Premier Foods Plc · LSE:PFD
Premier Foods — FY2015/16 Earnings Presentation
54 slides from Premier Foods's earnings presentation, May 17, 2016
Slide 1: Preliminary results for 52 weeks ended 2 April 2016
Preliminary results for 52 weeks ended 2 April 2016 17 May 2016
Slide 2: Q4 and Full Year Sales Growth
Q4 AND FULL YEAR SALES GROWTH Results provide strong platform for future growth prospects +0.6% +1.4% £131m +4.6% £51m Full Year Quarter 4 Full Year Adjusted Net debt sales growth sales growth Trading profit eps growth reduction Continued demonstration of strategic delivery 2
Slide 3: Group Sales Growth Trajectory
GROUP SALES GROWTH TRAJECTORY Demonstrates the strategy is working FY14/15 FY15/16 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 +2.4% +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-alignment 3
Slide 4: Medium-Term Prospects
MEDIUM–TERM PROSPECTS Growth strategy delivering and raising sales guidance +3.4% +2-4% 6 of top 8 Group brands sales FY16/17 & Growth strategy New strategic New investment Strong future Medium-term delivering results initiatives partner prospects sales guidance 4
Slide 5: Alastair Murray, Chief Financial Officer
Alastair Murray Chief Financial Officer 5
Slide 6: Group Sales Up +0.6% and +1.4% in Q4
GROUP SALES UP +0.6% AND +1.4% IN Q4 Marketing investment increased £3m and Trading profit flat £m FY15/16 FY14/15 Change (%) Q4 Change (%) Branded sales 684 684 (0.0%) +1.0% Non-branded sales 88 83 +5.5% +6.5% Total sales 772 767 +0.6% +1.4% Divisional contribution 167 163 +2.4% Group & corporate c
Slide 7: Grocery
GROCERY Bisto and Oxo volume and sales growth £m FY15/16 FY14/15 Change (%) Q4 Change (%) Branded sales 505 509 (0.7%) +0.2% Non-branded sales 44 43 1.1% +3.8% Total sales 549 552 (0.6%) +0.5% Divisional contribution 142 145 (2.1%) Divisional contribution % 25.9% 26.3% (0.4ppt) Strong Bisto and Ox
Slide 8: Sweet Treats
SWEET TREATS Divisional contribution reaches 11.2%, up 290bps on prior year £m FY15/16 FY14/15 Change (%) Q4 Change (%) Branded sales 178 175 +1.9% +3.0% Non-branded sales 45 41 +10.0% +10.5% Total sales 223 216 +3.4% +3.8% Divisional contribution 25 18 38.9% Divisional contribution % 11.2% 8.3% +2.
Slide 9: Operating Profit
OPERATING PROFIT Prior year loss turns to £55m Operating profit £m FY15/16 FY14/15 Underlying business Trading profit 131 131 Less: previous disposals (2) (2) Continuing operations Trading profit 129 129 Amortisation of intangible assets (38) (37) Foreign exchange fair value movements 3 (1) Restruct
Slide 10: Associate Investments Update
ASSOCIATE INVESTMENTS UPDATE £m Hovis Knighton Total Carrying value at 4 April 2015 22 13 35 Interest receivable 1 0 1 Share of loss from associates (14) (9) (23) Impairment charge (9) (4) (13) Carrying value at 2 April 2016 - - - Group consolidated Knighton on 1 April 2016 Net debt of £8m recog
Slide 11: Adjusted Earnings Per Share
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 shares in i
Slide 12: Net Debt Reduction Ahead of Expectations
NET DEBT REDUCTION AHEAD OF EXPECTATIONS £51m reduction; Net debt/EBITDA reduced to 3.6x from 4.0x 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 N
Slide 13: 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 14: 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 15: 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 administrative & PPF levy cash
Slide 16: Gavin Darby, CEO: Operating Review
Gavin Darby Chief Executive Officer Operating Review 16
Slide 17: Industry Trends Displaying Stability
INDUSTRY TRENDS DISPLAYING STABILITY Volume growth builds as deflation remains Inflation/(Deflation) Volume 3.0 3.0 % % +2.7% 0.0 (1.5%) (3.0) 0.0 Jul 2014 Mar 2016 Jul 2014 Mar 2016 Market volume growth now prevalent for c. twelve months Deflationary environment evident across broad range of ca
Slide 18: Raising FY16/17 Sales Guidance
RAISING 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 18
Slide 19: Group Sales Growth Trajectory
GROUP SALES GROWTH TRAJECTORY Demonstrates our strategy is working FY14/15 FY15/16 Q1 Q2 Q3 Q4 Q5 Q1 Q2 Q3 Q4 +2.4% +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 FY15 Q1-Q4 trends re-stated to reflect commercial costs re-alignment 19
Slide 20: Category Growth Over the Medium-Term
CATEGORY GROWTH OVER THE MEDIUM-TERM Category Volume Sales Share +2% +3% +1.1ppt Flavourings & Seasonings +0.8% +1% +1% +0.1ppt +5% +3% +0.5ppt Cake +1.0% +8% +9% +1.1ppt Total Categories +0.1% (1%) 0% (0.7ppt) Source: Kantar Worldpanel, 52 w/e 27 March 2016 2 years average growth 20
Slide 21: 6 Major Brands Delivering Sales Growth of 3.4%
6 MAJOR BRANDS DELIVERING SALES GROWTH OF 3.4% 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 22: 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 22
Slide 23: 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 23
Slide 24: 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 24
Slide 25: Paul Hollywood - First New Brand in 20 Years
PAUL HOLLYWOOD - FIRST NEW BRAND IN 20 YEARS Exciting new partnership to revitalise Homebaking category NOW LISTED IN MOST MAJOR RETAILERS Homebaking category worth £387m1 per annum 5th category for Grocery business - an historically under-invested category Unique range of 12 bread, savoury an
Slide 26: 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 27: 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 28: 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 29: 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 30: 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 31: Gavin Darby, CEO: Accelerating Growth
Gavin Darby Chief Executive Officer Accelerating Growth 31
Slide 32: New Strategic Initiatives to Accelerate Growth
NEW STRATEGIC INITIATIVES TO ACCELERATE GROWTH Strategic growth initiatives across all 3 business units 1 2 3 Sweet Treats Grocery International Build on the successful Leverage our brands and Accelerate International roll performance of Sweet Treats retailer relationships to drive out strategy whic
Slide 33: Consumer Trends Indicate Significant Growth Headroom for Cake on the Go
Sweet CONSUMER TRENDS INDICATE SIGNIFICANT GROWTH Treats HEADROOM FOR CAKE ON THE GO “On the Go” food in significant growth Under trade in convenience channels where Sweet Treats “On the Go” Cake category is underdeveloped purchase takes place Food on the Go market is now worth £19.3bn and is growin
Slide 34: 'Cake on the Go' Dual Phase Approach
Sweet ‘CAKE ON THE GO’ DUAL PHASE APPROACH Treats Targeting 5,000 retail outlets PHASE ONE - TRIAL PHASE TWO – NATIONAL ROLL-OUT National 21 store trial in Convenience channel 1. Manufacturing Capability In Place Average Rate of Sale of 3.8 – outsold key • £20m investment has twin-pack format ca
Slide 35: Expanding Grocery from Ambient to Chilled
Grocery EXPANDING GROCERY FROM AMBIENT TO CHILLED Significant opportunities in several areas of Chilled Chilled potentially doubles our market opportunity Strategy to seize 1 £9.2bn Leverage strong brand equity £5.5bn £3.7bn 2 Continue to innovate through new formats and products in various segments
Slide 36: Chilled Expansion: Ambrosia Example
Grocery CHILLED EXPANSION: AMBROSIA EXAMPLE Ambrosia has ability to expand into Chilled & Frozen DEEP CONSUMER INSIGHT CHILLED OPPORTUNITIES IDENTIFIED Full Research Time of day Motivation Simple Good start to End of day and U&A study Need State Modelling Goodness the day reward AMBROSIA BRAND PRODU
Slide 37: Increasing Our Reach Through Expansion into New Large Markets
International INCREASING OUR REACH THROUGH EXPANSION INTO NEW LARGE MARKETS Accelerating roll-out of cake in the US after a successful trial US market opportunity Strategy to seize +4.0% +5.7% Leverage existing relationship in the YoY YoY US £7.6bn Rely on existing manufacturing capability in th
Slide 38: Increasing Our Reach Through Driving Growth in Accessible Markets
International INCREASING OUR REACH THROUGH DRIVING GROWTH IN “ACCESSIBLE” MARKETS Create excitement in cake category in Middle East with Cadbury Middle East market opportunity Strategy to seize Seek to extend existing Cadbury Total Cake Market £120m (Nielsen Dec 15 MAT) Modern trade largest sect
Slide 39: Nissin opportunities
Gavin Darby 3 Chief Executive Officer Nissin opportunities 39
Slide 40: Opportunities to Drive Mutual Growth
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 SUPPLY CHAIN O
Slide 41: Potential Application of Patent Examples
POTENTIAL APPLICATION OF PATENT EXAMPLES SEGMENT PATENT POTENTIAL APPLICATION Laminated multi-layered noodles, allowing Batchelors Super another flavour/texture of noodles to be Noodles extension sandwiched between standard noodles Noodles Instant microwaveable noodles that do not Batchelors Deli Bo
Slide 42: Partnership Next Steps
PARTNERSHIP NEXT STEPS Work streams in place and underway Relationship agreement signed Non-executive Board member Mr.Kijima, appointed with effect from 21 July 2016 Major activity work streams identified and underway 1. Nissin branded products in UK 2. Premier branded products using Nissin in
Slide 43: Summary and Outlook/Guidance
SUMMARY Our investment strategy is delivering Sales growth +0.6% in FY and +1.4% in Q4 Adjusted PBT and eps up +3.5% and +4.6% respectively Net debt reduced to £534m IAS 19 pension schemes position continues to improve OUTLOOK/GUIDANCE FY16/17 sales outlook expected to be in line with Me
Slide 44: Q&A
Q&A 44
Slide 45: Appendix
Appendix 45
Slide 46: 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 47: Definitions
DEFINITIONS The period ‘FY15/16’ refers to the 52 weeks ended 2 April 2016. The period ‘FY14/15’ refers to the 52 weeks ending 4 April 2015. The period ‘Q4’ refers to the thirteen weeks ended 2 April 2016. Trading profit for the underlying business is reconciled to continuing operations Tradin
Slide 48: Segmental Comparatives
SEGMENTAL COMPARATIVES 52 Weeks to 2 April 2016 to reflect consolidation of Knighton Q1 Q2 H1 Q3 Q4 FY £m (13 weeks) (13 weeks) (26 weeks) (13 weeks) (13 weeks) (52 weeks) Grocery Branded sales 110.1 116.1 226.2 155.0 123.7 504.9 Non-branded sales 16.1 18.4 34.5 20.7 18.1 73.3 Total sales 126.2 134.
Slide 49: A Longer Term and Diversified Capital Structure
A LONGER TERM AND DIVERSIFIED CAPITAL STRUCTURE £m Raised £500m Senior Secured Notes in 350 FY14: 300 – £325m Fixed notes @6.5% – £175m Floating notes @5.0%+LIBOR 250 New £272m Revolving Credit Facility 200 – New and streamlined bank syndicate 150 Issued £340m net equity in FY14 100 Fixed pa
Slide 50: Interest and Tax
INTEREST £m FY15/16 FY14/15 Senior secured notes interest 31 31 Bank debt interest 9 10 Securitisation interest 1 3 Cash interest 41 44 Amortisation and deferred fees 4 4 Net regular interest 45 48 TAX Deferred tax asset of £26m at 2 April 2016 (4 April 2015: £42m) Capital allowances in excess o
Slide 51: Pensions – Combined Schemes
PENSIONS – COMBINED SCHEMES £m 2 April 2016 4 April 2015 Scheme Assets (£m) 2 April 2016 4 April 2015 Assets 4,343 4,248 Equities 405 349 Liabilities (4,212) (4,460) Government bonds 475 547 Surplus/(Deficit) 131 (212) Corporate bonds 2 330 Surplus/(Deficit) net of 105 (167) Property 292 260 notiona
Slide 52: 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 53: 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
Slide 54: Balance Sheet
BALANCE SHEET £m 2 April 2016 4 April 2015 Property, plant & equipment 188 183 Intangibles / Goodwill 1,145 1,174 Retirement assets 551 242 Investments & loans to associates - 35 Deferred tax 26 42 Non-current Assets 1,910 1,676 Working Capital - Stock 63 69 - Debtors 101 124 - Creditors (205) (213)