TIDMPFD
RNS Number : 9424C
Premier Foods plc
23 January 2015
23 January 2015
Premier Foods plc (the "Company")
Quarter 4 Management Statement
Improving sales trend through key trading period
Premier Foods today presents a management statement for the
quarter to 31 December 2014 and summary results for the twelve
months to 31 December 2014. As previously advised, the Company is
changing its year-end to early April, so the next audited financial
statements will be prepared to the fifteen months ended 4 April
2015. All disclosures in this statement are unaudited and the term
'year' refers to the twelve months to 31 December 2014.
-- Power Brands sales down (3.5%) in quarter 4, with improving trend in December
-- Highest quarterly market share for three years; highest December market share for four years
-- Positive results from areas where we are investing
-- Mr. Kipling delivered increased sales and share gains, with accelerating December trend
-- Trading profit for the year of GBP131.0m, in line with expectations
-- Adjusted PBT for the year of GBP77.1m and adjusted earnings per share of 8.6p
-- Net debt at 31 December 2014 of GBP567.6m, in line with expectations
Gavin Darby, Chief Executive Officer of Premier Foods said:
"I am pleased with the improved branded sales trends in the
fourth Quarter, and particularly our key December trading period,
in what continue to be challenging market conditions. The trend in
branded sales improved for the second consecutive quarter, our
market share in December was the highest it's been for the last
four years and we are encouraged by positive results from areas of
the business in which we invested. Mr. Kipling delivered a
particularly strong performance following its re-launch in the
second half of 2014.
Over the year as a whole, we achieved a great deal to set the
Company up for future growth. This included a major capital
restructuring to diversify and secure our sources of funding, a new
organisation structure to improve our focus and agility and a
further reduction in cost and complexity to help fund our
investment in marketing, new products and organisational
capabilities. We also delivered trading profit and net debt for the
year in line with current market expectations.
While the grocery market continues to evolve, we enter 2015 in a
stronger position. We will continue to invest behind our
innovation, marketing and category based strategies and work
closely with our customers to deliver category growth. We are very
encouraged by the quality and depth of these relationships. At the
same time the business will retain a tight focus on costs, trading
profit and organic de-leveraging, with Net debt expected to reduce
significantly in 2015. We believe this balanced approach is central
to the creation of future value."
Quarter 4 Sales
GBPm 2014 Q4 2013 Q4 Change
Power Brands 158.6 164.4 (3.5%)
Support brands 61.0 63.0 (3.2%)
-------- --------- --------
Total branded 219.6 227.4 (3.4%)
Non-branded 35.6 40.1 (11.5%)
-------- --------- --------
Total sales(2) 255.2 267.5 (4.6%)
-------- --------- --------
Quarter 4 Year to Date Sales
GBPm 2014 Q4 2013 Q4 Change
YTD YTD
Power Brands 519.0 543.5 (4.5%)
Support brands 184.0 194.9 (5.6%)
-------- --------- -------
Total branded 703.0 738.4 (4.8%)
Non-branded 85.5 94.0 (9.0%)
-------- --------- -------
Total sales(2) 788.5 832.4 (5.3%)
-------- --------- -------
Category review
The Company's underlying sales declined by (4.6%) in the fourth
quarter of the year, with Power Brand sales down (3.5%) and Branded
sales (3.4%) lower. Non-branded sales declined (11.5%).
The sales performances for both Power Brand and the total
branded portfolio in the Company's important fourth quarter
displayed an improving trend when compared to the second and third
quarters of the year, notwithstanding the impact of milder weather
in October and November. The trend for Power Brands improved
further still in December, with sales down (2.3%) in the month.
Additionally the Company's market share in its categories was the
highest recorded for four years in the month of December, while the
proportion of the Company's sales from its brands increased from
88.7% in 2013 to 89.2% for the twelve months ended 31 December
2014.
Mr. Kipling was the stand-out performer in the fourth quarter,
growing share, sales and volumes reflecting the benefits of its
major re-launch in the second half of year in addition to a strong
performance from its seasonal range and improved in-store
execution. This, the Company's largest brand, reached its highest
share position for over a year, delivered a retail sales increase
year on year of 28% in December and sold more cakes in the run up
to Christmas than at any other time in the previous two years(4) .
Mr. Kipling will also benefit from further television advertising
in the coming quarter while the new Snack Pack line, which will
more than double current capacity and significantly increase the
number of formats, is well on track.
The Company's second largest brand, Bisto, delivered encouraging
share gains throughout 2014, supported by launches of new products
Bisto Simply Casserole and Bisto Gravy Pastes and associated
advertising campaigns. In cooking sauces, sales of Loyd Grossman
increased in the year due to improvements in its promotional
strategy and supported by new products such as lasagne pouch
sauces. While Sharwood's has experienced a difficult year, we have
exciting new products which will shortly be launched into market
and will have a new television advertising campaign to support
Chinese New Year. Sales of Batchelors were slower in the quarter
with the brand being adversely affected by October and November's
milder weather.
In support brands, Homepride cooking sauces delivered increased
volumes and held share in the fourth quarter, arresting a long
period of decline and demonstrating the benefits of its new
contemporary product range and television advertising in the second
half of the year. Cadbury cake increased sales by nearly 5% and
grew share in the quarter following a good performance at
Halloween. Non-branded sales were (9.0%) lower in the year as a
result of the exit of lower margin cake and desserts contracts.
Overall, we are encouraged that in areas where we have targeted
brand investment, we are seeing a return through a positive impact
on sales, volumes and/or market share.
In International, good performances were recorded in Ireland and
USA although these were offset by adverse currency movements. The
Company will be doubling its investment in its International
business unit over the next twelve months to help drive growth in
particular geographies.
Market trends
In the wider UK food market, food price deflation materialised
in the fourth quarter for the first time in over ten years. This
reflects increased price competition across the grocery landscape
and a benign input cost environment. We continue to adapt our
business to reflect the impact of changes in shopper behaviour and
the impact on the UK retail environment. These trends include
increased sales in the discounter channel, increasing online
volumes, and a trend towards shopping in smaller convenience
outlets. The Company's strategy is to invest in long-term customer
partnerships where it seeks to both understand and support
individual customers' business strategies. In many cases, such as a
focus on category management and the drive to reduce SKUs (product
codes), a strong degree of alignment already exists. During the
year we have increased our UK customer facing resource by 14% and
we are encouraged by the quality and depth of our customer
relationships; an assessment which is supported both by external
data and the good progress being made on joint business plans with
major customers.
In the discounter channel, the Company will pursue appropriate
opportunities while continuing to take a disciplined approach to
this area and return on investment will be assessed rigorously when
deploying resources such as product development and capital. To
capture opportunities online, the Company is developing customised
joint business plans, identifying the right cross-selling
opportunities and recruiting additional resources to deliver on the
opportunities this channel presents. In Convenience, the Company
considers that its category leadership positions, together with its
portfolio offerings for the 'On the Go' and 'Meal for Tonight'
consumer trends mean it is well positioned to participate in this
growth area.
Trading profit and Adjusted earnings per share
GBPm 31 Dec 31 Dec Change
2014 2013
Underlying Trading profit(5) 131.0 139.5 (6.1%)
Net regular interest(7) (53.9) (58.4) 7.7%
-------
Adjusted profit before
tax(7) 77.1 81.1 (4.9%)
Less: notional tax (21.5%/23.25%) (16.6) (18.9) 12.2%
-------
Adjusted profit after tax 60.5 62.2 (2.7%)
Average shares in issue 707.1 366.1 -
Adjusted earnings per share(7)
(pence) 8.6p 17.0p -
------- --------
Gross margins were solid in the year, reflecting the beneficial
branded mix effect and benign input costs. We have continued to
manage promotional spend carefully to ensure that appropriate
returns are delivered. Of particular benefit during the year was
the improvement in capacity utilisation across the supply chain
following the completion of the Knighton Foods joint venture in
June 2014. Additionally, the Company continues to reduce complexity
to optimise its cost base following previous disposals and has
invested in systems and equipment to drive manufacturing
efficiency. Over the last two years, we have reduced the number of
SKUs (product codes) by 43% and more than halved the number of
suppliers. Our supplier programme has, in particular, enabled us to
develop more strategic, and mutually beneficial, partnerships
focused on growth, including with many small and medium sized
businesses. We plan to continue strengthening our supplier
relationships based on mutual respect.
Following the re-organisation structure announced in September
2014, in addition to its upweighted investment in the International
business, the Company will also be significantly increasing its
marketing and innovation resources across the Grocery and Sweet
Treats businesses. In the fourth quarter of the year consumer
marketing spend increased by over 80% compared to the prior year,
and the Company is encouraged by the positive results of this
investment to date. We remain committed to investment in all these
areas despite the challenging business environment.
Trading profit(5) for the twelve months to 31 December 2014 was
in line with current expectations at GBP131.0m and EBITDA(6) was
GBP145.5m. In the first half of the calendar year trading profit
was split broadly equally between the first and second quarters.
Adjusted profit before tax declined by GBP4.0m in the year to
GBP77.1m as the Trading profit performance was partly offset by a
reduced net regular interest charge of GBP53.9m. This reduced
financing charge reflects lower average Net debt in the year
following the repayment of the previous bank facility agreement
associated with the capital restructuring earlier in the year. The
Company expects net regular interest for the financial year ending
2 April 2016 to be approximately GBP10m lower than for the 12
months to 31 December 2014. A notional tax charge of 21.5% (2013:
23.25%) is used and reflects the substantially UK nature of the
Company's business.
The Company is pleased by the progress being made by Hovis, in
which it holds a minority interest, with the Hovis brand continuing
to grow market share.
The Company's adjusted earnings per share for the twelve months
ended 31 December 2014 was 8.6 pence per share. The average
weighted number of shares in the period was 707.1 million which
reflects the issue of new shares during the year for the placing
and rights issue transactions and the launch of the all employee
share incentive plan. The 2013 comparative earnings per share
information in the table above has been restated for the bonus
element of the rights issue transaction in March 2014.
Financial position and Pension valuation
GBPm 31 Dec 2014 31 Dec Change
2013
Net debt 567.6 830.8 263.2
IAS 19 Pension deficit
- Gross 323.1 603.3 280.2
IAS 19 Pension deficit
- Net 253.6 463.0 209.4
The Company's Net debt at 31 December 2014 was GBP567.6m and the
Company retains its medium-term leverage target of 2.5x Net
debt/EBITDA. Net debt was in line with expectations, with slightly
lower capital expenditure which was offset by working capital
movements. The Company's expectation of cash flows for the year
ending 2 April 2016 are unchanged and reflect normal quarterly
working capital movements and interest coupon payments.
The Company's capital expenditure is likely to be GBP20-GBP25m
in the coming year, reflecting opportunities presented by good
value cost reduction payback projects with attractive payback
benefits. The Company has now completed the implementation of SAP
across its supply chain network, and as a result, the proportion of
IT related capital expenditure is expected to be lower over the
medium term.
The valuation of the Company's pensions schemes under the IAS 19
accounting methodology at 31 December 2014 was a deficit of
GBP323.1m (31 December 2013: GBP603.3m; 30 June 2014: GBP536.2m)
which equates to a deficit of GBP253.6m net of deferred tax (31
December 2013: GBP463.0m; 30 June 2014: GBP420.9m). The main
factors behind this decrease in the deficit are: a widening of
credit spreads between government gilts and corporate bonds; the
impact on assets of the schemes hedging strategy, a reduction in
inflation rate assumptions and improved investment performance. It
should be noted that while this reduction in the pension deficit is
a positive movement for the Company, it is a measurement at a
particular point in time and does not impact on the previously
agreed pension deficit contribution payment schedule, which is
fixed until 2019.
Financial year end
As previously announced, the Company is changing its year end
and will prepare financial statements for the 15 months ended 4
April 2015 which will be released on Tuesday 19 May 2015. These
statements will include pro forma results for the twelve months to
4 April 2015.
Outlook
While near-term market conditions are expected to remain
challenging, the Company's commitment to brand investment
continues, with consumer marketing expenditure expected to double
in the first calendar quarter of 2015. This investment will be
funded by existing cost reduction programmes. At the same time the
Company will retain a tight focus on costs, Trading profit and
organic de-leveraging, the latter of which will benefit in 2015
from lower pension, interest and capital expenditure costs. The
Company believes this balanced approach is central to the creation
of future value.
Ends
For further information, please contact:
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:
Richard Johnson, Group Corporate Affairs
Director +44 (0) 1727 815 850
Maitland +44 (0) 20 7379 5151
Liz Morley
Tom Eckersley
Analyst Webinar
A webinar for investors and analysts hosted by Gavin Darby, CEO
and Alastair Murray, CFO, will take place on 23 January 2015 at
9.00am, details of which are outlined below. A replay of the
webinar will be available on the Company's website later in the
day. www.premierfoods.co.uk/investor-relations/results-centre/
Webinar www.premierfoods.co.uk/investor-relations/
Telephone number: 0800 376 7922 (UK toll free) +44
20 7192 8000 (standard international
access)
Password: Premier Foods
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 for Premier Foods is for the three months to
31 December 2014 or 31 December 2013 as appropriate. Quarter 4 year
to date sales data is for the twelve months to 31 December 2014 or
31 December 2013 as appropriate.
3. Sales for the three months to 31 December 2014 (31 December
2013) and for the twelve months to 31 December 2014 (31 December
2013) are stated following completion of the Knighton Foods joint
venture.
4. Unit sales as measured by IRI, 8 December 2012 - 20 December 2014.
5. Trading profit is defined as operating profit before
re-financing costs, restructuring costs, profits and losses
associated with divestment activity, amortisation and impairment of
intangible assets, the revaluation of foreign exchange and other
derivative contracts under IAS 39, profits and losses from
associate companies and pension administration costs and net
interest on the net defined benefit liability.
6. EBITDA is Trading profit before depreciation.
7. Adjusted profit before tax is defined as Trading profit less
net regular interest. Adjusted earnings per share is defined as
Adjusted profit before tax less a notional tax charge of 21.50%
(2013: 23.25%) divided by the weighted average of the number of
shares of 707.1 million (2013: 366.1 million). Net regular interest
is defined as total net interest excluding non-cash items such as
write-off of financing costs, fair value adjustments on interest
rate financial instruments and other interest.
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:
www.premierfoods.co.uk/news-&-media/image-gallery/
This information is provided by RNS
The company news service from the London Stock Exchange
END
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