Premier Foods plc · LSE:PFD
Premier Foods — FY2012 Earnings Presentation
41 slides from Premier Foods's earnings presentation, Feb 21, 2013
Slide 1: 2012 Preliminary Results
2012 Preliminary Results 21 February 2013
Slide 2: Forward looking statements
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 statements. Forward look
Slide 3: Agenda
Agenda • Initial perspectives Gavin Darby • 2012 Preliminary Results & Outlook Mark Moran • 2013 Priorities Gavin Darby • Q&A All 3
Slide 4: Initial perspectives
Initial perspectives • Premier Foods has many strengths and a number of challenges • The strategy is starting to deliver • Focus is now on execution • Continuity essential • My background – 24 years consumer goods experience – Brand builder - food, beverage and telecoms – Strong focus on customers •
Slide 5: 2012 Preliminary Results
2012 Preliminary Results Mark Moran Chief Financial Officer 5
Slide 6: We delivered our priorities for 2012
We delivered our priorities for 2012 • Agree re-financing package with the banks Re-financing successfully agreed • Focus investment to grow Power Brands Power Brand sales +2.1%, Grocery Power Brand sales +4.0% • Divest selected businesses to sharpen focus c£370m proceeds achieved, £40m ahead
Slide 7: Reporting methodology
Reporting methodology • ‘Underlying business’ excludes the following items: – 2011 disposals (Canned grocery, Meat-free, Irish brands) – 2012 disposals (Vinegar & sour pickles, Elephant Atta, Sweet Spreads & Jellies, Sweet Pickles & Table Sauces) – Milling sales – Fluctuations in the cost of wheat c
Slide 8: Operating profit
Operating profit £m 2012 2011 Underlying business sales 1,354 1,312 Underlying business Trading profit 123 112 Add: Contract loss - 5 Add: 2012 disposals 32 56 Add: 2011 disposals - 15 Continuing operations Trading profit 155 188 Amortisation of intangible assets (53) (72) Fair value movements on fo
Slide 9: Earnings per share
Earnings per share £m 2012 2011 Operating profit 96 (176) Net regular interest (70) (116) Other interest (22) 33 Profit/(Loss) before tax 4 (259) Tax 22 29 Net earnings/(Loss) 26 (230) Average weighted shares (millions) 239.8 239.8 Basic earnings/(loss) per share from continuing operations 11.0p (95
Slide 10: Adjusted earnings per share
Adjusted earnings per share £m 2012 2011 % Branded sales 1,116 1,105 1.0% Non-branded sales 238 207 14.9% Total Underlying sales 1,354 1,312 3.2% Underlying Trading profit 123 112 10.6% Disposals & contract loss 32 76 (57.9%) Continuing operations Trading profit 155 188 (17.8%) Net Regular Interest
Slide 11: Power Brands sales up 2.1%
Power Brands sales up 2.1% Sales (£m) 2012 2011 Growth (%) Power Brands 889 871 2.1% Support brands 227 234 (2.9%) Total branded 1,116 1,105 1.0% Non-branded 238 207 14.9% Total 1,354 1,312 3.2% • Power Brands up +2.1% overall due to improved focus on customer collaboration and higher marketing inve
Slide 12: Grocery division
Grocery division £m 2012 2011 Growth (%) Branded sales 742 724 2.5% Non-branded sales 115 87 31.8% Total sales 857 811 5.6% Power Brands sales 533 513 4.0% Divisional contribution* 195 207 (5.5%) • Post disposals, Grocery business now 87% branded with strong EBITDA margins • Grocery Power Brand sale
Slide 13: Bread division
Bread division £m 2012 2011 Growth (%) Branded bread sales 374 381 (1.7%) Non-branded bread sales 123 120 2.6% Total bread sales 497 501 (0.7%) Milling sales 192 193 (0.8%) Total sales 689 694 (0.7%) Divisional contribution* 27 52 (48.0%) • Hovis maintained value market share in a competitive market
Slide 14: Group Trading profit
Group Trading profit £m 2012 2011 Growth (%) Grocery divisional contribution 195 207 (5.5%) Bread divisional contribution 27 52 (48.0%) Group SG&A costs (99) (147) 32.7% Group Trading profit 123 112 10.6% • Delivered £48m overhead cost reductions in 2012, ahead of plan • Focus on right-sizing cost b
Slide 15: Recurring Cash Flow
Recurring Cash Flow £m 2012 2011 Trading profit 123 112 Depreciation 37 39 Other non-cash items 9 (44) Interest (52) (108) Taxation 0 (3) Pension contributions (18) (56) Regular capital expenditure (56) (62) Working capital 7 0 Recurring cash flow 50 (122) • Recurring cash flow of £50m • Other non-c
Slide 16: Cash Flow
Cash Flow £m 2012 2011 Recurring cash inflow/(outflow) 50 (122) Trading profit & other cash flows– disposed businesses 6 14 Restructuring activity (22) - Operating cash flow from total Group 34 (108) Net disposal proceeds 312 400 Financing fees & finance leases (24) (7) Free cash flow 322 285 • Rest
Slide 17: Net debt
Net debt £m Net debt at 31 December 2011 995 Additional term loan 188 Securitised debtors programme 74 Pro forma Net debt at 31 December 2011 1,257 Free cash flow 2012 FY (322) Other non cash items 16 Net debt at 31 December 2012 951 • Pro forma Net debt reduction of 24% in 2012 • Total free cash fl
Slide 18: 2013 outlook and guidance
2013 outlook and guidance Guidance 2013 SG&A cost savings £20m Consumer marketing £40-£45m Depreciation c.£35m Capex 3-3.5% of sales Net regular interest £60-65m Tax – P&L notional rate 23.25% Tax - cash £0-£3m • Market remains challenging • Continue growth momentum in Grocery • Re-build value in Br
Slide 19: 2013 Priorities
2013 Priorities Gavin Darby Chief Executive Officer 19
Slide 20: Priorities build on 2012 foundations
Priorities build on 2012 foundations • Strategy remains unchanged – Focus on Power Brands – Grocery and Bread managed separately • Continue growth momentum in Grocery – Optimise marketing investment behind Power Brands – Exploit multi-channel opportunities • Re-build value in Bread – Restructure Bak
Slide 21: Market remains challenging
Market remains challenging Market Implication for Premier • Falling disposable incomes - • Improve brand differentiation – consumers trading down quality, taste, packaging, value • Low/ no volume growth, • Optimise marketing & despite high promotional promotional investment activity • Consumers seek
Slide 22: In Grocery, we enter 2013 well placed
In Grocery, we enter 2013 well placed to address market conditions • Re-aligned commercial structure to deliver end-to- end approach • Portfolio of recognised & trusted brands with a focus on innovation and in-store execution • Enablers in place to drive execution and exploit multi-channel opportuni
Slide 23: Re-aligned Grocery team
Re-aligned Grocery team Grocery Commercial Director Sweet Savoury Customer Business Business Brands Sales Operations Unit Unit & B2B Category Shopper Insight Revenue Growth Mgt • Cross-functional business units provide end-to-end view • Facilitates faster & more effective decision making 23
Slide 24: Focus on innovation and in-store execution of branded programmes
Focus on innovation and in-store execution of branded programmes Ambrosia Devon Dream Batchelors “Super”Relaunch Healthier & VFM cream alternative Back on TV after 5 years Bisto Stock Melts Sharwood’s Meal Bays Innovation supported with new Strong in-store execution advertising 24
Slide 25: Enablers in place to drive execution
Enablers in place to drive execution • Improved Customer Sales Cross- Buying Relationships Marketing Functional Joint Merchandising Insight & Business Insight – Joint Business Plans with Strategy Planning Supply Chain Supply Chain Key customers • Pricing Consistency & Integrity – Structured price an
Slide 26: Exploit multi-channel opportunities
Exploit multi-channel opportunities Small Store Formats Discounters Online 26
Slide 27: In Bread, we are re-building value
In Bread, we are re-building value • 2012 was a challenging year, but – Bread remains an important category – Hovis is a strong brand – We have a strong market presence • Dedicated management team now in place • Focus in 2013 is on realising benefits of restructuring and selective investment in Hovi
Slide 28: Restructuring programme underway
Restructuring programme underway • Focus on delivering reduced cost-to-serve and improved profitability • Optimise Bakery & Milling footprint following contract loss – Close Eastleigh, Greenford and Birmingham bakeries – Restructure logistics network – Glasgow Mill closure • Diversify wheat sourcing
Slide 29: Hovis packaging re-launch in Q1
Hovis packaging re-launch in Q1 • Improved differentiation and shopper ‘find time’ 29
Slide 30: Realise Group-wide cost saving opportunities
Realise Group-wide cost saving opportunities • Deliver £20m of SG&A savings in 2013 • Continue to target 4% gross savings in manufacturing controllable costs • Explore further cost opportunities to fuel branded growth 30
Slide 31: Medium-term outlook
Medium-term outlook • Power Brand sales growth ahead of market • Improved divisional contribution • Sustained brand investment • Continued efficiency and cost reduction • Sound footing to deliver growth in Bread • Reduced Net debt Deliver Shareholder Value 31
Slide 32: Summary
Summary • Strategic priorities delivered in 2012 • Consumer environment remains challenging • Strategic direction endorsed • Execution now the focus Continue growth momentum in Grocery Re-build value in Bread Realise cost saving opportunities 32
Slide 33: Q&A
Q&A 33
Slide 34: Appendices
Appendices 34
Slide 35: Definitions
Definitions • Trading profit is defined as operating profit before refinancing costs, restructuring costs, profits and losses associated with divestment activity, amortisation and impairment of intangible assets, the revaluation of foreign exchange and other derivative contracts under IAS 39 and pen
Slide 36: Continuing - Underlying business
Continuing - Underlying business £m Continuing 2011 2012 Milling Contract Underlying Business Disposals Disposals revenue Loss Business 2012 Sales 1,756.2 (0.9) (210.1) (191.4) - 1,353.8 Trading 154.7 (0.3) (31.0) N/A - 123.4 profit EBITDA 194.3 (0.3) (35.4) N/A - 158.6 2011 Sales 1,999.5 (188.5) (2
Slide 37: 2012 Disposals
2012 Disposals Vinegar & Sweet Sweet £m Sour Ethnic Spreads & Pickles & Total Pickles Flour Jellies Table Sauces 2012 FY Sales 14.8 8.8 128.3 58.2 210.1 Trading 0.5 3.3 23.1 4.1 31.0 profit EBITDA 0.9 3.3 24.8 6.4 35.4 Months 7 7 10 12 Owned 2011 FY Sales 34.0 17.8 165.1 66.0 282.9 Trading 5.5 6.4 3
Slide 38: Interest
Interest £m 2012 2011 % Bank debt interest (36) (40) 10.2 Swap contract interest (17) (60) 71.0 Securitisation interest (3) (2) (24.0) Cash interest (56) (102) 44.9 Amortisation and deferred fees (14) (14) 2.2 Regular net interest charge (70) (116) 39.9 Unwind of provision discount (1) (2) 66.7 IAS
Slide 39: Taxation
Taxation • 2012 credit on continuing activities £21.9m – Due to recognising deferred tax asset from prior year losses • Cash tax minimal in 2012 due to: – Capital allowances in excess of depreciation charges – Increased by the amortisation of intangible assets that are not eligible for tax relief •
Slide 40: Pension valuation and assumptions
Pension valuation and assumptions Key IAS 19 assumptions 31 Dec 2012 31 Dec 2011 Discount rate 4.45% 4.80% Inflation rate 2.95% 3.15% (CPI 2.15%) (CPI 1.95%) Expected salary increases 3.95% 4.15% Mortality assumptions LTI +1.0% LTI +1.0% Pension deficit (£m) Assets 3,209 3,156 Liabilities (3,676) (3
Slide 41: Balance Sheet
Balance Sheet £m 2012 2011 Fixed Assets – Property, plant & equipment 374 417 Fixed Assets – Intangibles / Goodwill 1,391 1,679 Fixed Assets – Deferred tax 72 - Total Fixed Assets 1,837 2,096 Assets less liabilities held for sale 78 34 Working Capital Stock 116 137 Debtors 299 297 Creditors (407) (4