Premier Foods plc · LSE:PFD
Premier Foods — FY2019/20 Earnings Presentation
56 slides from Premier Foods's earnings presentation, Jun 24, 2020
Slide 1: Preliminary results for 52 weeks ended 28 March 2020
Preliminary results for 52 weeks ended 28 March 2020 24 June 2020
Slide 2: Alex Whitehouse, Chief Executive Officer
Alex Whitehouse Chief Executive Officer
Slide 3: We are making considerable progress
WE ARE MAKING CONSIDERABLE PROGRESS A successful branded growth model with reduced leverage and pensions de-risking 11 2.7x £m Current Projected Pensions NPV 1 2 3 Strategic review concluded 11 consecutive quarters Net debt / EBITDA with landmark pensions of UK sales growth beaten previous 3.0x targ
Slide 4: Premier Foods is a very different business to 4 years ago
PREMIER FOODS IS A VERY DIFFERENT BUSINESS TO 4 YEARS AGO A successful branded growth model with reduced leverage and de-risked pensions 2016 2020 Flat to marginally positive 11 consecutive quarters Trading sales growth UK sales growth Leverage 3.63x 2.72x Pensions NPV: £400-420m NPV: £175-185m1 New
Slide 5: Headline full year & Q4 results
HEADLINE FULL YEAR & Q4 RESULTS Strong UK trading – 11 consecutive quarters of revenue growth +2.8% +4.3% £133m ↓£62m 2.72x +3.6% +7.3% FY & Q4 UK FY & Q4 Net debt1 Trading profit Net debt/EBITDA Revenue growth Revenue growth reduction Branded growth model delivering profitable revenue growth and ac
Slide 6: Consistent & demonstrable progress over last 3 years
CONSISTENT & DEMONSTRABLE PROGRESS OVER LAST 3 YEARS Trading profit (£m) Adjusted PBT (£m) 133 93 129 88 123 79 74 117 FY16/17 FY17/18 FY18/19 FY19/20 FY16/17 FY17/18 FY18/19 FY19/20 Net debt (£m) Net debt/EBITDA 523 3.93 496 3.56 470 3.23 2.72 408 FY16/17 FY17/18 FY18/19 FY19/20 FY16/17 FY17/18 FY1
Slide 7: Duncan Leggett, Chief Financial Officer
Duncan Leggett Chief Financial Officer
Slide 8: Full year net debt progression since FY16/17
FULL YEAR NET DEBT PROGRESSION SINCE FY16/17 Consistent & disciplined track record of debt reduction Net debt /EBITDA 3.93x 3.56x 3.23x 2.72x 523 27 £m 496 26 470 62 408 Net debt FCF Net debt FCF Net debt FCF Net debt FY16/17 FY17/18 FY18/19 FY19/20 ▪ EBITDA grown + 12% since FY16/17 ▪ Cash interest
Slide 9: Net debt
NET DEBT Another year of strong debt reduction, comfortably beating 3.0x target £m 500 470 133 450 22 430 35 14 7 408 400 18 45 350 20 300 250 Net debt Trading profit Depreciation Pensions Capex Interest Working capital Restructuring Net debt IFRS 16 - Leases Net debt FY18/19 / Other Pre-IFRS 16 FY1
Slide 10: Free cash flow % EBITDA
FREE CASH FLOW % EBITDA Consistent & disciplined track record of debt reduction FY19/20 Free cash flow % EBITDA 153 18 14 7 142 35 45 FCF % EBITDA 41% 62 EBITDA Capex Working Capital Restructuring FCF pre Interest Pension FCF & other obligations servicing FCF % EBITDA expected to grow in medium term
Slide 11: Combined pension schemes
COMBINED PENSION SCHEMES Accounting combined surplus increased to £1,230m; Triennial value £202m lower Accounting Valuation trend (£m) Actuarial Triennial Valuation (£m) 2,000 RHM Premier Foods 1,505 1,500 Surplus/(Deficit) 2019 2016 2013 RHM 338 135 (504) 1,000 Premier Foods (552) (551) (538) 500 I
Slide 12: Landmark pensions agreement now agreed & signed
LANDMARK PENSIONS AGREEMENT NOW AGREED & SIGNED Set to deliver value for many stakeholders How do the benefits work through? 1 2 3 4 On buyout, Creates greater Utilises strength RHM scheme in prospective funding of RHM scheme healthy surplus1 RHM surplus2 certainty for & successful and moving would
Slide 13: FY19/20 Group headline results
FY19/20 GROUP HEADLINE RESULTS Revenue and Trading profit growth for third successive year £m FY19/20 FY18/19 Change (%) Q4 Change (%) Branded sales 706 679 +3.9% +5.0% Non-branded sales 141 145 (2.5%) (5.3%) Total sales 847 824 +2.8% +3.6% Divisional contribution 172 162 +6.2% Group & corporate cos
Slide 14: Grocery
GROCERY Branded revenue growing, translating to strong divisional contribution progress £m FY19/20 FY18/19 Change (%) Q4 Change (%) Branded sales 515 498 +3.3% +5.6% Non-branded sales 97 99 (1.8%) (6.1%) Total sales 612 597 +2.4% +3.7% Divisional contribution 148 138 +7.2% Divisional contribution %
Slide 15: Sweet Treats
SWEET TREATS Continued positive momentum through innovation and increased advertising £m FY19/20 FY18/19 Change (%) Q4 Change (%) Branded sales 191 181 +5.6% +3.5% Non-branded sales 45 46 (3.9%) (1.2%) Total sales 236 227 +3.6% +3.0% Divisional contribution 24 24 +0.4% Divisional contribution % 10.1
Slide 16: Strong financial metrics in FY19/20
STRONG FINANCIAL METRICS IN FY19/20 Statutory measures displaying excellent progress £95m £54m 5.5p £93m 8.9p +£91m +£96m +9.5p +6.0% +5.4% Operating Statutory PBT Basic eps Adjusted PBT Adjusted eps profit 16
Slide 17: Adjusted earnings per share growth +5.4%
ADJUSTED EARNINGS PER SHARE GROWTH +5.4% £m FY19/20 FY18/19 Change (%) Trading profit 133 129 +3.2% Net regular interest (39) (41) +3.1% Adjusted PBT 94 88 +6.0% Notional tax @ 19% (18) (17) (6.0%) Adjusted earnings 76 71 +6.0% Weighted average shares in issue (million) 846.6 841.5 +0.6% Adjusted ea
Slide 18: FY20/21 cash guidance
FY20/21 CASH GUIDANCE FY20/21 guidance £m Working capital Slightly negative Depreciation c.£20m Capital expenditure c.£25m Interest – cash £32-£34m Interest – P&L £35-£37m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £38m Pension administrative & PPF levy cash costs £4-
Slide 19: Alex Whitehouse, Chief Executive Officer
Alex Whitehouse Chief Executive Officer
Slide 20: COVID-19 update
COVID-19 UPDATE Health & wellbeing of colleagues is paramount as we help feed the nation 1. Group’s priority is health and wellbeing of our colleagues and other stakeholders 2. A wide range of additional health, safety and hygiene protocols adopted across supply chain: Colleagues - Already have high
Slide 21: COVID-19 update
COVID-19 UPDATE Health & wellbeing of colleagues is paramount as we help feed the nation Protecting Cash & liquidity the - Cash generated from operations >£90m at year end business - Prudent measure to draw down £85m of £177m revolving credit facility in March 1. Volumes and revenue - Excluding COVI
Slide 22: Our branded growth model strategy is delivering
OUR BRANDED GROWTH MODEL STRATEGY IS DELIVERING A combination of agility, pace and scale £ Sustainable Cost control Cash & profitable & efficiency generation revenue growth • Leading brand positions • Disciplined working capital • Lean SG&A cost base • Insight driven innovation management • Operatio
Slide 23: What underpins our innovation strategy
A REMINDER OF WHAT UNDERPINS OUR INNOVATION STRATEGY And is core to the delivery of organic growth 1 Consumer trends Insight Consumer at the heart of the innovation process Building in depth 1 consumer Health & Nutrition understanding 2 2 Innovation Convenience 3 Developing new products that make Sn
Slide 24: UK revenue performance
UK REVENUE PERFORMANCE Established track record of delivering sustainable, profitable revenue growth Quarterly UK revenue growth % movement year on year Sustainable & profitable 7.3% revenue growth 4.8% 4.4% 4.4% ▪ Strong growth across all 4.0% quarters in FY19/20; Q4 3.6% 3.4% saw increased volume
Slide 25: Outperforming our markets
OUTPERFORMING OUR MARKETS Market share gains in growing markets and innovation rate building Market share1 NPD as % Branded revenue Share gains in growing markets Continuing to grow NPD as proportion of revenue Market leading Innovation brands 6.5% 5.8% +1.50ppt 5.6% 4.4% +0.96ppt 3.2% 2.5% +0.43ppt
Slide 26: Mr Kipling delivers highest ever annual sales
MR KIPLING DELIVERS HIGHEST EVER ANNUAL SALES Revenues 17% higher than 2 years ago following brand relaunch Revenue growth since relaunch New Product Development & Brand Investment Mr Kipling ‘Minis’ Mr Kipling ‘Signature’ TV advertising range range FY18/19 +12% FY19/20 +4% FY19/20 vs 2 years +17% a
Slide 27: Cadbury Cake
CADBURY CAKE Revenue and share growth driven by exciting new product ranges FY19/20 New Product Development Cadbury Crème Egg Choc Cakes Cadbury Baking mixes Dairy Milk Slices +8% Revenue growth Cadbury Caramel Mini Rolls Share growth1 1 – Source: IRI, 52 w/e 28 March 2020 27
Slide 28: Batchelors & Nissin ranges growing very well
BATCHELORS & NISSIN RANGES GROWING VERY WELL Nissin ranges revenue nearly doubled in FY19/20 Batchelors Nissin £m Tasty Donkey 12 Premium noodle pots - +88% 10 FY revenue TV advertising Retail sales growth 8 6 4 5.0% 2 52 w/e Market +4% 3 +20% 0 share1 Jan 18 May Sep Dec Apr Aug Dec Mar 18 18 18 19
Slide 29: Grocery innovation focusing on convenience
GROCERY INNOVATION FOCUSING ON CONVENIENCE Convenience theme highly relevant for today’s consumer Bisto & Paxo Sharwood’s ▪ Convenient ready to use ▪ Sharwood’s Rice pots building on success of gravy pot ▪ Growing Batchelors range formats popularity of ▪ Just one minute in ▪ Demonstration of stretch
Slide 30: Innovation aligned to health & nutrition trends
INNOVATION ALIGNED TO HEALTH & NUTRITION TRENDS The branded growth model continues to drive the innovation agenda Sharwood’s & Loyd Grossman Oxo Plantastic Mr Kipling 30
Slide 31: Underpinned by excellent instore execution
UNDERPINNED BY EXCELLENT INSTORE EXECUTION Through collaborative retailer partnerships 1 2 Weighted Distribution* Instore Execution Grocery retailers, PF categories Mr Kipling Roald Dahl and Loyd Grossman 19.8% % Cake new product launches 18.7% Apr 2018 Apr 2019 Mar 2020 ▪ Particularly strong increa
Slide 32: International strategy
INTERNATIONAL STRATEGY FY19/20 revenues down (19%) but opportunity to grow our brands remains clear • Revised International strategy to deliver sustainable profitable revenue growth: - Recent disappointing performance - Opportunity evidenced by pockets of success and local ‘in market’ research - Req
Slide 33: Cost savings programme expected to over deliver
COST SAVINGS PROGRAMME EXPECTED TO OVER DELIVER Target of £5m additional cost savings by FY21/22 for brand re-investment Savings by type Savings by year 10% 10% 26% 20% £5m £5m Cost Cost savings savings 70% 64% Supply chain International SG&A Corporate restructuring FY19/20 FY20/21 FY21/22 Supply Ch
Slide 34: Looking ahead to FY20/21
LOOKING AHEAD TO FY20/21 The branded growth model continues to drive the innovation agenda Mr Kipling Batchelors and Nissin Cadbury Bird’s and Angel Delight 34
Slide 35: Emotionally engaging advertising investment
EMOTIONALLY ENGAGING ADVERTISING INVESTMENT Up to 6 major brands planned to benefit from increased advertising in FY20/21 Increasing advertising investment in FY20/21 Six major brands which account for 58% of Group sales 6th brand ? ? ‘Little Thief’ ‘Tasty Donkey’ New for 2020 ‘Dad’s night in’ New f
Slide 36: ESG: healthier choices and animal welfare
ESG Healthier choices and animal welfare recognition Healthier choices Animal welfare 1,042 64 Tonnes of sugar removed 35 • Enhancing nutritional Sector average Premier Foods profile of existing ranges • Achieved increased ranking to • Offer alternative Tier 2 in 2019 healthier options, e.g. • Asses
Slide 37: ESG: packaging progress and carbon emissions
ESG Packaging progress and Carbon emissions Packaging Carbon emissions Proportion of our packaging Of our packaging by weight is 95% which is recyclable 12% plastic Year on year 5.1% ↓ reduction in CO2 emissions 2018 2019 2025 target Proportion of our plastic which is recyclable 69% 81% 100% Reducti
Slide 38: Summary
SUMMARY Summary ▪ 11 consecutive quarters of UK revenue growth ▪ Innovation rate increased to 6.5% of branded revenue ▪ Record Mr Kipling sales in FY19/20 ▪ 3rd year of Trading profit and adjusted earnings growth ▪ Net debt/EBITDA of 2.7x, comfortably beating previous target ▪ Accounting combined pe
Slide 39: Outlook
OUTLOOK Outlook FY20/21 – Sales growth/decline by quarter ▪ Expect to deliver further progress in FY20/21 ▪ Continued focus on branded growth model with: - Further insightful product innovation and Q1 +c.20% Q2 - Increased emotionally engaging advertising investment ▪ New International strategy to d
Slide 40: Q&A
Q&A
Slide 41: Appendix
Appendix 41
Slide 42: 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 43: Definitions
DEFINITIONS ▪ The period ‘FY19/20’ refers to the 52 weeks ended 28 March 2020. The period ‘FY18/19’ refers to the 52 weeks ended 29 March 2019. ▪ The period ‘Q4’ refers to the thirteen weeks ended 28 March 2020 and the comparative period the thirteen weeks ended 29 March 2019. ▪ Trading profit is de
Slide 44: Leading category positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 43% 70% Quick Meals, Snacks & Soups 1 32% 46% Ambient Desserts 1 36% 55% Cooking Sauces & Accompaniments 1 16% 52% Ambient Cakes 1 24% 63% Sources: C
Slide 45: UK grocery market
UK GROCERY MARKET Ambient grocery shows lowest prevalence of retailer brand in UK grocery 17% 35% Chilled 45% Ambient Frozen & Fresh 55% 65% 83% Branded Non-branded Branded Non-branded Branded Non-branded Market size £33bn £46bn £6bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desser
Slide 46: Non-branded plays an important and supportive role in our business
NON-BRANDED PLAYS AN IMPORTANT AND SUPPORTIVE ROLE IN OUR BUSINESS Non-branded revenue by type Key principles & criteria • Application of a Capex light approach Knighton B2B & flour • To play an important & incremental role • Assists in supporting Manufacturing overhead recoveries • Strict financial
Slide 47: Operating profit up £91 million
OPERATING PROFIT UP £91 MILLION £m FY19/20 FY18/19 Change Trading profit 133 129 4 Amortisation of intangible assets (30) (35) 5 Foreign exchange fair value movements 2 (1) 3 Net interest on pension and administration costs (5) (1) (4) Non-trading items (5) (87) 82 Operating profit 95 5 90 ▪ Amortis
Slide 48: Interest & taxation
INTEREST & TAXATION £m FY19/20 FY18/19 Senior secured notes interest 31 32 Interest Bank debt interest 5 5 36 37 Amortisation of debt issuance costs 3 4 Net regular interest 39 41 ▪ Tax charge of £7m in FY19/20 ▪ Deferred tax liability increased from £14m to £185m largely due to increased combined T
Slide 49: Combined pension schemes – accounting basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Combined surplus increased £857m to £1,230m 28 March 2020 30 March 2019 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,745 775 5,520 4,334 707 5,041 Liabilities (3,240) (1,050) (4,290) (3,496) (1,172) (4,668)
Slide 50: Pensions – combined schemes
PENSIONS – COMBINED SCHEMES £m 28 March 2020 30 March 2019 Scheme Assets (£m) 28 March 2020 30 March 2019 Assets 5,520 5,041 Equities 12 180 Liabilities (4,290) (4,668) Government bonds 1,803 1,347 Surplus 1,230 373 Corporate bonds 25 27 Surplus net of deferred 997 310 Property 445 436 tax @ (19.0%/
Slide 51: Pensions agreement – company benefits
PENSIONS AGREEMENT – COMPANY BENEFITS Landmark agreement expected to deliver value for many stakeholders 1• Potential for significant reduction in pension deficit contribution payments 2• Resultant significant reduction in NPV of deficit contributions by up to c.45%1 3 £4m p.a. reduction in administ
Slide 52: Pensions agreement – scheme benefits
PENSIONS AGREEMENT – SCHEME BENEFITS Landmark agreement expected to deliver value for many stakeholders 1 More secure future for Premier Foods schemes members 2 Potential sharing of surplus on buyout across the whole trust Pension Scheme 3 The existing £450m security which the RHM Scheme benefits fr
Slide 53: Improved dividend matching arrangement
IMPROVED DIVIDEND MATCHING ARRANGEMENT Reduced payments to pension schemes compared to previous 1:1 plan Matching payment to pension scheme (£m) 25 20 Previous Revised 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Dividend paid (£m) ▪ Up to £5m of cash dividend - for every £1 paid as
Slide 54: Cash & liquidity
CASH & LIQUIDITY Part redemption of callable floating rate notes completed post year end £130m £91m £90m Cash £430m £266m Fixed notes due Oct 2023 Drawn RCF Senior available Secured liquidity Floating rate notes due July 2022 Undrawn RCF Notes £300m £85m Cash and Committed RCF at 28 March 2020 Longe
Slide 55: Capital structure
CAPITAL STRUCTURE First maturity July 2022 £m 350 300 300 250 200 177 150 130 100 50 0 2018 2019 2020 2021 July 2022 Dec 2022 Oct 2023 RCF Fixed notes Floating notes ▪ Appropriate liquidity and a comfortable maturity profile ▪ Floating rate notes reduced from £210m to £130m in June 2020 55
Slide 56: Balance sheet
BALANCE SHEET £m 28 March 2020 30 March 2019 Property, plant & equipment 194 186 Intangibles / Goodwill 987 1,012 Retirement benefit assets 1,512 838 Non-current Assets 2,693 2,036 Working Capital - Stock 68 78 - Debtors 89 89 - Creditors (250) (238) Total Working Capital (93) (71) Net debt Gross bo