Premier Foods plc · LSE:PFD
Premier Foods — H1 FY17/18 Earnings Presentation
40 slides from Premier Foods's earnings presentation, Nov 15, 2017
Slide 1: Half year results for 26 weeks ended 30 September 2017
Half year results for 26 weeks ended 30 September 2017 15 November 2017
Slide 2: Introduction
INTRODUCTION Important progress with strategic partnerships Financial results Strategic Highlights +1.5% +6.2% +23% H1 growth H1 Revenue growth Q2 Revenue growth Strategic partnerships International revenue £48m Flat to prior £535m Distribution year Space SKUs Trading profit Net debt Innovation Cust
Slide 3: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 3
Slide 4: Group Headline Results
GROUP HEADLINE RESULTS Revenue growth +1.5% and Trading profit flat to prior year £m FY17/18 H1 FY16/17 H1 Change (%) Q2 Change (%) Branded sales 295 295 (0.0%) +5.7% Non-branded sales 58 53 +10.1% +8.9% Total sales 353 348 +1.5% +6.2% Divisional contribution 63 63 +0.2% Group & corporate costs (15)
Slide 5: Grocery
GROCERY Strong quarter two revenue and lower Divisional contribution £m FY17/18 H1 FY16/17 H1 Change (%) Q2 Change (%) Branded sales 215 213 +0.9% +10.5% Non-branded sales 40 37 +7.4% +6.1% Total sales 255 250 +1.9% +9.7% Divisional contribution 51 56 (8.5%) Divisional contribution % 20.2% 22.5% (2.
Slide 6: Sweet Treats
SWEET TREATS Margin progression due to marketing phasing and SG&A savings £m FY17/18 H1 FY16/17 H1 Change (%) Q2 Change (%) Branded sales 81 83 (2.3%) (5.8%) Non-branded sales 17 15 +17.0% +15.7% Total sales 98 98 +0.7% (2.3%) Divisional contribution 12 7 +74.2% Divisional contribution % 11.7% 6.7%
Slide 7: Operating Profit
OPERATING PROFIT Lower restructuring costs partly offset by Knighton Foods impairment £m FY17/18 H1 FY16/17 H1 Trading profit 48 48 Amortisation of intangible assets (18) (19) Foreign exchange fair value movements 1 1 Restructuring costs (3) (7) Net interest on pension and administration costs (1) (
Slide 8: Adjusted Earnings Per Share
ADJUSTED EARNINGS PER SHARE Slightly ahead of prior year due to marginally lower interest and tax £m FY17/18 H1 FY16/17 H1 Change (%) Trading profit 48 48 0.0% Net regular interest (22) (22) +0.6% Adjusted PBT 26 26 +0.5% Notional tax @ 19%/20% (5) (5) +4.6% Adjusted earnings 21 21 +1.7% Weighted av
Slide 9: Net Debt of £535m at Half Year
NET DEBT OF £535m AT HALF YEAR £m 600 550 7 7 535 523 48 9 17 1 500 20 9 8 450 400 350 Net debt Trading profit Depreciation Pensions Capex Interest Taxation Working Restructuring Financing fees Net debt FY16/17 capital / Other FY17/18 H1 Half year Net debt of £535m is £21m lower than £556m reporte
Slide 10: Combined Pension Schemes – Accounting Basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Slight reduction in Premier Foods schemes deficit 30 September 2017 1 April 2017 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,061 661 4,722 4,191 674 4,865 Liabilities (3,473) (1,122) (4,595) (3,597) (1,163
Slide 11: Pension Schemes Valuation Evolution
PENSION SCHEMES VALUATION EVOLUTION Position of principle schemes relatively stable £m 800 600 RHM Premier Foods 588 400 200 0 (200) (400) (600) (461) (800) Dec Sept 2013 2017 11
Slide 12: FY17/18 Cash Guidance
FY17/18 CASH GUIDANCE Guidance broadly unchanged 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 administr
Slide 13: Gavin Darby, Chief Executive Officer – Operational review
Gavin Darby Chief Executive Officer Operational review 13
Slide 14: Strategy to Reduce Leverage Below 3x
STRATEGY TO REDUCE LEVERAGE BELOW 3x A balance between growth, cost control & cash generation 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
Slide 15: Industry Context
INDUSTRY CONTEXT Latest BRC data shows retail sales slowed – but food sales & volumes buoyant 5.0 % 4.0 3.0 Food sales 2.0 Food volumes Non-food sales 1.0 0.0 (1.0) Jan 2017 Oct 2017 UK food retail sales remain resilient: ‒ Food sales & volume growth while non-food sales slowing ‒ Inflation around
Slide 16: Our Recent Performance Set Against Peers
OUR RECENT PERFORMANCE SET AGAINST PEERS Year to date picture removes Easter phasing effect 5.8% Global Soft Drinks 4.3% Global Snacks & Meals 2.8% UK Biscuits 0.0% Premier Foods (0.3%) Global Food & Retail (0.6%) Global PE FMCG (0.6%) Global Food & Beverages (0.7%) US Soft Drinks/Snacks (0.7%) UK M
Slide 17: As Expected, Quarter 1 Was a Challenging One
AS EXPECTED, QUARTER 1 WAS A CHALLENGING ONE Q1 revenue declined, positive market shares and strategic partnerships Q1 sales Market share gains Strategic partnerships 1. Promotional Investment, particularly affecting Desserts category 2. Lower category volumes in June, impacted Bisto, Oxo, Ambrosia
Slide 18: A Return to Branded Volume & Revenue Growth in Q2
A RETURN TO BRANDED VOLUME & REVENUE GROWTH IN Q2 Batchelors now delivered three successive quarters’ growth Q2 Volume growth Q2 Revenue growth % movement year on year % movement year on year 16.4% 14.3% 12.9% 15.6% 11.3% 11.1% 9.2% 8.5% 7.6% 6.7% 5.2% 2.5% 0.4% (1.4%) (0.6%) (1.3%) +3.6% +7.7% Aver
Slide 19: Strategic Partnerships
STRATEGIC PARTNERSHIPS We have a great platform to leverage future growth £790m Revenue $4.4billion Revenue $26billion Revenue 4,000 employees 34 manufacturing 150 manufacturing 15 UK sites sites sites Nissin partnership provides access to Noodle supply chain and R&D expertise worldwide, in additi
Slide 20: Strategic Partnerships Delivering Growth
STRATEGIC PARTNERSHIPS DELIVERING GROWTH Q2 growth through Super Noodles and Soba Pots, Cadbury International 44% of Q2 Revenue growth Nissin partnership delivered Batchelors Super Noodle Pots and Soba Pots Nissin Cup Noodle just launched in UK Australia now Group’s second largest market after
Slide 21: International Continues Its Strong Trajectory
INTERNATIONAL CONTINUES ITS STRONG TRAJECTORY Cadbury, Mr Kipling and Sharwood’s are our biggest brands £m 55 Cadbury +18% CAGR 50 Mr Kipling 45 Sharwood's Bisto 40 Ambrosia 35 Oxo 30 Others 25 Sept 2015 Sept 2017 Rolling 12 month revenue International revenue x brand Revenue growth in Australia t
Slide 22: International Momentum Building
INTERNATIONAL MOMENTUM BUILDING Brand building in key geographies through direct marketing Australia New Zealand USA Direct marketing – 2nd Q3 Cadbury cake & Mr Sharwood’s expansion social media campaign Kipling launch in New in USA for Mr Kipling, follows Zealand following Further distribut
Slide 23: Mondelez International Global Strategic Partnership
MONDELEZ INTERNATIONAL GLOBAL STRATEGIC PARTNERSHIP Signed agreement expands access to 46 countries worldwide Canada Japan China Hong Kong Thailand Malaysia Singapore Caribbean Australia New Zealand Saudi Arabia Other Middle East South Africa Pakistan India 23
Slide 24: Grocery Highlights
GROCERY HIGHLIGHTS Innovation stream aligned to consumer trends Health & Nutrition Snacking/On the go Convenience Gluten free and Homepride Kids Angel Delight & Batchelors Pots Oxo and Bisto Ready to use • Bisto & Paxo Gluten free • Angel Delight in H1 • Bisto & Oxo grew volumes, ranges ‒ 9% Volume
Slide 25: Batchelors Growth Up to 8% in H1
BATCHELORS GROWTH UP TO 8% IN H1 A blend of factors delivering progress in volume and revenue Consumer trend alignment Nissin Supply Chain capability +8% H1 revenue growth Customer distribution Nissin R&D 25
Slide 26: Sweet Treats Highlights
SWEET TREATS HIGHLIGHTS Mondelez International Strategic Global Partnership signed during H1 Mr Kipling – On The Go Cadbury Revenue growth, margin enhancing Core range continues to deliver good momentum and expanding reach • Cadbury cake hit its 8.4% highest ever 52 w/e value market share of +55% +4
Slide 27: Recent Retailer Range Reviews
RECENT RETAILER RANGE REVIEWS Excellent category KPIs on Distribution, Space and SKU numbers +23,700 +16% +6.5% Average Average Distribution SKU count space gained points gained gained In house virtual category per category per category merchandising facility Note: Some range reviews yet to be compl
Slide 28: Retailer Brands
RETAILER BRANDS Both PF brands and retailer brand generally gaining market share 48.9% 42.3% PF share Own label share 33.8% 29.6% 25.6% 23.1% 18.5% 16.2% 12.5% 5.9% Share Flavourings & Ambient Ambient QMS Cooking Sauces growth/(decline) Seasonings Desserts Cake Market size £390m £362m £817m £290m £1
Slide 29: Supply Chain Update
SUPPLY CHAIN UPDATE Logistics transformation programme remains on track 1 Logistics Transformation 2 Manufacturing • Knighton Foods impacted by lower volumes and plant efficiencies • Additional labour costs associated with launch of Batchelors Pasta pots at Ashford • Ambrosia promotional optimisatio
Slide 30: Summary & Outlook
SUMMARY & OUTLOOK Overall revenue growth in H1 and volume driven revenue growth in Q2, +6.2% International business grew +23% in H1 and +30% in Q2 Strategic relationships delivered 44% of revenue growth in Q2 New advertising campaigns in second half with strong support for Bisto & Oxo in Q3
Slide 31: Q&A
Q&A 31
Slide 32: Appendix
Appendix 32
Slide 33: 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 34: Definitions
DEFINITIONS The period ‘FY17/18 H1’ refers to the 26 weeks ended 30 September 2017. The period ‘FY16/17 H1’ refers to the 26 weeks ended 1 October 2016. The period ‘Q2’ refers to the thirteen weeks ended 30 September 2017 and the comparative period, the thirteen weeks ended 1 October 2016. Tra
Slide 35: Leading Category Positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 43% 73% Quick Meals, Snacks & Soups =1 30% 46% Ambient Desserts 1 37% 61% Cooking Sauces & Accompaniments 1 16% 54% Ambient Cakes 1 23% 64% Sources:
Slide 36: Retailer Brand
RETAILER BRAND Ambient grocery shows lowest prevalence of retailer brand in UK grocery 23% 33% Chilled + Frozen 46% Ambient Fresh 54% 67% 77% Branded Non-branded Branded Non-branded Branded Non-branded Market size £29bn £44bn £6bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desserts
Slide 37: Interest & Taxation
INTEREST & TAXATION Interest £m FY17/18 H1 FY16/17 H1 Senior secured notes interest 16 15 Bank debt interest 4 5 Cash interest 20 20 Amortisation of debt issuance costs 2 2 Net regular interest 22 22 Taxation Deferred tax asset of £31m at 30 September 2017 (1 April 2017: £32m) Capital allowances
Slide 38: Pensions – Combined Schemes
PENSIONS – COMBINED SCHEMES £m 30 Sept 2017 1 April 2017 Scheme Assets (£m) 30 September 2017 1 April 2017 Assets 4,722 4,865 Equities 443 527 Liabilities (4,595) (4,760) Government bonds 867 519 Surplus 127 105 Corporate bonds 23 23 Surplus net of deferred 105 87 Property 344 357 tax @ (17.0%) Abso
Slide 39: Capital Structure
CAPITAL STRUCTURE Recent refinancing extends maturity of RCF and Senior Secured Notes Current debt maturity profile £m 350 325 300 250 210 200 184 Floating Notes 150 Fixed Notes RCF committed 100 50 33 0 2017 2018 March Dec March June 2019 2020 2021 2022 Appropriate liquidity and a comfortable mat
Slide 40: Balance Sheet
BALANCE SHEET £m 30 September 2017 1 April 2017 Property, plant & equipment 184 188 Intangibles / Goodwill 1,093 1,114 Retirement benefit assets 588 594 Deferred tax 31 32 Non-current Assets 1,896 1,928 Working Capital - Stock 90 72 - Debtors 80 65 - Creditors (215) (192) Total Working Capital (45)