Premier Foods plc · LSE:PFD
Premier Foods — H1 FY19/20 Earnings Presentation
46 slides from Premier Foods's earnings presentation, Nov 12, 2019
Slide 1: Half year results for 26 weeks ended 28 September 2019
Half year results for 26 weeks ended 28 September 2019 12 November 2019
Slide 2: Alex Whitehouse, Chief Executive Officer
Alex Whitehouse Chief Executive Officer
Slide 3: Headline Results
HEADLINE RESULTS Strong branded revenue growth & Net debt1 £39m lower +2.4% +4.3% £32m £51m ↓£39m +3.6% +5.6% +5.0% H1 & Q2 H1 & Q2 Trading profit Adjusted PBT Net debt1 Revenue growth Branded growth A stronger H1 performance than expected gives us increased confidence in full year outlook 1 – On pr
Slide 4: Operational Strategy Delivering
OPERATIONAL STRATEGY DELIVERING We have increased vigour, impetus and energy £ Sustainable Cost control Cash & profitable & efficiency generation revenue growth • Leading brand positions • Lean SG&A cost base • Tight focus on Capex • Sustained marketing investment • Operational Excellence • Discipli
Slide 5: Updated Executive Leadership Team
UPDATED EXECUTIVE LEADERSHIP TEAM Designed to deliver sharper commercial and operational focus New senior appointments Chief Chief Operations Marketing Officer Customer Officer Director Yilmaz Erceyes Richard Martin Paul Thompson • Refocused Executive Leadership Team • More functionally based; three
Slide 6: Duncan Leggett, Acting Chief Financial Officer
Duncan Leggett Acting Chief Financial Officer
Slide 7: Group Headline Results
GROUP HEADLINE RESULTS Revenue and Trading profit growth £m FY19/20 H1 FY18/19 H1 Change (%) Q2 Change (%) Branded sales 310 297 +4.3% +5.6% Non-branded sales 57 61 (6.8%) (5.7%) Total sales 367 358 +2.4% +3.6% Divisional contribution 70 68 +2.0% Group & corporate costs (19) (17) (7.5%) Trading prof
Slide 8: Grocery
GROCERY Branded revenue growing ahead of the market £m FY19/20 H1 FY18/19 H1 Change (%) Q2 Change (%) Branded sales 218 210 +3.8% +6.2% Non-branded sales 46 46 (0.1%) (1.8%) Total sales 264 256 +3.1% +4.7% Divisional contribution 59 57 +4.0% Divisional contribution % 22.5% 22.3% +0.2ppts ▪ Strong gr
Slide 9: Sweet Treats
SWEET TREATS Continued positive momentum from prior year £m FY19/20 H1 FY18/19 H1 Change (%) Q2 Change (%) Branded sales 92 87 +5.5% +4.1% Non-branded sales 11 15 (26.6%) (17.2%) Total sales 103 102 +0.7% +0.7% Divisional contribution 10 11 (8.0%) Divisional contribution % 10.1% 11.1% (1.0ppt) ▪ Mr
Slide 10: Operating Profit Up +27%
OPERATING PROFIT UP +27% £m FY19/20 H1 FY18/19 H1 Change Trading profit 51 51 0 Amortisation of intangible assets (15) (18) 3 Foreign exchange fair value movements 1 1 0 Net interest on pension and administration costs 0 (1) 1 Non-trading items (1) (5) 4 Operating profit 36 28 8 ▪ Amortisation of in
Slide 11: Adjusted Earnings Per Share +4.3%
ADJUSTED EARNINGS PER SHARE +4.3% £m FY19/20 H1 FY18/19 H1 Change (%) Trading profit 51 51 +0.2% Net regular interest (19) (21) +6.8% Adjusted PBT 32 30 +5.0% Notional tax @ 19% (6) (6) (5.0%) Adjusted earnings 26 24 +5.0% Weighted average shares in issue (million) 846.1 840.8 +0.6% Adjusted earning
Slide 12: IFRS 16 – Leases
IFRS 16 – LEASES Overview of expected full year position IFRS 16 FY19/20 - £m Comments ▪ New leases accounting standard, IFRS 16, effective adjustment for accounting periods commencing on or after 1 Balance sheet extract January 2019 Fixed Assets 12 Recognise asset ▪ This is the Group’s first result
Slide 13: H1 YoY Progression & FCF Pre Obligations Servicing
H1 YoY PROGRESSION & FCF PRE OBLIGATIONS SERVICING Consistent & disciplined track record of debt reduction H1 year on year Net debt progression 556 21 535 26 ▪ EBITDA grown + 9.2% since 510 39 FY16/17 £m 471 ▪ Cash interest declining as average debt levels fall ▪ Accelerating debt pay down Net debt
Slide 14: Net Debt
NET DEBT On track for good reduction in full year and to meet 3.0x leverage by year end £m 550 500 22 493 470 51 3 471 18 9 450 8 24 10 400 350 300 Net debt Trading profit Depreciation Pensions Capex Interest Working Restructuring Net debt IFRS 16 - Leases Net debt FY18/19 capital / Other Pre-IFRS 1
Slide 15: H1 Net Debt Progression
H1 NET DEBT PROGRESSION Consistent & disciplined track record of debt reduction 556 21 535 26 £m 510 39 471 Net debt FCF Net debt FCF Net debt FCF Net debt FY16/17 H1 FY17/18 H1 FY18/19 H1 FY19/20 H1 ▪ EBITDA grown + 9.2% since FY16/17 ▪ Cash interest declining as average debt levels fall ▪ Accelera
Slide 16: Combined Pension Schemes – Accounting Basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS RHM schemes surplus increases to over £1 billion 28 September 2019 30 March 2019 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,863 794 5,657 4,334 707 5,041 Liabilities (3,793) (1,275) (5,068) (3,496) (1,172
Slide 17: FY19/20 Cash Guidance
FY19/20 CASH GUIDANCE FY19/20 guidance £m Working capital Broadly neutral Depreciation c.£20m Capital expenditure c.£25m Interest – cash £35-£37m Interest – P&L £38-£40m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £37m Pension administrative & PPF levy cash costs £6-£8
Slide 18: Alex Whitehouse, Chief Executive Officer
Alex Whitehouse Chief Executive Officer
Slide 19: Operational Strategy Delivering
OPERATIONAL STRATEGY DELIVERING We have increased vigour, impetus and energy £ Sustainable Cost control Cash & profitable & efficiency generation revenue growth • Leading brand positions • Lean SG&A cost base • Tight focus on Capex • Sustained marketing investment • Operational Excellence • Discipli
Slide 20: UK Revenue Performance
UK REVENUE PERFORMANCE Track record of delivering sustainable profitable revenue growth Quarterly UK revenue growth Sustainable & profitable % movement year on year revenue growth 4.8% 4.4% 4.4% 4.0% 3.4% 2.6% +2.9% 1.6% 1.2% 0.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 FY17/18 FY18/19 FY19/20 20
Slide 21: Brand Performance
BRAND PERFORMANCE High quality mix of volume & price/mix Top 8 brands revenue growth Market share1 Volume & Price/Mix Share gains in growing markets +5.8% +2.6% Mkt growth +4.8% +0.62ppt +2.0% Mkt growth Market leader +0.34ppt Innovation H1 Q2 Grocery Sweet Treats Volume Price/Mix Market share gains
Slide 22: Driving Our Innovation Strategy Harder
DRIVING OUR INNOVATION STRATEGY HARDER And is core to the delivery of organic growth 1 Consumer trends Insight Consumer at the heart of the innovation process 1 Building in depth Health & Nutrition consumer understanding 2 2 Convenience Innovation 3 Developing new Snacking and On the go products tha
Slide 23: Mr Kipling Continues to Perform Strongly
MR KIPLING CONTINUES TO PERFORM STRONGLY Further good growth in H1, building on a very strong prior year FY18/19 New Product Development & Brand Investment FY19/20 H1 Mr Kipling ‘Signature’ TV advertising range ↑10% ↑8% Revenue Revenue ↑7% ↑2% Volume Volume 23
Slide 24: Nissin Ranges on an Exceptional Growth Trajectory
NISSIN RANGES ON AN EXCEPTIONAL GROWTH TRAJECTORY Revenue more than doubled in first half of year Soba Noodles Cup Noodles FY19/20 H1 +111% H1 revenue growth 2.9% Q2 Market share 24
Slide 25: Strong Innovation Launches Across the Portfolio
STRONG INNOVATION LAUNCHES ACROSS THE PORTFOLIO Convenience and indulgence themes highly relevant for today’s consumer Cadbury cake Sharwood’s Bisto ▪ Extremely strong consumer ▪ Sharwood’s Rice pots ▪ Convenient ready to use response building on success of gravy pot ▪ On track to be 2nd highest Bat
Slide 26: Plantastic Now Launched
AS TRAILED PREVIOUSLY….PLANTASTIC NOW LAUNCHED! A fresh new plant based brand to target the health conscious consumer Flapjacks & Cakes Grain Pots Launched end of Q2 Planned for Q4 launch PLANTASTIC A cross-category brand using plant based ingredients • Introduction of a fresh new brand ‘Plantastic’
Slide 27: Consumer Marketing Investment So Far This Year
CONSUMER MARKETING INVESTMENT SO FAR THIS YEAR Commitment to increase marketing investment Advertising investment in H1 Brands Increased New Earlier investment investment investment 27
Slide 28: Underpinned by Excellent Instore Execution
UNDERPINNED BY EXCELLENT INSTORE EXECUTION Through collaborative retailer partnerships 1 2 Weighted Distribution & SKU count Instore Execution Top 5 retailers YoY growth1 Mr Kipling Roald Dahl and Cup Noodle 25.6% 24.6% 22.3% 20.7% Weighted distribution SKU Count 2018 2019 ▪ Mr Kipling Roald Dahl ‘M
Slide 29: International Returned to Growth in Q2 – Up 6%
INTERNATIONAL RETURNED TO GROWTH IN Q2 – UP 6% Mr. Kipling in Australia delivered another strong result Australia North America H1 +9% 10% Cake market Q2 +20% share 1,000 US stores • Brand leader Mr Kipling continuing to perform well in Australia • Mr Kipling now listed in • Both core portfolio and
Slide 30: Looking Ahead to the Second Half
LOOKING AHEAD TO THE SECOND HALF Examples of our innovation launches which underpin confidence for H2 Mr Kipling Plantastic Batchelors Ambrosia 30
Slide 31: Advertising Investment
ADVERTISING INVESTMENT 5 major brands which make up over 50% of Group revenues planned for H2 Advertising investment Five major brands planned to benefit from media in H2 ? Increased Second Increased Increased New advertising investment burst investment investment in development 31
Slide 32: Cost & Efficiency Opportunities
COST & EFFICIENCY OPPORTUNITIES Targeting £5m additional cost savings over next two years to re-invest in brands 1 Operational Excellence 2 New Executive Leadership Team New senior appointments Chief Chief Operations Marketing Customer Director Officer Officer Manufacturing Logistics i) Manufacturin
Slide 33: Corporate & Social Responsibility - Packaging
CORPORATE & SOCIAL RESPONSIBILITY - PACKAGING Excellent progress in a number of areas Packaging Environmental Of our packaging by weight is 11% plastic Proportion of our packaging 94% which is recyclable • Removal of all black packaging 29 new Recyclable plastics used in our c.70% products from Cadb
Slide 34: Corporate & Social Responsibility - Nutrition
CORPORATE & SOCIAL RESPONSIBILITY - NUTRITION Sugar reduction, Award for low fat products & Plantastic Nutrition 1,000 Tonnes ↓ • On track to deliver 1,000 Tonnes sugar removal from portfolio by December Sharwood’s Low Fat Poppadoms 2019 won The Grocer New Product New plant-based brand • Achieved th
Slide 35: Summary & Outlook
SUMMARY & OUTLOOK Summary ▪ Strong H1 revenue delivery underpinned by innovation strategy ▪ Consistent delivery of revenue growth in the UK over last nine quarters ▪ Excellent Mr Kipling & Nissin noodles performances ▪ International returned to growth in Q2 ▪ H1 Trading profit ahead of our expectati
Slide 36: Q&A
Q&A
Slide 37: Appendix
Appendix 37
Slide 38: 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 39: Definitions
DEFINITIONS ▪ The period ‘FY19/20 H1’ refers to the 26 weeks ended 28 September 2019. The period ‘FY18/19 H1’ refers to the 26 weeks ended 29 September 2018. ▪ The period ‘Q2’ refers to the thirteen weeks ended 28 September 2019 and the comparative period the thirteen weeks ended 29 September 2018.
Slide 40: Leading Category Positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 44% 70% Quick Meals, Snacks & Soups 1 31% 44% Ambient Desserts 1 36% 54% Cooking Sauces & Accompaniments 1 16% 52% Ambient Cakes 1 22% 63% Sources: C
Slide 41: UK Grocery Market
UK GROCERY MARKET Ambient grocery shows lowest prevalence of retailer brand in UK grocery 17% 35% Chilled Frozen 45% Ambient & Fresh 55% 65% 83% Branded Non-branded Branded Non-branded Branded Non-branded Market size £32bn £46bn £6bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desser
Slide 42: 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 43: Interest & Taxation
INTEREST & TAXATION Interest £m FY19/20 H1 FY18/19 H1 Senior secured notes interest 15 16 Bank debt interest 2 3 17 19 Amortisation of debt issuance costs 2 2 Net regular interest 19 21 Taxation ▪ Tax charge of £3m in FY19/20 H1 ▪ Capital allowances in excess of depreciation provide further shield a
Slide 44: Pensions – Combined Schemes
PENSIONS – COMBINED SCHEMES £m 28 Sept 2019 30 March 2019 Scheme Assets (£m) 28 September 2019 30 March 2019 Assets 5,657 5,041 Equities 180 180 Liabilities (5,068) (4,668) Government bonds 1,632 1,490 Surplus 589 373 Corporate bonds 21 27 Surplus net of deferred 489 310 Property 419 437 tax @ (17.0
Slide 45: Capital Structure
CAPITAL STRUCTURE First maturity June 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 45
Slide 46: Balance Sheet
BALANCE SHEET £m 28 September 2019 30 March 2019 Property, plant & equipment 197 186 Intangibles / Goodwill 998 1,012 Retirement benefit assets 1,070 838 Non-current Assets 2,265 2,036 Working Capital - Stock 91 78 - Debtors 91 89 - Creditors (249) (238) Total Working Capital (67) (71) Net debt Gros