TIDMPFD TIDMIRSH
RNS Number : 4109U
Premier Foods plc
18 January 2017
18 January 2017
Premier Foods plc (the "Company" or the "Group")
Quarter 3 Trading Statement for 13 weeks ended
31 December 2016
-- Weak Q3 Group sales down (1.0%), despite strong December up +4.5%
-- Trading profit expectations for the year approximately 10%
lower than previously anticipated
-- Majority of major brands grew volumes and market share in Q3
-- New cost savings and efficiency programme to deliver GBP10m from FY17/18
-- First new products from Nissin partnership to launch in Q4
Gavin Darby, Chief Executive Officer
"Sales in our third quarter were weaker than expected despite a
strong December. We now expect category performance to remain
challenging during the fourth quarter and as a result sales will be
below previous expectations. Additionally, recovery of significant
input cost inflation in certain areas is taking longer than
originally foreseen. Consequently, we now expect Trading Profit for
FY16/17 to be approximately 10% below previous expectations."
"Six out of eight of our major brands gained volume and value
market share in the quarter although our categories were generally
softer due to changes in retailer promotion strategies. Our
International business delivered a ninth consecutive quarter of
growth, up 15%."
"Against the backdrop of these headwinds, we are today
initiating a new cost saving and efficiency programme which will
deliver GBP10 million from 2017/18 with equivalent further savings
the following year. This programme will support the Company's twin
goals of delivering Trading profit and free cash flow while
investing in innovation and consumer marketing."
Group trading
Group sales in the third quarter were GBP251.4m, (1.0%) lower
than the same period last year. Branded sales were (3.8%) lower,
while Non-branded sales performed strongly, ahead +11.6%. Group
volumes increased +3.4% in the quarter.
Grocery
Total sales in the Grocery business were (1.9%) lower as strong
Non-branded sales +13.0% were offset by weaker branded sales, down
(3.8%) in the quarter. Non-branded sales increased as a result of
growth in business to business volumes, particularly in Knighton
and from new contract wins in retail branded flour.
During the quarter the Group's Grocery categories have been
affected by changing retailer promotional strategies, notably a
reduction in multi-buy promotions which has the effect of reducing
category volumes. In the short term the Group has offset this
adverse volume impact by upweighting other promotional mechanics
such as reduced price deals. However, these mechanics are more
costly than multi-buys and result in reduced sales revenue per
unit.
While the quarter in overall terms was lower than the prior
year, branded sales were strong in December as a number of brands
returned to growth in the busy festive trading period. Bisto, Oxo,
Loyd Grossman, Ambrosia and Batchelors all delivered volume and
value market share gains in the quarter and sales of Loyd Grossman
sauces increased due to continued success of the Gastro pouches
range.
Market share gains in the Batchelors brand were particularly
encouraging as new flavours in Pasta 'n' Sauce delivered growth,
while distribution continues to build in the new High Veg, High
Protein and Soup & Dippers ranges.
Total International sales grew by nearly 15% in the quarter
following another strong performance in Australia, notably with the
Mr Kipling and Cadbury cake ranges. This marks the ninth
consecutive quarter of growth for the International business.
We expect the current changes in retailer promotional mechanics
to continue to impact sales growth through the first half of
calendar 2017. The Group is already working with customers to
refine promotional strategies to mutual benefit; for example by
introducing new multipack formats which will support category
growth.
Sweet Treats
Sales in Sweet Treats increased by 1.0% in the quarter. Branded
sales were (3.4%) lower while Non-branded sales increased by
10.3%.
Cadbury cake continued its strong momentum from the first half
of the year, with sales and market share both growing. The Group
continues to enjoy an excellent working relationship with Mondelez,
and discussions about extending the Group's long standing licence
arrangements for the Cadbury brand are making good progress. In the
fourth quarter, the Group will be launching new Cadbury cake Choc
Tarts in Caramel, Crunchie and Flake flavour variants.
The group sold over 216 million mince pies in 2016, up 17% on
the prior year. However, some of the volume manufactured by the
group switched from Mr Kipling to non-branded sales, which resulted
in softer branded sales offset by a very strong performance across
the non-branded range.
Input cost recovery
The Group is experiencing material input cost inflation, notably
in commodities such as sugar, chocolate, dairy, wheat and palm oil.
Input costs have also been driven up by currency devaluation. We
take a blended approach to managing these cost increases, managing
our own efficiencies, adjusting promotional mechanics and formats
where appropriate and finally looking at limited price increases
where these cannot be avoided. We are working collaboratively with
customers to agree these changes and are confident that appropriate
settlements will be reached, although this is taking longer than
originally foreseen.
Nissin partnership update
The Group is pleased to confirm it will be distributing its
first Nissin branded products in the next few weeks. The Soba
noodles pot product delivers authentic noodle texture and flavours
with distribution across most major retailers from February
2017.
Additionally, great progress has been made with the new
Batchelors Super Noodles Pot product which is expected to launch
earlier than expected, also from February 2017. This brand new
launch demonstrates the benefits of working closely with the Nissin
research & development teams and manufacturing base in Hungary
to deliver the popular Batchelors Super Noodles in a pot format for
the very first time.
Cost reduction and efficiency programmes
The Group is about to commence a substantial three year cost
reduction and efficiency programme. This programme is planned to
significantly improve operational efficiencies in the supply chain
from FY17/18, particularly in warehousing and distribution.
Additionally, the Group will continue to streamline processes in
all business units and is actively exploring further opportunities
to deliver significant cost savings across its SG&A cost base.
This programme is expected to deliver incremental cost savings of
GBP10m from FY17/18 with equivalent further savings the following
year.
Outlook
The Group's expectations for Sales and Trading profit in FY16/17
are lower than previously anticipated, with Trading profit expected
to be 10% lower. Net debt as of 1 April 2017 is expected to be
around GBP525 million. The Group today announces an incremental
cost saving and efficiency programme which it expects to deliver
GBP10m savings from FY17/18, with equivalent further savings the
following year. This programme will support the Company's twin
goals of delivering Trading profit and free cash flow while
continuing to invest in innovation and consumer marketing.
Ends
For further information, please contact:
Investors and analysts:
+44 (0) 1727
Alastair Murray, Chief Financial Officer 815 850
+44 (0) 1727
Richard Godden, Head of Investor Relations 815 850
Media:
Richard Johnson, Corporate Affairs +44 (0) 1727
Director 815 850
+44 (0) 1727
Marisa Fitch, Head of External Affairs 815 850
Maitland
+44 (0) 20 7379
5151 / 07714
Kate O'Neill 415229
This statement includes inside information.
Conference call
A conference call for investors and analysts hosted by Gavin
Darby, CEO and Alastair Murray, CFO, will take place today, 18
January 2016 at 9.00am, details of which are outlined below. A
replay of the conference call will be available on the Company's
website later in the day:
www.premierfoods.co.uk/investors/results-centre
Telephone number: 0800 376 7922 (UK toll free)
+44 20 7192 8000 (standard international access)
Conference ID: 44082922
Notes to editors:
1 All financial data detailed above is unaudited and has not been subject to review
by the Company's auditors.
2 All sales data relates to the 13 weeks to 31 December 2016 or 2 January 2016,
the "quarter", as appropriate.
Quarter 3 year to date sales data is for the 39 weeks to 31 December 2016 or
2 January 2016 as appropriate.
3 International sales growth is stated on a constant currency basis.
4 References to market share are sourced from IRI, 12 weeks ended 24 December
2016.
5 Trading profit is defined as profit 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 administrative
expenses.
Certain statements in this management statement are forward
looking statements. By their nature, forward looking statements
involve a number of risks, uncertainties or assumptions that could
cause actual results or events to differ materially from those
expressed or implied by those statements. Forward looking
statements regarding past trends or activities should not be taken
as representation that such trends or activities will continue in
the future. Accordingly, undue reliance should not be placed on
forward looking statements.
A Premier Foods image gallery is available using the following
link:
http://www.premierfoods.co.uk/media/image-gallery
Quarter 3 sales
GBPm 2016/17 2015/16 Change
Grocery
Branded 149.1 155.0 (3.8%)
Non-branded 23.4 20.7 13.0%
-------- --------- -------
Total 172.5 175.7 (1.9%)
-------- --------- -------
Sweet Treats
Branded 51.1 53.0 (3.4%)
Non-branded 27.8 25.2 10.3%
-------- --------- -------
Total 78.9 78.2 1.0%
-------- --------- -------
Group
Branded 200.2 208.0 (3.8%)
Non-branded 51.2 45.9 11.6%
-------- --------- -------
Total 251.4 253.9 (1.0%)
-------- --------- -------
Quarter 3 sales - year to date
GBPm 2016/17 2015/16 Change
Grocery
Branded 361.9 381.2 (5.1%)
Non-branded 60.9 55.2 10.4%
-------- --------- -------
Total 422.8 436.4 (3.1%)
-------- --------- -------
Sweet Treats
Branded 133.7 133.4 0.3%
Non-branded 42.9 38.6 11.1%
-------- --------- -------
Total 176.6 172.0 2.7%
-------- --------- -------
Group
Branded 495.6 514.6 (3.7%)
Non-branded 103.8 93.8 10.7%
-------- --------- -------
Total 599.4 608.4 (1.5%)
-------- --------- -------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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