Premier Foods plc · LSE:PFD
Premier Foods — H1 2009 Earnings Presentation
49 slides from Premier Foods's earnings presentation, Aug 5, 2009
Slide 1: Results for the Half Year to 27 June 2009
Results for the Half Year to 27 June 2009 Wednesday, 5 August 2009 1
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: Robert Schofield, Chief Executive
Robert Schofield Chief Executive 3
Slide 4: Highlights
Highlights • Capital structure fixed, covenant issues removed • Sales excluding bulk flour up 6.2% on H1 2008 – Price up 4.7%, Volume/Mix up 1.5% – Q2 stronger than Q1 – Total Group sales up 3.5% on H1 2008 • Hovis growth continues – Market share now at 26.3%**, compares to 22.7% in July 2008 • Groc
Slide 5: Paul Thomas, Finance Director
Paul Thomas Finance Director 5
Slide 6: Financial Overview
Financial Overview • Sales of £1,248.2m, up 6.2% excluding bulk flour • Trading profit of £123.6m, up 5.6%* – Synergies delivered in line with plan – Investment in marketing and promotional support • Adjusted profit before tax £45.9m (H1 2008: £55.6m) – Reflects increased interest charges • Net Debt
Slide 7: Trading Profit
Trading Profit 150 £m 140 17.8 (6.0) (2.8) 6.3 (8.8) 123.6 130 117.1 120 110 100 90 80 70 2008 H1 Volume & Mix Net Pricing, Synergies Meat free & Ireland Other 2009 H1 Promotions & Consumer Marketing • Hovis and UK Grocery developing well • 1.6 ppts market share gain* driven by new products, consume
Slide 8: Interest Charges
Interest Charges £m 2009 H1 2008 H1 Net cash interest payable 72.5 58.1 Amortisation of debt issuance costs 5.2 3.4 Regular net interest charge 77.7 61.5 Unwind of onerous lease discount 0.4 0.3 IAS 39 – valuation of financial instruments (33.8) (29.7) Exceptional amortisation of debt issuance costs
Slide 9: Exceptional Items
Exceptional Items £m 2009 H1 2008 H1 Integration expenditure 18.7 29.6 Hovis & other restructuring projects 9.5 13.0 Chilled restructuring projects 0.4 2.3 Gain on property disposals (3.3) (4.6) Exceptional items excluding financing fees 25.3 40.3 Financing fees* 16.8 - Total exceptional Items 42.1
Slide 10: Underlying Cash Flow
Underlying Cash Flow £m 2009 H1 2008 H1 2008 FY Cash flow from operations pre 119.6 119.4 320.3 depreciation Depreciation 26.0 24.0 50.7 Interest (72.0) (52.8) (105.4) Taxation 0.7 2.5 0.1 Pension deficit contributions (26.5) (26.2) (41.0) Regular capital expenditure (40.4) (36.5) (82.2) Working cap
Slide 11: Cash Flow
Cash Flow £m 2009 H1 2008 H1 2008 FY Cash flow pre non-recurring items (59.0) (62.4) 105.0 Operating exceptional cash costs (31.1) (60.9) (121.8) Integration capital expenditure (15.7) (44.7) (78.8) Disposal proceeds 54.2 24.3 26.4 Operating cash flow (51.6) (143.7) (69.2) Dividends - (36.3) (54.7)
Slide 12: Capital Structure
Capital Structure • Re-financing – Net equity raised of £379.6m – Significant liquidity and covenant headroom – Banking facilities extended to 2013 – Pension contributions agreed in principle to April 2014 • Total number of shares following capital restructure 2,398 million – New shares issued 1,553
Slide 13: Pensions
Pensions Accounting deficit (£m) Jun 2008 Dec 2008 Jun 2009 Assets 2,484 2,528 2,313 Liabilities (2,638) (2,540) (2,614) Gross deficit (154) (12) (301) Net deficit (111) (10) (216) • Company obliged to use IAS19 mark to market measure • Accounting valuation highly volatile in current market conditio
Slide 14: Other Matters
Other Matters • Tax Guidance – P&L credit for 2009 H1 of £6.8m Forecast tax rates 2009 2010 2011 2012 Expected P&L charge ~29% ~28% ~28% ~28% Cash tax as % of c. NIL 12-15% 18-23% 22-26% underlying PBT • Discontinued Operations – Speciality bakery businesses net sale proceeds £41.8m – Sales effectiv
Slide 15: Summary
Summary • Stable financial platform in place – Successful equity raise – Significant covenant and liquidity headroom – Pension cash contributions agreed until April 2014 • Delivering continued Trading profit growth in difficult economic environment • Continued focus on cash generation 15
Slide 16: Robert Schofield, Chief Executive
Robert Schofield Chief Executive 16
Slide 17: Agenda
Agenda • Our markets • Commercial strategy • Premier performance • Trading outlook 17
Slide 18: The Grocery Market - Consumer Inflation
The Grocery Market - Consumer Inflation Households are spending more than last year, but less than Inflation 10.0% 9.0% 1.0% (0.3%) (1.2%) 8.0% 7.0% 7.0% (1.3%) 6.0% 5.2% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Inflation Volume Store Choice Promotions Products HH Spend • Consumers buying more in volume terms
Slide 19: The Grocery Market - Cost Inflation
The Grocery Market - Cost Inflation • Current headline retail inflation rate for food at 7.0%* • Weakness of Sterling cf 2008 increasing input costs on imported commodities • Commodity prices remain volatile • Long term inflation unlikely to return to historically low levels – Global demand expected
Slide 20: The Grocery Market - Retailer Dynamics
The Grocery Market - Retailer Dynamics • Every retailer is a discounter – Low prices are not just the preserve of the traditional discounters • The recent growth of traditional discounters has peaked – Down from 17% growth in December 2008 to 7% in June 2009* • Each retailer is offering value in its
Slide 21: The Grocery Market – Market Shares
The Grocery Market – Market Shares The Grocery Market Movement - 2009 H1 vs 2008 H1 Total Market Volume Growth +1.1% Volume Market Share Value Market Share (1.9%) (0.8%) +1.9% +0.8% Brands Retailer Brands Brands Retailer Brands Commercial Levers Brands Innovation R Advertising R Promotions R Brands
Slide 22: The Grocery Market – The Consumer
The Grocery Market – The Consumer • Our consumers still want great tasting food • In a recession consumers are eating in more • They don’t want a double compromise • Consumers are looking for value – Increase in promotions and change in mechanics • A desire to reduce food wastage • Decline in organi
Slide 23: Premier's Performance In Its Categories
Premier’s Performance In Its Categories 2009 H1 vs 2008 H1 (0.9%) (0.7%) Market Share % Movement +1.6% Premier Brands All Other Brands Retailer Brands Market 2009 21.8% 48.2% 30.0% Share 2008 20.2% 49.1% 30.7% We Are Winning In Our Categories Source: IRI Infoscan Total Grocery, Volume Share, YTD 13
Slide 24: Premier's Brand Strategy
Premier’s Brand Strategy • Premier’s brands operate in 15 categories • Range from small niche brands up to RSV of £448m • We will invest disproportionately behind a few key brands • Criteria is simple – Brands that have scale – Brands that are in a growth category – Brands that have the capacity to
Slide 25: Loyd Grossman – Consumer and Trade Investment
Loyd Grossman – Consumer and Trade Investment • New product ranges • New packaging design • TV advertising • Co-ordinated promotional activity • In-store display and marketing Extensive Marketing Campaign On Loyd 25
Slide 26: Loyd Grossman Household Penetration and Market Share Gains
Loyd Grossman Household Penetration and Market Share Gains 26 24 HouseholdPenetration% 22 20 18 16 14 12 10 15/06/2008 29/06/2008 13/07/2008 27/07/2008 10/08/2008 24/08/2008 07/09/2008 21/09/2008 05/10/2008 19/10/2008 02/11/2008 16/11/2008 30/11/2008 14/12/2008 28/12/2008 11/01/2009 25/01/2009 08/02
Slide 27: Premier Trading Review
Premier Trading Review 27
Slide 28: Group Overview
Group Overview • Sales excluding bulk flour ahead +6.2% £m 2009 H1 YoY (%) – Price +4.7%, volume/mix +1.5% Sales – Strong bread sales growth Grocery 713.5 6.6% • Bulk flour sales down 21% Hovis 372.4 (3.2%) – Exit from low margin contract Chilled 162.3 6.8% – No impact on profitability 1,248.2 3.5%
Slide 29: Grocery
Grocery £m 2009 H1 2008 H1 YoY % Sales 713.5 669.1 6.6% Trading profit 101.4 92.8 9.3% Branded sales 71.1% 73.4% (2.3%) • UK sales up 7.6%, +6.0% price, +1.6% volume & mix – Branded sales mix reflects retailer brand cost inflation and increased branded promotions • Top 10 brands up 8.3% on H1 2008 •
Slide 30: Savoury Brands
Savoury Brands • Loyd Grossman – sales +35% – Household penetration – Up over 6.0 ppt since December ‘08 – Pasta bake and potato bake ‘Al Forno’ range just launched – Improved recipe quality across range • Branston – sales +41% – Mayo with twist now has a 6% share of mayonnaise from a standing start
Slide 31: Savoury Brands
Savoury Brands • Sharwood’s – sales + 2% – Successful TV advertising reflected in increased market share – Side dishes and Microwaveable Noodles launched in H1 – Biryani launch for H2 • Batchelor’s – sales +14% – Excellent sales growth from soup and noodles – Savoury Rice and Pasta relaunch Strong I
Slide 32: Sweet Brands
Sweet Brands • Hartley’s – sales +12% – Low Calorie Pots continued growth – New Children’s Fruit in Jelly launched in H1 • Ambrosia – sales +8% – Twin pot puddings launch in H2 – Significant marketing campaigns Strong Innovation Plan Across Key Brands 32
Slide 33: Sweet Brands
Sweet Brands • Mr. Kipling – sales +2% – New seasonal products driving market share gains – Promotional activity on special editions – Activity constrained by SAP implementation Mr. Kipling Taking Market Share 33
Slide 34: Hovis
Hovis £m 2009 H1 2008 H1 YoY % Sales 372.4 384.7 (3.2%) Trading profit 14.6 12.3 18.7% Branded sales % 51.0% 43.9% 7.1% • Market share increased by 3.6 ppts year on year to 26.3%* – At highest level in over 2 years • Hovis brand sales up +17% on H1 2008 – Marketing investment increased significantly
Slide 35: Value Brand Share %
Value Brand Share % 10 15 20 25 30 4 w/e 15 Jul, 06 35 4 w/e 4 Nov, 06 4 w/e 24 Feb, 07 4 w/e 16 Jun, 07 Hovis 4 w/e 6 O ct, 07 Warburtons 4 w/e 26 Jan, 08 4 w/e 17 May, 08 Kingsmill Total Grocery Outlets 4 w/e 6 Sep, 08 Own Label 4 w/e 27 Dec, 08 Value Share of Pre-packaged Bread, 4 w/e 18 Apr, 09
Slide 36: Value Brand Share %
Value Share of Pre-packaged Bread, Major Multiples Outlets 35% 31.3% 30% 29.6% Value Brand Share % 25% 20% 15.6% 15% 14.1% 10% 4 w/e 18 Apr, 09 4 w/e 15 Jul, 06 4 w/e 4 Nov, 06 4 w/e 24 Feb, 07 4 w/e 16 Jun, 07 4 w/e 6 Oct, 07 4 w/e 26 Jan, 08 4 w/e 17 May, 08 4 w/e 6 Sep, 08 4 w/e 27 Dec, 08 Hovis
Slide 37: Volume Brand Share %
Volume Share of Pre-packaged Bread, 35% Major Multiples Outlets 30% 26.9% 25% Volume Brand Share % 24.6% 21.6% 20% 16.2% 15% 10% 4 w/e 4 Nov, 06 4 w/e 26 Jan, 08 4 w/e 6 Sep, 08 4 w/e 15 Jul, 06 4 w/e 24 Feb, 07 4 w/e 16 Jun, 07 4 w/e 6 Oct, 07 4 w/e 27 Dec, 08 4 w/e 18 Apr, 09 4 w/e 17 May, 08 Hovi
Slide 38: Chilled
Chilled £m 2009 H1 2008 H1 YoY % Sales 162.3 151.9 6.8% Trading profit 7.6 12.0 (36.7%) Branded sales 41.3% 43.2% (1.9%) • Ready meals & cake – Contract wins driving sales growth – In line with expectations • Meat-free – Quorn sales up 5%, slightly down from long-term trend – Snacking range performi
Slide 39: Trading Outlook
Trading Outlook • Consumer environment expected to remain challenging • Continued marketing and promotional investment behind brands • More innovation to be launched into market in H2 • Inflation is still with us and cost recovery still necessary • Synergy delivery continues into H2 • Resilient bran
Slide 40: An Iconic Brand Portfolio
\=) S Jean INP ROSE'S rGatea FRANK COOPER'S “OXFORD” ROBERTSONS
Slide 41: Results for the Half Year to 27 June 2009
Results for the Half Year to 27 June 2009 Wednesday, 5 August 2009 41
Slide 42: Appendices
Appendices 42
Slide 43: Definitions
Definitions Trading profit is defined as operating profit from continuing operations before exceptional items, amortisation of intangible assets, the revaluation of foreign exchange and other derivative contracts under IAS39 and pension credits or charges in relation to the difference between the ex
Slide 44: Group Overview
Group Overview £m 2009 H1 2008 H1 YoY YoY (%) Sales Grocery 713.5 669.1 44.4 6.6% Hovis 372.4 384.7 (12.3) (3.2%) Chilled 162.3 151.9 10.4 6.8% Total 1,248.2 1,205.7 42.5 3.5% Trading Profit Grocery 101.4 92.8 8.6 9.3% Hovis 14.6 12.3 2.3 18.7% Chilled 7.6 12.0 (4.4) (36.7%) Total 123.6 117.1 6.5 5.
Slide 45: Summary Income Statement
Summary Income Statement £m 2009 H1 2008 H1 % Sales 1,248.2 1,205.7 3.5% Trading profit 123.6 117.1 5.6% Amortisation (38.2) (37.6) (1.6%) Pension financing (expense)/credit (2.1) 8.1 - Exceptional items* (45.4) (44.9) (1.1%) Foreign exchange valuation adjustments (14.4) (1.1) - Profit on disposal o
Slide 46: Adjusted Earnings Per Share
Adjusted Earnings Per Share Continuing Operations (£m) 2009 H1 2008 H1 % Trading profit 123.6 117.1 5.6% Regular interest charge (77.7) (61.5) (26.3%) Adjusted PBT 45.9 55.6 (17.4%) Tax at 28%/29% (12.9) (16.1) 19.9% Adjusted Profit after tax 33.0 39.5 (16.5%) Average shares in issue 1,743.9 905.3 A
Slide 47: Re-financing Fees Summary
Re-financing Fees Summary Re-financing Fees Classification £m Equity underwriting Reserves 24.3 Advisory fees P&L exceptional items – 2009 16.8 P&L exceptional items – 2008 2.5 Debt issuance fees Capitalised then amortised over term of financing facility 22.0 P&L exceptional financing fee 2.7 68.3 4
Slide 48: Pension Valuation And Assumptions
Pension Valuation And Assumptions Pension Deficit 31 Dec Discount Inflation Asset Other 27 June (£m) 2008 Rate Rate Values 2009 Assets 2,528 - - (264) 49 2,313 Liabilities (2,540) 42 (101) - (15) (2,614) Deficit (12) 42 (101) (264) 34 (301) Assumptions 27 June 2009 31 Dec 2008 Discount rate 6.4% 6.3
Slide 49: Interest Rate Hedging
Interest Rate Hedging • Interest charged on bank facilities is LIBOR plus applicable margin • Significant derivative programme in place to manage interest rate risk – At June 2009 £1,670m of 3m LIBOR swapped • £230m at 4.6% maturing Sept 2009 • £110m at 3.95% maturing Dec 2009 – Weighted average swa