REG - Premier Foods plc Premier Foods Fin - Half-year results
16/11/2022 07:00
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RNS Number : 5288G Premier Foods plc 16 November 2022
16 November 2022
Premier Foods plc (the "Group" or the "Company")
Half year results for the 26 weeks ended 1 October 2022
Strong first half, expectations for full year on track
Financial headlines
Headline measures (excluding The Spice Tailor)
· Group revenue up +6.2%, Q2 revenue up +6.4%
· Branded revenue growth up +3.9% in H1 and +3.6% in Q2
· Trading profit(1) up +6.2%, margins maintained in line with prior year
· Adjusted profit before tax up +11.9%, adjusted earnings per share up +11.4%
Statutory measures (including The Spice Tailor)
· Group revenue up +6.6%
· Statutory profit before tax up +37.1%
· Basic earnings per share of 4.2p, up +68.0%
· Combined pensions surplus of £961.8m, up +1.8% compared to 2 April 2022
Strategic & operational headlines
· Branded growth model delivered 5.0% average UK branded revenue growth over
last three years
· Gross margins in line with last year as input cost inflation offset by cost
savings and increased pricing
· International revenue growth up +11%(8) with broad based growth in target
markets
· Doubled new categories revenue through brand extensions including Rubs &
Marinades, Ice-cream and Porridge
· Completed highly complementary acquisition of The Spice Tailor
· On track to deliver full year expectations
Headline results (£m) FY22/23 H1 FY21/22 H1 % change
Revenue 418.6 394.1 6.2%
Trading profit(1) 56.7 53.4 6.2%
Adjusted profit before taxation(4) 47.0 42.0 11.9%
Adjusted earnings per share(7) (pence) 4.4 4.0 11.4%
Net debt(10) (includes The Spice Tailor) 337.7 345.0 2.1% lower
Statutory measures (£m) FY22/23 H1 FY21/22 H1 % change
Revenue 419.9 394.1 6.6%
Profit before taxation 42.1 30.7 37.1%
Profit after taxation 36.1 21.0 71.9%
Basic earnings per share (pence) 4.2 2.5 68.0%
Alternative performance measures above are defined and reconciled to statutory
measures throughout
Headline results presented for FY22/23 H1 exclude ownership of The Spice
Tailor. Statutory measures include one months' ownership of The Spice Tailor
for FY22/23 H1.
Trading profit is stated including software amortisation; FY21/22 H1
comparative is re-stated accordingly
Reconciliations for Revenue and Trading profit between statutory and headline
measures are provided in the appendices
Alex Whitehouse, Chief Executive Officer
"We have again made very good financial and strategic progress in the first
half of this year, reporting strong Group and branded revenue growth in what
continues to be a challenging environment. Our margins were in line with last
year, and we delivered adjusted PBT growth of nearly 12% due to our
consistently good trading performance and lower interest costs following our
refinancing in H1 last year."
"We continue to deliver against our five pillar growth strategy: our UK
Branded revenue has now grown 5% on average over the last three years; we
continue to invest in our supply chain to drive efficiencies; revenue from
extending our brands into new categories more than doubled, and International
revenue increased by 11%(8). Additionally, we have welcomed the highly
complementary brand The Spice Tailor into our portfolio in the first half; our
first acquisition for over 15 years."
"The financial resilience of the Group is illustrated by our strong underlying
cash generation, our 2026 dated fixed rate bonds following our 2021
refinancing, continued commitment to a leverage target of 1.5x and limited
direct exposure to the US Dollar."
"The current economic climate is undoubtedly challenging for consumers, and
our broad range of affordable brands have always played a key role for
families when times are tough. With people starting to eat out less, they
often find the best restaurant in town is at home, where you can make
nutritious and tasty meals more affordably. In this environment, our portfolio
of brands continues to display strong momentum and are well placed to deliver
further growth."
"As we look to the second half of the year, we will be launching more consumer
insight driven new products such as Plantastic branded Millionaire Flapjacks,
Mr Kipling Brownie Bites and pigs-in-blanket flavour Bisto granules for
Christmas, in addition to further advertising behind our major brands. A big
feature of our brand activation will be helping people cook and prepare
affordable meals at home for just £1 per serving through our "Best Restaurant
in Town" campaign."
"We continue to see further input cost inflation, which we expect to recover
through a combination of cost savings and our annual price increase in quarter
four this year. Following a strong first half and with good momentum as we
enter H2, we are on track to deliver on expectations for FY22/23."
Environmental, Social and Governance (ESG)
The Group unveiled its 'Enriching Life Plan' ESG strategy just over a year ago
and has made strong progress. The 'Enriching Life Plan' is articulated through
the three key strategic pillars of Product, Planet and People. The Group has
set out a series of major sustainability targets under each pillar which can
be found on the Company's website.
Under the product pillar, a unique, full range of non-HFSS (non-high fat, salt
& sugar) Mr Kipling Deliciously Good cakes have been launched this year. A
category first, not only do these cakes benefit from 30% less sugar and lower
fat, they are also made with higher levels of fibre and fruit compared with
the standard Mr Kipling range. Additionally, the percentage of total packaging
and plastics which are recyclable across the Group have now reached 96% and
80% respectively. Progress in the planet workstreams includes the submission
of emissions targets to SBTi for validation, and also being promoted to Tier 1
of the Business Benchmark on Farm Animal Welfare (BBFAW) for the first time.
In the people pillar, mental health awareness training has been completed by
93% of the Group's management population, we have also agreed a new corporate
charity partnership with FareShare and launched a colleague volunteering
scheme.
Outlook
Following the delivery of a strong financial performance in the first half of
the year, the Group takes good momentum into H2 as it continues to
successfully navigate the evolving macroeconomic climate. As it looks ahead to
the second half, it has plans for more consumer-insight driven new product
launches and further brand investment. With its leading portfolio of
affordable brands, the Group considers it is well placed to perform well in
the current challenging environment and it remains on track to deliver on
expectations for the full year. In the medium term, the Group will continue to
realise further shareholder value through the ongoing delivery of its five
pillar growth strategy and its target of 1.5x Net debt/EBITDA remains
unchanged.
Strategy overview
The Group delivers growth and creates value, through its five pillar strategy,
outlined below.
1. Continue to grow the UK core business
We have a well established and growing UK business which provides the basis
for further expansion. The branded growth model which we employ in the UK is
at the heart of what we do and is core to our success. Leveraging our leading
category positions, we launch new products to market driven by consumer
trends, support our brands with sustained levels of marketing investment and
foster strong customer and retailer partnerships.
Proof point: Three-year average H1 growth rate for UK branded
revenue of 5.0%.
2. Supply chain investment
We invest in operational infrastructure to increase efficiency and
productivity across our manufacturing and logistics operations, providing a
virtuous cycle for brand investment. Capital investment in our sites also
facilitates growth through our innovation strategy and enhances the safety and
working conditions of our colleagues.
Proof point: Two new manufacturing lines in Ashford and Lifton
sites, respectively; new case packer and auto-palletiser in Stoke and Carlton
sites.
3. Expand UK business into new categories
We leverage the strength of our brands, using our proven branded growth model
to launch products in adjacent, new food categories.
Proof point: Revenue growth of products in new categories doubled
in H1 compared to the prior year.
4. Build international businesses with critical mass
We are building sustainable business units with critical mass overseas,
applying our brand building capabilities to deliver growth in our target
markets of Republic of Ireland, Australia, North America and Europe. Our
primary brands to drive this expansion are Mr Kipling, Sharwood's and The
Spice Tailor.
Proof point: Revenue growth of 11%(8) in first half of the year.
5. Inorganic opportunities
We will utilise our brand building and commercial expertise to expand across a
wider portfolio, accelerating value creation through bolt-on and targeted
acquisition opportunities.
Proof point: Completed The Spice Tailor acquisition in the period.
Further information
A presentation to investors and analysts will be webcast today at 9:00am GMT.
To register for the webcast follow the link:
www.premierfoods.co.uk/investors/investor-centre
(http://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, 16
November 2022, at 1:30pm GMT. Dial in details are outlined below:
Telephone: 0800 640 6441 (UK toll free)
+44 20 3936 2999 (standard international access)
Access code: 474168
A factsheet providing an overview of the Half year results is available at:
www.premierfoods.co.uk/investors/results-centre
(http://www.premierfoods.co.uk/investors/results-centre)
A Premier Foods image gallery is available using the following link:
www.premierfoods.co.uk/media/image-gallery/
(http://www.premierfoods.co.uk/media/image-gallery/)
Further information on the 'Best Restaurant in Town' can be found at:
www.bestrestaurantintown.co.uk/ (https://www.bestrestaurantintown.co.uk/)
As one of Britain's largest food producers, we're passionate about food and
believe each and every day we have the opportunity to enrich life for
everyone. Premier Foods employs over 4,000 people operating from 15 sites
across the country, supplying a range of retail,
wholesale, foodservice and other customers with our iconic brands which
feature in millions of homes every day.
Through some of the nation's best-loved brands, including Ambrosia,
Batchelors, Bisto, Loyd Grossman, Mr Kipling, Oxo and Sharwood's, we're
creating great tasting products that contribute to healthy and balanced diets,
while committing to nurturing our people and our local communities, and going
further in the pursuit of a healthier planet, in line with our Purpose of
'Enriching Life Through Food'.
Contacts:
Institutional investors and analysts:
Duncan Leggett, Chief Financial Officer
Richard Godden, Director of Investor Relations
Investor.relations@premier (mailto:Investor.relations@premier) foods.co.uk
Media enquiries:
Lisa Kavanagh, Director of Communications
Headland
Ed Young +44 (0) 7884 666830
Jack Gault +44 (0) 7799 089357
- Ends -
This announcement may contain "forward-looking statements" that are based on
estimates and assumptions and are subject to risks and uncertainties.
Forward-looking statements are all statements other than statements of
historical fact or statements in the present tense, and can be identified by
words such as "targets", "aims", "aspires", "assumes", "believes",
"estimates", "anticipates", "expects", "intends", "hopes", "may", "would",
"should", "could", "will", "plans", "predicts" and "potential", as well as the
negatives of these terms and other words of similar meaning. Any
forward-looking statements in this announcement are made based upon Premier
Foods' estimates, expectations and beliefs concerning future events affecting
the Group and subject to a number of known and unknown risks and
uncertainties. Such forward-looking statements are based on numerous
assumptions regarding the Premier Foods Group's present and future business
strategies and the environment in which it will operate, which may prove not
to be accurate. Premier Foods cautions that these forward-looking statements
are not guarantees and that actual results could differ materially from those
expressed or implied in these forward-looking statements. Undue reliance
should, therefore, not be placed on such forward-looking statements. Any
forward-looking statements contained in this announcement apply only as at the
date of this announcement and are not intended to give any assurance as to
future results. Premier Foods will update this announcement as required by
applicable law, including the Prospectus Rules, the Listing Rules, the
Disclosure and Transparency Rules, London Stock Exchange and any other
applicable law or regulations, but otherwise expressly disclaims any
obligation or undertaking to update or revise any forward-looking statement,
whether as a result of new information, future developments or otherwise.
Financial results
Overview
£m FY22/23 H1 FY21/22 H1 % change
Branded revenue 358.3 345.0 3.9%
Non-branded revenue 60.3 49.1 22.8%
Group revenue 418.6 394.1 6.2%
Divisional contribution(2) 83.5 77.0 8.4%
Divisional contribution margin 19.9% 19.5% +0.4ppts
Trading profit(1) 56.7 53.4 6.2%
Trading profit margin 13.5% 13.5% 0.0ppt
Adjusted EBITDA 68.5 67.1 2.1%
Adjusted profit before tax 47.0 42.0 11.9%
Adjusted earnings per share (pence) 4.4 4.0 11.4%
Basic earnings per share (pence) 4.2 2.5 68.0%
The table above is presented excluding the impact of The Spice Tailor, with
the exception of Basic earnings per share
Group revenue (excluding The Spice Tailor) increased by 6.2% in the first half
of the year, with branded revenue ahead 3.9% and non-branded revenue up 22.8%.
Growth was consistently strong across the period, with quarter 1 and quarter 2
revenue growth of 6.0% and 6.4% respectively. Divisional contribution grew by
8.4% to £83.5m, as margins expanded by 40 basis points. Trading profit
increased by 6.2% to £56.7m, with group and corporate costs rising,
reflecting wage and salary inflation, additional strategic roles and a
provision release in the prior year. Adjusted profit before tax and adjusted
earnings per share increased by 11.9% and 11.4% respectively, reflecting lower
interest costs. Basic earnings per share (including The Spice Tailor)
increased by 68.0% from 2.5p to 4.2p in the period.
Group revenue including one month's contribution from The Spice Tailor
increased by 6.6% in H1 and by 7.1% in Q2.
Trading performance
Grocery
£m FY22/23 H1 FY21/22 H1 % change
Branded revenue 256.1 244.9 4.6%
Non-branded revenue 46.9 39.2 19.5%
Total revenue 303.0 284.1 6.7%
Divisional contribution(2) 70.2 64.3 9.2%
Divisional contribution margin 23.1% 22.6% +0.5ppts
The table above is presented excluding the impact of The Spice Tailor
Revenue in the Grocery business (excluding The Spice Tailor) increased by 6.7%
in the first half of the year to £303.0m. Branded revenue grew by 4.6% to
£256.1m while non-branded revenue increased by 19.5%. Divisional contribution
was £70.2m, a 9.2% increase on the comparative period, with margins expanding
by 50 basis points.
In the second quarter, Grocery revenue increased by 6.9%, demonstrating the
consistency of top-line growth through the period, with branded revenue up
4.6% and non-branded revenue ahead 21.8%. Market share grew by 34 basis points
in the first half of the year, illustrating the strength and resilience of the
Group's portfolio as consumers budgets are becoming increasingly stretched.
Non-branded revenue growth reflected strong pricing benefits, the recovery of
out of home business to business volumes and contract wins.
The Group's branded growth model leverages the strength of its market leading
brands, launching insightful new products, supporting the brands with
emotionally engaging advertising and building strategic retail partnerships.
Branded revenues in the UK have grown by 5.0% on a three-year compound annual
growth rate basis, serving to illustrate the success of this strategy.
In the first half of the year, Batchelors, Loyd Grossman, Sharwood's,
Homepride and Nissin all delivered particularly strong year on year growth.
New product development, driven by key consumer trends included Homepride
pasta bakes, Sharwood's East Asian cooking sauces, Batchelors pasta 'n' sauce
chef specials and Ambrosia Deluxe custard pots.
One of the Group's key growth strategies' is to expand into adjacent
categories, leveraging the Group's strong brand equities. In the first half of
this year, revenues from products launched in new categories more than
doubled. Significant contributors to this performance have been a range of
ice-creams, extending the Mr Kipling, Ambrosia and Angel Delight brands and
also ready to eat Porridge under the Ambrosia brand. In Ice-cream, the Group
has become the launch customer's second largest branded supplier in the
category and has already developed a 16% market share. Ambrosia Porridge has
become a key brand in the ready to eat porridge category, with a 11% market
share in one major retailer.
Further exciting product innovation still to come in H2 includes Plantastic
protein pots and creamy pasta sauces, Sharwood's 60% less fat Poppadoms and
Bisto Best meat free gravy.
Sweet Treats
£m FY22/23 H1 FY21/22 H1 % change
Branded revenue 102.2 100.1 2.1%
Non-branded revenue 13.4 9.9 35.8%
Total revenue 115.6 110.0 5.1%
Divisional contribution(2) 13.3 12.7 4.7%
Divisional contribution margin 11.5% 11.5% (0.0ppt)
Sweet Treats revenue increased by 5.1% in the first half of the year compared
to the prior period. Branded revenue grew by 2.1% while non-branded revenue
increased by over 35%. The particularly strong growth in non-branded revenue
of 35.8% was due to pricing benefits of existing ranges and contract wins in
pies and tarts and seasonal ranges.
Growth in the second quarter was similar to the first half, with revenue
growing by 5.2%. Divisional contribution also increased year on year, up 4.7%
to £13.3m, with margins in line with the prior period. Revenue growth
reflected pricing to recover input cost inflation, partly offset by lower
volumes due to less promotional activity in the period. Consequently, market
share was also lower, although this is expected to be a temporary effect.
In the first half of the year, the newly launched non-HFSS (non-high fat, salt
& sugar) Mr Kipling Deliciously Good cake range received a very strong
response from consumers. This groundbreaking new range is a clear
demonstration of how the Group is delivering against the Group's 'Enriching
Life Plan' ESG strategy and offers consumers further healthier options to
support healthier lifestyles. The range, which comes in seven different
variants, is made with 30% less sugar and lower fat and benefits from a higher
content of fibre and fruit compared with the standard Mr Kipling range. These
cakes are the only full range which can be promoted on end of aisles and at
front of store in large supermarkets, under new legislation. The Deliciously
Good range was also pivotal in delivering weighted branded distribution growth
(the number of major retailer listings, weighted by store size), in Sweet
Treats for the 26 weeks to 1 October 2022 (Source: IRI).
The Sweet Treats business also benefitted from a fresh new TV campaign for Mr
Kipling, the 'Piano' advert, continuing the strategy under the brand growth
model of building emotional connections with consumers.
Looking ahead to the second half of the year, innovation to be launched to
market includes Mr Kipling Brownie Bites, Cadbury celebration cakes, and
Plantastic Millionaire Flapjacks, to expand the Group's presence in these
parts of the cake market.
International
International performance was strong again, with revenue growth of 11%(8)
compared to the prior period. This growth was broad based across the Group's
target markets of Australia, Canada, Europe, Ireland and the USA. The key
focus brands which the Group considers possess the greatest potential for
long-term international growth, are Sharwood's, Mr Kipling and The Spice
Tailor. In the period, Sharwood's and Mr Kipling grew by 28% and 11%
respectively.
The Group's strategy of building sustainable businesses in its target markets
is progressing well. In Australia, the Mr Kipling and Cadbury cake brands have
collectively delivered the Group's highest ever share of the cake market in
recent months and reached 16.6% during H1. Additionally, and following the
acquisition of The Spice Tailor, the International's business reach in the
Australian ethnic cooking sauces market is significantly enhanced, and
presents further opportunity for growth.
In Canada, revenue grew by over 40% in the period and 30 new product lines of
Sharwood's and The Spice Tailor products have recently achieved new listings
in a leading North American retailer. In the USA, Sharwood's revenue increased
by well over 50%, due to healthier ranges performing strongly in market. The
Mr Kipling test in the USA continues with encouraging rate of sale KPIs.
Ireland delivered strong revenue growth in major multiple retailers,
especially through Nissin which grew 80%, although this was offset by some
industry wide supply chain issues in the convenience channel of the market.
Europe continues to deliver distribution gains for Sharwood's, entering the
Netherlands for the first time and expanding presence in Spain and Germany.
Operating profit
Growth in Trading profit of £3.3m, to £56.7m, was offset by non-trading
items of £4.7m, predominantly reflecting M&A advisory costs and other
one-off supply chain charges. Brand amortisation was £10.3m in the first half
of the year and movement in the fair valuation of foreign exchange and
derivative contracts was a credit of £0.7m. Net interest on pensions and
administrative expenses was a credit of £8.5m in the period. Other
non-trading income of £2.6m in the prior period related primarily to the
successful resolution of a legacy legal matter. Consequently, Operating profit
for the first half was £50.9m compared to £51.3m in the comparative period.
Finance costs
Net finance cost was £8.8m in the period, a reduction of £11.8m compared to
the prior period. This was primarily due to the accelerated amortisation of
debt issuance costs (£4.3m) and the early redemption of the Group's now
retired £300m 2023 dated Fixed Rate Notes (£4.7m) in the comparative period.
Net regular interest, the definition used for adjusted earnings per share, was
£9.7m in H1, £1.7m lower than the prior period. This reduction was
principally due to lower Senior secured notes interest charges following
redemptions of the Group's now retired 2022 Floating Rate Notes ("FRN"),
partly offset by slightly higher SONIA on the Group's revolving credit
facility and its debtors securitisation facility. Interest on the Group's
Senior secured notes declined by £1.9m to £5.8m in the first half of the
year compared to the prior period.
Taxation
The taxation charge for the 26 weeks ended 1 October 2022 of £6.0m (2021/22:
£9.7m) comprised primarily a charge on operating activities of £8.0m
(2021/22: £5.8m) and adjustments to remeasure the opening deferred tax
balances, due to the increase in the rate of UK corporation tax from the
current level of 19% to 25% effective from April 2023.
The Group currently retains brought forward losses which it can utilise to
offset against future tax liabilities. Due to changes in tax legislation with
respect to the offset of tax losses, the Group has now recommenced paying cash
tax in low single digit £millions.
Earnings per share
£m FY22/23 H1 FY21/22 H1 % change
Operating profit 50.9 51.3 (0.8%)
Net finance cost (8.8) (20.6) 57.3%
Profit before taxation 42.1 30.7 37.1%
Taxation (6.0) (9.7) 38.1%
Profit after taxation 36.1 21.0 71.9%
Average shares in issue (million) 860.3 856.9 0.4%
Basic Earnings per share (pence) 4.2 2.5 68.0%
The Group reported profit before tax of £42.1m in the period, an increase of
£11.4m compared to FY21/22 H1. Profit after tax in the first half of the year
grew by £15.1m to £36.1m and basic earnings per share increased by 68.0% to
4.2 pence.
Cash flow
The Group reported an outflow of cash during the period of £55.5m, largely
due to £43.8m paid to acquire The Spice Tailor. Trading profit of £56.7m was
£3.3m higher than the prior year for the reasons outlined above, while
depreciation including software amortisation was £11.8m. The first half of
the year saw a working capital outflow of (£28.6m), largely due to higher
stock valuation levels reflecting inflation of raw materials and seasonal
stock build requirements.
Net interest paid was £9.7m (FY21/22 H1: £14.6m), largely due to a lower
coupon on the Group's Fixed Rate Notes. Pension deficit contribution payments
were £18.9m in the period and administration cash costs were £1.8m,
totalling £20.7m cash outflow to the schemes.
Capital expenditure in the period was £6.3m. In the full year, the Group
expects capital expenditure to be approximately £30m, as it looks to
accelerate investment across the supply chain in the medium term. Such
investment is planned to be in both growth projects supporting the Group's
innovation strategy and cost release projects to deliver efficiency savings.
One of the key objectives of this programme, is that through improving
operational efficiency, the resultant increase in gross margin provides
additional funds for brand investment. This strategy of investing in supply
chain infrastructure represents a virtuous cycle to provide the fuel for the
Group's branded growth model. Projects completed in the first half of the year
include automation solutions at the Group's cake manufacturing sites; an end
of line auto case packer at the Stoke site was installed in addition to an
auto palletiser at Carlton, South Yorkshire.
On a statutory basis, cash generated from operating activities was £6.9m
(2021/22: £13.5m) after deducting net interest paid of £9.7m and tax of
£0.4m. Cash generated from financing activities was £12.7m in the period
after a £10.3m dividend payment to shareholders. A dividend match payment to
the Group's pension schemes of £2.7m was made in the period. The cash
generated from financing activities in the first half of the prior year
included the proceeds from the issuance of the Group's £330m 2026 dated 3.5%
Fixed Rate Notes in the period and the retirement of previously issued Fixed
and Floating Rate Notes.
Net debt at 1 October 2022 was £337.7m, an decrease of £7.3m compared to
FY21/22 H1 and an increase of £52.7m compared to 2 April 2022. As at 1
October 2022, the Group held cash and bank deposits of £23.8m and had drawn
£25.0m on its £175m revolving credit facility.
Pensions
IAS 19 Accounting Valuation (£m) 1 October 2022 2 April 2022
RHM Premier Foods Combined RHM Premier Foods Combined
Assets 3,251.1 584.3 3,835.4 4,273.7 826.3 5,100.0
Liabilities (2,155.2) (718.4) (2,873.6) (3,134.9) (1,020.2) (4,155.1)
Surplus/(Deficit) 1,095.9 (134.1) 961.8 1,138.8 (193.9) 944.9
Net of deferred tax (25%) 821.9 (100.6) 721.3 854.1 (145.4) 708.7
The combined RHM and Premier Foods' pension schemes were in a £961.8m surplus
at 1 October 2022, a £16.9m increase compared to six months earlier. This is
equivalent to a surplus of £721.3m net of a deferred tax charge of 25.0%.
Asset values and liabilities fell in both sections of the schemes due to the
hedging in place. Liabilities fell by more than assets in the Premier Foods
section leading to an overall increase in the combined surplus. The movement
in liabilities was impacted by the increase in discount rate applied, from
2.75% to 5.25%, reflecting recent rises in UK corporate bond yields. Asset
values were lower across a number of asset classes, not least Government
bonds, also due to recent market movements.
A deferred tax rate of 25.0% is deducted from the IAS19 retirement benefit
valuation of the Group's schemes to reflect the fact that pension deficit
contributions made to the Group's pension schemes are allowable for tax. The
deferred tax rate has been increased from the 19.0% rate used for the prior
period to 25.0% following the change in the UK's corporation tax rate,
effective from April 2023.
Assets in the combined schemes decreased by £1,264.6m, or by 24.8%, to
£3,835.4m in the period. RHM scheme assets reduced by £1,022.6m to
£3,251.1m while the Premier Foods' schemes assets decreased by £242.0m to
£584.3m. In the combined schemes, liabilities decreased by £1,281.5m, or
30.8%, to £2,873.6m. The RPI inflation rate assumption used increased by ten
basis points to 3.7%, compared to 3.6% as at 2 April 2022.
There were no issues encountered by the pension scheme as a result of LDI
asset collateral calls due to recent volatility in financial markets.
The Triennial actuarial valuation of the pension schemes as at 31 March 2022
remains ongoing and the Group will provide an update on the conclusion of this
valuation in due course. The net present value of future pension deficit
contributions to the end of the recovery periods, is in the range of
£240-260m(13).
Principal risks and uncertainties
Strong risk management is key to delivery of the business' strategic
objectives. The Group has an established risk management process, the
Executive Leadership Team performing a formal robust assessment of the
principal risks bi-annually which is reviewed by the Board and Audit
Committee. Risks are monitored at a segment and functional level throughout
the year considering both internal and external factors. The Group's
principal risks and uncertainties were disclosed on page 51 to 57 of the
annual report and accounts for the financial period ended 2 April 2022 and
these remain relevant for the current period. The major strategic and
operational risks are summarised under the headings of Macroeconomic and
geopolitical instability, Impact of Government legislation, Market and
retailer actions, Operational integrity, Legal compliance, Climate risk,
Technology, Product portfolio, HR and employee risk, Strategy delivery. The
Group notes the increase since the year end of the widely reported
macro-economic and industry wide supply chain environment issues which it
continues to navigate successfully through. In particular, the Group
acknowledges risks around recent rises in input cost inflation and potential
changes in consumer behaviour.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
The Company's Half year results are presented for the 26 weeks ended 1 October
2022 and the comparative period, 26 weeks ended 2 October 2021. All references
to the 'quarter', unless otherwise stated, are for the 13 weeks ended 1
October 2022 and the comparative periods, 13 weeks ended 2 October 2021.
Quarter 2 and H1 Sales
Q2 Sales (£m) FY22/23 H1
Excluding The Spice Tailor The Spice Tailor Including The Spice Tailor
Grocery
Branded 136.8 1.3 138.1
Non-branded 24.5 0.0 24.5
Total 161.3 1.3 162.6
Sweet Treats
Branded 51.9 0.0 51.9
Non-branded 8.4 0.0 8.4
Total 60.3 0.0 60.3
Group
Branded 188.7 1.3 190.0
Non-branded 32.9 0.0 32.9
Total 221.6 1.3 222.9
% change vs prior year
Grocery
Branded 4.6% 5.6%
Non-branded 21.8% 21.8%
Total 6.9% 7.8%
Sweet Treats
Branded 1.0% 1.0%
Non-branded 42.7% 42.7%
Total 5.2% 5.2%
Group
Branded 3.6% 4.3%
Non-branded 26.5% 26.5%
Total 6.4% 7.1%
H1 Sales (£m) FY22/23 H1
Excluding The Spice Tailor The Spice Tailor Including The Spice Tailor
Grocery
Branded 256.1 1.3 257.4
Non-branded 46.9 0.0 46.9
Total 303.0 1.3 304.3
Sweet Treats
Branded 102.2 0.0 102.2
Non-branded 13.4 0.0 13.4
Total 115.6 0.0 115.6
Group
Branded 358.3 1.3 359.6
Non-branded 60.3 0.0 60.3
Total 418.6 1.3 419.9
% change vs prior year
Grocery
Branded 4.6% 5.1%
Non-branded 19.5% 19.5%
Total 6.7% 7.1%
Sweet Treats
Branded 2.1% 2.1%
Non-branded 35.8% 35.8%
Total 5.1% 5.1%
Group
Branded 3.9% 4.3%
Non-branded 22.8% 22.8%
Total 6.2% 6.6%
Divisional contribution & Trading profit (£m) Excluding The Spice Tailor The Spice Tailor Including The Spice Tailor
FY22/23 H1
Divisional contribution(2)
Grocery 70.2 (0.0) 70.2
Sweet Treats 13.3 - 13.3
Total 83.5 (0.0) 83.5
Group & corporate costs (26.8) (0.0) (26.8)
Trading profit(1) 56.7 (0.0) 56.7
FY21/22 H1
Divisional contribution(2)
Grocery 64.3 - 64.3
Sweet Treats 12.7 - 12.7
Total 77.0 - 77.0
Group & corporate costs (23.6) - (23.6)
Trading profit(1) 53.4 - 53.4
EBITDA to Operating profit reconciliation (£m) FY22/23 H1 FY21/22 H1
Adjusted EBITDA(3) 68.5 67.1
Depreciation (9.3) (9.3)
Trading profit - Old definition 59.2 57.8
Software amortisation (2.5) (4.4)
Trading profit - New definition 56.7 53.4
Amortisation of brand assets (10.3) (9.9)
Fair value movements on foreign exchange & derivative contracts 0.7 3.0
Net interest on pensions and administrative expenses 8.5 2.2
Non-trading items (4.7) 2.6
Operating profit 50.9 51.3
Finance costs (£m) FY22/23 H1 FY21/22 H1 Change
Senior secured notes interest 5.8 7.7 1.9
Bank debt interest - net 3.0 2.5 (0.5)
8.8 10.2 1.4
Amortisation of debt issuance costs 0.9 1.2 0.3
Net regular interest(5) 9.7 11.4 1.7
Write-off of financing costs - 4.3 4.3
Early redemption fee - 4.7 4.7
Re-measurement due to discount rate change (1.3) - 1.3
Other finance cost 0.4 0.4 0.0
Other finance income - (0.2) (0.2)
Net finance cost 8.8 20.6 11.8
Adjusted earnings per share (£m) FY22/23 H1 FY21/22 H1 Change
Trading profit(1) 56.7 53.4 6.2%
Less: Net regular interest(5) (9.7) (11.4) 14.7%
Adjusted profit before tax 47.0 42.0 11.9%
Less: Notional tax (19%) (8.9) (8.0) (11.9%)
Adjusted profit after tax(6) 38.1 34.0 11.9%
Average shares in issue (millions) 860.3 856.9 0.4%
Adjusted earnings per share (pence) 4.4 4.0 11.4%
Net debt (£m) Post-IFRS 16
Net debt at 2 April 2022 285.0
Movement in cash 55.5
Movement in debt issuance costs 0.3
Movement in lease creditor (3.1)
Net debt at 1 October 2022 337.7
Free cash flow (£m) FY22/23 H1 FY21/22 H1
Trading profit(1) 56.7 53.4
Depreciation & software amortisation 11.8 13.7
Other non-cash items 1.8 1.4
Capital expenditure (6.3) (6.3)
Working capital (28.6) (23.2)
Operating cash flow(15) 35.4 39.0
Interest (9.7) (14.6)
Pension contributions (20.7) (19.5)
Free cash flow(10) 5.0 4.9
Non-trading items (2.7) 2.0
Net proceeds from share issue 0.1 0.6
Re-financing fees (0.7) (13.2)
Taxation (0.4) -
Dividend (including pensions match) (13.0) (11.0)
Acquisition (43.8) -
Movement in cash (55.5) (16.7)
Repayment of borrowings - (320.0)
Proceeds from borrowings 25.0 344.0
Net (decrease)/increase in cash and cash equivalents (30.5) 7.3
Notes and definitions of alternative performance measures
The Company uses a number of alternative performance measures to measure and
assess the financial performance of the business. The directors believe that
these alternative performance measures assist in providing additional useful
information on the underlying trends, performance and position of the Group.
These alternative performance measures are used by the Group for reporting and
planning purposes and it considers them to be helpful indicators for investors
to assist them in assessing the strategic progress of the Group.
1. The Group uses Trading profit to review overall Group profitability. Trading
profit is defined as profit/(loss) before tax, before net finance costs,
amortisation of brand assets, non-trading items (items requiring separate
disclosure by virtue of their nature in order that users of the financial
statements obtain a clear and consistent view of the Group's underlying
trading performance), fair value movements on foreign exchange and other
derivative contracts, net interest on pensions and administration expenses and
past service costs. The revised definition of Trading profit includes software
amortisation as the Group considers this should be treated in the same way as
tangible asset depreciation for definitional purposes. FY21/22 H1 has been
re-stated accordingly.
2. Divisional contribution refers to Gross Profit less selling, distribution and
marketing expenses directly attributable to the relevant business segment.
3. Adjusted EBITDA is Trading profit as defined in (1) above excluding
depreciation and software amortisation.
4. Adjusted profit before tax is Trading profit as defined in (1) above less net
regular interest.
5. Net regular interest is defined as net finance cost after excluding write-off
of financing costs, early redemption fees, other interest payable and other
finance income.
6. Adjusted profit after tax is Adjusted profit before tax as defined in (4)
above less a notional tax charge of 19.0% (2021/22: 19.0%).
7. Adjusted earnings per share is Adjusted profit after tax as defined in (6)
above divided by the weighted average of the number of shares of 860.3 million
(26 weeks ended 2 October 2021: 856.9 million).
8. International sales exclude The Spice Tailor and remove the impact of foreign
currency fluctuations and adjusts prior year sales to ensure comparability in
geographic market destinations. The constant currency calculation is made by
adjusting the current year's sales to the same exchange rate as the prior
year. The constant currency adjustment is calculated by applying a blended
rate.
£m Reported Adjustment Constant currency
FY22/23 H1 26.7 0.1 26.8
FY21/22 H1 24.2 N/A 24.2
Growth/(decline) % 10.5% 10.7%
1. Non-trading items have been presented separately throughout the financial
statements. These are items that management believes require separate
disclosure by virtue of their nature in order that the users of the financial
statements obtain a clear and consistent view of the Group's underlying
trading performance. In identifying non-trading items, management have applied
judgement including whether i) the item is related to underlying trading of
the Group; and/or ii) how often the item is expected to occur.
2. Net debt is defined as total borrowings, less cash and cash equivalents and
less capitalised debt issuance costs.
3. Free cash flow is Net increase or decrease in cash and cash equivalents
excluding proceeds and repayment of borrowings, less dividend payments,
disposal proceeds, re-financing fees, proceeds from share issues, tax,
acquisitions and non-trading items.
4. IRI, 24 weeks ended 1 October 2022.
5. The schedule of future contributions are as agreed per the 2021 actuarial
funding valuation for the Premier Foods sections, discounted using the Company
post tax WACC of 7.4%, as stated in the 2022 Annual Report.
6. Acquisition accounting pertaining to The Spice Tailor acquisition can be found
in Note 17 of the financial statements.
7. Operating cash flow excludes interest and pension contributions.
Additional notes:
· The directors believe that users of the financial statements are most
interested in underlying trading performance and cash generation of the Group.
As such intangible brand asset amortisation and impairment are excluded from
Trading profit because they are non-cash items.
· Non-trading items have been excluded from Trading profit because they are
incremental costs incurred as part of specific initiatives that may distort a
user's view of underlying trading performance.
· Net regular interest is used to present the interest charge related to the
Group's ongoing financial indebtedness, and therefore excludes non-cash items
and other credits/charges which are included in the Group's net finance cost.
· Group & corporate costs refer to group and corporate expenses which are
not directly attributable to a reported segment and are disclosed at total
Group level.
· In line with accounting standards, the International and The Spice Tailor
operating segments, the results of which are aggregated within the Grocery
reported segment, are not required to be separately disclosed for reporting
purposes.
Statement of directors' responsibilities
The directors confirm that these condensed interim financial statements have
been prepared in accordance with UK adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority and that
the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the 26 weeks
period ended 1 October 2022 and their impact on the condensed set of financial
statements, and a description of the principal risks and uncertainties for the
remaining 26 weeks of the financial period; and
· material related-party transactions in the first 26 weeks and any material
changes in the related-party transactions described in the last annual report.
The maintenance and integrity of the Premier Foods plc website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that might have occurred to the interim
financial statements since they were initially presented on the website.
The directors of Premier Foods plc are listed on pages 62-63 of the Premier
Foods plc annual report and accounts for the 52 weeks period ended 2 April
2022. A list of current directors is maintained on the Premier Foods plc's
website: www.premierfoods.co.uk
Approved by the Board on 16 November 2022 and signed on its behalf by:
Alex Whitehouse
Chief Executive Officer
Duncan Leggett
Chief Financial Officer
Independent review report to Premier Foods plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Premier Foods plc's condensed consolidated interim financial
statements (the "interim financial statements") in the Half year results of
Premier Foods plc for the 26 week period ended 1 October 2022 (the
"period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the Condensed consolidated balance sheet as at 1 October 2022;
· the Condensed consolidated statement of profit or loss and the Condensed
consolidated statement of comprehensive income for the period then ended;
· the Condensed consolidated statement of cash flows for the period then ended;
· the Condensed consolidated statement of changes in equity for the period then
ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Half year results of Premier
Foods plc have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom. 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, 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.
We have read the other information contained in the Half year results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with this ISRE. However, future events or
conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Half year results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Half year results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Half year results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Half year results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
16 November 2022
Condensed consolidated statement of profit or loss (unaudited)
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
Note £m £m
Continuing operations
Revenue 4 419.9 394.1
Cost of sales (274.3) (257.5)
Gross profit 145.6 136.6
Selling, marketing and distribution costs (62.2) (59.6)
Administrative costs (32.5) (25.7)
Operating profit 4 50.9 51.3
Finance cost 5 (10.2) (21.1)
Finance income 5 1.4 0.5
Profit before taxation 42.1 30.7
Taxation charge 6 (6.0) (9.7)
Profit for the period attributable to owners of the parent 36.1 21.0
Basic earnings per share (pence) 7 4.2 2.5
Diluted earnings per share (pence) 7 4.1 2.4
The following notes form an integral part of the condensed consolidated
interim financial information.
Condensed consolidated statement of comprehensive income (unaudited)
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
Note £m £m
Profit for the period 36.1 21.0
Other comprehensive income, net of tax
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit schemes 8 (15.7) 43.5
Deferred tax credit/(charge) - (30.6)
Corporation tax credit on pension movements 3.5 3.1
Items that are or may be reclassified to profit or loss
Exchange differences on translation 0.5 0.1
Other comprehensive income, net of tax (11.7) 16.1
Total comprehensive income attributable to owners of the parent 24.4 37.1
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 2022 2 April 2022
Note £m £m
ASSETS:
Non-current assets
Property, plant and equipment 188.1 190.9
Goodwill 17 680.3 646.0
Other intangible assets 17 300.7 293.5
Deferred tax assets 22.2 23.1
Net retirement benefit assets 8 1,107.7 1,148.7
2,299.0 2,302.2
Current assets
Stocks 116.7 78.1
Trade and other receivables 95.2 96.5
Derivative financial instruments 10 2.8 2.4
Cash and cash equivalents 12 23.8 54.3
238.5 231.3
Total assets 2,537.5 2,533.5
LIABILITIES:
Current liabilities
Trade and other payables (259.9) (254.0)
Financial liabilities:
- short-term borrowings 9 (25.0) -
- derivative financial instruments 10 - (0.3)
Lease liabilities 9 (1.2) (2.1)
Provisions for liabilities and charges 11 (6.7) (2.3)
(292.8) (258.7)
Non-current liabilities
Long term borrowings 9 (323.5) (323.2)
Lease liabilities 9 (11.8) (14.0)
Net retirement benefit obligations 8 (145.9) (203.8)
Provisions for liabilities and charges 11 (7.7) (8.3)
Deferred tax liabilities (219.0) (212.9)
Other liabilities (13.4) (5.7)
(721.3) (767.9)
Total liabilities (1,014.1) (1,026.6)
Net assets 1,523.4 1,506.9
EQUITY:
Capital and reserves
Share capital 86.3 86.3
Share premium 1.6 1.5
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Profit and loss reserve 1,093.1 1,076.7
Total equity 1,523.4 1,506.9
The following notes form an integral part of the condensed consolidated
interim financial information.
Condensed consolidated statement of cash flows (unaudited)
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
Note £m £m
Cash generated from operations 12 17.0 28.1
Interest paid (9.9) (14.9)
Interest received 0.2 0.3
Taxation paid (0.4) -
Cash generated from operating activities 6.9 13.5
Purchase of property, plant and equipment (5.5) (6.0)
Purchase of intangible assets (0.8) (1.4)
Acquisition of subsidiaries, net of cash acquired 17 (43.8) -
Cash used in investing activities (50.1) (7.4)
Proceeds from borrowings 25.0 344.0
Repayment of borrowings - (320.0)
Repayment of lease liabilities (1.4) (1.3)
Financing fees(1) (0.7) (8.5)
Early redemption fee(1) - (4.7)
Dividends paid (10.3) (8.5)
Proceeds from share issue 0.1 0.6
Purchase of shares to satisfy share awards - (0.4)
Cash generated from financing activities 12.7 1.2
Net (decrease)/increase in cash and cash equivalents (30.5) 7.3
Cash, cash equivalents and bank overdrafts at beginning of period 54.3 1.1
Cash, cash equivalents and bank overdrafts at end of period 12 23.8 8.4
(1) Payments in the current period relate to the one year extension of the
revolving credit facility. Payments in the prior period related to payments
made as part of the refinancing of the Group's debt in June 2021. See note 9
for further details.
The following notes form an integral part of the condensed consolidated
interim financial information.
Condensed consolidated statement of changes in equity (unaudited)
Share capital Share premium Merger reserve Other reserves Profit and loss reserve Total equity
Note £m £m £m £m £m £m
At 3 April 2021 85.5 0.6 351.7 (9.3) 755.1 1,183.6
Profit for the period - - - - 21.0 21.0
Remeasurements of defined benefit schemes 8 - - - - 43.5 43.5
Deferred tax charge - - - - (30.6) (30.6)
Corporation tax credit on pension movements - - - - 3.1 3.1
Exchange differences on translation - - - - 0.1 0.1
Other comprehensive income - - - - 16.1 16.1
Total comprehensive income - - - - 37.1 37.1
Shares issued 0.4 0.2 - - - 0.6
Share-based payments - - - - 1.5 1.5
Purchase of shares to satisfy share awards - - - - (0.4) (0.4)
Deferred tax movements on share-based payments - - - - 0.8 0.8
Dividends 13 - - - - (8.5) (8.5)
At 2 October 2021 85.9 0.8 351.7 (9.3) 785.6 1,214.7
At 2 April 2022 86.3 1.5 351.7 (9.3) 1,076.7 1,506.9
Profit for the period - - - - 36.1 36.1
Remeasurements of defined benefit schemes 8 - - - - (15.7) (15.7)
Corporation tax credit on pension movements - - - - 3.5 3.5
Exchange differences on translation - - - - 0.5 0.5
Other comprehensive income - - - - (11.7) (11.7)
Total comprehensive income - - - - 24.4 24.4
Shares issued - 0.1 - - - 0.1
Share-based payments - - - - 1.8 1.8
Deferred tax movements on share-based payments - - - - 0.5 0.5
Dividends 13 - - - - (10.3) (10.3)
At 1 October 2022 86.3 1.6 351.7 (9.3) 1,093.1 1,523.4
The following notes form an integral part of the condensed consolidated
interim financial information.
1. General information
Premier Foods plc (the "Company") is a public limited company incorporated in
the United Kingdom and domiciled in England, registered number 05160050, 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 food products as described in the Group's annual report and
accounts for the financial period ended 2 April 2022.
2. Basis of preparation
This condensed set of financial statements has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the UK.
The annual financial statements of the group for the 52 weeks ending 1 April
2023 will be prepared in accordance with UK-adopted international accounting
standards. As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, this condensed set of financial statements
has been prepared applying the accounting policies and presentation that were
applied in the preparation of the company's published consolidated financial
statements for the 52 weeks ended 2 April 2022 which were prepared in
accordance with UK-adopted international accounting standards in conformity
with the requirements of the Companies Act 2006. There has been no significant
impact on the Group profit or net assets on adoption of new or revised
accounting standards in the period. Amounts are presented to the nearest
£0.1m, unless otherwise stated.
Following a competitive tender process, PricewaterhouseCoopers LLP were
appointed as the Group's auditors for the 52 weeks ending 1 April 2023. The
financial information for the period ended 1 October 2022 is unaudited but has
been subject to an independent review by PricewaterhouseCoopers LLP.
The Group's financial statements for the 52 week period ended 2 April 2022,
which were approved by the Board of Directors on 18 May 2022, were reported on
by KPMG LLP and delivered to the Registrar of Companies. The report of the
auditors 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 16 November 2022.
Going concern
The Group's revolving credit facility includes net debt/EBITDA and
EBITDA/interest covenants as detailed in note 9. 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 is required to test covenants
biannually aligned to reporting dates. The Group was compliant with its
covenant tests as at 2 April 2022 and 1 October 2022.
Having undertaken a robust assessment of the Group's forecasts with specific
consideration to the trading performance of the Group, cashflows and covenant
compliance, the directors have a reasonable expectation that the Group is able
to operate within the level of its current facilities, meet the required
covenant tests and has adequate resources to continue in operational existence
for at least 12 months from the date of approval of these financial
statements. The Group therefore continues to adopt the going concern basis
in preparing its financial information for the reasons set out below:
At 1 October 2022, the Group had total assets less current liabilities
of £2,244.7m and net assets of £1,523.4m. Liquidity as at that date
was £173.8m, made up of cash and cash equivalents, and undrawn committed
credit facilities of £150.0m expiring in May 2025. At the time of the
approval of this report, the cash and liquidity position of the group has not
changed significantly.
The directors have rigorously reviewed the current global political and
economic uncertainty driven by the conflict in Ukraine and the inflationary
pressures across the industry, and have modelled a severe but plausible
downside case impacting future financial performance, cash flows and covenant
compliance, that cover a period of at least 12 months from the date of
approval of the financial statements. This downside case represents severe but
plausible assumptions related primarily to the impact of inflation during the
review period. The directors have also considered the situation relating to
COVID-19, climate change, risk of cyber attacks, and upcoming UK regulations
impacting the food industry and consumer preferences that may have an adverse
impact on supply of, or the demand for certain product groups in the downside
case modelled and assumed all scenarios within the downside case impact during
the periods reviewed.
Whilst the downside scenario is deemed severe but plausible, it is considered
by the directors to be a robust stress test of going concern, having an
adverse impact on revenue, margin and cash flow. Should circumstances mean
there is further downside, whilst not deemed plausible, the directors, in
response have identified mitigating actions within their control, that would
reduce costs, optimising cashflow and liquidity. Amongst these are the
following actions: reducing capital expenditure, reducing marketing spend and
delaying or cancelling discretionary spend. The directors have assumed no
significant structural changes to the business will be needed in any of the
scenarios modelled. None of the scenarios modelled are sufficiently material
to prevent the Group from continuing as a going concern.
The directors, after reviewing financial forecasts and financing arrangements,
consider that the Group has adequate resources to continue to meet its
liabilities as they fall due for at least 12 months from the date of approval
of this report. Accordingly, the directors are satisfied that it is
appropriate to adopt the going concern basis in preparing its consolidated
financial information.
3. Accounting policies
These Group interim financial statements have been prepared in accordance with
the accounting policies adopted in the Group's most recent annual financial
statements for the year ended 2 April 2022 with the addition of the Business
Combinations policy below.
When preparing the Group interim financial statements management undertakes
judgments, estimates and assumptions that affect the recognition and
measurement of assets and liabilities, income and expense. The actual results
may differ from the judgments, estimates and assumptions made by management.
In preparing these Group interim financial statements the significant
judgments, estimates and key sources of estimation uncertainty made by
management were the same as those that applied to the Group financial
statements for the year ended 2 April 2022, with the exception of fair value
estimates in relation to the acquisition of The Spice Tailor. See note 17 for
details of the fair value of assets and liabilities acquired and consideration
transferred.
Business Combinations
The Group applies the acquisition method in accounting for business
combinations. The consideration transferred by the Group to obtain control of
a subsidiary is calculated as the sum of the acquisition-date fair values of
assets transferred, liabilities incurred and the equity interests issued by
the Group, which includes the fair value of any asset or liability arising
from a contingent consideration arrangement. Acquisition costs are expensed as
incurred. Assets acquired and liabilities assumed are measured at their
acquisition-date fair values.
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 CODM reviews the performance by operating segments. The
Grocery segment primarily sells savoury ambient food products and the Sweet
Treats segment sells primarily sweet ambient food products. The International
segment has been aggregated within the Grocery segment for reporting purposes
as revenue is below 10% of the Group's total revenue and the segment is
considered to have similar characteristics to that of Grocery as identified in
IFRS 8. There has been no change to the segments during the period.
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,
amortisation of intangible assets, fair value movements on foreign exchange
and other derivative contracts, net interest on pensions and administrative
expenses, and any material items that require separate disclosure by virtue of
their nature in order that users of the financial statements obtain a clear
and consistent view of the Group's underlying trading performance.
The segment results for the period ended 1 October 2022 and 2 October 2021,
and the reconciliation of the segment measures to the respective statutory
items included in the financial information, are as follows:
26 weeks ended 1 Oct 2022
Grocery Sweet Total
Treats
£m £m £m
Revenue 304.3 115.6 419.9
Divisional contribution 70.2 13.3 83.5
Group and corporate costs (26.8)
Trading profit 56.7
Amortisation of brand assets (10.3)
Fair value movements on foreign exchange and other derivative contracts 0.7
Net interest on pensions and administrative expenses 8.5
Non-trading items(1) (4.7)
Operating profit 50.9
Finance cost (10.2)
Finance income 1.4
Profit before taxation 42.1
Depreciation (5.5) (3.8) (9.3)
(1)Non-trading items relate primarily to M&A advisory costs and one-off
supply chain charges.
26 weeks ended 2 Oct 2021
Grocery Sweet Total
Treats
£m £m £m
Revenue 284.1 110.0 394.1
Divisional contribution 64.3 12.7 77.0
Group and corporate costs (19.2)
Trading profit 57.8
Amortisation of intangible assets (14.3)
Fair value movements on foreign exchange and other derivative contracts(1) 3.0
Net interest on pensions and administrative expenses 2.2
Non-trading items:
- Other(2) 2.6
Operating profit 51.3
Finance cost(3) (21.1)
Finance income 0.5
Profit before taxation 30.7
Depreciation (5.3) (4.0) (9.3)
(1)The gain of £3.0m reflects changes in fair value rate during the 26-week
period and movement in nominal value of the instruments held at 2 October 2021
from the 3 April 2021 position.
(2)Other relates primarily to the resolution of a legacy legal matter.
(3)Finance cost includes £4.3m write-off of transaction fees and £4.7m early
redemption fee as part of the refinancing of the Group's debt in June 2021.
Inter-segment transfers or transactions are entered into under the same terms
and conditions that would be available to unrelated third parties.
The Group primarily supplies the UK market, although it also supplies certain
products to other countries in Europe and the rest of the world. The following
table provides an analysis of the Group's revenue, which is allocated on the
basis of geographical market destination, and an analysis of the Group's
non-current assets by geographical location.
Revenue
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
United Kingdom 392.9 369.9
Other Europe 11.9 12.1
Rest of world 15.1 12.1
Total 419.9 394.1
Non-current assets
As at As at
1 Oct 2022 2 Apr 2022
£m £m
United Kingdom 1,169.1 1,130.4
Non-current assets exclude deferred tax assets and retirement benefit assets.
5. Finance income and costs
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Interest payable on bank loans and overdrafts (3.0) (2.5)
Interest payable on senior secured notes (5.8) (7.7)
Interest payable on revolving facility (0.1) (0.3)
Amortisation of debt issuance costs (0.9) (1.2)
(9.8) (11.7)
Write off of financing costs(1) - (4.3)
Early redemption fee(2) - (4.7)
Other interest payable (0.4) (0.4)
Total finance cost (10.2) (21.1)
Interest receivable on bank deposits 0.1 0.3
Other finance income 1.3 0.2
Total finance income 1.4 0.5
Net finance cost (8.8) (20.6)
(1) Write off of financing costs in the previous period relates to the
refinancing of the senior secured fixed rate notes due to mature in 2023 and
revolving credit facility, and redemption of senior secured floating rate
notes due to mature in 2022.
(2) Early redemption fee in the prior period relates to a non-recurring
payment arising on the early redemption of the £300m senior secured fixed
rate notes due to mature in October 2023 as part of the refinancing of the
Group's debt in June 2021.
6. Taxation
Current tax
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Current tax
- Current period (3.5) (3.1)
Deferred tax
- Current period (5.0) (3.2)
- Prior periods 0.1 0.1
- Changes in tax rate on the opening balances 2.4 (3.5)
Income tax charge (6.0) (9.7)
Tax relating to items recorded in other comprehensive income included:
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Corporation tax credit on pension movements 3.5 3.1
Deferred tax charge on change in corporate tax rate - (17.9)
Deferred tax credit on prior year - 1.6
Deferred tax credit/ (charge) on pension movements - (14.3)
3.5 (27.5)
The applicable rate of corporation tax for the period is 19%. Per the Finance
Act of 2021, the corporation tax rate will increase from the current 19% to
25% starting in April 2023 and the impact of the move to a blended rate on the
deferred tax balances was reflected in the prior year. The current year
deferred tax balances have been remeasured to reflect the year end rate of 25%
resulting in a tax credit of £2.4m which has been recorded in the
consolidated statement of profit or loss.
Tax charged for the 26 week period ended 1 October 2022 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the period ended 1 April 2023 using rates substantively enacted by 1 October
2022 as required by IAS 34 'Interim Financial Reporting'. The tax charge for
the period differs from the standard rate of corporation tax in the United
Kingdom of 19.0% (26 weeks ended 2 October 2021: 19.0%). The reasons for this
are explained below:
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Profit before taxation 42.1 30.7
Tax charge at the domestic income tax rate of 19.0% (26 weeks ended 2 October (8.0) (5.8)
2021: 19.0%)
Tax effect of:
Non-taxable items 1.7 0.2
Other disallowable items (1.1) -
Adjustment due to change in tax rate on the opening balances 2.4 (3.5)
Difference between current and deferred tax rate (1.1) (0.7)
Adjustments to prior periods 0.1 0.1
Income tax charge (6.0) (9.7)
7. Earnings per share
Basic earnings per share has been calculated by dividing the profit for the
period ended 1 October 2022 attributable to owners of the parent of £36.1m
(26 weeks ended 2 October 2021: £21.0m profit) by the weighted average number
of ordinary shares of the Company.
26 weeks ended 1 Oct 2022 26 weeks ended 2 Oct 2021
Number Number
Weighted average number of ordinary shares for the purpose of basic earnings 860.3 856.9
per share (m)
Effect of dilutive potential ordinary shares (m) 21.3 18.2
Weighted average number of ordinary shares for the purpose of diluted earnings 881.6 875.1
per share
26 weeks ended 1 Oct 2022 26 weeks ended 2 Oct 2021
Basic Dilutive effect of share options Diluted Basic Dilutive effect of share options Diluted
Profit after tax (£m) 36.1 36.1 21.0 21.0
Weighted average number of shares (m) 860.3 21.3 881.6 856.9 18.2 875.1
Earnings per share (pence) 4.2 (0.1) 4.1 2.5 (0.1) 2.4
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 or loss in calculating basic and diluted
earnings per share.
Adjusted basic earnings per share ("Adjusted basic EPS")
Adjusted basic earnings per share is defined as trading profit less net
regular interest payable, less a notional tax charge at 19.0% (26 weeks ended
2 October 2021: 19.0%) 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, early redemption fees, other interest payable and other
finance income.
Trading profit and Adjusted basic EPS have been reported as the directors
believe these assist in providing additional useful information on the
underlying trends and performance of the Group.
8. 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. Although the Premier Foods Section, Premier Grocery Products
Section and RHM Section identified below are no longer separate schemes
following the merger in 2020, historically, Premier Foods companies' pension
liabilities and ex-RHM companies' liabilities have been shown separately.
These are as follows:
(a) The "Premier" Schemes, which comprise:
Premier Foods Pension Section of RHM Pension Scheme
Premier Grocery Products Pension Section of RHM Pension Scheme
Premier Grocery Products Ireland Pension Scheme ('PGPIPS')
Chivers 1987 Pension Scheme
Hillsdown Holdings Limited Pension Scheme
(b) The "RHM" Pension Schemes, which comprise:
RHM Section of the RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The interim actuarial valuations for the new Premier Foods and Premier Grocery
Products Sections as at 31 March 2021 have been agreed with no change to the
rate of deficit contributions paid in the short term. The triennial valuation
cycle continues with effect from 31 March 2022 for all three Sections of the
RHM Pension Scheme.
The exchange rates used to translate the overseas euro based schemes are
£1.00 = €1.1730 for the average rate during the period, and £1.00 =
€1.1388 for the closing position at 1 October 2022.
All pension schemes are closed to future accrual.
At the balance sheet date, the combined principal actuarial assumptions were
as follows:
Premier schemes RHM schemes
At 1 October 2022
Discount rate 5.25% 5.25%
Inflation - RPI 3.70% 3.70%
Inflation - CPI 3.25% 3.25%
Expected salary increases n/a n/a
Future pension increases
- RPI (min 0% and max 5%) 3.25% 3.25%
- CPI (min 3% and max 5%) 3.70% 3.70%
At 2 April 2022
Discount rate 2.75% 2.75%
Inflation - RPI 3.60% 3.60%
Inflation - CPI 3.20% 3.20%
Expected salary increases n/a n/a
Future pension increases
- RPI (min 0% and max 5%) 3.35% 3.35%
- CPI (min 3% and max 5%) 3.65% 3.65%
For the smaller overseas schemes, the discount rate used was 3.75% (52 weeks
ended 2 April 2022: 1.75%) and future pension increases were 3.40% (52 weeks
ended 2 April 2022: 2.60%).
The mortality assumptions are based on standard mortality tables. The
directors have considered the impact of the current Covid-19 pandemic on the
mortality assumptions and consider that use of the updated Continuous
Mortality Improvement (CMI) 2021 projections released in March 2022 for the
future improvement assumption a reasonable approach. Management considers the
2020 and 2021 mortality experience to be outliers and therefore have applied a
0% weight to the 2020 and 2021 mortality experience data. However, an addition
to the mortality scaling factors of 2% has been applied, which reflects the
expected long term negative outlook from the impact of Covid-19 on future life
expectancy. The estimated impact of the addition to the mortality scaling
factors is approximately 0.5% decrease in defined benefit obligation in
respect of the schemes.
An adjustment to the base mortality tables has been made for the Premier Foods
schemes to reflect the latest scheme mortality studies which were commissioned
by the trustee in 2021. The life expectancy assumptions are as follows:
Premier schemes RHM schemes
Life expectancy at 1 October 2022
Male pensioner, currently aged 65 86.6 85.2
Female pensioner, currently aged 65 88.3 87.7
Male non-pensioner, currently aged 45 87.5 86.5
Female non-pensioner, currently aged 45 89.8 89.3
Life expectancy at 2 April 2022
Male pensioner, currently aged 65 86.6 85.2
Female pensioner, currently aged 65 88.3 87.7
Male non-pensioner, currently aged 45 87.5 86.5
Female non-pensioner, currently aged 45 89.8 89.3
Premier schemes % of total RHM schemes % of total Total % of total
£m % £m % £m
Assets with a quoted price in an active market at 1 October 2022:
Government bonds 166.2 28.4 91.6 2.8 257.8 6.7
Cash 2.6 0.5 108.7 3.3 111.3 2.9
Assets without a quoted price in an active market at 1 October 2022:
UK equities 0.1 0.0 - - 0.1 0.0
Global equities 3.3 0.6 3.6 0.1 6.9 0.2
Government bonds 26.2 4.5 2.1 0.1 28.3 0.7
Corporate bonds 0.2 0.0 5.4 0.2 5.6 0.1
UK Property 80.4 13.8 258.9 8.0 339.3 8.8
European property 47.3 8.1 214.1 6.6 261.4 6.8
Absolute return products 33.2 5.7 736.4 22.7 769.6 20.1
Infrastructure funds 31.1 5.3 358.8 11.0 389.9 10.2
Interest rate swaps - - 244.3 7.5 244.3 6.4
Inflation swaps - - 52.7 1.6 52.7 1.4
Private equity 43.5 7.4 297.2 9.1 340.7 8.9
LDI - - 6.0 0.2 6.0 0.2
Global credit 36.3 6.2 382.2 11.8 418.5 10.9
Illiquid credit 98.7 16.9 221.6 6.8 320.3 8.4
Cash 8.7 1.5 0.1 0.0 8.8 0.2
Other(1) 6.5 1.1 267.4 8.2 273.9 7.1
Fair value of scheme assets 584.3 100 3,251.1 100 3,835.4 100
as at 1 October 2022
Assets with a quoted price in an active market at 2 April 2022:
Government bonds 337.1 40.8 842.3 19.7 1,179.4 23.1
Cash 27.9 3.4 76.0 1.8 103.9 2.0
Assets without a quoted price in an active market at 2 April 2022:
UK equities 0.1 0.0 0.3 0.0 0.4 0.0
Global equities 4.3 0.5 5.7 0.1 10.0 0.2
Government bonds 31.8 3.9 2.5 0.1 34.3 0.7
Corporate bonds 0.3 0.0 6.0 0.1 6.3 0.1
UK property 84.9 10.3 285.4 6.7 370.3 7.3
European property 38.3 4.6 168.3 3.9 206.6 4.0
Absolute return products 62.5 7.6 872.2 20.4 934.7 18.3
Infrastructure funds 26.7 3.2 338.0 7.9 364.7 7.2
Interest rate swaps 0.1 0.0 397.4 9.3 397.5 7.8
Inflation swaps - - 93.4 2.2 93.4 1.8
Private equity 39.9 4.8 280.1 6.5 320.0 6.3
LDI - - 7.7 0.2 7.7 0.2
Global credit 74.3 9.0 554.3 13.0 628.6 12.3
Illiquid credit 81.6 9.9 191.6 4.5 273.2 5.4
Cash 9.8 1.2 0.1 0.0 9.9 0.2
Other(1) 6.7 0.8 152.4 3.6 159.1 3.1
Fair value of scheme assets 826.3 100% 4,273.7 100% 5,100.0 100%
as at 2 April 2022
(1 ) Included in Other in the RHM Schemes is £124.7m (2 April 2022:
£111.2m) of assets which were sold during 2020/21 and were awaiting
settlement at the reporting date.
For assets without a quoted price in an active market fair value is determined
with reference to net asset value statements provided by third parties.
Pension assets have been reported using 30 September 2022 valuations where
available. As is usual practice for pensions assets where valuations at this
date were not available, the most recent valuations (predominantly at 30 June
2022) have been rolled forward for cash movements to 30 September 2022 and
recognised as lagged valuations. This is considered by management the most
appropriate estimate of valuations for these assets using the information
available at the time. At 1 October 2022 the financial statements include
£362m of assets using lagged valuations and were these lagged valuations to
move by 1% there would be a £3.6m impact on the fair value of scheme assets.
This approach is principally relevant for Private Equity, Property Assets,
Illiquid Credits and Global Credits asset categories. Pension assets
valuations are subject to estimation uncertainty due to market volatility,
which could result in a material movement in asset values over the next 12
months.
The amounts recognised in the balance sheet arising from the Group's
obligations in respect of its defined benefit schemes are as follows:
Premier schemes RHM schemes Total
£m £m £m
At 1 October 2022
Present value of defined benefit obligation (718.4) (2,155.2) (2,873.6)
Fair value of plan assets 584.3 3,251.1 3,835.4
(Deficit)/surplus in schemes (134.1) 1,095.9 961.8
At 2 April 2022
Present value of defined benefit obligation (1,020.2) (3,134.9) (4,155.1)
Fair value of plan assets 826.3 4,273.7 5,100.0
(Deficit)/surplus in schemes (193.9) 1,138.8 944.9
The aggregate surplus of £944.9m has increased to a surplus of £961.8m
during the period ended 1 October 2022. The increase of £16.9m (52 weeks
ended 2 April 2021: £67.8 increase) is primarily due to net remeasurement
gains on scheme assets and liabilities.
The disclosures in note 8 represent those schemes that are associated with
Premier ('Premier schemes') and those that are associated with ex-RHM
companies ('RHM schemes'). These differ to that disclosed on the balance
sheet, in which the schemes have been split between those in an asset position
and those in a liability position. The disclosures in note 8 reconcile to
those disclosed on the balance sheet as shown below:
At 1 October 2022 At 2 April 2022
Premier Schemes RHM Schemes Total Premier Schemes RHM Schemes Total
£m £m £m £m £m £m
Schemes in net asset position 11.8 1,095.9 1,107.7 9.9 1,138.8 1,148.7
Schemes in net liability position (145.9) - (145.9) (203.8) - (203.8)
Net (Deficit)/surplus in schemes (134.1) 1,095.9 961.8 (193.0) 1,138.8 944.9
Changes in the present value of the defined benefit obligation were as
follows:
Premier schemes RHM schemes Total
£m £m £m
Defined benefit obligation at 3 April 2021 (1,175.1) (3,536.9) (4,712.0)
Interest cost (22.7) (68.9) (91.6)
Past service cost (0.1) (0.2) (0.3)
Settlement 0.2 - 0.2
Remeasurement gain 139.7 333.5 473.2
Exchange differences 0.5 0.2 0.7
Benefits paid 37.3 137.4 174.7
Defined benefit obligation at 2 April 2022 (1,020.2) (3,134.9) (4,155.1)
Interest cost (13.7) (42.2) (55.9)
Settlement 0.3 - 0.3
Remeasurement gain 296.5 950.7 1,247.2
Exchange differences (1.5) (0.8) (2.3)
Benefits paid 20.2 72.0 92.2
Defined benefit obligation at 1 October 2022 (718.4) (2,155.2) (2,873.6)
Changes in the fair value of plan assets were as follows:
Premier RHM schemes Total
schemes
£m £m £m
Fair value of scheme assets at 3 April 2021 792.5 4,459.4 5,251.9
Interest income on scheme assets 15.3 87.3 102.6
Remeasurement gains/(losses) 17.5 (133.4) (115.9)
Administrative costs (4.2) (2.5) (6.7)
Settlement (0.3) - (0.3)
Contributions by employer 40.9 0.5 41.4
Additional employer contribution(1) 2.5 - 2.5
Exchange differences (0.6) (0.2) (0.8)
Benefits paid (37.3) (137.4) (174.7)
Fair value of scheme assets at 2 April 2022 826.3 4,273.7 5,100.0
Interest income on scheme assets 11.0 57.7 68.7
Remeasurement losses (254.2) (1,008.7) (1,262.9)
Administrative costs (2.1) (2.2) (4.3)
Settlement (0.3) - (0.3)
Contributions by employer 19.0 1.7 20.7
Additional employer contribution(1) 2.7 - 2.7
Exchange differences 2.1 0.9 3.0
Benefits paid (20.2) (72.0) (92.2)
Fair value of plan assets at 1 October 2022 584.3 3,251.1 3,835.4
(1) Contribution by the Group to the Premier schemes due to the payment of
dividends during the year.
The reconciliation of the net defined benefit (deficit)/surplus over the
period is as follows:
Premier RHM schemes Total
schemes
£m £m £m
(Deficit)/surplus in schemes at 3 April 2021 (382.6) 922.5 539.9
Amount recognised in profit or loss (11.8) 15.7 3.9
Remeasurements recognised in other comprehensive income 157.2 200.1 357.3
Contributions by employer 40.9 0.5 41.4
Additional employer contribution(1) 2.5 - 2.5
Exchange differences recognised in other comprehensive income (0.1) - (0.1)
(Deficit)/surplus in schemes at 2 April 2022 (193.9) 1,138.8 944.9
Amount recognised in profit or loss (4.8) 13.3 8.5
Remeasurements recognised in other comprehensive income 42.3 (58.0) (15.7)
Contributions by employer 19.0 1.7 20.7
Additional employer contribution 2.7 - 2.7
Exchange differences recognised in other comprehensive income 0.6 0.1 0.7
(Deficit)/surplus in schemes at 1 October 2022 (134.1) 1,095.9 961.8
The total amounts recognised in the consolidated statement of profit or loss
are as follows:
Premier schemes RHM schemes Total
£m £m £m
26 weeks ended 1 October 2022
Operating profit
Administrative costs (2.1) (2.2) (4.3)
Net interest (cost)/credit (2.7) 15.5 12.8
Total (cost)/credit (4.8) 13.3 8.5
26 weeks ended 2 October 2021
Operating profit
Administrative costs (2.0) (1.2) (3.2)
Net interest (cost)/credit (3.8) 9.2 5.4
Total (cost)/credit (5.8) 8.0 2.2
52 weeks ended 2 April 2022
Operating profit
Past service cost (0.1) (0.2) (0.3)
Settlement (costs)/credits (0.1) - (0.1)
Administrative costs (4.2) (2.5) (6.7)
Net interest (cost)/credit (7.4) 18.4 11.0
Total (cost)/credit (11.8) 15.7 3.9
9. Bank and other borrowings
As at As at
1 Oct 2022 2 Apr 2022
£m £m
Current:
Secured senior credit facility - revolving (25.0) -
Lease liabilities (1.2) (2.1)
Total borrowings due within one year (26.2) (2.1)
Non-current:
Lease liabilities (11.8) (14.0)
Transaction costs(1) 6.5 6.8
Senior secured notes (330.0) (330.0)
Total borrowings due after more than one year (335.3) (337.2)
Total bank and other borrowings (361.5) (339.3)
(1)Included in transaction costs is £2.1m (2 April 2022: £1.9m) relating to
the revolving credit facility.
Revolving credit facility
During the period, the Group extended the period of its revolving credit
facility (RCF) by one year to May 2025 with the same lending group.
Transactions costs of £0.6m were capitalised in relation to this extension.
The RCF of £175m attracts a leverage-based margin of between 2.0% and 4.0%
above SONIA.
Banking covenants of net debt / EBITDA and EBITDA / interest are in place and
are tested biannually. The covenant package attached to the revolving credit
facility is:
Net debt / EBITDA(1) EBITDA / Interest(1)
2022/23 FY 3.50x 3.00x
2023/24 FY 3.50x 3.00x
(1)Net debt, EBITDA and Interest are as defined under the revolving credit
facility.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock Exchange. The notes
totalling £330m mature in October 2026 and attract an interest rate of 3.5%.
10. Financial instruments
The following table shows the carrying amounts (which approximate to fair
value except as noted below) 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 2022 As at 2 April 2022
Carrying amount Fair Carrying amount Fair
value value
£m £m £m £m
Financial assets not measured at fair value:
Cash and cash equivalents 23.8 23.8 54.3 54.3
Financial assets at amortised cost:
Trade and other receivables 62.5 62.5 65.7 65.7
Financial assets at fair value through profit or loss:
Trade and other receivables 6.8 6.8 3.3 3.3
Derivative financial instruments
- Forward foreign currency exchange contracts 1.0 1.0 0.1 0.1
- Commodity and energy derivatives 1.8 1.8 2.3 2.3
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - - (0.3) (0.3)
Other financial liabilities at fair value through profit or loss
- Deferred contingent consideration (note 17) (8.2) (8.2) - -
Financial liabilities at amortised cost:
Trade and other payables (252.8) (252.8) (247.4) (247.4)
Senior secured notes (330.0) (260.2) (330.0) (305.8)
Senior secured credit facility - revolving (25.0) (25.0) - -
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 2022 As at 2 April 2022
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
£m £m £m £m £m
Financial assets at fair value through profit or loss:
Trade and other receivables - 4.4 2.4 - 3.3 -
Derivative financial instruments
- Forward foreign currency exchange contracts - 1.0 - - 0.1 -
- Commodity and energy derivatives - 1.8 - - 2.3 -
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - - - - (0.3) -
Other financial liabilities at fair value through profit or loss:
- Deferred contingent consideration (note 17) - - (8.2) - - -
Financial liabilities at amortised cost:
Senior secured notes (260.2) - - (305.8) - -
The fair value of trade and other receivables and trade and other payables is
considered to be equal to the carrying amount of these items due to their
short-term nature.
Calculation of fair values
The fair values of the financial assets and liabilities are defined as 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.
During the period, the Group recognised other receivables with a fair value of
£2.4m and deferred contingent consideration with a fair value of £8.2m as
a result of the acquisition of The Spice Tailor. The fair values for both are
based on unobservable inputs and are classified as a level 3 fair value
estimate under the IFRS fair value hierarchy. See note 17 for further
details.
Methods and assumptions used to estimate all other fair values are consistent
with those used in the 52 weeks ended 2 April 2022.
11. Provisions for liabilities and charges
As at As at
1 Oct 2022 2 Apr 2022
£m £m
Within one year (6.7) (2.3)
Between two and five years (5.0) (2.9)
After 5 years (2.7) (5.4)
Total (14.4) (10.6)
During the period, as a result of the acquisition of The Spice Tailor, the
Group recognised provisions of £2.5m, including £2.4m in relation to the
fair value of contingent liabilities acquired as part of the business
combination. See note 17 for further details.
During the 26 week period ended 1 October 2022 provisions for liabilities and
charges increased by £3.8m. The increase of £3.8m is due primarily to these
acquired contingent liabilities as well as an increase in provisions for
expected further property costs. Total provisions for liabilities and charges
of £14.4m (2 April 2022: £10.6m) comprise primarily of provisions for site
costs, dilapidations and environmental liabilities related to leasehold
properties and provisions for insurance.
12. Notes to the cash flow statement
Reconciliation of profit before taxation to cash flows from operating
activities
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Profit before taxation 42.1 30.7
Net finance cost 8.8 20.6
Operating profit 50.9 51.3
Depreciation of property, plant and equipment 9.3 9.3
Amortisation of intangible assets 12.7 14.3
Fair value movements on financial instruments (0.7) (3.0)
Net interest on pensions and administrative expenses (8.5) (2.2)
Equity settled employee incentive schemes 1.8 1.5
Increase in stocks (35.4) (21.9)
Decrease in trade and other receivables 6.6 8.0
Increase/(Decrease) in trade and other payables and provisions 3.7 (7.2)
Dividend match pension contribution(1) (2.7) (2.5)
Contribution to defined benefit pension schemes (20.7) (19.5)
Cash generated from operations 17.0 28.1
(1)Contribution by the Group to the Premier sections of the RHM pension
schemes due to the payment of dividends during the period.
Analysis of movement in borrowings
As at Cash flows Non-cash interest expense Other As at
2 April 2022 non-cash movements 1 Oct 2022
£m £m £m £m £m
Cash and bank deposits 54.3 (30.5) - - 23.8
Net cash and cash equivalents 54.3 (30.5) - - 23.8
Borrowings - revolving credit facilities - (25.0) - - (25.0)
Borrowings - Senior Secured Fixed Rate Notes maturing October 2026 (330.0) - - - (330.0)
Lease liabilities (IFRS 16) (16.1) 1.8 (0.4) 1.7 (13.0)
Gross borrowings net of cash(1) (291.8) (53.7) (0.4) 1.7 (344.2)
Debt issuance costs(2) 6.8 0.7 - (1.0) 6.5
Total net borrowings(1) (285.0) (53.0) (0.4) 0.7 (337.7)
Total net borrowings excluding lease liabilities(1) (268.9) (54.8) - (1.0) (324.7)
(1) Borrowings excludes derivative financial instruments.
(2) The non-cash movement in debt issuance costs relates to the amortisation
of capitalised borrowing costs only.
13. Dividends
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
1.2 pence per ordinary share (26 weeks ended 2 October 2021: 1.0 pence) 10.3 8.5
A final dividend of 1.2 pence per share for the 52 week period ended 2 April
2022 was approved by the shareholders at the Company's Annual General Meeting
on 20 July 2022 and was subsequently paid on 29 July 2022.
14. Capital commitments
The Group has capital expenditure on property, plant and equipment contracted
for at the end of the reporting period but not yet incurred at 1 October 2022
of £5.8m (2 April 2022: £5.7m).
15. Contingencies
There were no material contingent liabilities as at 1 October 2022 and 2 April
2022.
16. Related party transactions
The Group's related party transactions and relationships for the 52 weeks
ended 2 April 2022 were disclosed on page 154 of the annual report and
accounts for the financial period ended 2 April 2022.
As at 1 October 2022 the following are also considered to be related parties
under the Listing Rules due to their shareholdings exceeding 10% of the
Group's total issued share capital:
- Nissin Foods Holding Co., Ltd. ('Nissin') is considered to be a
related party by virtue of its 25.00% (2 April 2022: 19.14%) equity
shareholding in Premier Foods plc and its right to appoint a member to the
Board of Directors.
Transactions with related parties
Transactions with associates and major shareholders during the period are set
out below.
26 weeks ended 26 weeks ended
1 Oct 2022 2 Oct 2021
£m £m
Sale of services:
- Nissin 0.1 -
Total sales 0.1 -
Purchase of goods:
- Nissin 10.8 10.0
Total purchases 10.8 10.0
17. Acquisitions
On 31 August 2022, the Group acquired 100% of the ordinary share capital of
The Spice Tailor Limited ('Spice Tailor') and its wholly owned subsidiaries,
The Spice Tailor (Direct) Limited, The Spice Tailor (Canada) Limited and The
Spice Tailor (Australia) Pty Ltd for initial consideration of £43.8m (this
comprises £44.5m cash consideration less £0.7m cash acquired). Additional
consideration is dependent on future performance with an earn out structure
over a three year period from FY2024, subject to further growth targets with a
maximum cap of total consideration of £72.5m. The acquisition is well aligned
to the Group's growth strategy, being highly complementary to the Group's
Sharwoods and Loyd Grossman brands and having a strong geographical fit, with
a presence in the UK, Australian, Canadian and Irish markets, significantly
expanding the Group's ethnic foods business in Australia.
The following table summarises the Group's preliminary assessment of the
consideration for Spice Tailor, and the amounts of the assets acquired and
liabilities assumed.
IFRS book value at acquisition Fair value adjustments Fair value
Recognised amounts of identifiable assets acquired and liabilities assumed £m £m £m
Property, plant & equipment 0.1 - 0.1
Brands and other intangible assets - 20.5 20.5
Inventories 3.0 0.2 3.2
Trade and other receivables(1) 2.4 2.4 4.8
Trade and other payables (3.4) - (3.4)
Provisions (0.1) (2.4) (2.5)
Cash and cash equivalents 0.7 - 0.7
Deferred tax liability - (5.0) (5.0)
Total identifiable net assets 2.7 15.7 18.4
Goodwill on acquisition 34.3
Initial consideration transferred in cash 44.5
Deferred contingent consideration 8.2
Total consideration 52.7
(1) Fair value adjustment relates to the recognition of indemnification assets
in relation to contingent liabilities acquired
Identifiable net assets
The fair values of the identifiable assets and liabilities acquired have been
determined provisionally at 1 October 2022, given proximity of the acquisition
to period end. As permitted under IFRS 3 the Group will retrospectively adjust
the provisional amounts recognised to reflect new information obtained about
facts and circumstances that existed and, if known, would have affected the
measurement of the amounts recognised as at the acquisition date.
As a result of the business combination, the Group recognised provisions of
£2.5m, including £2.4m in relation to the fair value of contingent
liabilities acquired which relate primarily to future tax liabilities in line
with IAS 37.
The fair value of the trade and other receivables acquired as part of the
business combination was £4.8m. This includes an indemnification asset of
£2.4m in relation to the contingent liabilities assumed, and trade
receivables amounting to £2.4m which approximated to the contractual cash
flows.
Consideration transferred
Consideration included cash of £44.5m transferred on completion of the
acquisition. An additional £8.2m was recognised in relation to the fair value
of deferred contingent consideration which is dependent on future performance
with an earn out structure over a three year period from FY2024, subject to
further growth targets. The deferred contingent consideration is included
within non-current other liabilities.
The fair value of deferred contingent consideration represents the present
value of estimate payments measured at the time of acquisition based on the
Group's estimate of future performance. The fair value is based on
unobservable inputs and is a classified as a level 3 fair value estimate under
the IFRS fair value hierarchy. See note 10 for further details.
Acquisition-related costs amounting to £2.7m are not included as part of
consideration transferred and have been recognised as an expense in the
consolidated statement of profit or loss, as part of administrative expenses.
Goodwill
Goodwill amounting to £34.3m was recognised on acquisition and while The
Spice Tailor brand forms much of the enterprise value of the business, there
is a premium associated to the purchase of a pre-existing, well positioned
business. This goodwill is not expected to be deductible for tax purposes
and is allocated to the Group's Grocery CGU.
The carrying amount of goodwill and the beginning and end of the period is as
follows:
£m
Carrying value
At 4 April 2022 646.0
Acquisition of subsidiary 34.3
At 1 October 2022 680.3
The Spice Tailor contribution to the Group results
From the date of the acquisition to 1 October 2022, The Spice Tailor
contributed £1.3m to the Group's Revenues and a loss before tax of £nil. Had
the acquisition occurred on 3 April 2022, on a pro forma basis, the Group's
Revenue for the period to 1 October 2022 would have been £426.8m and Profit
before tax for the same period would have been £41.2m.
18. Subsequent events
There were no reportable events after the balance sheet date.
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