Introduction to Premier Foods February 2016

Transcription

1 Introduction to Premier Foods February 2016

2 CAUTIONARY STATEMENT Certain statements in this presentation are forward looking statements. By their nature, forward looking statements involve a number of risks, uncertainties or assumptions that could cause actual results or events to differ materially from those expressed or implied by those 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. 2 2

3 CONTENTS 1 2 History & introduction Why invest in us? 3 Recent results 4 Capital structure 5 Appendix 3 3

4 1 History & Introduction 4

5 A BRIEF HISTORY Timeline Ownership Private Public Strategy Building scale Restructuring Category Growth M&A Acquisitions Divestments Organic focus Flavourings & Seasonings 50% 40% 30% 20% 10% 0% No. 1 Market Value: 409m PF No.2 No.3 5

6 WE ARE ONE OF THE UK s LEADING AMBIENT GROCERY SUPPLIERS % Share Total UK ambient grocery market: 25bn Source: Kantar Worldpanel, 52 weeks ending 3 January 2016, excludes Foodservice and out of home 6 6

7 A FOCUSED PORTFOLIO IN AN AGILE ORGANISATION 58% fewer brands than in 2008 Grocery Sweet Treats International Corporate functions Employees Legal IT Grocery 1,620 Sales Marketing Innovation Technical Commercial Finance Business unit Human Resources Procurement Group finance Corporate Affairs Central Human Resources Sweet Treats 2,055 Group 3,

8 SUPPLY CHAIN INFRASTRUCTURE CARLTON SKELMERSDALE (D) MORETON STOKE WORKSOP CHARNWOOD CORBY (D) RUGBY (D) LIFTON ASHFORD ANDOVER SWEET TREATS SITES GROCERY SITES D indicates distribution site 8 8

9 2 Why invest in us? 9

10 OUR INVESTMENT PROPOSITION Focused on driving category growth Broad stable of leading brands driving category growth through marketing and innovation Diverse manufacturing processes provide wide scope to innovate Strong capabilities to serve today s multi-format retail environment Continued cost reduction supports brand investment Strong operational cash flows Committed and experienced management team 10 10

11 WE ENJOY LEADING CATEGORY POSITIONS Flavourings & Seasonings 50% 40% 30% 20% 10% 0% No. 1 Ambient Cakes No. 1 Ambient Desserts No. 1 Market Value: 414m 30% Market Value: 968m 60% Market Value: 307m 20% 40% 10% 20% 0% 0% PF No.2 No.3 PF No.2 No.3 PF No.2 No.3 Cooking Sauces & Accompaniments No. 1 Easy Eating No. 1 20% 15% 10% 5% 0% Market Value: 864m PF No.2 No.3 40% 30% 20% 10% 0% Market Value: 356m PF No.2 No.3 Share source: IRI Retail sales value, 52 w/e 27 June

12 WE CONTINUE TO DELIVER CATEGORY GROWTH Category Volume Sales Share Flavourings & Seasonings +1.6% +8% +1% +5% +3% +0.9ppt +0.2ppt Cake +2.0% +15% +9% +1.2ppt +14% +11% +0.6ppt Total Categories +1.2% +5% +2% +0.2ppt Source: Kantar Worldpanel, 52 w/e 13 September

13 DEMONSTRABLE RETURN ON MARKETING & INNOVATION FY16 H1 Volume & Sales growth Household penetration 1 Marketing & Innovation Programme Bisto +1.7ppts Oxo +0.5ppts Mr. Kipling +4.1ppts Cadbury Volume Sales +4.7ppts 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 1 - Kantar Worldpanel, 52 w/e 13 September

14 INNOVATION AND BRAND INVESTMENT Doubling of innovation rate since FY14; marketing H2 focused Sales from innovation FY16 Consumer marketing 36-38m H2 H1 2013/ / /16 Source: IRI, 52 w/e 3 October

15 EXCITING GROCERY INNOVATION PROGRAMME FOR Q4 Rooted in deep consumer insights Ambrosia Deluxe Custard and Frozen Custard Paul Hollywood Baking Mixes Homepride All American Cooking Sauces 15 15

16 MORE INNOVATION FROM SWEET TREATS Launching instore in the fourth quarter Exceedingly Good Oaty Slices Mr Kipling Cup cakes 16 16

17 PREMIUMISATION ACROSS THE PORTFOLIO Superior products based on consumer needs allows premium pricing Ambrosia Batchelors Mr Kipling Premium /serving % +28% +25% +107% 17 17

18 CATEGORY REVIEW DYNAMICS Our category strategy fosters strong customer partnerships 43% Market leading positions SKU reduction programme Well placed to work in close partnership with major customers Category captaincy Innovation programme 18 18

19 DELIVERING GROWTH IN ALL CHANNELS 16.4% Outgrew market in H1 2.5% 13.0% 11.4% 0.9% 1.4% 3.7% 8.0% Market Premier Foods (0.3%) (1.7%) Supermarkets Online Convenience Bargain stores Discounters Growth ahead of market Market size ( m) 2, Source Kantar Worldpanel, 52 w/e 13 September 2015; Premier Foods discounters growth includes estimate for Non-branded 19 19

20 CAPITAL PROJECTS RETURNS PROVIDE FUEL FOR BRAND INVESTMENT Major investment in Stoke cake bakery 25% 39% 7m <3 years > 2m 36% Growth Cost release Infrastructure 2015/16 Investment Payback Annual cost release 2015/16 CAPEX c. 25m Strong pipeline of cost release and growth projects Many with good paybacks 20 20

21 PEOPLE STRATEGY PROGRESSING WELL Attracting high calibre senior talent; employee survey results Recent senior management recruits Employee survey Grocery Finance Director Grocery Operations Director Sweet Treats Marketing Director International Sales Director 84% High participation Brand Director Quick Meal Solutions & Soups Brand Director Cooking Sauces Brand Director Desserts & Homebaking Grocery Insights Director +7ppts Employee engagement 21 21

22 SWEET TREATS - HEALTH & NUTRITION Cake in Context Consumers view cake as a treat Sugar has important structural function as well as sweetness 106 calories 140 calories 230 calories Sugar replacement technologies at early stage of development Positive Approach Reformulating to reduce calories and sugar where technologically possible and without compromising taste (e.g. Milkshake slices) Introducing calorie caps on individual cakes Investing in portion controlled Snack Pack format Industry pioneer on front of pack traffic light nutrition labelling Wholesome and nourishing ingredients in new product development Investing in R&D resource to manage increased nutritional focus 22 22

23 3 Recent results 23

24 Q3 RESULTS SUMMARY Solid Q3 trading underpinned by strong Sweet Treats performance +0.1% +0.3% Group Q3 sales & Q3 YTD sales Sweet Treats +6.5% International +9.8% Grocery (2.7%) 24

25 Q3 HIGHLIGHTS Strong execution instore and growing in growth channels +43% +27% Consumer Marketing Instore Shipper Displays Discounters +over 30% Sold 185 million Mince Pies, +8% 25

26 GROUP RESULTS Solid Q3 trading underpinned by strong Sweet Treats performance Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales +1.6% +0.1% (1.0%) (0.4%) Non-branded sales +10.6% 3.7% +6.4% +5.3% Total sales +2.4% +0.4% +0.1% +0.3% Background of a broader food sector where top-line growth was negative Simplification of capital structure through closure of debtors securitisation programme Strong innovation programme planned for Q4 Profit and Net debt expectations for full year unchanged Sales targets of 1-2% for FY16/17 and medium term unchanged 26

27 GROCERY An unexpectedly mild December and reduced promotional activity of Ambrosia Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales +3.1% +0.6% (3.1%) (1.0%) Non-branded sales +5.6% (2.4%) +4.2% +0.3% Total sales +3.3% +0.3% (2.7%) (0.9%) Mildest December since records began held back Q4 sales Ambrosia sales lower in the quarter reflecting decision to reduce less profitable promotions Record ever Bisto market share in December Significantly improved instore execution with 27% more off shelf shipper displays over Christmas 27 27

28 SWEET TREATS Sales up +6.5% due to strong innovation programme Sales YoY (%) Q2 H1 Q3 Q3 YTD Branded sales (2.6%) (1.3%) +6.0% +1.5% Non-branded sales +18.7% +15.2% +7.5% +10.0% Total sales +0.2% +0.8% +6.5% +3.3% Strong innovation programme, especially Cadbury Amaze Bites and Hot Cakes driving branded sales increase of +6.0% in Q3 Mince pie contract gains across multiple retail and discounters channels delivering good Non-branded sales growth In 2015, the Company sold 185 million mince pies, 8% higher than the prior year Mr Kipling and Cadbury grew share on a year to date basis 28 28

29 4 Capital structure 29

30 A LONGER TERM AND DIVERSIFIED CAPITAL STRUCTURE Raised 500m Senior Secured Notes in FY14: 325m Fixed 175m Floating New 272m Revolving Credit Facility New and streamlined bank syndicate Issued 340m equity in FY14 Fixed payment schedule with Pension Trustees through to 2019 Net debt / EBITDA: FY15/16 H1 actual 3.9x Medium term target - 2.5x Dividend payable when Net debt / EBITDA <3.0x m RCF Floating notes Fixed notes 30 30

31 OUR CASH GUIDANCE IS UNCHANGED 2015/16 guidance m Working capital Neutral to slightly negative Depreciation c. 16m Capital expenditure c. 25m Interest cash 40-43m Interest P&L c. 45m Tax cash Nil Tax notional P&L rate 20.0% Pension deficit contributions 6m Pension administrative & PPF levy cash costs 8-10m Restructuring costs c. 5m Consumer marketing 36-38m Capex programme expected to deliver strong payback cost release projects Cash tax expected to be nil over medium term Pension administrative & PPF cash costs reflected in Operating profit but not Trading profit 31 31

32 H1 NET DEBT IN LINE WITH EXPECTATIONS Stronger cash flows expected in H2 reflecting seasonality m Net debt 4 April 2015 Trading profit Depreciation Pensions Capex Interest Working capital Restructuring Other Net debt 3 Oct 2015 Net debt in line with expectations; expected H2 cash inflows reflect seasonality of business Working capital outflow due to stock build; expected to partly unwind in H

33 4 Appendix 33

34 INDUSTRY BACKDROP IS WELL DOCUMENTED Grocery volume growth momentum while deflation persists Inflation/(Deflation) Volume 3.0 % 3.0 % +1.9% 0.0 (1.7%) (3.0) Jul 2014 Sep Jul 2014 Sep 2015 Market volume growth now prevalent for c. twelve months Deflationary environment evident across broad range of categories Source: Kantar Worldpanel, Total Grocery 12 w/e 13 September

35 IMPROVED PENSION DEFICIT Combined schemes includes RHM surplus offset by Premier Foods deficit; lower deficit due to increased discount rate IAS19 Accounting valuation ( m) 3 October April 2015 Assets 4,118 4,248 Liabilities (4,151) (4,460) Deficit (33) (212) Deficit net of deferred tax 20.0%/21.0%) (26) (167) Discount rate 3.70% 3.30% Inflation rate (RPI) 3.10% 3.00% Reduction in deficit principally reflects liability reduction due to discount rate increase from 3.3% to 3.7% Deficit reflects RHM surplus of 383m offset by Premier schemes deficit of 416m Pension deficit cash contributions fixed until 2019 NPV of post tax deficit contributions per agreed schedule is c. 390m 35 35

36 PENSIONS COMBINED SCHEMES m 3 Oct April 2015 Assets 4,118 4,248 Liabilities (4,151) (4,460) Deficit (33) (212) Deficit net of deferred tax (26) (167) Key IAS 19 assumptions 3 Oct April 2015 Discount rate 3.70% 3.30% Inflation rate (RPI/CPI) 3.1%/2.0% 3.0%/1.9% Mortality assumptions LTI +1.0% LTI +1.0% Deficit reflects RHM schemes surplus of 383m offset by Premier schemes deficit of 416m Scheme Assets ( m) 3 Oct April 2015 Equities Government bonds Corporate bonds Property Absolute/Target return 1,306 1,333 Cash Infrastructure funds Swaps Private equity Other Total 4,118 4,

37 PENSION DEFICIT SCHEDULE CONTRIBUTIONS Restated to reflect financial year end change m 2015/ / / / /20 Deficit contributions Administration costs (including PPF levy) Total cash outflow Table above shows the phasing of previously agreed deficit contributions in the context of the Company s new financial calendar 37 37

38 PENSION DEFICIT SENSITIVITIES Pension sensitivities (IAS 19 basis, m) Increase/ (reduction) in assets Increase/ (reduction) in liabilities Increase/ (reduction) in deficit 25 basis point decrease in government gilts basis point increase in credit spread - (170) (170) 25 basis point increase in RPI Life expectancy increase by 1 year Above sensitivities are indicative only Sensitivities may change over time Schemes investment strategy may change over time 38 38