Premier Foods plc · LSE:PFD
Premier Foods — FY2016/17 Earnings Presentation
43 slides from Premier Foods's earnings presentation, May 16, 2017
Slide 1: Preliminary results for 52 weeks ended 1 April 2017
Preliminary results for 52 weeks ended 1 April 2017 16 May 2017
Slide 2: A Summary of FY16/17
A SUMMARY OF FY16/17 A challenging year with a number of rapidly changing external factors Headlines External environment (1.4%) £117m Inflation (9.3%) Deflation Full year sales Trading profit £300- Low growth £523m £320m environment Net debt Pensions NPV 2
Slide 3: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 3
Slide 4: Group Headline Results
GROUP HEADLINE RESULTS Second and third quarter results impacted by external factors £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 659 683 (3.5%) (2.9%) Non-branded sales 131 118 +11.1% 12.3% Total sales 790 801 (1.4%) (1.0%) Divisional contribution 150 165 (9.4%) Group & corporate costs
Slide 5: Grocery
GROCERY External environment impacted FY16/17 performance £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 482 505 (4.5%) (2.9%) Non-branded sales 81 73 10.7% 11.8% Total sales 563 578 (2.6%) (1.0%) Divisional contribution 130 140 (7.3%) Divisional contribution % 23.1% 24.2% (1.1ppt) Lowe
Slide 6: Sweet Treats
SWEET TREATS Good Cadbury & Non-branded performance £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 177 178 (0.5%) (2.8%) Non-branded sales 50 45 11.6% 14.6% Total sales 227 223 1.9% (0.7%) Divisional contribution 20 25 (20.8%) Divisional contribution % 8.7% 11.2% (2.5ppt) Strong Cadbury
Slide 7: Group Trading Profit Bridge
GROUP TRADING PROFIT BRIDGE Trading performance impacted by external factors £m 140 129 120 117 100 80 Trading profit Cost inflation time H2 Retailer promo Q2 Grocery Mix Marketing SG&A & Trading profit FY15/16 lag strategies category declines Efficiencies FY16/17 Increased input cost inflation an
Slide 8: Operating Profit
OPERATING PROFIT Increased £7m to £62m £m FY16/17 FY15/16 Continuing operations Trading profit 117 129 Amortisation of intangible assets (38) (38) Foreign exchange fair value movements (1) 3 Restructuring costs (16) (11) Net interest on pension and administration costs (0) (15) Impairment - (13) Ope
Slide 9: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE Adjusted eps 7.2p £m FY16/17 FY15/16 Change (%) Trading profit 117 129 (9.3%) Net regular interest (43) (45) 4.7% Adjusted PBT 74 84 (11.8%) Notional tax @ 20.0% (15) (17) (11.8%) Adjusted earnings 59 67 (11.8%) Weighted average shares in issue (million) 830.1 826.0 0.5%
Slide 10: Net Debt £11m Lower at £523m
NET DEBT £11m LOWER AT £523m Strong cash flow conversion before servicing obligations £m 600 550 534 117 14 523 40 5 500 21 52 450 16 400 350 Net debt Trading profit Depreciation Pensions Capex Interest Working capital / Restructuring Net debt FY15/16 Other FY16/17 Pension cash costs to be £11-£13
Slide 11: Pension Deficit Contribution Schedule Changes
PENSION DEFICIT CONTRIBUTION SCHEDULE CHANGES Cash payments to schemes reduced by £32m over next three years £m 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 New plan Deficit contributions 35 35 37 38 38 38 Administration costs 4-6 4-6 4-6 6-8 6-8 6-8 Total 39-41 39-41 41-43 44-46 44-46 44-46 Prev
Slide 12: Triennial Pensions Valuation
TRIENNIAL PENSIONS VALUATION £641m reduction in funding deficit confirmed Surplus/(Deficit) £m April 2016 April 2013 Change Change (%) RHM 135 (504) 639 - Premier Foods (551) (538) (13) (2.4%) Ireland (5) (20) 15 75.0% Total schemes (421) (1,062) 641 60.4% Strong performance in RHM portfolio benef
Slide 13: Combined Pension Schemes – Accounting Basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Accounting surplus £105m; NPV of recovery schedule now £300-£320m 1 April 2017 2 April 2016 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,191 674 4,865 3,759 584 4,343 Liabilities (3,597) (1,163) (4,760) (3,
Slide 14: Pension Schemes Valuation Evolution
PENSION SCHEMES VALUATION EVOLUTION RHM scheme displays progression over last two years £m 800 600 RHM Premier Foods 594 400 RHM scheme now in 200 surplus for over 2 years 0 Premier Foods deficit remains in £400-£500m (200) range (400) (489) (600) (800) Dec 2013 Apr 2017 14
Slide 15: FY17/18 Cash Guidance
FY17/18 CASH GUIDANCE FY17/18 guidance £m Working capital Slightly negative Depreciation £16-£18m Capital expenditure £20-£22m Interest – cash £40-£43m Interest – P&L £45-£48m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £35m Pension administrative & PPF levy cash costs
Slide 16: Proposed Capital Structure Update
PROPOSED CAPITAL STRUCTURE UPDATE £210m Floating rate notes issuance and RCF extended to December 2020 Current debt maturity profile Pro forma debt maturity profile 350 325 350 325 300 272 300 250 250 184 210 200 175 200 150 150 100 100 50 50 33 0 0 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020
Slide 17: Gavin Darby, Chief Executive Officer: Strategy update
Gavin Darby Chief Executive Officer Strategy update 17
Slide 18: An Industry Undergoing Rapid Changes
AN INDUSTRY UNDERGOING RAPID CHANGES A return to inflation and changing retailer promotional strategies Deflation → Inflation Retailer promotional strategies Over 2 years of food deflation Move away from multi-buy deals drives has rapidly reversed higher price investment +2.3%1 Inflation/Deflation 2
Slide 19: Our Recent Performance Set Against Peers
OUR RECENT PERFORMANCE SET AGAINST PEERS H2 performance in the ambient grocery market 1.3% Global Soft Drinks 0.7% Global Food PF sales down (0.9%) 0.0% UK Biscuits in H2 as measured by Kantar & broadly in (0.7%) Global Food & Retail line with reported (0.9%) Premier Foods sales (3.2%) Global Soft
Slide 20: Re-balancing Our Strategy
RE-BALANCING OUR STRATEGY Reflecting a rapidly changing external environment Industry in transition Inflation Low growth Deflation environment Revenue growth Cost efficiency Cash Revenue growth Cost efficiency Cash Previous Re-balance 20
Slide 21: Strategic Priorities
STRATEGIC PRIORITIES Path to deleveraging target is reflected in Group’s updated strategy 1 2 3 Protect & Drive Revenues Cost & Efficiency Cash generation 1. UK Underpinned by 2 year cost 1. Lower pension costs (i) Invest in innovation and reduction programme New agreement with £32m marketing to dri
Slide 22: Exciting Strategic Partnerships
EXCITING STRATEGIC PARTNERSHIPS Cadbury and Nissin relationships to tap into snacking & convenience Global Strategic Partnership in Cake A Leading Global player in Instant Noodles 46 5+3yrs geographies Licence renewal • Substantially enhanced geographical • Initial strong results from Batchelors dis
Slide 23: Cost Reduction & Efficiency Programme: Logistics
COST REDUCTION & EFFICIENCY PROGRAMME Aggregate £20m savings across Logistics and SG&A over next 2 years 1 Logistics Restructuring 15% Reduction in transport miles • Consolidation of Grocery & • Centre of gravity analysis Sweet Treats distribution undertaken centres • Single hub solution • Third par
Slide 24: Cost Reduction & Efficiency Programme: SG&A
COST REDUCTION & EFFICIENCY PROGRAMME Aggregate £20m savings across Logistics and SG&A over next 2 years 2 SG&A CEO Sweet Treats International Legal & Corp Procurement CFO Grocery MD HR IT Corporate Affairs MD MD Development & Central Ops Retained role Role removed 40% • Executive team reduced from
Slide 25: Capital Allocation Methodology
CAPITAL ALLOCATION METHODOLOGY Increased focus on maximising ROI 3 Capital Investment 3 Marketing Investment Advertising ROI Medium term • Time of year to air Growth plan by ROI to maximise ROI Cost release investment • Total brand media Infrastructure type drives higher ROIs • Media buying efficien
Slide 26: Gavin Darby, Chief Executive Officer: Operating Review
Gavin Darby Chief Executive Officer Operating Review 26
Slide 27: Foreign Currency & Commodity Inflation
FOREIGN CURRENCY & COMMODITY INFLATION Timing lag to recover costs through blend of mitigating actions 1.05 1.00 0.95 ↑44% Wheat 0.90 0.85 US$ € 0.80 Foreign currency movements ↑100% Butter ↑33% Sugar A blend of mitigating actions Source: Mintec, commodity cost increases refer to market spot prices
Slide 28: Changing Promotional Strategies
CHANGING PROMOTIONAL STRATEGIES Move from multi-buys has reduced total categories by £27m Multi-buys Price reduction FY17/18 & Solutions Gross revenue 1. Some major retailers upweighting number of multi-buy promotions to Net similarly previous levels revenue 2. Introduction of multi-packs ‒ Batchelo
Slide 29: Market Share Gains
MARKET SHARE GAINS Six out of eight of our major brands are grew value share in the year Volume share Value share ppt movement year on year ppt movement year on year 1.2 1.1 0.9 0.4 0.4 0.4 0.4 0.2 0.1 0.1 0.2 (0.1) (0.7) (0.9) (1.0) (1.2) Source: IRI 52 weeks ended 11 March 2017 29
Slide 30: Flavourings & Seasonings
FLAVOURINGS & SEASONINGS Bisto and Oxo continuing to gain market share Category FY16/17 FY17/18 dynamics Oxo Stock Pots Bisto & Oxo Ready To Use 1 Category position 43% Market share Oxo brand is nearly 10% of Flavourings & Seasonings category Available in four flavours and 73% in reduced salt va
Slide 31: Quick Meals, Snacks & Soups
QUICK MEALS, SNACKS & SOUPS Strong Batchelors recovery in Q4 supported by Nissin partnership Category FY16/17 FY17/18 dynamics Batchelors Super Noodle Pots Batchelors Pasta ‘n’ Sauce Pots 2 Category position 29% Market Strong initial volumes • New for launch in FY17/18 H1 share Returned Batchelo
Slide 32: Desserts
DESSERTS Ambrosia 100th and Angel Delight 50th anniversaries in 2017 Category FY16/17 FY17/18 dynamics Ambrosia Deluxe range Angel Delight pots 1 Category position 38% Market share Deluxe range attracting younger consumers with • Individual ready to eat portion 61% Salted Caramel and Creamy • No n
Slide 33: Cooking Sauces & Accompaniments
COOKING SAUCES & ACCOMPANIMENTS Loyd Grossman pouches range performing strongly Category FY16/17 FY17/18 dynamics Loyd Grossman New ranges for all brands 1 Category position 16% Market share Premium pouch ranges continue • Sharwood’s regionally inspired to perform well premium sauces Closely ali
Slide 34: Ambient Cakes
AMBIENT CAKES Excellent FY16/17 Cadbury performance; new Mr Kipling ranges in FY17/18 Category FY16/17 FY17/18 dynamics Cadbury Mr Kipling 1 Category position 23% Market share • Gluten free range Amaze Bites £5m annual retail • Indulgent bites with premium 64% sales value flavours such as Dark Cho
Slide 35: International Sales Up +18%
INTERNATIONAL SALES UP +18% Delivered 10th successive quarter of sales growth Sales growth trajectory Australia 10 successive quarters’ growth Largest cake branded manufacturer 30.0% 69% 13 FY16/17 New cake SKUs 20.0% Australia sales in major retailer growth 10.0% Sharwood’s Integrated marketing cam
Slide 36: Summary & Outlook
SUMMARY & OUTLOOK Industry changes during FY16/17: ‒ Transition from deflation to inflation ‒ Changing retailer promotional strategies Re-balancing our strategic priorities International displaying strong momentum First new Nissin partnership products in market and performing strongly Stra
Slide 37: Q&A
Q&A 37
Slide 38: Appendix
Appendix 38
Slide 39: 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 40: Definitions
DEFINITIONS The period ‘FY16/17’ refers to the 52 weeks ended 1 April 2017. The period ‘FY15/16’ refers to the 52 weeks ended 2 April 2016. The period ‘Q4’ refers to the thirteen weeks ended 1 April 2017 and the comparative period, the thirteen weeks ended 2 April 2016. Underlying business is
Slide 41: Interest and Tax
INTEREST £m FY16/17 FY15/16 Senior secured notes interest 31 31 Bank debt interest 8 10 Cash interest 39 41 Amortisation of debt issuance costs 4 4 Net regular interest 43 45 TAX Deferred tax asset of £32m at 1 April 2017 (2 April 2016: £26m) Capital allowances in excess of depreciation Total
Slide 42: Pensions – Combined Schemes
PENSIONS – COMBINED SCHEMES £m 1 April 2017 2 April 2016 Scheme Assets (£m) 1 April 2017 2 April 2016 Assets 4,865 4,343 Equities 527 405 Liabilities (4,760) (4,212) Government bonds 519 475 Surplus 105 131 Corporate bonds 23 2 Surplus net of deferred 87 107 Property 357 292 tax @ (17.0%/18.0%) Abso
Slide 43: Balance Sheet
BALANCE SHEET £m 1 April 2017 2 April 2016 Property, plant & equipment 188 188 Intangibles / Goodwill 1,114 1,145 Retirement benefit assets 594 551 Deferred tax 32 26 Non-current Assets 1,928 1,910 Working Capital - Stock 72 63 - Debtors 65 101 - Creditors (192) (205) Total Working Capital (55) (41)