TIDMPFD TIDMIRSH
RNS Number : 1535P
Premier Foods plc
15 November 2016
15 November 2016
Premier Foods plc (the "Group" or the "Company")
Half year results for the 26 weeks ended 1 October
2016
---------------------------------------------------
Continued strategic progress despite weaker second
quarter sales for Grocery
---------------------------------------------------
-- H1 Group underlying sales(2) down (1.8%) due to weak Grocery
sales (4.0%); partly offset by good performance in Sweet Treats
+4.1%
-- Q2 Grocery underlying sales(2) down (9.5%) due to warmer weather after good Q1
-- Sweet Treats & International delivering consistently strong quarter on quarter growth
-- Total reported sales up +2.0% reflecting Knighton Foods consolidation
-- Underlying Trading profit(4) GBP48.0m, GBP2.0m lower partly
due to increased marketing investment
-- Net debt GBP556.0m at H1; GBP29m lower than prior year H1
-- Combined IAS 19 pensions deficit GBP228.8m due to fall in discount rates
-- Net present value of pension deficit recovery schedule expected to reduce by c.GBP100m
-- Profit and Net debt expectations for the year unchanged
Premier Foods today announces its Half year results for the 26
weeks ended 1 October 2016.
Gavin Darby, Chief Executive Officer
-------------------------------------
"Following a good first quarter where we saw a number of our
brands in growth, the second quarter was much weaker in our Grocery
business due to warmer weather which resulted in lower sales in the
first half overall. However, our Sweet Treats and International
businesses continued to demonstrate their strong momentum,
delivering against our strategic priorities and growing over 4% and
9% respectively."
"We remain very confident in our strategic progress, our
customer relationships are strong and we have an extensive new
product innovation programme planned for the balance of the year.
We are pleased with the progress that we have made on the 2016
triennial pension scheme valuations, which has resulted in the NPV
of the pension deficit recovery plan expected to reduce by
c.GBP100m. We expect Group sales to grow between 2-4% in the second
half of the year and our profit and Net debt expectations for the
full year remain unchanged."
Continuing operations FY16/17 FY15/16
H1 H1
-------------------------- -------- --------
Revenue (GBPm) 348.0 341.2
Loss before taxation
(GBPm) (8.7) (5.1)
Basic (loss)/earnings
per share (pence) (6.7) 2.6
Underlying results FY16/17 FY15/16 Change
H1 H1 (%)
-------------------------- -------- -------- -------
Group sales (GBPm) 348.0 354.5 (1.8%)
Trading profit (GBPm)(4) 48.0 50.0 (4.0%)
Adjusted profit before
tax (GBPm)(6) 26.3 27.5 (4.4%)
Adjusted earnings
per share (pence)(7) 2.54 2.66 (4.6%)
Measures above are defined below and reconciled to statutory
measures in the appendices.
A presentation to investors and analysts will take place today,
15 November 2016, at 9:00am. The presentation will be webcast at
www.premierfoods.co.uk/investors/investor-centre. A recording of
the webcast will be available on the Company's website later in the
day.
A conference call for bond investors and analysts will take
place today, 15 November 2016, at 1:30pm. Dial in details are
outlined below:
Telephone: 0800 376 7922
+44 20 7192 8000
Conference
ID: 4286906
A factsheet of the Half Year results is available at:
www.premierfoods.co.uk/investors/results-centre
This announcement contains inside information
For further information, please contact:
Institutional investors and analysts:
Alastair Murray, Chief Financial
Officer +44 (0) 1727 815 850
Richard Godden, Head of Investor
Relations +44 (0) 1727 815 850
Media enquiries:
Richard Johnson, Corporate
Affairs Director +44 (0) 1727 815 850
Marisa Fitch, Head of External
Affairs +44 (0) 1727 815 850
Maitland +44 (0) 20 7379 5151
Kate O'Neill
Tom Eckersley
- Ends -
Notes to editors:
1. The statutory accounting period is the 26 weeks from 3 April
2016 to 1 October 2016 and comparative results are for the 26 weeks
from 5 April 2015 to 3 October 2015.
2. Underlying business is defined as continuing operations
excluding the results of previously disposed businesses and
includes results of acquired businesses in current and comparative
reporting periods.
3. Trading profit is reconciled to profit/(loss) before tax in
the appendices and is defined as profit/(loss) before tax before
net finance costs, profits and losses from share of associates,
amortisation of intangible assets, impairment, fair value movements
on foreign exchange and other derivative contracts, restructuring
costs, and net interest on pensions and administration
expenses.
4. Underlying Trading profit is Trading profit as defined in (3)
above and excludes the results of previously disposed businesses
and includes results of acquired businesses in current and
comparative reporting periods.
5. EBITDA is Trading profit excluding depreciation.
6. Underlying adjusted profit before tax is defined as
underlying Trading profit as defined in (4) above, less net regular
interest. Net regular interest is defined as net finance cost after
excluding write-off of financing costs, fair value movements on
interest rate financial instruments and other interest.
7. Underlying adjusted earnings per share is defined as Adjusted
profit before tax less a notional tax charge of 20.0% (2015/16:
20.0%) divided by the weighted average of the number of shares of
827.7million (26 weeks ended 3 October 2015: 825.7million).
A Premier Foods image gallery is available using the following
link:
www.premierfoods.co.uk/media/image-gallery/
Operating review
-----------------
The following commentary unless otherwise stated is prepared for
the 26 weeks ended 1 October 2016 with comparative results for the
26 weeks ended 3 October 2015. Results are stated on an 'Underlying
business' basis which are unaudited, include results of Knighton
and exclude all disposals and joint ventures transactions
previously completed. All references to the 'Half year', unless
otherwise stated, are for the 26 weeks ended 1 October 2016 and the
comparative period, 26 weeks ended 3 October 2015. All references
to the 'quarter', unless otherwise stated, are for the 13 weeks
ended 1 October 2016 and the comparative period, 13 weeks ended 3
October 2015.
GBPm FY16/17 FY15/16 Change
H1 H1
(26 weeks) (26 weeks) (%)
Group Sales
Branded 295.4 306.6 (3.7%)
Non-branded 52.6 47.9 9.8%
------------ ------------ -------
Total 348.0 354.5 (1.8%)
Divisional contribution 62.8 67.6 (7.2%)
Group & corporate
costs (14.8) (17.6) 16.4%
------------ ------------ -------
Trading profit 48.0 50.0 (4.0%)
EBITDA(5) 56.1 58.3 (3.8%)
Quarter 2 sales results
GBPm FY16/17 FY15/16 Change
Q2 Q2
(13 weeks) (13 weeks) (%)
Group Sales
Branded 144.1 156.5 (7.9%)
Non-branded 28.4 25.8 10.1%
------------ ------------ -------
Total 172.5 182.3 (5.4%)
Introduction
Group sales for the 26 weeks ended 1 October 2016 were
GBP348.0m, a (1.8%) decrease on the prior year. In the second
quarter of the year, total sales were (5.4%) lower at GBP172.5m.
Branded sales were GBP295.4m in the first half of the year, down
(3.7%) while non-branded sales grew 9.8%.
While Trading profit for the 26 weeks ended 1 October 2016 was
GBP48.0m compared to GBP50.0m reported in the prior period, the
group invested nearly GBP1m more in consumer marketing in the first
half compared to the prior year and a similar amount in its Cake on
the go initiative.
Market overview
In overall terms, the UK Grocery market continues to display
evidence of volume growth. Price deflation continued to be a
feature of the market while consumer disposable incomes have
steadily increased. Consequently, overall purchasing power for UK
consumers has arguably been robust in recent months.
As previously commented, the Group recognises the broader
macroeconomic uncertainty created by the UK electorate voting to
the leave the European Union. Initial indications show that there
has been little if any impact on consumer spending patterns; the
main impact is expected to be the resultant effects of Sterling
weakness over recent months. The Group's main direct foreign
currency exposure is with respect to Euros of which it is a net
purchaser of over EUR50m per annum. The Group has a broadly neutral
position with respect to buying and selling of US dollars. All the
Group's manufacturing and distribution sites are located in the
United Kingdom and 89% of its expenditure is with UK based
suppliers. While the Group uses forward cover contracts for certain
commodities and currencies, it expects to employ a range of
mitigating actions to recover the effects on any input cost
inflation in the coming months. Input cost inflation, where it
occurs, may be direct or indirect in form; the former reflects
direct purchases from the Group's suppliers; the latter originating
further down the supply chain.
Brand investment and innovation
The Group expects to spend approximately GBP36m on consumer
marketing investment in this financial year. This is in line with
the prior year and is the equal highest amount of annual marketing
spend the Group has ever made. During the course of FY16/17, seven
brands will benefit from TV advertising, with the peak of media
spend planned to be in the third quarter of the year, aligning to
the Group's highest quarter sales.
The largest element of consumer marketing investment involves
advertising some of the Group's main brands on television. While
the quantum of actual expenditure can be a general proxy for total
investment, a more accurate measure for assessing how much consumer
marketing will, or has been spent, is through the measurement of
Television Viewer Ratings (TVRs). TVRs are measured by the number
of people watching an individual television advertisement as a
percentage of the total population. The more times an individual
advertisement is shown, the higher the aggregate TVRs recorded. In
the first half of this year, the Group's TVRs increased by 57%.
Over the last two years, the Group has invested significantly in
ensuring it has the right size and calibre of teams in place to
deliver on its strategy. In line with this, the Company has
increased the number of its marketing colleagues across its three
business units, particularly in the areas of consumer insights and
research & development. Recruitment of new marketing colleagues
has typically come from those with backgrounds and experience in
major FMCG or consumer facing organisations.
Customer relationships
The Group has made demonstrable progress over recent years with
its retail customers. In the last few months it has concluded
category range reviews in partnership with a number of major
customers. Every year, an independent survey of consumer goods
companies who supply major retailers is undertaken. Each company is
assessed on a core range of KPIs and a league table of results is
compiled. In its Grocery categories, the Group has made significant
improvement, climbing from 17(th) position (from 18 suppliers)
three years ago to 7(th) (from 20 suppliers) in 2016. This
excellent progress reflects improved ratings in areas such as
category management, commitment to consumer marketing, promotional
activity practices, personnel and customer service.
As part of building ever stronger relationships with its
customers, the Group has launched certain new innovative products
with many of its customers on an exclusive basis for an agreed
period of time. The Group has also been successful in winning a
number of awards in areas such as product innovation and supplier
collaboration. The Group believes it is well placed to continue to
develop these relationships.
Cost reduction and efficiency programmes
In logistics, the Group has continued to review options in both
its transport and warehousing operations which may lead to changes
in the configuration of its network. While these reviews are
ongoing, the majority of these changes are likely to take place
from FY17/18.
The National Living Wage (NLW) for all employees above the age
of 25 was introduced by HM Government, with effect from April 2016.
The Company expects there will be a relatively small increase in
labour costs in FY16/17 as a result of this legislation. The impact
is expected to be greater at some of the Group's manufacturing
sites than others. Additionally, HM Government have also proposed
to implement an Apprenticeship Levy, effective from April 2017. The
Group will look to offset the impact of this levy through its
continued investment in training and apprenticeships.
The Group continues to simplify its processes and ways of
working across the organisation. This involves streamlining certain
processes to ensure the business remains agile and empowering its
colleagues to work even more effectively and efficiently.
Grocery
GBPm FY16/17 FY15/16 Change Q2 Change
H1 H1 (%)
(26 weeks) (26 weeks) (%)
Sales
Branded 212.8 226.2 (5.9%) (12.4%)
Non-branded 37.5 34.5 8.6% 8.8%
------- ----------
Total sales 250.3 260.7 (4.0%) (9.5%)
Divisional contribution 56.2 60.2 (6.6%) -
Total sales in the Grocery business were GBP250.3m in the first
half of the year, (4.0%) lower than the prior year as growth in
non-branded sales was offset by a decline in branded sales to
GBP212.8m. A good sales performance in the first quarter of +1.9%
was offset by lower sales in the second quarter. Divisional
contribution was GBP4.0m lower in the period at GBP56.2m due to
lower Q2 volumes and higher consumer marketing.
In the second quarter of the period, a number of the Grocery
business unit's categories were adversely impacted by warmer
weather compared to the prior year. In this quarter, categories
such as Gravy and Stocks and Soup declined in volume terms by
(13.0%) and (16.3%) respectively, while Chilled Salads and Ice
Cream, which the Group has no major presence in, grew by 13.7% and
17.3% respectively. As a result, and after a strong first quarter
when six Grocery brands grew sales, none of the major Grocery
brands grew in the second quarter.
In the Flavourings & Seasonings category, Bisto and Oxo grew
share in the period, with Oxo Stock Pots in particular performing
well, taking share from the market leader. In the second half of
the year, a new television advertising campaign featuring a modern
day Oxo family will support the momentum of the Stock Pots range.
Additionally, new products for the remainder of the year include
Oxo Ready to Use stock in pouches, Bisto ready to serve pouches and
Bisto Best sauces in pouches, all aligned to consumer trends such
as convenience and foodieness.
Ambrosia benefitted from share gains in custard, driven by the
new range of Ambrosia Deluxe products, with flavours such as Salted
Caramel and Creamy Toffee. The Ambrosia brand saw a new advertising
campaign, the 'Taste of Happy' to support this new range. This
campaign will be repeated in the third quarter to align with one of
the peak sales volumes periods for the Ambrosia brand.
Batchelors broadly held share in soup as it launched a new range
of high protein soup products during the half. In the second half
of the year, new products to market will include a range of
filling, tasty and healthy snack pots which align strongly to
consumer trends. High Protein pots, High Veg pots and Soup Dippers
are the new product ranges which are expected to achieve a good
range of distribution in major customers.
Historically, some of the Group's smaller brands have been
encumbered by a lack of innovation and investment. With intent to
redress this, the Group has two new product launches planned for
the second half of the year from some of the smaller brands in its
portfolio. First will be the launch of a premium stuffing offering
under the Paxo brand. Launched in time for the run up to Christmas,
Paxo Sensational Stuffing will be available in four exciting
variants. Additionally, the Group will also be launching ready to
eat Angel Delight pots. This convenient range of individual portion
size pots will have no artificial flavours, colours or
preservatives.
Non-branded sales grew by 8.6% in the period to GBP37.5m owing
to increased business to business volumes, notably in the Knighton
business, but also due to a new contract win in retailer branded
flour with a major customer.
Sweet Treats
GBPm FY16/17 FY15/16 Change Q2 Change
H1 H1 (%)
(26 weeks) (26 weeks) (%)
Sales
Branded 82.6 80.4 2.7% 5.1%
Non-branded 15.1 13.4 12.5% 12.9%
-------- ----------
Total sales 97.7 93.8 4.1% 6.4%
Divisional contribution 6.6 7.4 (12.1%) -
Total sales in the Sweet Treats business increased by 4.1% in
the first half of the year and by 6.4% in the second quarter; this
being the sixth successive quarter of sales growth. Branded sales
grew by 2.7% while non-branded sales were strongly ahead of the
prior year; up 12.5%.
Divisional contribution was GBP6.6m in the half, GBP0.8m lower
than the prior year. This reflects increased investment in instore
marketing and enhanced organisational capability to deliver a
successful Cake on the go operation.
Cadbury cake again enjoyed an excellent period, continuing its
strong trajectory from the prior year. The Amaze Bites product was
a standout performer, with retail sales now in the region of GBP6m
on an annual basis and helping to deliver double-digit sales growth
for Cadbury cake. The Double Choc and Chocolate Orange Amaze Bites
products are the top two performing new cake products in the total
category over the last year. In the second half of the year,
Cadbury cake is expected to benefit from launches of Cadbury Choc
Tarts and brand new variants of Mini Rolls, Caramel and Crunchie
whole cakes.
Mr Kipling sales were lower in the period, primarily as a result
of lower promotional activity. A range of premium Cupcakes
exclusive in one major customer has been performing well and there
is an exciting range of new seasonal lines including Mr. Kipling
Stollen Slices launched for the Christmas period. The Group's Cake
on the go initiative is building distribution well, with business
won in new channels; particularly in key travel locations.
Non-branded sales growth reflected new contract wins across a
broad range of retail customers and in both seasonal and all year
round ranges. In particular, the business unit has been successful
in gaining some premium Mince Pie contracts for the first time.
International
Sales in the International business increased by over 9% in the
first half of the year driven by strong performances in Australia
and the USA. On a constant currency basis, sales were up
approximately 4% reflecting weaker sales in Ireland.
The Group's cake business in Australia has delivered positive
growth, year on year, for the last two years. The Group is now the
branded market leader in the Australian cake market. Sharwood's
also continues to grow share in Australia and in the second half of
the year, is expected to benefit from an integrated marketing
campaign. This marks the business unit's evolution from a sales and
distribution model to a strategy including marketing directly to
its consumers.
At the beginning of the second half, the International business
launched a comprehensive range of Cadbury cakes in the United Arab
Emirates where the cake market is worth GBP120m. This launch is
supported by a very strong instore marketing campaign with
distribution expected to build to over 200 stores during the third
quarter of the year.
Nissin opportunities
Work streams established for the co-operation agreement with
Nissin are now well underway. Dedicated project teams in the UK,
Europe and Japan are working at pace to deliver the first products
to market under these still relatively new arrangements.
There are three major areas which the partnership is focusing
its efforts. First is the distribution of existing Nissin branded
products such as Soba noodles in the UK by the Company which are
expected to build distribution across major retailers in the fourth
quarter of this financial year.
Secondly, an exciting range of innovative new products under the
Batchelors brand are currently under development at Nissin's
manufacturing facility in Hungary and are expected to come to
market in the first half of 2017.
Thirdly, the Group will leverage Nissin's presence and
relationships in the USA market to substantially extend the
distribution of its Sharwood's range of cooking sauces. This
arrangement is expected to double the availability of Sharwood's in
the USA and extend the brand into more states; particularly in the
western half of the USA.
Net regular interest
GBPm FY16/17 FY15/16 Change
H1 H1
(26 weeks) (26 weeks) (%)
Senior secured notes
interest 15.3 15.4 0.5
Bank debt interest 4.4 4.8 8.7
19.7 20.2 2.5
Amortisation of
debt issuance costs 2.0 2.3 12.1
------------ ------------ -------
Net regular interest 21.7 22.5 3.4
------------ ------------ -------
Net regular interest in the first half of the year was GBP21.7m;
GBP0.8m lower than the comparative period and in line with the
Group's expectations. The largest component of financing was
interest due to holders of the senior secured notes and was
GBP15.3m in the period. Bank debt interest was GBP4.4m in the half
year, GBP0.4m lower than the comparative period reflecting lower
average debt and lower levels of LIBOR. Expectations for Net
regular interest of GBP44-GBP45m for the full year are
unchanged.
Cash flow
Total cash outflows in the period were GBP19.8m and in line with
the Company's expectations with Trading profit of GBP48.0m and
depreciation of GBP8.1m. Interest paid in the period was GBP20.2m
and capital expenditure was GBP6.2m. Pension contributions of
GBP32.1m were GBP26.1m higher than the prior year, in line with the
previously agreed schedule of pension deficit contributions and
costs associated with administering the pension schemes. The
pension contribution schedule is weighted more to the first half of
the year. Other non-cash items principally relate to the add-back
of share based payments. Cash restructuring costs of GBP11.3m
relate to corporate activity costs earlier in the year and costs
associated with redundancy payments.
GBPm FY16/17 FY15/16
H1 H1
(26 weeks) (26 weeks)
Trading profit 48.0 50.0
Depreciation 8.1 8.3
Other non-cash items 3.2 2.1
Interest (20.2) (20.7)
Pension contributions (32.1) (6.0)
Capital expenditure (6.2) (13.7)
Working capital &
other (8.6) (13.7)
------------
Recurring cash (outflow)/inflow (7.8) 6.3
------------ ------------
Restructuring costs (11.3) (2.8)
------------
Free cash (outflow)/inflow (19.1) 3.5
Purchase of own shares (0.7) (1.5)
------------
Total cash (outflow)/inflow (19.8) 2.0
------------ ------------
Net debt
GBPm
Net debt at 2 April
2016 534.2
Total cash outflow
in period 19.8
Movement in debt
issuance costs 2.0
------
Net debt at 1 October
2016 556.0
------
Net debt at 1 October 2016 was GBP556.0m, an increase of
GBP21.8m from the year end position, principally reflecting the
resumption of higher pension deficit contributions in this
financial year and also as higher operational cash flows are
usually seen in the second half of the year. In line with previous
years, the Group's cash generation will be weighted to the second
half of the year and its expectations for Net debt for the full
year remain unchanged.
Pensions
IAS 19 Accounting 1 October 2016 2 April 2016
Valuation (GBPm)
RHM Premier Combined RHM Premier Combined
Foods Foods
Assets 4,424.0 691.9 5,115.9 3,758.7 584.2 4,342.9
Liabilities (4,062.0) (1,282.7) (5,344.7) (3,207.8) (1,004.2) (4,212.0)
---------- ---------- ---------- ----------
Surplus/(Deficit) 362.0 (590.8) (228.8) 550.9 (420.0) 130.9
Net of notional
tax (20.0%) 289.6 (472.6) (183.0) 440.7 (336.0) 104.7
The IAS 19 pension schemes valuation reported a deficit for the
combined RHM and Premier Foods' pension schemes at 1 October 2016
of GBP228.8m, equivalent to GBP183.0m net of a notional tax charge.
This compares to a combined schemes surplus at 2 April 2016 of
GBP130.9m and GBP104.7m after a notional tax charge.
The IAS 19 valuation at 1 October 2016 comprised a GBP362.0m
surplus in respect of the RHM schemes and a deficit of GBP590.8m in
relation to the Premier Foods schemes. The primary reasons for this
change are movements in long-term interest rates and a decrease in
corporate bond spreads of c.40 basis points since the vote for the
UK to leave the EU on 23 June 2016. The valuation on an accounting
basis is not relevant to future deficit recovery payments which are
in any case fixed until December 2019.
Combined pensions schemes 1 October 2 April
(GBPm) 2016 2016
Assets
Equities 467.6 405.4
Government bonds 491.4 474.8
Corporate bonds 174.1 1.9
Property 360.1 292.3
Absolute return products 1,188.7 1,227.6
Cash 115.7 326.9
Infrastructure funds 231.3 228.0
Swaps 1,436.6 862.5
Private equity 300.6 259.4
Other 349.8 264.1
------------ ----------
Total Assets 5,115.9 4,342.9
Financial assumptions
Discount rate 2.25% 3.55%
Inflation rate (RPI/CPI) 3.15%/2.05% 3.0%/1.9%
The Company has reached agreement in principle with the Trustee
of its largest pension scheme, the RHM Pension Scheme, on the basis
to be used for the triennial actuarial valuation as at 31 March
2016. It is also in constructive dialogue with the respective
Trustees of the two Premier schemes on the basis to be used for
their valuations at 5 April 2016 and 31 March 2016 respectively.
The Company expects to reach agreement with all Trustees on the
basis used which will result in the combined scheme deficits having
fallen from GBP1,062 million at the 2013 valuations to GBP416
million in 2016. The principal reason for this improvement is
investment performance in the RHM scheme, which is heavily hedged
against movements in long-term interest rates and is now fully
funded. The overall position is summarised below.
Actuarial valuation surplus/(deficit)
GBPm 2016 2013 Change
RHM 135 (504) 639
Premier Foods (551) (538) (13)
Irish schemes 0 (20) 20
----------- --------------- ------------
Total schemes (416) (1,062) 646
----------- --------------- ------------
Following the agreement of the actuarial valuation basis, the
Company has agreed in principle a new contribution schedule with
the Trustee of the RHM Pension scheme, which reflects the improved
financial position of this fund. Under this schedule the Company
will make no deficit recovery payments to the RHM Scheme after 1
January 2020. In the previous recovery plan, payments to the RHM
scheme were GBP20m pa in 2020 rising to GBP24m pa from 2024 and
increasing at 3% pa thereafter. Previously agreed payments in the
period to 31 December 2019 remain unchanged.
In respect of the Premier Schemes, the Company expects the
current dialogue with the respective Trustees to result in deficit
recovery plans broadly in line with those agreed in 2013, and with
no changes to payments made by the Group in the period to 31
December 2019.
Once the formal agreements with the Trustees are complete these
will be submitted to The Pensions Regulator for review, as is
standard practice with all UK defined benefit pension schemes.
Once formally adopted, these new recovery plans will represent a
significant reduction in the Company's contractual obligations, and
as a result the Company expects the NPV of future deficit recovery
payments to reduce from the previously quoted value of GBP400-420m
to GBP300-320m, a reduction of GBP100m. The Company is also
reducing its expectations for future pension administration costs
and the PPF levy from GBP8-10m pa to GBP6-8m pa, effective from
FY16/17 onwards.
In the normal way, deficit recovery payments for 2020/21 and
beyond will be subject to further review following the 2019
actuarial valuation and are then subject to amendment in either
direction depending on (among other factors) the financial position
of the pension schemes at that point and company affordability.
Outlook
The Group remains confident that it is making good progress on
its strategic priorities. It has an extensive new product
innovation programme, its customer relationships are strong and it
has demonstrated an ability to deliver cost efficiencies. Sales
growth in the second half of FY16/17 is expected to be weighted to
the fourth quarter and in the range of 2-4%, noting that as always,
the outturn will be partly dependent on average seasonal
temperatures. In the full year, sales are now expected to grow 1-2%
and the Group's medium term target of 2-4% sales growth is
unchanged. Profit expectations for the full year are unchanged,
with this year's consumer marketing costs now expected to be
broadly in line with last year's. The Group's expectation for Net
debt at the full year is also unchanged, with cash generation
weighted to the second half of the year reflecting the business's
seasonality.
The Board are focused on delivering shareholder value and see a
strong future for Premier Foods with its leading category
positions, great brands and strong operational cash flows.
Financial review
-----------------
Within this financial review, the Company presents its results
for the 26 weeks ended 1 October 2016 with comparative information
for the 26 weeks ended 3 October 2015. All commentary on the
performance of the Company included below refers to continuing
operations unless otherwise stated and therefore reflects the
respective periods that the Company maintained ownership of
previously completed disposals.
Income statement
Revenue from continuing operations in the first half of the year
was GBP348.0m compared to GBP341.2m in the prior period. While
revenue on an underlying basis declined in the period, the 2.0%
growth to GBP348.0m reflects the consolidation of Knighton Foods
Limited ("Knighton") from 1 April 2016. Grocery revenue for the 26
weeks ended 1 October 2016 was GBP250.3m compared to GBP247.4m in
the comparative period, while Sweet Treats revenue was GBP97.7m
compared to GBP93.8m in the prior period.
Gross profit was GBP123.7m in the half year, a decrease of
GBP3.0m compared to the prior period. In the second quarter of the
year, the Group's Grocery categories experienced declines as a
result of much warmer weather compared to the comparative period
and accordingly branded volumes and Gross profits were lower. Gross
margins were lower in the period predominantly following the
consolidation of Knighton.
Divisional contribution for the Group was GBP62.8m in the period
compared to GBP68.2m for the prior year, largely reflecting the
movement in Gross profit as outlined above. Grocery Divisional
contribution was GBP56.2m, a decrease of GBP4.6m compared to the
prior year, while Sweet Treats Divisional contribution was GBP6.6m,
a decrease of GBP0.8m from GBP7.4m. The Grocery business invested
more in consumer marketing in the first half of the year while the
Sweet Treats business invested in instore marketing and enhanced
organisational capability in its cake on the go operation.
Operating profit
The Group reported an Operating profit for the half year of
GBP22.0m compared to GBP23.3m in the comparative period.
Amortisation charges were broadly similar to the prior period at
GBP19.0m, as were fair value movements on foreign exchange and
other derivative contracts of GBP1.0m. Restructuring costs of
GBP7.1m relate to corporate activity costs in the period and costs
associated with redundancy payments. Net interest on pensions and
administrative expenses in the year were GBP0.9m; GBP6.1m lower
than the prior period, due to an opening combined pensions surplus
(GBP130.9m compared with a deficit of GBP211.8m (4 April 2015)) and
hence net interest credit of GBP2.7m, offset by administration
charges of GBP3.6m.
Finance costs
Net finance cost for the period ended 1 October 2016 was
GBP30.7m compared to GBP21.4m in the comparative period. The main
factor driving this increase was GBP8.6m of discount unwind
relating to long term property provisions held by the Group. This
increase in the discount unwind, which has no cash effect, is a
result of changes in government gilts over the last six months.
Aside from this, finance costs were broadly unchanged from the
prior year and the Group's sources of financing were largely
unchanged in the period, except for the previously announced
closure of its GBP80m debtors securitisation programme. The largest
component of financing costs in the period was interest payable on
the senior secured notes issued by the Group in March 2014 and
amounted to GBP15.3m (FY15/16 H1: GBP15.4m).
Associate investments
In the prior year, the Group wrote off its investment in Hovis
Limited ("Hovis") to GBPNil. In the comparative period, the Group
reported a (GBP7.0m) share of loss from associates, of which
(GBP6.8m) was due to its share of loss from Hovis. On 1 April 2016,
the Group gained control (as defined under IFRS 10) of Knighton, in
which the Group already held 49% of the ordinary share capital and
associated voting rights and hence the results of Knighton are
consolidated in the Group's financial statements for the period
ended 1 October 2016. On 24 May 2016, the Group acquired the
remaining 51% of the ordinary share capital of Knighton.
Loss before taxation
The Group made a loss before tax of GBP8.7m for the period ended
1 October 2016 compared to a prior period loss of GBP5.1m.
Operating profit of GBP22.0m was offset by net finance costs of
GBP30.7m as outlined above.
Taxation
A taxation charge of GBP46.9m is reported for the half year
ended 1 October 2016 compared to a prior period credit of GBP26.8m.
The charge in the period is offset by a credit recorded in the
statement of other comprehensive income (OCI) of GBP50.2m. The
P&L charge is ultimately driven by the movement of the IAS 19
pension valuation from a net surplus to net deficit in the period.
This restricts the amount of deferred tax asset the group is able
to recognise, resulting in derecognition of the majority of assets
relating to losses. In the prior year the credit related to
deferred tax movements on loss recognition. The applicable rate of
corporation tax for the period was 20.0% (2015/16 H1: 20.0%).
The Group's deferred tax net asset as at 1 October 2016 was
GBP30.1m. Within this deferred tax net asset of GBP30.1m, the Group
has recognised an asset reflecting prior year tax losses of
approximately GBP30m and this, together with a further GBP45m of
unrecognised tax losses, equate to approximately GBP440m of losses
which can be used to offset taxable profits in future periods.
These losses can generally be carried forward indefinitely.
Detailed proposals announced in the Chancellor of the Exchequer's
2016 budget regarding limits on interest charge deductions and the
utilisation of prior year losses are yet to be announced and hence
any potential implications on the Group's current or future tax
position will be disclosed in due course.
The corporation tax rate for the remainder of the 2016/17
financial year is expected to be 20.0% and the applicable deferred
tax rate is 17.0%.
Earnings/(loss) per share
The Group reports a basic loss per share on continuing
operations for the 26 weeks ended 1 October 2016 of (6.7) pence,
compared to a basic earnings per share on continuing operations in
the prior period of 2.6 pence. Earnings/(loss) per share is
calculated by dividing the earnings/(loss) attributed to ordinary
shareholders of (GBP55.6m) (2015/16 H1: GBP21.7m) by the weighted
average number of shares in issue during the period.
Adjusted earnings per share for continuing operations were 2.5
pence (2015/16 H1: 2.7 pence). Adjusted earnings per share on
continuing operations has been calculated by dividing the adjusted
earnings (defined as Trading profit less net regular interest and
notional taxation) attributed to ordinary shareholders of GBP21.0m
(2015/16 H1: GBP22.2m) by the weighted average number of ordinary
shares in issue during each period. These earnings have been
calculated by reflecting tax at a notional rate of 20.0%. The
weighted average number of shares in issue for the 26 weeks ended 1
October 2016 was 827.7m and the comparative period ended 3 October
2015 was 825.7m.
Cash flow and borrowings
The Group's net borrowings as at 1 October 2016 were GBP556.0m,
an increase of GBP21.8m since 2 April 2016 and a decrease of
GBP29.3m since 3 October 2015. The cash inflow from operations for
the half year to 1 October 2016 was GBP7.0m, compared to GBP42.2m
in the comparative period. The principal change in the reduction in
cash generated from operations is due to the increase in retirement
benefit cash outflows, in line with the previously agreed fixed
deficit repayment contribution schedule. Working capital outflows
of GBP13.8m are principally due to stock builds towards the end of
the period.
Net cash interest paid was GBP20.2m in the half year compared to
GBP20.7m in the prior period. The purchase of property, plant and
equipment and intangible assets was GBP6.0m in the period, GBP12.0m
lower than the comparative period as capital programmes in the
current year are weighted to the second half of the year. No cash
tax was payable in the period due to the loss in the period.
The Group utilised GBP89.0m of its GBP272.0m revolving credit
facility at the period end date and held GBP14.0m in net cash and
cash equivalents.
Retirement benefit schemes
At 1 October 2016, the Company's pension schemes under the IAS
19 accounting valuation showed a combined gross deficit of
GBP228.8m, compared to a combined surplus of GBP130.9m at 2 April
2016. The valuation at 1 October 2016 comprised a GBP362.0m surplus
in respect of the RHM schemes (2 April 2016: GBP550.9m) and a
deficit of GBP590.8m (2 April 2016: GBP420.0m) in relation to the
Premier Foods schemes. Further commentary on the Group's pension
schemes is provided in the Operating review.
The Accounting Standards Board under IFRIC 14, are currently
reviewing the recognition of a pensions surplus in the financial
statements of an entity. Dependent upon the final published
standard, there is potential that any future defined benefit
surplus may not be recognised in the financial statements of the
Group and additionally, the deficit valuation methodology may also
change.
Principal risks and uncertainties
The Group's principal risks and uncertainties were disclosed on
page 28 to 31 of the annual report and accounts for the financial
period ended 2 April 2016. The major strategic and operational
risks are summarised under the headings of Commercial Arrangements,
Commodity prices / Brexit, Regulatory and Government policy,
Investments, Pension fund deficit, Innovation and consumer trends,
Operational continuity and Legal compliance.
The Brexit risk stated that the forecasted devaluation of
sterling would have an adverse impact on imported raw material
costs, only partially offset by positive currency benefits in our
international business. Since the vote to leave the EU referendum
on 23 June 2016, sterling has devalued as predicted and certain
imported raw material costs are therefore increasing. While the
Group has forward cover in place for certain currencies and
commodities, the benefits of these are only short term in nature
and the Group continues to look to minimise direct and indirect
currency exposure through a range of mitigating actions, in line
with its policy.
Alastair Murray
Chief Financial Officer
Appendices
-----------
The Company's results are presented for the 26 weeks ended 1
October 2016. Results are stated on an 'Underlying business' basis
which include results of Knighton and exclude all disposals and
joint ventures transactions previously completed and are
unaudited.
'Continuing operations' includes the respective periods that the
Company maintained ownership of previously completed disposals and
joint ventures entered into. The results of the 26 weeks ended 1
October 2016 and its comparative period the 26 weeks ended 3
October 2015, are commented on in the financial review. In the
table below, 'Acquisitions' in the comparative period refer to the
results of Knighton.
GBPm Continuing Less: Less: Add: Underlying
operations Disposals Associates Acquisitions business
------------ ------------ ----------- ------------ -------------- -----------
2016/17
H1
Sales 348.0 0.0 0.0 0.0 348.0
Trading
profit(4) 48.0 0.0 0.0 0.0 48.0
EBITDA(5) 56.1 0.0 0.0 0.0 56.1
2015/16
H1
Sales 341.2 0.0 0.0 13.3 354.5
Trading
profit(4) 50.3 0.2 0.1 (0.6) 50.0
EBITDA(5) 58.0 0.2 0.1 0.0 58.3
------------ ------------ ----------- ------------ -------------- -----------
Continuing operations earnings per share is calculated as set
out below:
GBPm FY16/17 FY15/16
H1 H1
(26 weeks) (26 weeks)
Continuing Trading profit 48.0 50.3
Amortisation of intangible
assets (19.0) (18.7)
Foreign exchange fair value
movements 1.0 1.2
Net interest on pension and
administrative expenses (0.9) (7.0)
Restructuring costs (7.1) (2.5)
Operating profit 22.0 23.3
Net finance cost (30.7) (21.4)
Share of loss from associates - (7.0)
Loss before tax (8.7) (5.1)
Taxation (charge)/credit (46.9) 26.8
------------ ------------
(Loss)/Profit after tax (55.6) 21.7
Divided by:
Average shares in issue (millions) 827.7 825.7
Basic (loss)/earnings per
share (6.7p) 2.6p
Underlying Adjusted earnings per share is calculated as set out
below:
GBPm FY16/17 FY15/16
H1 H1
(26 weeks) (26 weeks)
Underlying Trading profit 48.0 50.0
Less net regular interest (21.7) (22.5)
Adjusted profit before tax 26.3 27.5
Less notional tax at 20.0% (5.3) (5.5)
------------ ------------
Adjusted profit after tax 21.0 22.0
Divided by:
Average shares in issue (millions) 827.7 825.7
Adjusted earnings per share 2.54p 2.66p
Underlying results for 52 weeks to 2 April 2016 (Includes effect
of Knighton consolidation)
The table below is presented to show the underlying trading
results of the Group as if it controlled Knighton for the duration
of the 52 weeks ended 2 April 2016 and are unaudited.
These results form the basis on which the Group will report its
underlying results for the 52 weeks ending 1 April 2017.
GBPm 52 weeks to 2 April 2016
------------------- ----------------------------------------------------------------
Q1 Q2 H1 Q3 Q4 FY
(13 (13 (26 (13 (13 (52
weeks) weeks) weeks) weeks) weeks) 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 126.2 134.5 260.7 175.7 141.8 578.2
Divisional
contribution - - 60.2 - - 140.2
Sweet Treats
Branded sales 40.0 40.4 80.4 53.0 45.1 178.5
Non-branded
sales 6.0 7.4 13.4 25.2 6.0 44.6
Total sales 46.0 47.8 93.8 78.2 51.1 223.1
Divisional
contribution - - 7.4 - - 25.0
Group
Branded sales 150.1 156.5 306.6 208.0 168.8 683.4
Non-branded
sales 22.1 25.8 47.9 45.9 24.1 117.9
Total sales 172.2 182.3 354.5 253.9 192.9 801.3
Divisional
contribution - - 67.6 - - 165.2
Group & corporate - - (17.6) - - (36.1)
Trading profit - - 50.0 - - 129.1
EBITDA - - 58.3 - - 146.5
------------------- --------- --------- --------- --------- --------- ---------
-- The Company reports its Full Year results on a 52 week ended basis.
-- The term Divisional contribution refers to Gross Profit less
selling, distribution and marketing expenses directly attributable
to the relevant business unit.
-- Group & corporate costs refer to group and corporate
expenses which are not directly attributable to a business unit and
are reported at total Group level.
-- The International business unit is currently too small for
separate disclosure and in line with accounting standards is
aggregated within the Grocery business unit for reporting
purposes.
Pension deficit contribution schedule
The table below shows the phasing of previously agreed pension
deficit contributions.
GBPm 2016/17 2017/18 2018/19 2019/20
----------------------- -------- -------- -------- --------
Deficit contributions 48 49 44 40
----------------------- -------- -------- -------- --------
Administration
costs + PPF
levy 6-8 6-8 6-8 6-8
----------------------- -------- -------- -------- --------
Total cash
outflow 54-56 55-57 50-52 46-48
----------------------- -------- -------- -------- --------
Responsibility Statement of the Directors
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors of Premier Foods plc are listed on page 43 of the
Premier Foods plc annual report and accounts for the financial
period ended 2 April 2016. Tsunao Kijima has been appointed on the
board as non-executive director with effect from 21 July 2016.
Approved by the Board on 14 November 2016 and signed on its
behalf by:
Gavin Darby
Chief Executive Officer
Alastair Murray
Chief Financial Officer
INDEPENT REVIEW REPORT TO PREMIER FOODS PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
twenty six weeks ended 01 October 2016 which comprises the
condensed consolidated balance sheet, the related condensed
consolidated statement of profit and loss, statement of
comprehensive income, statement of cash flows and statement of
changes in equity for the twenty six week period then ended and the
related explanatory notes. We have read the other information
contained in the half-yearly financial report and considered
whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the EU.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
IAS 34 Interim Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
(UK and Ireland) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the twenty six weeks ended
01 October 2016 is not prepared, in all material respects, in
accordance with IAS 34 as adopted by the EU and the DTR of the UK
FCA.
Richard Pinckard
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 November 2016
Condensed consolidated statement of profit or loss
(unaudited)
Period Period
ended ended
1 Oct 3 Oct
2016 2015
Note GBPm GBPm
-------------------------------------- ----- -------------------- -------------------
Continuing operations
Revenue 4 348.0 341.2
Cost of sales (224.3) (214.5)
-------------------------------------- ----- -------------------- -------------------
Gross profit 123.7 126.7
Selling, marketing and distribution
costs (60.9) (58.5)
Administrative costs (40.8) (44.9)
-------------------------------------- ----- -------------------- -------------------
Operating profit 4 22.0 23.3
Finance cost 5 (31.7) (24.1)
Finance income 5 0.8 2.2
Fair value movements on interest
rate financial instruments 5 0.2 0.5
Share of loss from associates 10 - (7.0)
-------------------------------------- ----- -------------------- -------------------
Loss before taxation from continuing
operations (8.7) (5.1)
Taxation (charge)/credit 6 (46.9) 26.8
-------------------------------------- ----- -------------------- -------------------
(Loss)/profit after taxation
from continuing operations (55.6) 21.7
Loss from discontinued operations 8 - (0.2)
-------------------------------------- ----- -------------------- -------------------
(Loss)/profit for the period
attributable to owners of the
parent (55.6) 21.5
-------------------------------------- ----- -------------------- -------------------
Basic (loss)/earnings per share 7 (6.7) 2.6
-------------------------------------- ----- -------------------- -------------------
Diluted (loss)/earnings per share 7 (6.7) 2.5
-------------------------------------- ----- -------------------- -------------------
Adjusted earnings per share(1) 7 2.5 2.7
-------------------------------------- ----- -------------------- -------------------
(1) Adjusted earnings per share is defined as trading
profit less net regular interest payable, less a
notional tax charge at 20.0% (2015/16: 20.0%) divided
by the weighted average number of ordinary shares
of the Company.
The following notes form an integral part of the condensed
consolidated interim financial information.
Condensed consolidated statement of comprehensive income
(unaudited)
Period Period
ended ended
1 Oct 3 Oct
2016 2015
Note GBPm GBPm
--------------------------------------- ----- -------- ------------------
(Loss)/profit for the period (55.6) 21.5
Other comprehensive income/(losses)
Items that will never be reclassified
to profit or loss
Remeasurements of defined benefit
schemes 14 (390.7) 179.8
Deferred tax credit/(charge) 50.2 (35.5)
Items that are or may be reclassified
to profit or loss
Exchange differences on translation 0.1 0.4
--------------------------------------- ----- -------- ------------------
Other comprehensive (loss)/income,
net of tax (340.4) 144.7
--------------------------------------- ----- -------- ------------------
Total comprehensive (loss)/income
attributable to owners of the parent (396.0) 166.2
---------------------------------------------- -------- ------------------
The following notes form an integral part of the condensed
consolidated interim financial information.
Condensed consolidated balance sheet (unaudited)
As at As at
1 Oct 2 Apr
2016 2016
Note GBPm GBPm
---------------------------------------- ----- ---------------- ---------------
ASSETS:
Non-current assets
Property, plant and equipment 183.7 187.8
Goodwill 650.1 649.8
Other intangible assets 478.9 496.0
Retirement benefit assets 14 362.0 550.9
Deferred tax assets 30.1 25.9
---------------------------------------- ----- ---------------- ---------------
1,704.8 1,910.4
Current assets
Inventories 80.5 63.2
Trade and other receivables 84.3 100.5
Financial assets - derivative
financial instruments 12 1.7 1.6
Cash and cash equivalents 15 34.5 8.0
---------------------------------------- ----- ---------------- ---------------
201.0 173.3
---------------------------------------- ----- ---------------- ---------------
Total assets 1,905.8 2,083.7
---------------------------------------- ----- ---------------- ---------------
LIABILITIES:
Current liabilities
Trade and other payables (198.0) (204.7)
Financial liabilities:
- short-term borrowings 11 (20.6) (0.4)
- derivative financial instruments 12 (1.0) (2.0)
Provisions for liabilities and
charges 13 (6.1) (6.3)
Current income tax liabilities (0.8) (0.7)
---------------------------------------- ----- ---------------- ---------------
(226.5) (214.1)
Non-current liabilities
Financial liabilities - long-term
borrowings 11 (569.9) (541.8)
Retirement benefit obligations 14 (590.8) (420.0)
Provisions for liabilities and
charges 13 (51.3) (47.3)
Other liabilities (11.3) (12.0)
---------------------------------------- ----- ---------------- ---------------
(1,223.3) (1,021.1)
---------------------------------------- ----- ---------------- ---------------
Total liabilities (1,449.8) (1,235.2)
---------------------------------------- ----- ---------------- ---------------
Net assets 456.0 848.5
---------------------------------------- ----- ---------------- ---------------
EQUITY:
Capital and reserves
Share capital 82.7 82.7
Share premium 1,406.7 1,406.6
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Profit and loss reserve (1,375.8) (979.3)
---------------------------------------- ----- ---------------- ---------------
Capital and reserves attributable
to owners of the Parent 456.0 852.4
---------------------------------------- ----- ---------------- ---------------
Non-controlling interest 9 - (3.9)
---------------------------------------- ----- ---------------- ---------------
Total equity 456.0 848.5
---------------------------------------- ----- ---------------- ---------------
The following notes form an integral part of the condensed
consolidated interim financial information.
Condensed consolidated statement of cash flows (unaudited)
Period Period
ended ended
1 Oct 3 Oct
2016 2015
Note GBPm GBPm
-------------------------------------- ----- --------------------- --------------------
Cash generated from operations 15 7.0 42.2
Interest paid (21.0) (22.3)
Interest received 0.8 1.6
-------------------------------------- ----- --------------------- --------------------
Cash (used)/generated from operating
activities (13.2) 21.5
Purchase of property, plant
and equipment (3.9) (13.9)
Purchase of intangible assets (2.1) (4.1)
Cash used in investing activities (6.0) (18.0)
Repayment of borrowings (1.6) (1.0)
Proceeds from borrowings 34.0 -
Movement in securitisation funding
programme (6.4) (19.7)
Proceeds from share issue 0.1 -
Purchase of shares to satisfy
share awards (0.7) (1.5)
-------------------------------------- ----- --------------------- --------------------
Cash generated/(used) in financing
activities 25.4 (22.2)
Net inflow/(outflow) of cash
and cash equivalents 6.2 (18.7)
Cash, cash equivalents and bank
overdrafts at beginning of period 7.8 21.7
-------------------------------------- ----- --------------------- --------------------
Cash, cash equivalents and bank
overdrafts at end of period 15 14.0 3.0
-------------------------------------- ----- --------------------- --------------------
The following notes form an integral part of the condensed
consolidated interim financial information.
Condensed consolidated statement of changes in equity
(unaudited)
Profit
and
Share Share Merger Other loss Non-controlling Total
capital premium reserve reserves reserve interest equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- ----- --------- --------- ---------- ---------- ---------------- --------
At 5 April
2015 82.6 1,406.4 351.7 (9.3) (1,291.2) - 540.2
Profit for the
period - - - - 21.5 - 21.5
Remeasurements
of defined
benefit
schemes 14 - - - - 179.8 - 179.8
Deferred tax
charge - - - - (35.5) - (35.5)
Exchange differences
on translation - - - - 0.4 - 0.4
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Other comprehensive
income - - - - 144.7 - 144.7
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Total comprehensive
income - - - - 166.2 - 166.2
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Share-based
payments - - - - 2.1 - 2.1
Purchase of
shares to satisfy
share awards - - - - (1.5) - (1.5)
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
At 3 October
2015 82.6 1,406.4 351.7 (9.3) (1,124.4) - 707.0
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
At 3 April
2016 82.7 1,406.6 351.7 (9.3) (979.3) (3.9) 848.5
Loss for the
period - - - - (55.6) - (55.6)
Remeasurements
of defined
benefit schemes
14 - - - - (390.7) - (390.7)
Deferred tax
credit - - - - 50.2 - 50.2
Exchange differences
on translation - - - - 0.1 - 0.1
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Other comprehensive
losses - - - - (340.4) - (340.4)
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Total comprehensive
losses - - - - (396.0) - (396.0)
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
Shares
issued - 0.1 - - - - 0.1
Share-based
payments - - - - 3.2 - 3.2
Purchase of
shares to satisfy
share awards - - - - (0.7) - (0.7)
Deferred tax
movements on
share-based
payments - - - - 0.9 0.9
Movement in
non-controlling
interest - - - - (3.9) 3.9 -
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
At 1 October
2016 82.7 1,406.7 351.7 (9.3) (1,375.8) - 456.0
-------------------------------- ----- --------- --------- ---------- ---------- ---------------- --------
The following notes form an integral part of the condensed
consolidated interim financial information.
Notes to the financial information (unaudited)
1. General information
Premier Foods plc (the "Company") is a public limited company
incorporated and domiciled in England and Wales, registered number
5160050, with its registered office at Premier House, Centrium
Business Park, Griffiths Way, St Albans, Hertfordshire AL1 2RE. The
principal activity of the Company and its subsidiaries (the
"Group") is the manufacture and distribution of branded and own
label ambient food products as described in the Group's annual
report and accounts for the financial period ended 2 April
2016.
2. Significant accounting policies
Basis of preparation
The condensed consolidated financial information ("financial
information") for the period ended 1 October 2016 has been prepared
in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34, "Interim Financial
Reporting" as adopted by the European Union. The financial
information for the period ended 1 October 2016 should be read in
conjunction with the Group's financial statements for the 52 weeks
ended 2 April 2016, which have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union. They have been prepared applying the accounting
policies and presentation as applied in the preparation of the
Group's published consolidated financial statements for the 52
weeks ended 2 April 2016, except where new or revised accounting
standards have been applied. There has been no significant impact
on the Group profit or net assets on adoption of new or revised
accounting standards in the period.
The financial information for the period ended 1 October 2016 is
unaudited but has been subject to an independent review by KPMG
LLP.
The Group's financial statements for the 52 weeks ended 2 April
2016, which were approved by the Board of Directors on 16 May 2016,
were reported on by KPMG LLP and delivered to the Registrar of
Companies. The report of the auditor was unqualified, did not
contain a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
did not contain any statement under section 498 (2) or (3) of the
Companies Act 2006.
This financial information was approved for issue on 14 November
2016.
Basis for preparation of financial statements on a going concern
basis
The Group's revolving credit facility includes net debt/EBITDA
and EBITDA/interest covenants. In the event these covenants are not
met then the Group would be in breach of its financing agreement
and, as would be the case in any covenant breach, the banking
syndicate could withdraw funding to the Group. The Group was in
compliance with its covenant tests as at 2 April 2016 and 1 October
2016. The Group's forecasts, taking into account reasonably
possible changes in trading performance, show that the Group should
be able to operate within the level of its current facilities
including covenant tests. The directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the next 12 months. The Group therefore
continues to adopt the going concern basis in preparing its
consolidated financial statements.
3. Critical accounting policies, estimates and judgements
The following are areas of particular significance to the
Group's interim financial information and include the use of
estimates and the application of judgement, which is fundamental to
the preparation of this condensed consolidated interim financial
information. There have been no significant changes to critical
estimates and judgements from the financial period ended 2 April
2016.
Employee benefits
The present value of the Group's defined benefit pension
obligations depends on a number of actuarial assumptions. The
primary assumptions used include the discount rate applicable to
scheme liabilities, the long-term rate of inflation and estimates
of the mortality applicable to scheme members. Each of the
underlying assumptions is set out in more detail in note 14.
At each reporting date, and on a continuous basis, the Group
reviews the macro-economic, Company and scheme specific factors
influencing each of these assumptions, using professional advice,
in order to record the Group's ongoing commitment and obligation to
defined benefit schemes in accordance with IAS 19 (Revised).
In addition, the recognition of any defined benefit asset is
assessed in accordance with IFRIC 14.
Goodwill and other intangible assets
Impairment reviews in respect of goodwill are performed annually
unless an event indicates that an impairment review is necessary.
Impairment reviews in respect of intangible assets are performed
when an event indicates that an impairment review is necessary.
Examples of such triggering events include a significant planned
restructuring, a major change in market conditions or technology,
expectations of future operating losses, or a significant reduction
in cash flows. The recoverable amounts of CGUs are determined based
on the higher of net realisable value and value in use
calculations. These calculations require the use of estimates.
Acquired brands, trademarks and licences are considered to have
finite lives that range from 20 to 40 years for brands and
trademarks and 10 years for licences. The determination of the
useful lives takes into account certain quantitative factors such
as sales expectations and growth prospects, and also many
qualitative factors such as history and heritage, and market
positioning, hence the determination of useful lives are subject to
estimates and judgement.
Advertising and promotion costs
Sales rebates and discounts are accrued on each relevant
promotion or customer agreement and are charged to the statement of
profit or loss at the time of the relevant promotional buy-in as a
deduction from revenue. Accruals for each individual promotion or
rebate arrangement are based on the type and length of promotion
and nature of customer agreement. At the time an accrual is made
the nature and timing of the promotion is typically known. Areas of
estimation include sales volume/activity and the amount of product
sold on promotion.
For short term promotions, the Group performs a true up of
estimates where necessary on a monthly basis, using real time sales
information where possible and finally on receipt of a customer
claim which typically follows 1-2 months after the end of a
promotion. For longer term discounts and rebates the Group uses
actual and forecast sales to estimate the level of rebate. These
accruals are updated monthly based on latest actual and forecast
sales.
Expenditure on advertising is charged to the statement of profit
or loss when incurred, except in the case of airtime costs when a
particular campaign is used more than once. In this case they are
charged in line with the airtime profile.
Deferred tax
When assessing whether the recognition of a deferred tax asset
can be justified, and if so at what level, the directors take into
account the following:
-- Projected profits or losses included in the latest management
approved forecast and other relevant information that allow profits
chargeable to corporation tax to be derived.
-- The total level of recognised and unrecognised losses that
can be used either to offset deferred tax liabilities or to reduce
future forecast taxable profits.
-- The period over which there is sufficient certainty that
profits can be made that would support the recognition of an
asset.
Associates
Associates are all entities over which the Group has significant
influence but not control.
Judgement is sometimes required when assessing whether the Group
has significant influence or control. Control is illustrated by the
power over relevant activities and the exposure to the variability
of returns. In determining whether the Group has the practical
ability to direct relevant activities, factors such as voting
rights, financial and operational dependency and any special
relationships are taken into consideration.
4. Segmental analysis
IFRS 8 requires operating segments to be determined based on the
Group's internal reporting to the Chief Operating Decision Maker
("CODM"). The CODM has been determined to be the Executive
Leadership Team as it is primarily responsible for the allocation
of resources to segments and the assessment of performance of the
segments.
The Group's operating segments are defined as "Grocery", "Sweet
Treats" and "International". The Grocery segment primarily sells
savoury ambient food products and the Sweet Treats segment sells
sweet ambient food products. The International segment has been
aggregated within the Grocery segment for reporting purposes, in
accordance with the criteria set out in IFRS 8.
The CODM uses Divisional contribution as the key measure of the
segments' results. Divisional contribution is defined as gross
profit after selling, marketing and distribution costs. Divisional
contribution is a consistent measure within the Group and reflects
the segments' underlying trading performance for the period under
evaluation.
The Group uses Trading profit to review overall group
profitability. Trading profit is defined as profit/(loss) before
tax before net finance costs, profits and losses from share of
associates, amortisation of intangible assets, impairment, fair
value movements on foreign exchange and other derivative contracts,
restructuring costs, and net interest on pensions and
administration expenses.
The segment results for the period ended 1 October 2016 and 3
October 2015, and the reconciliation of the segment measures to the
respective statutory items included in the consolidated financial
statements, are as follows:
Period ended 1 Oct 2016
------------------------------ -------------------------------------------------------
Grocery Sweet Continuing
Treats operations
GBPm GBPm GBPm
------------------------------ -------------------- -------------- -----------------
Revenue 250.3 97.7 348.0
------------------------------ -------------------- -------------- -----------------
Divisional contribution 56.2 6.6 62.8
Group and corporate costs (14.8)
------------------------------ -------------------- -------------- -----------------
Trading profit 48.0
Amortisation of intangible
assets (19.0)
Fair value movements on foreign exchange and
other derivative contracts 1.0
Restructuring costs (7.1)
Net interest on pensions
and administrative expenses (0.9)
------------------------------ -------------------- -------------- -----------------
Operating profit 22.0
Finance cost (31.7)
Finance income 0.8
Fair value movements on interest rate
financial instruments 0.2
Loss before taxation from
continuing operations (8.7)
------------------------------ -------------------- -------------- -----------------
Depreciation (3.9) (4.2) (8.1)
------------------------------ -------------------- -------------- -----------------
Period ended 3 Oct 2015
------------------------------- -------------------------------------------------------
Grocery Sweet Continuing
Treats operations
GBPm GBPm GBPm
------------------------------- -------------------- -------------- -----------------
Revenue 247.4 93.8 341.2
------------------------------- -------------------- -------------- -----------------
Divisional contribution 60.8 7.4 68.2
Group and corporate costs (17.9)
------------------------------- -------------------- -------------- -----------------
Trading profit 50.3
Amortisation of intangible
assets (18.7)
Fair value movements on foreign exchange and
other derivative contracts 1.2
Restructuring costs (2.5)
Net interest on pensions
and administrative expenses (7.0)
------------------------------- -------------------- -------------- -----------------
Operating profit 23.3
Finance cost (24.1)
Finance income 2.2
Fair value movements on interest rate
financial instruments 0.5
Share of loss from associates (7.0)
------------------------------- -------------------- -------------- -----------------
Loss before taxation from
continuing operations (5.1)
------------------------------- -------------------- -------------- -----------------
Depreciation (4.1) (3.6) (7.7)
------------------------------- -------------------- -------------- -----------------
Inter-segment transfers or transactions are entered into under
the same terms and conditions that would be available to unrelated
third parties.
5. Finance income and costs
Period Period
ended ended
1 Oct 3 Oct
2016 2015
GBPm GBPm
----------------------------------------- ------- ------------------
Interest payable on bank loans and
overdrafts (2.9) (2.5)
Interest payable on senior secured
notes (15.3) (15.4)
Interest payable on revolving facility (1.9) (3.2)
Interest payable on interest rate
financial instruments (0.4) (0.7)
Other interest payable(1) (9.1) -
Amortisation of debt issuance costs (2.0) (2.3)
----------------------------------------- ------- ------------------
(31.6) (24.1)
Write off of financing costs (0.1) -
----------------------------------------- ------- ------------------
Total finance cost (31.7) (24.1)
----------------------------------------- ------- ------------------
Interest receivable on bank deposits 0.8 1.6
Other interest receivable - 0.6
----------------------------------------- ------- ------------------
Total finance income 0.8 2.2
----------------------------------------- ------- ------------------
Fair value movements on interest
rate financial instruments 0.2 0.5
----------------------------------------- ------- ------------------
Net finance cost (30.7) (21.4)
----------------------------------------- ------- ------------------
(1) Included in other interest payable is GBP8.6m
(2015: GBPnil) relating to the unwind of the discount
on certain of the Group's long term provisions.
6. Taxation
The taxation charge on continuing operations for the period
ended 1 October 2016 of GBP46.9m (2015: GBP26.8m credit) includes a
credit of GBP1.0m (2015: GBP1.7m credit) relating to the loss for
the period, which is based upon management's best estimate of the
effective annual income tax rate expected for the full financial
year, a charge of GBP44.9m (2015: GBP25.1m credit) relating to
derecognising deferred tax assets in respect of losses, and a
charge of GBP3.0m (2015: GBPnil) relating to the restatement of
deferred tax balances at 17%.
7. Earnings/(loss) per share
Basic earnings/(loss) per share has been calculated by dividing
the loss for the period ended 1 October 2016 attributable to owners
of the parent of GBP55.6m (2015: GBP21.5m profit) by the weighted
average number of ordinary shares of the Company.
Period Period
ended ended
1 Oct 3 Oct
2016 2015
Number Number
-------------------------------------------------- ------------ ---------------------------
Weighted average number of ordinary
shares for the purpose of basic earnings/(loss)
per share 827,687,105 825,741,256
Effect of dilutive potential ordinary
shares 46,059,476 26,585,640
-------------------------------------------------- ------------ ---------------------------
Weighted average number of ordinary
shares for the purpose of diluted
earnings/(loss) per share 873,746,581 852,326,896
-------------------------------------------------- ------------ ---------------------------
Period ended Period ended
1 Oct 2016 3 Oct 2015
------------------------- -------------------------------------- ---------------------------------------
Dilutive Dilutive
effect effect
of share of share
Basic options Diluted Basic options Diluted
------------------------- ----------- ------------ ----------- ----------- ------------- -----------
Continuing operations
(Loss)/profit after
tax (GBPm) (55.6) (55.6) 21.7 21.7
(Loss)/earnings per
share (pence) (6.7) - (6.7) 2.6 (0.1) 2.5
------------------------- ----------- ------------ ----------- ----------- ------------- -----------
Discontinued operations
Loss after tax (GBPm) - - (0.2) (0.2)
Loss per share (pence) - - - - - -
------------------------- ----------- ------------ ----------- ----------- ------------- -----------
Total
(Loss)/profit after
tax (GBPm) (55.6) (55.6) 21.5 21.5
(Loss)/earnings per
share (pence) (6.7) - (6.7) 2.6 (0.1) 2.5
------------------------- ----------- ------------ ----------- ----------- ------------- -----------
Dilutive effect of share options
The dilutive effect of share options is calculated by adjusting
the weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares. The
only dilutive potential ordinary shares of the Company are share
options and share awards. A calculation is performed to determine
the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the
Company's shares) based on the monetary value of the share awards
and the subscription rights attached to the outstanding share
options.
No adjustment is made to the profit/(loss) in calculating basic
and diluted earnings/(loss) per share.
There is no dilutive effect of share options or share awards, as
the Group made a loss in the period.
Adjusted earnings per share ("Adjusted EPS")
Adjusted earnings per share is defined as trading profit less
net regular interest payable, less a notional tax charge at 20.0%
(2015: 20.0%) divided by the weighted average number of ordinary
shares of the Company.
Net regular interest is defined as net finance cost after
excluding write-off of financing costs, fair value movements on
interest rate financial instruments and other interest.
Trading profit and Adjusted EPS have been reported as the
directors believe these provide an alternative measure by which the
shareholders can better assess the Group's underlying trading
performance.
Period Period
ended ended
1 Oct 3 Oct
2016 2015
GBPm GBPm
-------------------------------------- ------- -------
Trading profit 48.0 50.3
Less net regular interest payable (21.7) (22.5)
------- -------
Adjusted profit before tax 26.3 27.8
Notional tax at 20.0% (5.3) (5.6)
Adjusted profit after tax 21.0 22.2
Average shares in issue (m) 827.7 825.7
-------------------------------------- ------- -------
Adjusted EPS (pence) 2.5 2.7
-------------------------------------- ------- -------
Net regular interest
Net finance cost (30.7) (21.4)
Exclude fair value movements on
interest rate financial instruments (0.2) (0.5)
Exclude write off of financing
costs 0.1 -
Exclude other interest 9.1 (0.6)
-------------------------------------- ------- -------
Net regular interest (21.7) (22.5)
-------------------------------------- ------- -------
8. Discontinued operations
Income and expenditure incurred on discontinued operations for
the period ended 1 October 2016 and 3 October 2015 comprises costs
relating to the previously disposed Bread business.
Period Period
ended ended
1 Oct 3 Oct
2016 2015
GBPm GBPm
------------------------------------- -------- --------------------
Revenue - -
Operating expenses - (0.2)
------------------------------------- --------- --------------------
Operating loss - (0.2)
Finance cost - -
-------- --------------------
Loss before taxation - (0.2)
Taxation credit - -
------------------------------------- -------- --------------------
Loss after taxation on discontinued
operations for the period - (0.2)
------------------------------------- --------- --------------------
During the period ended 1 October 2016, discontinued operations
contributed a GBP0.7m inflow (2015: GBP1.0m outflow) to the Group's
operating cash flows, GBPnil (2015: GBPnil) to investing activities
and GBPnil (2015: GBPnil) to financing activities.
9. Ownership of subsidiaries/businesses
On 1 April 2016, the Group gained control (as defined under IFRS
10) of Knighton Foods Investments Limited ('Knighton'), in which
the Group already held 49% of the ordinary share capital and
associated voting rights. The Group considers that it had power to
control Knighton as the company became financially and
operationally dependent upon the Group, with the Group taking
operational decisions over the relevant activities of the
company.
At 2 April 2016, the Group owned 49% of the ordinary share
capital. On 24 May 2016, the Group acquired the remaining 51% of
the ordinary share capital of Knighton.
Goodwill of GBP4.1m is attributable to the intellectual property
of Knighton and synergies which arose on acquisition.
Given the proximity of the transfer of control to 2 April 2016,
the values of identifiable assets and liabilities acquired were
provisional. During the period, a fair value adjustment has been
made in respect of provisions for liabilities that existed at the
acquisition date. Fair values remain provisional until 12 months
after the transfer of control.
The following table summarises the consideration for Knighton,
and the amounts of the assets acquired and liabilities assumed.
At 2 April At 1 Oct
2016 Provisional Purchase Fair Value 2016 Provisional
values of NCI adjustments fair values
on acquisition
Recognised amounts of GBPm GBPm GBPm GBPm
identifiable assets acquired
and liabilities assumed
------------------------------- ------------------ ----------- -------------- ------------------
Property, plant & equipment 2.4 - - 2.4
Inventories 7.0 - - 7.0
Trade and other receivables 9.2 - - 9.2
Trade and other payables (16.2) - (0.3) (16.5)
Cash and cash equivalents (0.2) - - (0.2)
Financial liabilities
- borrowings and other
loans (9.9) - - (9.9)
------------------------------- ------------------ ----------- -------------- ------------------
Total identifiable net
liabilities (7.7) - (0.3) (8.0)
------------------------------- ------------------ ----------- -------------- ------------------
Non-controlling interest 3.9 (3.9) - -
------------------------------- ------------------ ----------- -------------- ------------------
Goodwill 3.8 - 0.3 4.1
------------------------------- ------------------ ----------- -------------- ------------------
Equity - 3.9 - 3.9
------------------------------- ------------------ ----------- -------------- ------------------
Total consideration - - - -
------------------------------- ------------------ ----------- -------------- ------------------
Subsidiaries with significant non-controlling interests
At 2 April 2016 the Group had one subsidiary company which had a
material non-controlling interest of 51%, Knighton. Following the
acquisition of the remaining 51% of the ordinary share capital of
Knighton, the non-controlling interest recognised as at 2 April
2016 of GBP3.9m has subsequently been transferred to equity.
10. Investment in associates
In the 52 weeks ended 2 April 2016, a total impairment charge of
GBP13.6m was recognised relating to the Group's investments in
Hovis Holdings Limited ('Hovis') and Knighton. The impairment
relating to Hovis reflected the highly competitive bread industry
and the previous significant losses. The impairment of the Knighton
investment reflected the challenges faced by the Knighton
business.
At 2 April 2016, the Group owned 49% of the ordinary share
capital. On 24 May 2016, the Group acquired the remaining 51% of
the ordinary share capital of Knighton.
Hovis Knighton Total
GBPm GBPm GBPm
--------------------- ---------------------------- ---------------------------- ------------------------------
At 4 April 2015 22.6 12.6 35.2
Interest receivable 0.8 0.2 1.0
Share of loss from
associates (6.8) (0.2) (7.0)
At 3 October 2015 16.6 12.6 29.2
Share of loss from
associates (7.3) (8.3) (15.6)
Impairment charge (9.3) (4.3) (13.6)
--------------------- ---------------------------- ---------------------------- ------------------------------
At 2 April 2016 and - - -
at 1 October 2016
--------------------- ---------------------------- ---------------------------- ------------------------------
11. Bank and other borrowings
As at As at
1 Oct 2 Apr
2016 2016
GBPm GBPm
--------------------------------- -------------------- -------------------
Current:
Bank overdrafts (20.5) (0.2)
Finance lease obligations (0.1) (0.2)
Total borrowings due within one
year (20.6) (0.4)
--------------------------------- -------------------- -------------------
Non-current:
Secured senior credit facility
- revolving (89.0) (55.0)
Transaction costs 6.2 6.9
-------------------
(82.8) (48.1)
Bank term loan - (1.5)
--------------------------------- -------------------- -------------------
- (1.5)
Senior secured notes (500.0) (500.0)
Transaction costs 12.9 14.2
--------------------------------- -------------------
(487.1) (485.8)
--------------------------------- -------------------- -------------------
Securitisation facility - (6.4)
--------------------------------- -------------------- -------------------
- (6.4)
Total borrowings due after more
than one year (569.9) (541.8)
--------------------------------- -------------------- -------------------
Total bank and other borrowings (590.5) (542.2)
--------------------------------- -------------------- -------------------
Revolving credit facility
The revolving credit facility of GBP272m is due to mature in
March 2019 and attracts an initial bank margin of 3.50% above
LIBOR. Banking covenants of net debt / EBITDA and EBITDA / interest
are in place and are tested biannually.
The Group entered into a three year floating to fixed interest
rate swap in June 2014, with a nominal value of GBP150m amortising
to GBP50m, attracting a swap rate of 1.44%.
Term loan
The term loan as at 2 April 2016 related to that of Knighton and
was priced at 2.75% above LIBOR. This was repaid during the
period.
Securitisation facility
The securitisation facility drawn as at 2 April 2016 related to
that of Knighton and was priced at 2.25% above LIBOR. This was
repaid during the period.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock
Exchange. The notes totalling GBP500m are split between fixed and
floating tranches. The fixed note of GBP325m matures in March 2021
and attracts an interest rate of 6.50%. The floating note of
GBP175m matures in March 2020 and attracts an interest rate of
5.00% above LIBOR.
12. Financial instruments
The following table shows the carrying amounts and fair values
of the Group's financial assets and financial liabilities. Fair
value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date. Set out below is a summary of
methods and assumptions used to value each category of financial
instrument.
As at 1 Oct 2016 As at 2 Apr
2016
Carrying Fair Carrying Fair
amount value amount value
GBPm GBPm GBPm GBPm
------------------------------------- --------------------- --------------- --------- ---------
Loans and receivables:
Cash and cash equivalents 34.5 34.5 8.0 8.0
Trade and other receivables 58.9 58.9 83.6 83.6
Financial assets at fair value through profit or
loss:
Derivative financial instruments
- Forward foreign currency
exchange contracts 1.7 1.7 1.6 1.6
Financial liabilities at fair value through profit
or loss:
Derivative financial instruments
- Commodity and energy derivatives (0.2) (0.2) (1.0) (1.0)
- Interest rate swaps (0.8) (0.8) (1.0) (1.0)
Financial liabilities at amortised cost:
Trade and other payables (193.3) (193.3) (199.9) (199.9)
Senior secured notes (500.0) (501.6) (500.0) (511.7)
Senior secured credit facility
- revolving (89.0) (89.0) (55.0) (55.0)
Bank term loan - - (1.5) (1.5)
Bank overdraft (20.5) (20.5) (0.2) (0.2)
Finance lease obligations (0.1) (0.1) (0.2) (0.2)
Securitisation facility - - (6.4) (6.4)
------------------------------------- --------------------- --------------- --------- ---------
The following table presents the Group's assets and liabilities
that are measured at fair value using the following fair value
measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
As at 1 Oct 2016 As at 2 Apr
2016
Level 1 Level Level Level
2 1 2
GBPm GBPm GBPm GBPm
----------------------------------------------------------------------------------------- ------- --------- -------
Financial assets at fair value through profit or
loss:
Derivative financial instruments
- Forward
foreign
currency
exchange
contracts - 1.7 - 1.6
Financial liabilities at fair value through profit
or loss:
Derivative financial instruments
- Commodity
and energy
derivatives - (0.2) - (1.0)
- Interest
rate swaps - (0.8) - (1.0)
Financial liabilities at amortised cost:
Senior secured
notes (501.6) - (511.7) -
--------------- ------------------------------------------------------------------------- ------- --------- -------
13. Provisions for liabilities and charges
As at As at
1 Oct 2 Apr
2016 2016
GBPm GBPm
------------- ------------------- -------------------
Non-current (51.3) (47.3)
Current (6.1) (6.3)
------------- ------------------- -------------------
Total (57.4) (53.6)
------------- ------------------- -------------------
Total provisions for liabilities and charges of GBP57.4m at 1
October 2016 (2 April 2016: GBP53.6m) comprise restructuring
provisions of GBP32.8m (2 April 2016: GBP26.4m) which primarily
relate to provisions for non-operational leasehold properties, and
other provisions of GBP24.6m (2 April 2016: GBP27.2m) which
primarily relate to insurance claims, dilapidations against
leasehold properties and environmental liabilities.
14. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of defined benefit schemes under
which current and former employees have built up an entitlement to
pension benefits on their retirement. These are as follows:
(a) The Premier schemes, which comprise:
Premier Foods Pension Scheme ("PFPS")
Premier Grocery Products Pension Scheme ("PGPPS")
Premier Grocery Products Ireland Pension Scheme ("PGPIPS")
Chivers 1987 Pension Scheme
Chivers 1987 Supplementary Pension Scheme.
(b) The RHM schemes, which comprise:
RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The most recent full actuarial valuation of the PFPS, the PGPPS
and RHM pension schemes was carried out on 31 March 2013 / 5 April
2013 to establish ongoing funding arrangements. Deficit recovery
plans have been agreed with the Trustees of each of the schemes.
Actuarial valuations for the schemes based in Ireland were carried
out in 2014. Actuarial valuations as at 31 March 2016 / 5 April
2016 are substantially complete.
The exchange rates used to translate the overseas Euro based
schemes are GBP1.00 = EUR1.1735 for the average rate during the
period, and GBP1.00 = EUR1.1607 for the closing position at 1
October 2016.
At the balance sheet date, the combined principal actuarial
assumptions used for all the schemes were as follows:
Premier RHM schemes
schemes
At 1 October 2016
Discount rate 2.25% 2.25%
Inflation - RPI 3.15% 3.15%
Inflation - CPI 2.05% 2.05%
Expected salary increases n/a n/a
Future pension increases 2.10% 2.10%
---------------------------- --------- ------------
At 2 April 2016
Discount rate 3.55% 3.55%
Inflation - RPI 3.00% 3.00%
Inflation - CPI 1.90% 1.90%
Expected salary increases n/a n/a
Future pension increases 2.00% 2.00%
---------------------------- --------- ------------
For the smaller overseas schemes the discount rate used was
1.25% (2015/16: 1.85%) and future pension increases were 1.40%
(2015/16: 1.50%).
The mortality assumptions are based on standard mortality tables
and allow for future mortality improvements. The assumptions are as
follows:
Premier RHM schemes
schemes
--------------------------------- --------- ------------
Life expectancy at 1 October
2016
Male pensioner, currently aged
65 87.8 86.2
Female pensioner, currently
aged 65 90.0 88.4
Male non-pensioner, currently
aged 45 89.1 87.5
Female non-pensioner, currently
aged 45 91.5 89.9
Life expectancy at 2 April 2016
Male pensioner, currently aged
65 87.8 86.2
Female pensioner, currently
aged 65 90.0 88.4
Male non-pensioner, currently
aged 45 89.1 87.5
Female non-pensioner, currently
aged 45 91.5 89.9
---------------------------------- --------- ------------
The fair values of plan assets split by type of asset are as
follows:
Premier schemes % of total RHM schemes % of total Total % of total
GBPm % GBPm % GBPm %
----------------------------- ---------------- ----------- ------------ ----------- -------- -----------
Assets with a quoted price in an active market at 1 October 2016:
UK equities 0.5 0.1 0.5 0.0 1.0 0.0
Global equities 6.1 0.9 460.5 10.4 466.6 9.1
Government bonds 25.2 3.6 466.2 10.5 491.4 9.6
Corporate bonds - - 174.1 3.9 174.1 3.4
Property 9.5 1.4 350.6 7.9 360.1 7.0
Absolute return products 404.6 58.5 784.1 17.7 1,188.7 23.2
Cash 10.1 1.4 105.6 2.4 115.7 2.3
Other 235.9 34.1 2.8 0.1 238.7 4.7
Assets without a quoted price in an active market at 1 October 2016:
Infrastructure funds - - 231.3 5.2 231.3 4.5
Swaps - - 1,436.6 32.5 1,436.6 28.1
Private equity - - 300.6 6.8 300.6 5.9
Other - - 111.1 2.6 111.1 2.2
Fair value of scheme assets
as at 1 October 2016 691.9 100 4,424.0 100 5,115.9 100
----------------------------- ---------------- ----------- ------------ ----------- -------- -----------
Assets with a quoted price in an active market at 2 April 2016:
UK equities 1.4 0.2 0.5 0.0 1.9 0.1
Global equities 18.5 3.1 385.0 10.2 403.5 9.3
Government bonds 22.7 3.9 452.1 12.0 474.8 10.9
Corporate bonds - - 1.9 0.1 1.9 0.0
Property 8.2 1.4 284.1 7.6 292.3 6.7
Absolute return products 368.3 63.1 859.3 22.9 1,227.6 28.2
Cash 8.7 1.5 318.2 8.5 326.9 7.5
Other 156.1 26.7 2.5 0.1 158.6 3.7
Assets without a quoted price in an active market at 2 April 2016:
Infrastructure funds - - 228.0 6.1 228.0 5.2
Swaps - - 862.5 22.8 862.5 20.0
Private equity - - 259.4 6.9 259.4 6.0
Other 0.3 0.1 105.2 2.8 105.5 2.4
----------------------------- ---------------- ----------- ------------ ----------- -------- -----------
Fair value of scheme assets
as at 2 April 2016 584.2 100 3,758.7 100 4,342.9 100
----------------------------- ---------------- ----------- ------------ ----------- -------- -----------
The schemes invest in interest rate and inflation swaps to
protect from fluctuations in interest and inflation.
The amounts recognised on the balance sheet arising from the
Group's obligations in respect of its defined benefit schemes are
as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
------------------------------------- ---------- ------------ ----------
At 1 October 2016
Present value of funded obligations (1,282.7) (4,062.0) (5,344.7)
Fair value of plan assets 691.9 4,424.0 5,115.9
------------------------------------- ---------- ------------ ----------
(Deficit)/surplus in schemes (590.8) 362.0 (228.8)
------------------------------------- ---------- ------------ ----------
At 2 April 2016
Present value of funded obligations (1,004.2) (3,207.8) (4,212.0)
Fair value of plan assets 584.2 3,758.7 4,342.9
------------------------------------- ---------- ------------ ----------
(Deficit)/surplus in schemes (420.0) 550.9 130.9
------------------------------------- ---------- ------------ ----------
The aggregate deficit has increased by GBP359.7m during the
period ended 1 October 2016 (52 weeks ended 2 April 2016: GBP342.7m
decrease) primarily due to a decrease in the discount rate
assumption.
Changes in the present value of the defined benefit obligation
were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
---------------------------- ---------- ------------ ----------
Defined benefit obligation
at 4 April 2015 (1,065.9) (3,394.4) (4,460.3)
Interest cost (33.7) (109.3) (143.0)
Remeasurement gains 63.0 162.2 225.2
Exchange differences (4.6) (2.5) (7.1)
Benefits paid 37.0 136.2 173.2
Defined benefit obligation
at 2 April 2016 (1,004.2) (3,207.8) (4,212.0)
Interest cost (17.1) (55.7) (72.8)
Remeasurement losses (275.2) (874.2) (1,149.4)
Exchange differences (4.0) (2.2) (6.2)
Benefits paid 17.8 77.9 95.7
---------------------------- ---------- ------------ ----------
Defined benefit obligation
at 1 October 2016 (1,282.7) (4,062.0) (5,344.7)
---------------------------- ---------- ------------ ----------
Changes in the fair value of plan assets were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
--------------------------------- ------- ------------ --------
Fair value of plan assets
at 4 April 2015 612.5 3,636.0 4,248.5
Interest income on plan assets 18.7 117.4 136.1
Remeasurement (losses)/gains (19.4) 139.0 119.6
Administrative costs (2.6) (5.0) (7.6)
Contributions by employer 7.6 5.3 12.9
Exchange differences 4.4 2.2 6.6
Benefits paid (37.0) (136.2) (173.2)
--------------------------------- ------- ------------ --------
Fair value of plan assets
at 2 April 2016 584.2 3,758.7 4,342.9
Interest income on plan assets 10.1 65.4 75.5
Remeasurement gains 82.0 676.7 758.7
Administrative costs (1.4) (2.2) (3.6)
Contributions by employer 30.9 1.2 32.1
Exchange differences 3.9 2.1 6.0
Benefits paid (17.8) (77.9) (95.7)
--------------------------------- ------- ------------ --------
Fair value of plan assets
at 1 October 2016 691.9 4,424.0 5,115.9
--------------------------------- ------- ------------ --------
The reconciliation of the net defined benefit liability over the
period is as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
------------------------------ --------- --------- --------
(Deficit)/surplus in schemes
at 4 April 2015 (453.4) 241.6 (211.8)
Amount recognised in profit
or loss (17.6) 3.1 (14.5)
Remeasurements recognised in
other comprehensive income 43.6 301.2 344.8
Contributions by employer 7.6 5.3 12.9
Exchange rate losses (0.2) (0.3) (0.5)
(Deficit)/surplus in schemes
at 2 April 2016 (420.0) 550.9 130.9
Amount recognised in profit
or loss (8.4) 7.5 (0.9)
Remeasurements recognised in
other comprehensive income (193.2) (197.5) (390.7)
Contributions by employer 30.9 1.2 32.1
Exchange rate losses (0.1) (0.1) (0.2)
------------------------------ --------- --------- --------
(Deficit)/surplus in schemes
at 1 October 2016 (590.8) 362.0 (228.8)
------------------------------ --------- --------- --------
The total amounts recognised in the consolidated statement of
profit or loss are as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
----------------------------- --------- ------------ -------
Period ended 1 October 2016
Operating profit
Administrative costs (1.4) (2.2) (3.6)
Net interest (cost)/credit (7.0) 9.7 2.7
----------------------------- --------- ------------ -------
Total for the period (8.4) 7.5 (0.9)
----------------------------- --------- ------------ -------
Period ended 3 October 2015
Operating profit
Administrative costs (1.3) (2.4) (3.7)
Net interest (cost)/credit (7.4) 4.1 (3.3)
Total for the period (8.7) 1.7 (7.0)
----------------------------- --------- ------------ -------
52 weeks ended 2 April 2016
Operating profit
Administrative costs (2.6) (5.0) (7.6)
Net interest (cost)/credit (15.0) 8.1 (6.9)
----------------------------- --------- ------------ -------
Total (17.6) 3.1 (14.5)
----------------------------- --------- ------------ -------
15. Notes to the cash flow statement
Reconciliation of loss before taxation
to cash flows from operating activities
Period Period
ended ended
1 Oct 3 Oct
2016 2015
GBPm GBPm
-------------------------------------------- -------- -------
Continuing operations
Loss before taxation (8.7) (5.1)
Net finance cost 30.7 21.4
Share of loss from associates - 7.0
-------------------------------------------- -------- -------
Operating profit 22.0 23.3
Depreciation of property, plant
and equipment 8.1 7.7
Amortisation of intangible assets 19.0 18.7
Fair value movements on financial
instruments (1.0) (1.2)
Equity settled employee incentive
schemes 3.2 2.1
Increase in inventories (17.4) (13.8)
(Increase)/decrease in trade and
other receivables 15.4 (4.0)
(Decrease)/Increase in trade and
other payables and provisions (11.8) 7.9
Movement in retirement benefit obligations (31.2) 2.5
-------
Cash generated from continuing operations 6.3 43.2
Discontinued operations 0.7 (1.0)
-------------------------------------------- -------- -------
Cash generated from operations 7.0 42.2
-------------------------------------------- -------- -------
Analysis of movement
in borrowings
As at Cash flows Other non-cash As at
2 Apr 2016 movements 1 Oct
2016
GBPm GBPm GBPm GBPm
--------------------------- ------------------ --------------------- --------------- -------------------
Bank overdrafts (0.2) (20.3) - (20.5)
Cash and bank deposits 8.0 26.5 - 34.5
--------------------------- ------------------ --------------------- --------------- -------------------
Net cash and cash
equivalents 7.8 6.2 - 14.0
Borrowings - term
facilities (1.5) 1.5 - -
Borrowings - revolving
credit facilities (55.0) (34.0) - (89.0)
Borrowings - senior
secured notes (500.0) - - (500.0)
Finance lease obligations (0.2) 0.1 - (0.1)
Securitisation facility (6.4) 6.4 - -
--------------------------- ------------------ --------------------- --------------- -------------------
Gross borrowings net
of cash(1) (555.3) (19.8) - (575.1)
Debt issuance costs 21.1 - (2.0) 19.1
--------------------------- ------------------
Total net borrowings(1) (534.2) (19.8) (2.0) (556.0)
--------------------------- ------------------ --------------------- --------------- -------------------
(1) Borrowings excludes derivative
financial instruments.
16. Contingencies
There were no material contingent liabilities as at 1 October
2016 and 2 April 2016.
17. Related party transactions
There were no material related party transactions in the period
ended 1 October 2016. The Group's related party transactions and
relationships for the 52 weeks ended 2 April 2016 were disclosed on
pages 129-130 of the annual report and accounts for the financial
period ended 2 April 2016.
18. Subsequent events
There have been no material subsequent events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFWESLFMSELF
(END) Dow Jones Newswires
November 15, 2016 02:01 ET (07:01 GMT)
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