Premier Foods Plc · LSE:PFD
Premier Foods — Q2 2022 Earnings Presentation
47 slides from Premier Foods's earnings presentation, Nov 16, 2021
Slide 1: Half Year Results for 26 Weeks Ended 2 October 2021
HALF YEAR RESULTS FOR 26 WEEKS ENDED 2 OCTOBER 2021 16 NOVEMBER 2021
Slide 2: Alex Whitehouse, CEO
ALEX WHITEHOUSE CEO
Slide 3: Headline Half year results; Revenue ahead of expectations
Headline Half year results; Revenue ahead of expectations Q2 revenue H1 revenue Trading profit Adjusted PBT Performance +8.5% +7.5% Total Total compared to 2 +13.1% +46.3% years ago +13.3% +11.4% Branded Branded +0.4% (6.5%) Performance Total Total compared to 1 (12.2%) (2.9%) year ago +2.1% (6.1%)
Slide 4: Making strong strategic progress
Making strong strategic progress Q2 +14.6% H1 + 11.8% FY19/20 Post Re-financing 1 2 3 4 5 UK Branded International Infrastructure Re-financing revenue growth vs Category expansion Investment progress completed 2 years ago Guided by our new purpose, ‘Enriching Life Through Food’ 4
Slide 5: Duncan Leggett, CFO
DUNCAN LEGGETT CFO
Slide 6: Earnings enhancing refinancing completed in the first half
Earnings enhancing refinancing completed in the first half Bond pricing RCF & Credit ratings Substantial interest cost reduction ▪ New £175m RCF with 39 refreshed bank Group £m ▪ Progressive net regular interest reduction since 33 6.25% 3.50% ▪ Maturity to 2024 with FY19/20 two extension ▪ FY20/21 p
Slide 7: Group headline results – Branded revenue up 11.4% vs 2 years ago
Group headline results – Branded revenue up 11.4% vs 2 years ago Change vs 1 year Change vs 2 years £m FY21/22 H1 FY20/21 H1 FY19/20 H1 ago ago Branded revenue 345 368 310 (6.1%) +11.4% Non-branded revenue 49 54 57 (9.4%) (14.0%) Total revenue 394 422 367 (6.5%) +7.5% Gross margin % 34.7% 34.8% 34.3
Slide 8: Grocery – Branded revenue and DC well ahead of 2 years ago
Grocery – Branded revenue and DC well ahead of 2 years ago Change vs 1 year Change vs 2 years £m FY21/22 H1 FY20/21 H1 FY19/20 H1 ago ago Branded revenue 245 273 218 (10.3%) +12.2% Non-branded revenue 39 44 46 (10.1%) (14.4%) Total revenue 284 317 264 (10.3%) +7.6% Divisional contribution 64 79 59 (
Slide 9: Sweet Treats – Branded growth model driving progress
Sweet Treats – Branded growth model driving progress Change vs 1 year Change vs 2 years £m FY21/22 H1 FY20/21 H1 FY19/20 H1 ago ago Branded revenue 100 94 92 +6.3% +9.5% Non-branded revenue 10 11 11 (6.4%) (12.2%) Total revenue 110 105 103 +5.0% +7.1% Divisional contribution 13 9 10 +39.9% +22.5% Di
Slide 10: Adjusted earnings per share 45% ahead of two years ago
Adjusted earnings per share 45% ahead of two years ago £m FY21/22 H1 FY20/21 H1 FY19/20 H1 vs FY20/21 FY19/20 Trading profit 58 66 51 (12.2%) +13.1% Net regular interest (12) (18) (19) +36.8% +41.2% Adjusted PBT 46 47 32 (2.9%) +46.3% Notional tax @ 19% (8) (9) (6) +2.9% +46.3% Adjusted earnings 38
Slide 11: Statutory and headline metrics
Statutory and headline metrics Compared to 2 years ago Compared to prior year £51m 2.5p £51m 2.5p £345m +£15m +66.7% (£14m) (51.0%) £58m1 lower Operating Operating Basic eps Basic eps Net debt profit profit ▪ Operating profit in prior year benefitted from reversal of impairment due to Hovis sale pro
Slide 12: Cashflow – full year expectations unchanged
Cashflow – full year expectations unchanged £m 400 ▪ Capex spend weighted to H2 11 345 ▪ Full benefit of 350 333 67 13 interest savings to 15 flow through in H2 15 following refinancing 300 6 ▪ Working capital 19 outflow due to seasonal stock build 250 ▪ No further refinancing costs expected in H2 2
Slide 13: Pension schemes segregated merger – progress update
Pension schemes segregated merger – progress update 1,800 £4m members ✓ ✓ ✓ ✓ ✓ Revised investment Higher returns Winding up Administration Implemented strategy with targeted for PF lumpsum completed costs savings stronger governance increased hedging sections (15% of PF members) 13
Slide 14: Combined Pensions Schemes – combined surplus of £608m, up £68m
Combined Pensions Schemes – combined surplus of £608m, up £68m 2 October 2021 3 April 2021 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,490 828 5,318 4,459 793 5,252 Liabilities (3,533) (1,177) (4,710) (3,537) (1,175) (4,712) Surplus/(Deficit) 957 (3
Slide 15: Alex Whitehouse, CEO
Shar voods STIR FRY SAUCE J Sharwoods
Slide 16: Our new ESG strategy, 'Enriching Life Plan'
Our new ESG strategy, ‘Enriching Life Plan’ Major, new, ambitious targets Pillar PRODUCT PLANET PEOPLE GREAT TASTING NUTRITIOUS AND CONTRIBUTING TO A HEALTHIER NOURISHING THE LIVES OF OUR SUSTAINABLE FOOD PLANET COLLEAGUES AND COMMUNITIES Our Healthier Nutrition Taking action on climate change A div
Slide 17: A reminder of what we have already achieved
A reminder of what we have already achieved PRODUCT PLANET PEOPLE • Reduced CO2 emissions by • 17 new better for you 5.8% last year and by 43% ranges in FY20/21 since 20082 • 84% of ranges have a • Maintain zero waste to better for you option landfill record • 1,102 tonnes of sugar • Water usage red
Slide 18: Our strategy and purpose
Our strategy and purpose 1 2 3 4 5 Continue Supply chain Expand UK into Build International Inorganic to grow the UK core investment new categories businesses with opportunities critical mass A solid and growing UK Invest in operational Build sustainable Utilise brand building Leverage proven busine
Slide 19: Our Branded growth model is at the core of what we do
1 Our Branded growth model is at the core of what we do 1 Leading brand positions 2 Insight driven new products • Our brands are leaders in their categories • Launch new products linked to key consumer trends • High household penetration • Major focus on health & nutrition 3 Sustained marketing inve
Slide 20: Consistent UK revenue performance at c.4% growth
1 Consistent UK revenue performance at c.4% growth Quarterly UK revenue growth 2 year UK CAGR % movement year on year 22.9% 7.1% 4.3% 4.6% 7.3% 7.8% 7.4% 2.8% 4.4% 4.0% 3.4% 4.8% 3.6% +3.9% 2.6% 4.4% 3.0% 1.2% 1.6% 1.5% Q1 Q2 Total UK UK Branded (14.0%) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q
Slide 21: Market share gains versus two years ago
1 Market share gains versus two years ago H1 market share1 vs 2 years ago Household penetration2 vs 2 years ago 73bps ▪ Grocery brands saw lower 67bps volume of promotions in Q1 61bps prior year 58bps 49bps ▪ Sweet Treats driven by +135bps +288bps benefits from excellent NPD program; Mr Kipling Sign
Slide 22: Navigating the macro and industry-wide challenges
1 Navigating the macro and industry-wide challenges HGV drivers ▪ Customer service levels remain strong ▪ Our supply chain team doing a great job to anticipate, plan and mitigate challenges ▪ We have secured the logistics resources for our peak period Tight labour market ▪ Many long service colleagu
Slide 23: The Branded Growth Model at work in H1
1 The Branded Growth Model at work in H1 Sweet Treats Innovation Grocery innovation Brand investment Loyd Grossman – Pizza range ▪ Product innovation a major driver of Sweet Treats +6.3% branded growth in H1 ▪ Mr Kipling 30% less sugar Viennese Whirls and Signature premium range contributors to grow
Slide 24: Nissin: the exceptional growth trajectory continues
1 Nissin: the exceptional growth trajectory continues Turnover profile (£m) Authentic pot snack market Recent NPD & commercial expertise 60% 16 50% 13 45% 40% 35% 8 30% 19% 20% 23% 4 3 10% 11% 0% 2017 2018 2019 2020 2021 FY17/18 FY18/19 FY19/20 FY20/21 LTM Nissin Competitor 1 Competitor 2 Competitor
Slide 25: Accelerating our healthier range and plant-based propositions
1 Accelerating our healthier range and plant-based propositions Better for you ranges Plant-based +25% Healthier ranges revenue growth vs 2YA 25
Slide 26: Investing in our infrastructure
2 Investing in our infrastructure Capital investment fuels branded growth Investment examples Ashford – Batchelors and Sharwood’s Cash Capital ▪ New manufacturing line generation investment to produce pot snacks ranges ▪ Previously outsourced, now manufactured at Ashford site Gross Lifton – Ambrosia
Slide 27: Strategic progress – Category expansion
3 Strategic progress – Category expansion First examples of category expansion ▪ Strong start in H1, ahead of original plan ▪ Distribution expansion Targeting up to ▪ Oxo extension beyond Stock £10m revenue from ▪ Product proposition orientated to summer category expansion BBQ season this year ▪ Cak
Slide 28: International – H1 sales 7% ahead of two years ago
4 International – H1 sales 7% ahead of two years ago H1 overall performance Ireland Revenue vs 2 years ago Revenue vs prior year +7%1 (5%)1 Applying the branded Global shipping Pandemic ▪ Successful application of UK branded growth model growth model delays impacts continues ▪ Branded growth of 39%
Slide 29: International – Strategic progress in all priority markets
4 International – Strategic progress in all priority markets Canada USA Australia Europe Leverage market leading position Test launch and refining range of Mr Kipling cake for future growth in USA 1000 900 800 500 230 Full roll-out of Mr ▪ Sharwood’s continues to perform Kipling slices +2,400 strong
Slide 30: Continuing to drive the Branded Growth Model in H2
Continuing to drive the Branded Growth Model in H2 New product development Brand investment – 6 TV campaigns in H2 Cadbury Oreo cake bars - build New Bisto TV advert on success of Crunchie and Fudge for H2 campaign Batchelors Paxo – Meat free pots Low salt stuffing Ambrosia ‘Moley’ back on air Angel
Slide 31: Strategic brand extensions into new categories
Strategic brand extensions into new categories Recent extensions H2 initiatives Biscuits Ice-cream ▪ Strategy to leverage ▪ Utilising iconic flavour variants for each Mr Kipling brand ice-cream: equity in Sweet Treats - Mr Kipling French Fancy, Chocolate Slice ▪ Targets everyday treat - Ambrosia Van
Slide 32: A very good start to the year, strong progress & navigating challenges
A very good start to the year, strong progress & navigating challenges Strong 2yr Branded Branded Growth Model Navigating challenges revenue growth delivering FY19/20 Post Re-financing Expansion into new categories International progress Interest costs halved 32
Slide 33: Outlook: Firmly on track to deliver our profit expectations for the year
Outlook: Firmly on track to deliver our profit expectations for the year 1 2 3 Group enters H2 Navigating Continued with strong industry wide progress on momentum challenges strategic priorities 4 5 6 FY21/22 interest Firmly on track to Net debt/EBITDA costs almost deliver full year 1.5x in medium h
Slide 34: mn ANGEL SLICES
mn 6 ANGEL SLICES =
Slide 35: Appendix
APPENDIX
Slide 36: Cautionary statement
Cautionary statement This presentation may contain "forward-looking statements" that are based on estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements are all statements other than statements of historical fact or statements in the present tense, and can b
Slide 37: Definitions
Definitions ▪ The period ‘FY21/22 H1’ refers to the 26 weeks ended 2 October 2021, unless where otherwise stated. The period ‘FY20/21 H1’ refers to the 26 weeks ended 26 September 2020. The period ‘FY19/20 H1’ refers to the 52 weeks ended 28 September 2019. ▪ The period ‘Q2’ refers to the thirteen w
Slide 38: Strong brand equity
Strong brand equity Categories Brands Position Share Penetration Flavourings & Seasonings 1 44% 71% Quick Meals, Snacks & Soups 1 33% 47% Ambient Desserts 1 36% 56% Cooking Sauces & Accompaniments 1 15% 53% Ambient Cakes 1 24% 65% Sources: Category position & market share: IRI 52 w/e 2 Oct 2021; Pen
Slide 39: UK Grocery market
UK Grocery market 18% 34% Chilled 46% Ambient Frozen & Fresh 54% 66% 82% Branded Non-branded Branded Non-branded Branded Non-branded Market size £36bn £51bn £7bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desserts Cake Market size £435m £411m £961m £322m £1,021m PF share 44% 33.0% 1
Slide 40: Non-branded
Non-branded Non-branded revenue by type Key principles & criteria • Application of a Capex light approach Knighton B2B & flour • Retention of branded IP • Strict financial hurdles apply for new business • Assists in supporting Manufacturing overhead recoveries 20% 24% FY21/22 H1 commentary 25% • FY2
Slide 41: Quarter 1 and Quarter 2 sales
Quarter 1 and Quarter 2 sales Quarter 1 Quarter 2 £m Change vs 1 year ago Change vs 2 years ago Change vs 1 year ago Change vs 2 years ago Grocery Branded revenue (19.6%) +12.0% (0.4%) +12.5% Non-branded revenue (6.0%) (10.1%) (13.6%) (17.8%) Total revenue (17.9%) +8.2% (2.5%) +7.2% Sweet Treats Bra
Slide 42: Operating profit
Operating profit £m FY21/22 H1 FY20/21 H1 Change Trading profit 58 66 (8) Amortisation of intangible assets (14) (13) (1) Foreign exchange fair value movements 3 (0) 3 Reversal of impairment loss of Loan receivable - 16 (16) Net interest on pension and administration costs 2 0 2 Non-trading items 2
Slide 43: Interest and taxation
Interest and taxation £m FY21/22 H1 FY20/21 H1 FY19/20 H1 Senior secured notes interest 8 14 16 Interest Bank debt interest 2 3 2 10 17 18 Amortisation of debt issuance costs 1 1 1 Net regular interest 11 18 19 ▪ Tax charge of £10m in FY21/22 H1, due to current tax of £3m and deferred tax of £7m ref
Slide 44: Capital structure
Capital structure Year ago Today1 £m £m 350 350 330 300 300 300 250 250 210 200 177 200 175 150 150 100 100 50 50 0 0 2020 2021 July 2022 Dec 2022 Oct 2023 2021 2022 2023 May 2024 2025 Oct 2026 RCF Fixed notes Floating notes Fixed notes RCF Ratchet grid broadly in line RCF % Margin 2.75% + 3M L RCF
Slide 45: Capital allocation
Capital allocation Context A cash generative business with leading sector margins Margins & • Maintenance of Trading profit margins with progressive investment in consumer marketing 1 • Trading profit and adjusted PBT of equal importance in monitoring future progress PBT 2 Capex • Accelerated capita
Slide 46: Guidance
Guidance FY21/22 guidance £m • Low single digit £m cash tax payable medium-term due to tax legislation changes on brought forward Working capital Slightly negative losses and lower relief due to expected lower Depreciation c.£20m pension deficit contributions Capital expenditure c.£25m Interest – ca
Slide 47: Summarised Balance sheet
Summarised Balance sheet £m 2 October 2021 3 April 2021 Property, plant & equipment 188 192 Intangibles / Goodwill 950 963 Deferred tax asset 23 29 Retirement benefit assets 970 935 Non-current Assets 2,131 2,119 Working Capital - Stock 91 69 - Debtors 75 83 - Creditors (242) (250) Total Working Cap