Premier Foods plc · LSE:PFD
Premier Foods — FY2017/18 Earnings Presentation
39 slides from Premier Foods's earnings presentation, May 15, 2018
Slide 1: Preliminary results for 52 weeks ended 31 March 2018
Preliminary results for 52 weeks ended 31 March 2018 15 May 2018
Slide 2: Key strategic initiatives drive strongest revenue growth for over five years
KEY STRATEGIC INITIATIVES DRIVE STRONGEST REVENUE GROWTH FOR OVER FIVE YEARS +5.3% £123m £496m +3.6% 3.56x +7.0% +5.1% ↓£27m Full Year H2 & Q4 Trading profit Net debt Net debt/EBITDA Revenue growth Revenue growth “Our growth this year has been led through leveraging our strategic partnerships, drivi
Slide 3: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 3
Slide 4: Group headline results
GROUP HEADLINE RESULTS Revenue growth of +3.6% and £6m Trading profit progression £m FY17/18 FY16/17 Change (%) Q4 Change (%) Branded sales 670 659 1.6% 5.6% Non-branded sales 149 131 13.9% 15.3% Total sales 819 790 3.6% 7.0% Divisional contribution 156 150 4.1% Group & corporate costs (33) (33) (0.
Slide 5: Grocery
GROCERY Sales growth of +4.6% with momentum building £m FY17/18 FY16/17 Change (%) Q4 Change (%) Branded sales 498 482 3.4% 7.8% Non-branded sales 91 81 12.1% 18.5% Total sales 589 563 4.6% 9.4% Divisional contribution 130 130 0.1% Divisional contribution % 22.1% 23.1% (1.0ppts) A slow start to th
Slide 6: Sweet Treats
SWEET TREATS Margins return to double digit % and revenue growth of +1.2% £m FY17/18 FY16/17 Change (%) Q4 Change (%) Branded sales 172 177 (3.2%) (0.3%) Non-branded sales 58 50 16.9% 5.1% Total sales 230 227 1.2% 0.5% Divisional contribution 26 20 30.3% Divisional contribution % 11.2% 8.7% +2.5ppts
Slide 7: Operating profit
OPERATING PROFIT 12.7% higher than prior year following lower restructuring charges £m FY17/18 FY16/17 Change (%) Trading profit 123 117 5.1% Amortisation of intangible assets (36) (38) 4.2% Foreign exchange fair value movements 0 (1) - Restructuring costs (9) (16) 46.2% Net interest on pension and
Slide 8: Adjusted earnings per share
ADJUSTED EARNINGS PER SHARE Eps growth of 6.4% as adjusted PBT ahead +5.9% £m FY17/18 FY16/17 Change (%) Trading profit 123 117 5.1% Net regular interest (44) (43) (3.6%) Adjusted PBT 79 74 5.9% Notional tax @ 19%/20% (15) (15) 0.6% Adjusted earnings 64 59 7.2% Weighted average shares in issue (mill
Slide 9: Net debt below £500m – a reduction of £27m
NET DEBT BELOW £500m – A REDUCTION OF £27m Net debt/EBITDA now 3.56x £m 600 3.93x 3.56x 550 523 123 7 496 500 38 1 3 13 450 19 40 17 400 350 300 Net debt Trading profit Depreciation Pensions Capex Interest Taxation Working capital Restructuring Financing fees Net debt FY16/17 / Other FY17/18 EBITD
Slide 10: Combined pension schemes – accounting basis
COMBINED PENSION SCHEMES – ACCOUNTING BASIS Aggregate surplus increased to £317m 31 March 2018 1 April 2017 IAS19 Accounting valuation (£m) Premier Premier RHM Combined RHM Combined Foods Foods Assets 4,185 679 4,864 4,191 674 4,865 Liabilities (3,431) (1,116) (4,547) (3,597) (1,163) (4,760) Surplus
Slide 11: Pension schemes valuation evolution
PENSION SCHEMES VALUATION EVOLUTION Position of principal schemes stable and improving Surplus/ (Deficit) £m 1,000 800 754 600 400 200 0 (200) (400) (437) (600) (800) Dec Mar 2013 2018 RHM Premier Foods 11
Slide 12: FY18/19 cash guidance
FY18/19 CASH GUIDANCE FY18/19 guidance £m Working capital Slightly negative Depreciation £16-£18m Capital expenditure Maximum £22m Interest – cash £38-£42m Interest – P&L £43-£47m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £35m Pension administrative & PPF levy cash c
Slide 13: Proposed capital structure update
PROPOSED CAPITAL STRUCTURE UPDATE £300m Fixed rate note issuance and RCF extension to December 2022 Current debt maturity profile Proposed debt maturity profile £m £m 350 325 350 300 300 300 250 250 210 210 200 183 200 176 150 150 100 100 50 34 50 0 0 2018 March Dec March June 2018 2019 2020 2021 Ju
Slide 14: Gavin Darby, Chief Executive Officer – Operational review
Gavin Darby Chief Executive Officer Operational review 14
Slide 15: Strategy to drive revenue growth and deliver cost efficiencies to generate cash
STRATEGY TO DRIVE REVENUE GROWTH AND DELIVER COST EFFICIENCIES TO GENERATE CASH 1 2 Drive revenue growth Cost control & efficiency 1. UK – Innovation through insights; 1. Logistics restructuring growing to 10% of branded sales programme 2. UK – Strengthen well established 2. Manufacturing cost savin
Slide 16: Industry context
INDUSTRY CONTEXT UK food sales displaying consistent growth and earnings gap narrowing Food sales buoyant vs Non-food sales Average earnings gap narrowing % % 6.0 3.5 5.0 3.0 4.0 2.5 2.0 3.0 1.5 2.0 1.0 1.0 0.5 0.0 0.0 Jan 2016 Jan 2017 Jan 2018 (1.0) (2.0) Jan 2017 Mar 2018 Food sales Food volumes
Slide 17: Strong quarterly momentum building
STRONG QUARTERLY MOMENTUM BUILDING Quarterly Revenue growth % movement year on year 7.0% 6.2% 4.0% 1.9% 1.4% UK food deflation 0.1% and multibuy reductions (1.0%) (1.0%) (3.1%) (5.4%) Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY15/16 FY16/17 FY17/18 17
Slide 18: Our top 8 brands grew by 2.1% on average in H2
OUR TOP 8 BRANDS GREW BY 2.1% ON AVERAGE IN H2 H2 Revenue growth % movement year on year 13.0% Batchelors growth entirely innovation led 3.8% 4.0% 2.2% 3.0% Ambrosia sales lower following move to less deep promotional activity Mr Kipling returned to growth in (1.6%) (1.9%) Q4 (4.3%) Sharwood
Slide 19: Innovation led growth
INNOVATION LED GROWTH All our new product innovation is aligned to consumer trends Innovation as % UK branded sales Key consumer trends Targeting 10% of UK branded sales Health & 10.0% Nutrition 6.4% Convenience 5.1% 3.6% Snacking/On the go FY15/16 FY16/17 FY17/18 Target Indulgence For definitions,
Slide 20: Innovation aligned to consumer trends
INNOVATION ALIGNED TO CONSUMER TRENDS Health & Nutrition a key opportunity Health & Nutrition Convenience Lower calories, Green traffic lights, Gluten free Bisto, Oxo and Batchelors • Mr Kipling fruit slices • Bisto & Oxo grew revenue and share points in ‒ Average 92 calories per slice FY17/18, supp
Slide 21: Innovation aligned to consumer trends
INNOVATION ALIGNED TO CONSUMER TRENDS Our portfolio well placed to bring more relevant consumer choices Snacking/On the go Indulgence Angel Delight & Mr Kipling Flapjacks Ambrosia and Cadbury cake • Angel Delight • Ambrosia deluxe pots ‒ +11% revenue growth in FY17/18 driven by ‒ Deluxe Belgian Choc
Slide 22: Batchelors case study
BATCHELORS CASE STUDY The Group’s fastest growing brand 3 years ago Yet we had We then added Today ↓(12%) 50% +11% Revenues FY revenue falling growth Penetration Nissin expertise 30% Required modernising Market share Consumer insights Modern ranges 22
Slide 23: International is a substantial growth driver
INTERNATIONAL IS A SUBSTANTIAL GROWTH DRIVER Revenues nearly doubled over last 3 years; further progress expected 61 +92% 48 38 £m 32 Grocery Sweet Treats International % DC margins2 FY14/15 FY15/16 FY16/17 FY17/18 Revenue grew 25%1 in full year to over £61m and by 34%1 in Q4 Represents compound
Slide 24: International highlights
INTERNATIONAL HIGHLIGHTS Another excellent year in Australia and return to growth in Ireland Australia Ireland Cake continues to drive Major retailer category strong growth +81% captaincy & advisory Batchelors Soupa Revenue FY16/17 FY17/18 launched end of Q4 – 3rd Growth category in Australia 0
Slide 25: Mondelez International & Nissin partnerships
MONDELEZ INTERNATIONAL & NISSIN PARTNERSHIPS Grew by 19% in FY17/18 and account for 55% of revenue growth in year Revenue growth (£m) 100 +19% 55% £87m of Group Revenue Revenue growth in FY17/18 in FY17/18 50 FY16/17 FY17/18 25
Slide 26: 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 27: Cost reduction & efficiency in FY18/19
COST REDUCTION & EFFICIENCY IN FY18/19 Comprehensive set of programmes in place to maintain margins 1 Logistics Transformation 2 Capital projects 1. Moreton Cadbury Mini roll capacity expansion 2. Worksop Additional pouch capacity 3. Stoke Adaption of existing manufacturing line • Experienced initia
Slide 28: Our colleagues
OUR COLLEAGUES High quality and motivated teams People Reward National Living Wage (NLW) £££ • Good balance of internal • New bonus structure for • Relatively low exposure to NLW promotions and external recruits management with greater legislation compared to some • Attracting high quality talent wi
Slide 29: Health, nutrition & responsibility
HEALTH, NUTRITION & RESPONSIBILITY We take our responsibilities seriously and are making good progress Calorie control Plastics 70% Recyclable plastics used in our products 240 Tonnes of plastics removed over Tonnes last 3 years • Green traffic lights for Fat, Saturates & Sugar • 247 calories per po
Slide 30: A strategy led by strategic partnerships, international growth, innovation and cost efficiency
A STRATEGY LED BY STRATEGIC PARTNERSHIPS, INTERNATIONAL GROWTH, INNOVATION AND COST EFFICIENCY Summary Outlook Sales, Trading profit and Net debt progress Expectations of further progress in all ahead of market expectations FY18/19, weighted to H2 Revenue growth of +3.6% in the full year; ‒ Fu
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’ refers to the 52 weeks ended 31 March 2018. The period ‘FY16/17’ refers to the 52 weeks ended 1 April 2017. The period ‘Q4’ refers to the thirteen weeks ended 31 March 2018 and the comparative period, the thirteen weeks ended 1 April 2017. Trading profit is def
Slide 35: Leading category positions
LEADING CATEGORY POSITIONS Strong market shares and high household penetration Categories Brands Position Share Penetration Flavourings & Seasonings 1 43% 74% Quick Meals, Snacks & Soups 1 31% 46% Ambient Desserts 1 36% 58% Cooking Sauces & Accompaniments 1 16% 54% Ambient Cakes 1 22% 63% Sources: C
Slide 36: Retailer brand
RETAILER BRAND Ambient grocery shows lowest prevalence of retailer brand in UK grocery 17% 34% Chilled Frozen 45% Ambient & Fresh 55% 66% 83% Branded Non-branded Branded Non-branded Branded Non-branded Market size £31bn £44bn £6bn Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desserts
Slide 37: Interest & taxation
INTEREST & TAXATION Interest £m FY17/18 FY16/17 Senior secured notes interest 32 31 Bank debt interest 7 8 39 39 Amortisation of debt issuance costs 5 4 Net regular interest 44 43 Taxation Deferred tax liability of £12m at 31 March 2018 (1 April 2017: £32m asset) Total recognised & unrecognised
Slide 38: Pensions – combined schemes
PENSIONS – COMBINED SCHEMES £m 31 March 2018 1 April 2017 Scheme Assets (£m) 31 March 2018 1 April 2017 Assets 4,864 4,865 Equities 297 527 Liabilities (4,547) (4,760) Government bonds 1,046 519 Surplus 317 105 Corporate bonds 21 23 Surplus net of deferred 263 87 Property 391 357 tax @ (17.0%) Absol
Slide 39: Balance sheet
BALANCE SHEET £m 31 March 2018 1 April 2017 Property, plant & equipment 185 188 Intangibles / Goodwill 1,075 1,114 Retirement benefit assets 754 594 Deferred tax - 32 Non-current Assets 2,014 1,928 Working Capital - Stock 76 72 - Debtors 75 65 - Creditors (214) (192) Total Working Capital (63) (55)