Premier Foods plc · LSE:PFD
Premier Foods — FY2014/15 Earnings Presentation
41 slides from Premier Foods's earnings presentation, May 19, 2015
Slide 1: Preliminary results for period ending 4 April 2015
Preliminary results for period ending 4 April 2015 19 May 2015
Slide 2: Investment strategy delivering results
INVESTMENT STRATEGY DELIVERING RESULTS Delivery of £131m Trading profit +82% +22% Increased level of Accelerated brand Stronger customer Revenue generating innovation investment relationships headcount Increased momentum driving share gains Note: Brand investment refers to six months to 4 April 2015
Slide 3: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 3
Slide 4: Financial reporting changes
FINANCIAL REPORTING CHANGES 1. Financial reporting year will be on a 52 week basis 2. Re-classification of certain commercial costs from selling, marketing & distribution costs to turnover 3. Reporting cycle 4. Grocery and Sweet Treats reporting segments 4
Slide 5: Improving branded sales trend reflecting effective investment & innovation
IMPROVING BRANDED SALES TREND REFLECTING EFFECTIVE INVESTMENT & INNOVATION Power Brands Total Branded Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q5 (0.0%) (1.6%) (3.8%) (4.3%) (4.3%) (4.4%) (5.4%) (5.8%) (7.7%) (7.9%) Quarter 5 performance continued better trend from Q4; brand investment a strong contributor To
Slide 6: Brand investment in second half of year
BRAND INVESTMENT IN SECOND HALF OF YEAR 52 weeks 52 weeks £m Change (%) to 4 April 2015 to 5 April 2014 Branded sales 684 713 (4.1%) Total sales 767 803 (4.5%) Gross Profit 294 294 0.0% Gross margin % 38.3% 36.6% +1.7ppt Consumer marketing (33) (25) (31.9%) Other expenses (130) (129) (0.8%) Trading
Slide 7: Operating profit
OPERATING PROFIT Operating loss due to impairments 52 weeks ending 52 weeks ending £m 4 April 2015 5 April 2014 Underlying business Trading profit 131 140 Add: previous disposals (2) 4 Continuing operations Trading profit 129 144 Amortisation of intangible assets (37) (42) Foreign exchange valuation
Slide 8: Adjusted earnings per share
ADJUSTED EARNINGS PER SHARE 52 weeks ending 52 weeks ending £m Change (%) 4 April 2015 5 April 2014 Underlying Trading profit 131 140 (6.4%) Net regular interest (48) (65) 26.5% Adjusted PBT 83 75 11.1% Notional tax @ 21%/ 23% (17) (17) (1.4%) Adjusted earnings 66 58 14.1% Weighted average shares in
Slide 9: Net debt & cash flows reflect seasonality
NET DEBT & CASH FLOWS REFLECT SEASONALITY 31 DECEMBER 2014 – 4 APRIL 2015 Reflects timing 600 of year end £m 11 585 580 16 568 24 560 11 4 7 540 520 Net debt Trading profit Depreciation Pensions Capex Interest Working Net debt 31 Dec 2014 capital 4 April 2015 Net debt in line with expectations E
Slide 10: Improved pension deficit
IMPROVED PENSION DEFICIT IAS19 Accounting Valuation (£m) 4 April 2015 31 Dec 2014* 31 Dec 2013 Assets 4,248 3,952 3,219 Liabilities (4,460) (4,275) (3,822) Deficit (212) (323) (603) Deficit net of deferred tax (Tax @ 21.4%/21.5%/23.25%) (167) (254) (463) Discount rate 3.30% 3.55% 4.40% Inflation rat
Slide 11: We remain focused on organic de-leveraging
WE REMAIN FOCUSED ON ORGANIC DE-LEVERAGING 2015/16 guidance £m Working capital Broadly neutral 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 lev
Slide 12: Gavin Darby, Chief Executive Officer
Gavin Darby Chief Executive Officer 12
Slide 13: Investment strategy delivering results
INVESTMENT STRATEGY DELIVERING RESULTS Delivery of £131m Trading profit +82% +22% Increased level of Accelerated brand Stronger customer Revenue generating innovation investment relationships headcount Increased momentum driving share gains Note: Brand investment refers to six months to 4 April 2015
Slide 14: Consumer confidence improves and channel growth profiles converge
CONSUMER CONFIDENCE IMPROVES AND CHANNEL GROWTH PROFILES CONVERGE 45.0% 10.0% 35.0% 25.0% 5.0% 15.0% 0.0% 5.0% (5.0%) Jan 2013 Mar 2015 Hard Discounters Online High Street Discounters (5.0%) Market Convenience Supermarkets Jan-12 Jan-15 Asda/CEBR Income Tracker Channel growth Evidence consumer con
Slide 15: Return of volume growth as deflation persists
RETURN OF VOLUME GROWTH AS DEFLATION PERSISTS 3.0 +2.8% +3.4% % (2.0%) 0.0 Jul 2014 Mar 2015 Jul 2013 Mar 2015 Volume Inflation/(Deflation) Market volume growth has returned over recent months Deflationary environment is most clearly seen in dairy and fresh produce Source: Kantar Worldpanel , To
Slide 16: Investing to outperform our markets
INVESTING TO OUTPERFORM OUR MARKETS Volume Value 9.0% 3.3% 1.9% 0.0% Market Premier Foods Market Premier Foods +2.0ppt +0.9ppt Share gain1 Share gain1 Source: IRI Volume and Retail sales value, 12 w/e 4 April 2015 16
Slide 17: Exceedingly good response to cake investment
EXCEEDINGLY GOOD RESPONSE TO CAKE INVESTMENT Category Volume Sales Share +19% +8% +0.7ppt +3.8% +26% +26% +1.7ppt Retail execution Seasonal Brand investment Source: IRI volume & retail sales value, 12 w/e 4 April 2015 17
Slide 18: Flavourings and seasonings driving category growth
FLAVOURINGS AND SEASONINGS DRIVING CATEGORY GROWTH Category Volume Sales Share +12% +6% +0.5ppt +4.1% +3% +6% +0.1ppt Brand extension Premiumisation Brand investment Source: IRI volume & retail sales value, 12 w/e 4 April 2015 18
Slide 19: Upcoming & exciting new products for 2015/16
UPCOMING & EXCITING NEW PRODUCTS FOR 2015/16 Sweet Treats Mr. Kipling Cadbury cake +26% 8 years 1st TV ad Q5 campaign sales1 in 8 years 1 - Source: IRI retail sales value, 12 w/e 4 April 2015 19
Slide 20: New Mr Kipling snack pack line to drive category growth agenda
NEW MR.KIPLING SNACK PACK LINE TO DRIVE CATEGORY GROWTH AGENDA 2 → 14 Format Sizes Channel Tailored New Product Automation Pack Formats Launches 20
Slide 21: Grocery innovation reflects consumer insights
GROCERY INNOVATION REFLECTS CONSUMER INSIGHTS Consumer insights Hob-top cooking is fastest growing cooking method1 Hob cooking is used to prepare nearly 30% of all main meals Perceived as quicker than oven cooking after a busy day Consumer need state Consumer need state Over 50% of meat based
Slide 22: Innovation and brand investment
INNOVATION AND BRAND INVESTMENT Sales From Innovation Brand Investment in 2015/16 20.0% 6.9% 11.3% +c.15% 8 Spend Brands on TV 2013/14 2014/15 Target 22
Slide 23: Focused on delivering revenue and efficiency development
FOCUSED ON DELIVERING REVENUE AND EFFICIENCY DEVELOPMENT Colleagues Promotional ROI 22.5% (17.6%) >40% Revenue Support Generating Functions Over the last 12 months, Proportion of promotions which headcount increased in exceeded sales and returns International, Sales, Marketing and targets was ov
Slide 24: 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 less
Slide 25: We are strategically aligned with our major customers
WE ARE STRATEGICALLY ALIGNED WITH OUR MAJOR CUSTOMERS SKUs in Market Category bottom 20% leading strategy of major positions customers <3% PRESENTS CATEGORY GROWTH OPPORTUNITIES 25
Slide 26: Significant progress with our major customers
SIGNIFICANT PROGRESS WITH OUR MAJOR CUSTOMERS Awarded 22 category captaincy roles in 2015 from a maximum 30 2012 2015 Top 6 customers Premier Foods categories Premier Foods categories Low influence Category advisor Category Captain * “I can’t remember having such a positive brief from my team in adv
Slide 27: Investment strategy delivering results: summary and outlook
SUMMARY Improving branded sales trends Strong volume and value share growth in our markets Positive results from areas where we are investing Significant progress with our major customers OUTLOOK Markets continue to be challenging; Q1 slower due to early Easter Expectations for year unch
Slide 28: Q&A
Q&A 28
Slide 29: Appendix
Appendix 29
Slide 30: 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 31: Definitions
DEFINITIONS Results for the 52 weeks ended 4 April 2015 and comparative period, 52 weeks ended 5 April 2014, are presented on a ‘Pro forma’ basis. The ‘Pro forma’ results are unaudited, exclude the results of previously completed business disposals, joint ventures and are presented to illustrate t
Slide 32: Financial reporting changes
FINANCIAL REPORTING CHANGES 1. Financial reporting year will be on a 52 week basis – Move from Gregorian to weekly reporting – Re-classification of certain commercial costs from selling, marketing & distribution costs to turnover – Subsequently absolute comparatives change 2. Reporting cycle – This
Slide 33: Segmental comparatives
SEGMENTAL COMPARATIVES 52 WEEKS TO 4 APRIL 2015 Q1 Q2 H1 Q3 Q4 FY £m (13 weeks) (13 weeks) (26 weeks) (13 weeks) (13 weeks) (52 weeks) Grocery Branded sales 112.4 112.6 225.0 160.1 123.4 508.5 Non-branded sales 11.3 10.3 21.6 11.3 10.3 43.2 Total sales 123.7 122.9 246.6 171.4 133.7 551.7 Divisional
Slide 34: Branded sales responding to investment and innovation
BRANDED SALES RESPONDING TO INVESTMENT AND INNOVATION Quarter sales (£m) 2014/15 Q4 2013/14 Q4 Change (%) Power Brands 125 127 (1.6%) Support brands 45 43 4.5% Total branded 170 170 (0.0%) Non-branded 16 17 (6.0%) Total 186 187 (0.6%) 52 week sales (£m) 2014/15 2013/14 Change (%) Power Brands 505 52
Slide 35: Own label remains broadly flat in our categories
OWN LABEL REMAINS BROADLY FLAT IN OUR CATEGORIES +2.0% +0.0% (0.1%) (0.7%) (1.6%) (2.0%) Cake Desserts Flavourings Sauces & Easy Total & Seasonings Accomps Eating 1 - IRI Retail sales value, 12 w/e 4 April 2015 35
Slide 36: A longer term and diversified capital structure
A LONGER TERM AND DIVERSIFIED CAPITAL STRUCTURE £m Raised £500m Senior Secured Notes in 350 FY14: 300 – £325m Fixed notes @6.5% – £175m Floating notes @5.0%+LIBOR 250 New £272m Revolving Credit Facility 200 – New and streamlined bank syndicate 150 Issued £340m net equity in FY14 100 Fixed pa
Slide 37: Interest and tax
INTEREST 52 weeks ended 52 weeks ended £m 4 April 2015 5 April 2014 Senior secured notes interest 31 1 Bank debt interest 10 34 Securitisation interest 3 3 Cash interest 44 38 Amortisation and deferred fees 4 27 Net regular interest 48 65 TAX Deferred tax asset of £42m at 4 April 2015 (31 Dec 2013
Slide 38: Pensions – combined schemes
PENSIONS – COMBINED SCHEMES £m 4 April 2015 31 Dec 2013 Scheme Assets (£m) 4 April 2015 31 Dec 2013 Assets 4,248 3,219 Equities 349 300 Liabilities (4,460) (3,822) Government bonds 547 516 Deficit (212) (603) Corporate bonds 330 384 Deficit net of deferred tax (167) (463) Property 260 182 Absolute/T
Slide 39: 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 (subje
Slide 40: 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 175 205 30 25 basis point increase in credit spread - (190) (190) 25 basis point in
Slide 41: Balance sheet
BALANCE SHEET £m 4 April 2015 31 December 2013 Property, plant & equipment 183 196 Intangibles / Goodwill 1,174 1,289 Retirement assets 242 - Investments & loans to associates 35 - Deferred tax 42 73 Non-current Assets 1,676 1,558 Working Capital - Stock 69 69 - Debtors 124 248 - Creditors (213) (33