tuesday, 4th March 2008 43
Slide 44: Summary Income Statement
Summary Income Statement £m 2007 2006 % Sales 2,247.6 840.7 167.3% Trading profit 280.2 129.4 116.5% Amortisation (66.2) (10.9) 507.3% Pension Credit 16.1 4.7 242.6% Exceptional items* (158.7) (19.4) 718.0% Foreign exchange valuation adjustments 4.7 (3.3) - Operating profit 76.1 100.5 (24.3%) Intere
Slide 45: Sales Analysis
Sales Analysis Sales (£m) 2007 2007 2006 Pro forma Reported Pro forma Pro forma Change (%) Convenience Foods, Pickles, 442.3 442.3 454.5 (2.7%) Sauces & Meat free Spreads, Desserts & Beverages* 251.0 251.0 263.8 (4.8%) Chivers Ireland 22.0 23.1 23.3 (0.9%) Campbell’s 250.2 250.2 243.8 2.6% Core Prem
Slide 46: Trading Profit Analysis
Trading Profit Analysis Trading Profit (£m) 2007 2007 2006 Pro forma Change Reported Pro forma Pro forma (%) Convenience Foods, Pickles, Sauces 43.0 43.0 45.7 (5.9%) & Meat free Spreads, Desserts & Beverages ** 60.6 60.6 62.1 (2.4%) Chivers Ireland 1.0 1.0 0.8 25.0% Campbell’s * 51.1 51.1 41.4 23.3%
Slide 47: Grocery
Grocery Sales (£m) 2007 2006 Pro forma Pro Pro forma Change (%) forma Convenience Foods, Pickles & 442.3 454.5 (2.7%) Sauces & Meat free Campbell’s 250.2 243.8 2.6% Spreads, Desserts & Beverages ** 251.0 263.8 (4.8%) Culinary Brands 271.2 270.1 0.4% Chivers Ireland 23.1 23.3 (0.9%) Grocery sales 1,2
Slide 48: Reporting on the new Premier
Reporting on the new Premier For 2008 Interim results onwards, we will report three divisions only, (as previously announced at our Investor Seminar) : • Grocery: – Convenience Foods, Pickles & Sauces – Spreads, Desserts & Beverages – Campbell’s – Culinary Brands – Manor Cakes • Bread & Milling – Wr
Slide 49: Interest Rate Hedging
Interest Rate Hedging • £2.1bn amortising 5 year term and revolving credit facility maturing in March 2012, – £1,618.5m drawn at 31 December 2007 • Interest charged is LIBOR plus applicable margin – Applicable margin linked to Net Debt/EBITDA – now 125 bps. • Significant derivative programme in plac