Premier Foods Plc · LSE:PFD
Premier Foods — Investor Presentation (September 2016)
42 slides from Premier Foods's investor presentation, September 2016
Slide 1: Introduction to Premier Foods
Introduction to Premier Foods September 2016
Slide 2: 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 3: Contents
CONTENTS 1 History & introduction 2 Why invest in us? 3 Current guidance & Nissin 4 Recent results 5 Capital structure 6 Appendix 3 3
Slide 4: History & Introduction
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Slide 5: A Brief History
A BRIEF HISTORY Timeline 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ownership Private Public Strategy Building scale Restructuring Category Growth M&A Acquisitions Divestments Organic focus Flavourings & Seasonings No. 1 50% Market Value: £409m 40% 30% 20% 10% 0% PF N
Slide 6: We are one of the UK's leading ambient grocery suppliers
WE ARE ONE OF THE UK’s LEADING AMBIENT GROCERY SUPPLIERS 6.3 5.7 % Share 3.8 3.4 3.3 3.2 3.0 2.8 2.8 2.6 2.3 2.0 1.9 Total UK ambient grocery market: £25bn Source: Kantar Worldpanel, 52 weeks ending 19 June 2016, excludes Foodservice and out of home 6 6
Slide 7: A focused portfolio in an agile organisation
A FOCUSED PORTFOLIO IN AN AGILE ORGANISATION Business unit structure designed to deliver growth Corporate Grocery Sweet Treats International Employees functions Legal Grocery 1,560 IT Procurement Sweet Treats Group finance 2,175 Corporate Affairs Group Central Human Resources 3,735 Sales Marketing I
Slide 8: Supply chain infrastructure
SUPPLY CHAIN INFRASTRUCTURE CARLTON SKELMERSDALE (D) WORKSOP MORETON CHARNWOOD CORBY (D) STOKE KNIGHTON ASHFORD RUGBY (D) SWEET TREATS SITES ANDOVER GROCERY SITES LIFTON ‘D’ indicates distribution site 8 8
Slide 9: Health & Nutrition
HEALTH & NUTRITION Refreshed 3 year plan to encourage healthier choices Market context • Consumers increasingly looking for healthier options • Sugar has become a major focus • Government to publish Childhood Obesity Strategy in 2016 Comprehensive 3-year plan covering broad portfolio • Reduce sugar
Slide 10: Why Invest In Us?
2 Why Invest In Us? 10
Slide 11: Our Investment Proposition
OUR INVESTMENT PROPOSITION Focused on driving category growth Broad stable of leading brands driving category growth through marketing and innovation Diverse manufacturing processes provide wide scope to innovate Strong capabilities to serve today’s multi-format retail environment Continue
Slide 12: We enjoy leading category positions
WE ENJOY LEADING CATEGORY POSITIONS Flavourings & Seasonings No. 1 Ambient Cakes No. 1 Ambient Desserts No. 1 30% Market Value: £965m 50% Market Value: £375m 40% 20% 30% 20% 10% 10% 0% 0% PF No.2 No.3 PF No.2 No.3 Cooking Sauces & Quick Meals, Snacks & Accompaniments No. 1 Soups No. 1 40% Market Val
Slide 13: Consumer focused approach
CONSUMER FOCUSED APPROACH Our innovation strategy starts and ends with consumers Insight Innovation Execution Developing new products Supporting with media Building in depth that make consumers & outstanding in-store consumer understanding lives easier execution Macro Consumer Trends Convenience Foo
Slide 14: Innovation and brand investment
INNOVATION AND BRAND INVESTMENT 9 brands planned for TV advertising in FY16/17 Sales from innovation Consumer marketing (£m) 42-44 20.0% 36 18.1% 33 11.3% 25 6.9% FY14 FY15 FY16 Target 2013/14 2014/15 2015/16 2016/17F Source: IRI, New & Existing product development, 52 w/e 19 March 2016 14
Slide 15: FY15/16: 6 brands delivered 3.4% sales growth
FY15/16: 6 BRANDS DELIVERED 3.4% SALES GROWTH Driven by marketing investment and innovation Top 6 performing brands Ambrosia + Batchelors 8.5% 5.9% 3.3% 3.4% 1.8% (2.9%) Sales growth % Marketing % Sales NPD % Sales Sales growth % Marketing % Sales NPD % Sales c.60% of branded sales c.25% of branded
Slide 16: Brands return to growth following investment
BRANDS RETURN TO GROWTH FOLLOWING INVESTMENT 6 Brands have received disproportionate focus so far Marketing Investment & Innovation 2014 2015/16 (15 months) Sales decline Investment Product Launches Sales growth 3.5% 3.4% £31m 20 All data is Company sourced FY15/16 and FY14 16
Slide 17: What's next for Ambrosia and Batchelors?
WHAT’S NEXT FOR AMBROSIA AND BATCHELORS? TV advertising and new product launches Ambrosia Batchelors Deluxe Custard and Frozen Custard Protein & Veg Pots and Soup ranges Consumer Trends Consumer Trends Premium Indulgence Convenience Foodieness Healthier 17
Slide 18: UK food retailing dynamics
UK FOOD RETAILING DYNAMICS Requires flexibility, agility and a category approach A continually changing and challenging environment 3.0 Changing Market Promotional trip share strategies 0.0 dynamics (3.0) Range Management Jul Mar reviews changes 2014 2016 Food deflation Shifts in shopper dynamics Ch
Slide 19: Growth channels
GROWTH CHANNELS Delivering strong growth; broadly in line with market Online1 Hard Discounters1,2 +9.6% +9.1% 14.8% 13.8% Market Premier Foods Market Premier Foods • Head of Digital appointed • Growing in both Grocery and Sweet • Online specific joint business plans Treats • Tracking tools now used
Slide 20: Supply chain efficiency
SUPPLY CHAIN EFFICIENCY Targeting further cost reduction across supply chain in FY16/17 Line Efficiency Streamlined Teams Logistics Restructuring • 3rd party expertise advising • Planned headcount • Significant opportunity to on manufacturing process reduction across Grocery consolidate distribution
Slide 21: Revenue management
REVENUE MANAGEMENT Premiumisation strategy and promotional efficiency Premiumisation Promotional Efficiency Display Typical % premium • Off-shelf feature key to +25-100% per serving driving volumes +5% • 27% more shipper volumes over Christmas ROI Premium product sales • Increased return on % total
Slide 22: Strong operational cash flows
STRONG OPERATIONAL CASH FLOWS FY15/16 Net debt reduction of £51m; lower reduction in FY16/17 4.0x £m 600 585 131 580 3.6x 560 540 8 534 0 8 526 42 520 500 25 480 460 16 13 440 420 400 Net debt Trading profit Depreciation Pensions Capex Interest Working capital Restructuring Net debt Knighton Net deb
Slide 23: Committed and experienced management team
COMMITTED AND EXPERIENCED MANAGEMENT TEAM All with strong consumer sector backgrounds Chief Executive Chief Financial Grocery Sweet Treats International Officer Officer Managing Director Managing Director Managing Director Gavin Darby Alastair Murray Alex Whitehouse Graham Hunter Jette Andersen 23 2
Slide 24: Current guidance & Nissin
3 Current guidance & Nissin 24
Slide 25: FY16/17 sales guidance
FY16/17 SALES GUIDANCE Expect FY16/17 sales growth +2-4%; additional Nissin opportunities Marketing Innovation Sales guidance Grocery Cake on the chilled Go +2-4% Opportunity Revenue Growth mgmt channels International Existing growth Strategic initiatives momentum 25
Slide 26: Cake on the go national roll-out
CAKE ON THE GO NATIONAL ROLL-OUT Significantly under-developed On the Go cake market National Roll-Out “On the Go” food in significant growth 1. Manufacturing Capability In Place Cake category is underdeveloped • £20m investment has twin-pack format capability • Further innovation on Exceedingly Goo
Slide 27: Grocery chilled expansion: Ambrosia example
GROCERY CHILLED EXPANSION: AMBROSIA EXAMPLE Ambrosia has ability to expand into Chilled & Frozen 1 2 AMBROSIA BRAND EQUITIES DEEP CONSUMER INSIGHT 49% 95% 100 years Household Prompted Brand penetration awareness heritage Full Research Time of day Motivation and U&A study Need State Modelling 3 4 CHI
Slide 28: International cake expansion
INTERNATIONAL CAKE EXPANSION Increasing our reach into large and accessible new markets 1 2 US market opportunity Middle East market opportunity +4.0% +5.7% YoY YoY Total Cake Market £120m (Nielsen Dec 15 MAT) Modern trade largest sector and showing £7.6bn category growth YOY £120m £76m £3.1bn W
Slide 29: Nissin - opportunities to drive mutual growth
NISSIN - OPPORTUNITIES TO DRIVE MUTUAL GROWTH NISSIN BRANDED PRODUCTS IN UK PREMIER BRANDED PRODUCTS USING NISSIN IP Leverage Premier Foods category positions Introduce Nissin products under Batchelors Drive authenticity in market Development of co-branded products INTERNATIONAL GROWTH SUPPL
Slide 30: Cash guidance for FY16/17
CASH GUIDANCE FOR FY16/17 FY16/17 guidance £m Working capital Neutral to positive Depreciation £17-18m Capital expenditure £20-25m Interest – cash £40-£43m Interest – P&L c.£44-45m Tax – cash Nil Tax – notional P&L rate 20.0% Pension deficit contributions £48m Pension administration & PPF levy cash
Slide 31: EU referendum
EU REFERENDUM The FY16/17 financial impact to the Group of the UK voting to leave the EU is low Foreign currency movements 1. Group is net purchaser of around €50m per annum US$ 2. Currency exposure substantially hedged for FY16/17 3. Lower US$/£ rates helpful to International growth plans €50m Econ
Slide 32: Recent results
4 Recent results 32
Slide 33: Positive sales growth trajectory
POSITIVE SALES GROWTH TRAJECTORY FY15/16 results provide strong platform for future growth prospects +1.4% +0.6% £131m +4.6% £51m +1.9% Q4 Full Year Full Year Adjusted Net debt & FY16/17 Q1 sales growth Trading profit eps growth reduction sales growth Continued demonstration of strategic delivery 33
Slide 34: Group sales growth trajectory
GROUP SALES GROWTH TRAJECTORY Demonstrates the strategy is working FY14/15 FY15/16 FY16/17 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 Q1 +2.4% +1.9% +1.4% +0.1% (0.6%) (1.6%) (4.9%) (5.5%) (6.6%) (6.8%) - Trend adjusted for effect of early Easter in 2015 FY14/15 Q1-Q4 trends re-stated to reflect commercial costs re
Slide 35: FY15/16 adjusted earnings per share
FY15/16 ADJUSTED EARNINGS PER SHARE 4.6% adjusted eps growth due to lower interest costs £m FY15/16 FY14/15 Change (%) Trading profit1 131 131 0.0% Net regular interest (45) (48) 6.0% Adjusted PBT 86 83 3.5% Notional tax @ 20.0%/ 21.0% (17) (17) 1.5% Adjusted earnings 69 66 4.8% Weighted average sha
Slide 36: International sales up 18%
INTERNATIONAL SALES UP 18%1 Strong growth in USA & Australia; People investment in FY15/16 Australasia USA People +47% +4.6ppt +23% +2.2ppt 9 → 28 FY Sales Indian sauces FY Sales Indian sauces growth market share growth market share 1. Encouraging results from • Significant increase in team Mr Kipli
Slide 37: Capital structure
5 Capital structure 37
Slide 38: An established and diversified capital structure
AN ESTABLISHED AND DIVERSIFIED CAPITAL STRUCTURE £m £500m Senior Secured Notes due in 350 2020 and 2021: 300 – £325m Fixed notes @6.5% 250 – £175m Floating notes @5.0%+LIBOR 200 £272m Revolving Credit Facility – Streamlined bank syndicate 150 Fixed payment schedule with Pension 100 Trustees th
Slide 39: Combined pension schemes surplus
COMBINED PENSION SCHEMES SURPLUS RHM surplus offsets Premier Foods scheme deficit; Discount rate up +25bps 2 April 2016 4 April 2015 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 3,759 584 4,343 3,636 613 4,248 Liabilities (3,208) (1,004) (4,212) (3,394
Slide 40: Pension schemes valuation evolution
PENSION SCHEMES VALUATION EVOLUTION RHM scheme displays progression over last two years £m 800 RHM scheme now in surplus for over 12 600 RHM Premier Foods 551 months 400 Premier Foods deficit relatively constant at c.£400m 200 Future accounting 0 treatment may prescribe non- recognition of (20
Slide 41: Pension deficit schedule contributions
PENSION DEFICIT SCHEDULE CONTRIBUTIONS £m 2016/17 2017/18 2018/19 2019/20 Deficit contributions 48 49 44 44 Administration costs 8-10 8-10 8-10 8-10 (including PPF levy) Total cash outflow 56-58 57-59 52-54 52-54 Table above shows the phasing of previously agreed deficit contributions in the conte
Slide 42: Pension deficit sensitivities
PENSION DEFICIT SENSITIVITIES Increase/ Increase/ Increase/ Pension sensitivities (reduction) in (reduction) in (reduction) in (IAS 19 basis, £m) assets liabilities deficit 25 basis point decrease in government gilts 170 181 11 25 basis point increase in credit spreads - (170) (170) 25 basis point i
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