Premier Foods Plc · LSE:PFD
Premier Foods — FY2018/19 Earnings Presentation
48 slides from Premier Foods's earnings presentation, May 14, 2019
Slide 1: Preliminary results for 52 weeks ended 30 March 2019
Preliminary results for 52 weeks ended 30 March 2019 14 May 2019
Slide 2: Strategic and Financial Review
Alastair Murray Acting CEO & Chief Financial Officer Strategic and Financial Review 2
Slide 3: Executive Leadership Team
EXECUTIVE LEADERSHIP TEAM Collectively nearly 170 years of consumer facing experience Alastair Murray Alex Whitehouse Jette Andersen Acting CEO & Chief Financial Officer UK Managing Director International Managing Director Mark Hughes David Wilkinson Simon Rose Procurement & Central Ops Director HR
Slide 4: Continued improvement on key financial measures in FY18/19
CONTINUED IMPROVEMENT ON KEY FINANCIAL MEASURES IN FY18/19 +0.6% £128.5m £88m £470m 3.23x +3.1% +4.5% +12.1% ↓£27m Full Year & Q4 Trading profit Adjusted PBT Net debt Net debt/EBITDA Revenue growth Revenue and profit growth delivering a further year of Net debt reduction 4
Slide 5: Consistent progress over the last two years
CONSISTENT PROGRESS OVER THE LAST TWO YEARS Trading profit (£m) Adjusted PBT (£m) 128.5 88 123 79 117 74 FY16/17 FY17/18 FY18/19 FY16/17 FY17/18 FY18/19 Net debt (£m) Net debt/EBITDA 523 3.93 496 3.56 3.23 470 FY16/17 FY17/18 FY18/19 FY16/17 FY17/18 FY18/19 5
Slide 6: Group headline results
GROUP HEADLINE RESULTS Revenue and Trading profit growth £m FY18/19 FY17/18 Change (%) Q4 Change (%) Branded sales 679 670 +1.4% +4.2% Non-branded sales 145 149 (2.7%) (3.3%) Total sales 824 819 +0.6% +3.1% Divisional contribution 162 156 +3.9% Group & corporate costs (33) (33) (1.8%) Trading profit
Slide 7: Grocery
GROCERY Growth from Batchelors, Sharwood’s, Soba and Angel Delight £m FY18/19 FY17/18 Change (%) Q4 Change (%) Branded sales 498 498 0.0% +4.2% Non-branded sales 99 91 +8.6% +6.4% Total sales 597 589 +1.3% +4.6% Divisional contribution 138 130 +6.3% Divisional contribution % 23.2% 22.1% +1.1ppts ▪ U
Slide 8: Sweet Treats
SWEET TREATS Mr Kipling brand relaunch delivered +10% growth in UK £m FY18/19 FY17/18 Change (%) Q4 Change (%) Branded sales 181 172 +5.3% +4.2% Non-branded sales 46 58 (20.3%) (35.2%) Total sales 227 230 (1.2%) (1.4%) Divisional contribution 24 26 (8.4%) Divisional contribution % 10.4% 11.2% (0.8pp
Slide 9: Operating profit
OPERATING PROFIT Lower in the year due to GMP recognition, restructuring and impairment £m FY18/19 FY17/18 Change Trading profit 129 123 6 Amortisation of intangible assets (34) (36) 2 Foreign exchange fair value movements (1) 0 (1) Net interest on pension and administration costs (1) (2) 1 Non-trad
Slide 10: Adjusted earnings per share up +11.5%
ADJUSTED EARNINGS PER SHARE UP +11.5% £m FY18/19 FY17/18 Change (%) Trading profit 129 123 +4.5% Net regular interest (41) (44) +8.9% Adjusted PBT 88 79 +12.1% Notional tax @ 19% (17) (15) (12.1%) Adjusted earnings 71 64 +12.1% Weighted average shares in issue (million) 841.5 836.8 +0.6% Adjusted ea
Slide 11: Further net debt reduction despite restructuring
FURTHER NET DEBT REDUCTION DESPITE RESTRUCTURING Net debt/EBITDA now just over 3.2x £m 550 3.56x 3.23x 496 129 500 12 8 18 470 8 450 30 18 400 42 17 350 300 Net debt Trading profit Depreciation Pensions Capex Interest Working capital Restructuring Financing fees Hovis Net debt FY17/18 / Other FY18/1
Slide 12: Combined pension schemes – accounting basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Combined surplus £56m higher at £373m 30 March 2019 31 March 2018 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,334 707 5,041 4,185 679 4,864 Liabilities (3,496) (1,172) (4,668) (3,431) (1,116) (4,547) Surpl
Slide 13: Pension schemes valuation evolution
PENSION SCHEMES VALUATION EVOLUTION Highest recorded RHM surplus; Premier Foods deficit stable Surplus/ (Deficit) £m 1,000 800 RHM Premier Foods 838 600 400 200 0 (200) (400) (465) (600) (800) Dec Mar 2013 2019 13
Slide 14: IFRS 16 – Leases: Guidance
IFRS 16 – LEASES Guidance ▪ New leases accounting standard, IFRS 16, effective for accounting periods commencing on or after 1 January 2019 ▪ Group’s first results to reflect IFRS 16 will be Half year results and Preliminary results for FY19/20 – Net debt will be provided on both new and old basis ▪
Slide 15: IFRS 16 – Leases: Illustrative position
IFRS 16 – LEASES Illustrative position FY18/19 IFRS 16 FY18/19 £m Comments reported adjustment pro forma Balance sheet extract Fixed Assets 191 20 211 Recognise asset Lease liability - (20) (20) Recognise lease liability Net assets 191 - 191 Net debt (470) (20) (490) Include lease liability in Net d
Slide 16: FY19/20 cash guidance
FY19/20 CASH GUIDANCE FY19/20 guidance £m Working capital Negative Depreciation c.£20m Capital expenditure c.£25m Interest – cash £35-£39m Interest – P&L £38-£42m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £37m Pension administrative & PPF levy cash costs £6-£8m Cash
Slide 17: Strategy to drive revenue growth, deliver efficiency to generate cash
STRATEGY TO DRIVE REVENUE GROWTH, DELIVER EFFICIENCY TO GENERATE CASH Drive revenue growth Cost control & efficiency £ Cash generation Drive revenue growth Cost control & efficiency Cash generation 1. UK – Insight driven 1. Logistics restructuring & 1. Tight focus on Capex innovation and execution o
Slide 18: Average quarterly revenue growth +2.2%
AVERAGE QUARTERLY REVENUE GROWTH +2.2% Delivered a good quarter 4 Quarterly Revenue growth % movement year on year 7.0% 6.2% 4.0% 3.1% 1.7% +2.2% 1.0% (1) UK food deflation and multibuy reductions (2) (2) Logistics programme impacted (1) Sweet Treats + International (2.2%) (3.1%) performance Q1 Q2 Q
Slide 19: UK branded performance
UK BRANDED PERFORMANCE Acceleration of revenue growth through the year FY18/19 revenue growth +2.7% 4.9% 2.8% 2.0% 0.9% Q1 Q2 Q3 Q4 ▪ Quarter 4 received a slight benefit from Brexit related stock build at customers 19
Slide 20: A mixed international picture as sales 12% lower
A MIXED INTERNATIONAL PICTURE AS SALES (12%) LOWER Cadbury cake overstocks & export wholesaler distributors decline FY18/19 commentary 1. Elevated supply chain stocks of Cadbury cake in Australia impacted sales throughout the year – Follows very strong comparatives in FY17/18 – Now worked through th
Slide 21: Robust plans to re-ignite international growth in FY19/20
ROBUST PLANS TO RE-IGNITE INTERNATIONAL GROWTH IN FY19/20 Cake and Sharwood’s key drivers of double-digit revenue target North America Australia Caribbean • Accelerating rate of NPD through strengthening customer relationships • Bespoke pack design for USA & Canadian markets • Expansion plan for FY1
Slide 22: UK Operational review
Alex Whitehouse UK Managing Director UK Operational review 22
Slide 23: UK branded performance
UK BRANDED PERFORMANCE Acceleration of revenue growth through the year FY18/19 revenue growth +2.7% 4.9% 2.8% 2.0% 0.9% Q1 Q2 Q3 Q4 ▪ FY18/19 performance builds on accelerating momentum in prior year, especially Batchelors & Angel Delight ▪ In H2, 7 of 8 major brands delivered revenue growth ▪ Drive
Slide 24: Our consumer focused innovation strategy
OUR CONSUMER FOCUSED INNOVATION STRATEGY Insight informed product innovation through to instore execution Insight Innovation Execution Building in depth Developing new Supporting with consumer products that make outstanding in-store understanding consumers lives easier execution 24
Slide 25: Consumer trends & innovation
CONSUMER TRENDS & INNOVATION Identification of key consumer trends and innovation rate increases Consumer trends Innovation as % UK branded sales % of NPD in market after Informs the innovation process Targeting 10% of UK branded sales 2 years 1 Health & Nutrition 70% 6.7% 6.4% 2 5.1% Convenience 3.
Slide 26: Successful Mr Kipling relaunch in FY18/19
SUCCESSFUL MR KIPLING RELAUNCH IN FY18/19 The Group’s biggest brand delivered double-digit growth in the year FY17/18 Brand Relaunch Ingredients FY18/19 ↓2% ↑10% Revenue Revenue Packaging redesign New product development ↓3% ↑7% Volume Volume TV advertising Instore execution 26
Slide 27: Batchelors momentum continued
BATCHELORS MOMENTUM CONTINUED Another very good year; high single-digit average growth over 2 years FY17/18 FY18/19 FY19/20 +7% +7% 30% FY revenue FY revenue growth Market share growth More NPD to come Growth fuelled by Further pots range extension supported by strong including Big Pasta pots range
Slide 28: Instore execution has been key to UK performance
INSTORE EXECUTION HAS BEEN KEY TO UK PERFORMANCE Distribution growth, Chinese New Year activity and major retailer events 1 2 3 Distribution building Chinese New Year Major retailer events Top 4 retailers YoY growth Sharwood’s Instore displays Cross category activity 3.4% 2.9% 1.8% 52 week 26 week 1
Slide 29: Looking ahead to FY19/20
LOOKING AHEAD TO FY19/20 Upweighted advertising plan for year ahead & progress on innovation rate Innovation as % UK branded sales Advertising investment Targeting 10% of UK branded sales 5 major brands on air in FY19/20 10.0% 7.5% 6.4% 6.7% 5.1% 3.6% 3.0% 1.6% FY13/14 FY14/15 FY15/16 FY16/17 FY17/1
Slide 30: Product innovation continues to support growth
PRODUCT INNOVATION CONTINUES TO SUPPORT GROWTH All of our new product innovation is aligned to consumer trends Health & Nutrition Convenience Ambrosia 30% less sugar & fat Bisto ready to use Gravy pots ▪ Relaunch of Ambrosia Light Custard with 30% ▪ Convenient ready to use gravy pot less sugar & als
Slide 31: Innovation aligned to indulgence consumer trend
INNOVATION ALIGNED TO INDULGENCE CONSUMER TREND Cadbury cake and Mr Kipling new products for FY19/20 Cadbury Mr Kipling Dairy Milk slices ‘Signature range’ ▪ Dairy Milk the biggest brand in confectionery ▪ Premium tier ▪ Cadbury cake in slices is a first, and includes chunks of Cadbury Dairy Milk of
Slide 32: Introducing Plantastic
INTRODUCING….PLANTASTIC A fresh new plant based brand to target the health conscious consumer Cake Desserts PLANTASTIC A cross-category brand launching in H2 • Introduction of a fresh new brand ‘Plantastic’ • A cross-category range of products using plant based ingredients • Targeting to appeal acro
Slide 33: Cost Efficiency, Capex & CSR
Alastair Murray Acting CEO & Chief Financial Officer Cost Efficiency, Capex & CSR 33
Slide 34: Logistics transformation programme
LOGISTICS TRANSFORMATION PROGRAMME Programme now complete and customer service levels returned to normal Logistics Transformation What happened in FY18/19? Where are we now? • Third & final phase of consolidation ✓ Programme now complete programme took place in Q2/Q3 ✓ Labour availability and retent
Slide 35: Capital investment
CAPITAL INVESTMENT Increased investment in FY19/20 to c.£25m through growth projects 1 Cake product flexibility & enhancement 2 Batchelors pots capacity & flexibility • Stoke manufacturing site – Re-development & enhancement of existing manufacturing line – Facilitate multiple innovation options • C
Slide 36: Corporate & social responsibility
CORPORATE & SOCIAL RESPONSIBILITY Progress continues across a number of areas Packaging Sugar Proportion of our packaging that 1,000 2019 target of sugar removal 94% is recyclable from portfolio Tonnes 320 Tonnes of plastics removed over Tonnes last 3 years Food waste management Environmental manage
Slide 37: Summary & outlook
SUMMARY & OUTLOOK Summary ▪ Second year of Revenue, Trading profit, Adjusted eps, Net debt and Net debt/EBITDA progress ▪ Group’s biggest brand, Mr Kipling grew double digit following brand relaunch ▪ Continued momentum for Batchelors ▪ Trading profit growth despite major challenges from logistics p
Slide 38: Q&A
Q&A
Slide 39: Appendix
Appendix 39
Slide 40: 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 41: Definitions
DEFINITIONS ▪ The period ‘FY18/19’ refers to the 52 weeks ended 30 March 2019. The period ‘FY17/18’ refers to the 52 weeks ended 31 March 2018. ▪ The period ‘Q4’ refers to the thirteen weeks ended 30 March 2019 and the comparative period, the thirteen weeks ended 31 March 2018. ▪ Trading profit is d
Slide 42: Leading category positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 43% 71% Quick Meals, Snacks & Soups 1 32% 46% Ambient Desserts 1 35% 56% Cooking Sauces & Accompaniments 1 15% 52% Ambient Cakes 1 22% 64% Sources: C
Slide 43: UK grocery market
UK GROCERY MARKET Ambient grocery shows lowest prevalence of retailer brand in UK grocery 18% 34% Chilled Frozen 45% Ambient & Fresh 55% 66% 82% Branded Non-branded Branded Non-branded Branded Non-branded Market size £31bn £43bn £6bn 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: Interest & taxation
INTEREST & TAXATION Interest £m FY18/19 FY17/18 Senior secured notes interest 32 32 Bank debt interest 5 7 37 39 Amortisation of debt issuance costs 4 5 Net regular interest 41 44 Taxation ▪ Deferred tax liability of £14m at 30 March 2019 (31 March 2018: £12m liability) ▪ Total recognised assets rel
Slide 46: Pensions – combined schemes
PENSIONS – COMBINED SCHEMES £m 30 March 2019 31 March 2018 Scheme Assets (£m) 30 March 2019 31 March 2018 Assets 5,041 4,864 Equities 180 297 Liabilities (4,668) (4,547) Government bonds 1,490 1,046 Surplus 373 317 Corporate bonds 27 21 Surplus net of deferred 310 263 Property 437 391 tax @ (17.0%)
Slide 47: 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 48: Balance sheet
BALANCE SHEET £m 30 March 2019 31 March 2018 Property, plant & equipment 186 185 Intangibles / Goodwill 1,012 1,075 Retirement benefit assets 838 754 Non-current Assets 2,036 2,014 Working Capital - Stock 78 76 - Debtors 89 75 - Creditors (238) (214) Total Working Capital (71) (63) Net debt Gross bo