REG - Premier Foods plc Premier Foods Fin - Half-year results
16/11/2023 07:00
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RNS Number : 6137T Premier Foods plc 16 November 2023
16 November 2023
Premier Foods plc (the "Group" or the "Company")
Half year results for the 26 weeks ended 30 September 2023
Full year expectations raised following strong first half performance
Headline results (£m) FY23/24 H1 FY22/23 H1 change
Headline Revenue 484.4 406.5 19.2%
Trading profit(1) 67.5 56.7 19.0%
Adjusted profit before taxation(4) 56.9 47.0 21.2%
Adjusted earnings per share(7) (pence) 5.0 4.4 12.0%
Net debt(10) 273.1 337.7 £64.6m lower
Statutory measures (£m) FY23/24 H1 FY22/23 H1 % change
Revenue 494.1 419.9 17.7%
Profit before taxation 58.1 42.1 38.0%
Profit after taxation 42.7 36.1 18.3%
Basic earnings per share (pence) 5.0 4.2 19.0%
Alternative performance measures above are defined and reconciled to statutory
measures throughout.
Headline Revenue presented for FY23/24 H1 excludes 'Knighton Foods', Statutory
Revenue includes Knighton Foods
Headlines
· Branded revenue up +15.8%; Q2 branded revenue up +14.3%
· Total Headline Grocery revenue up +24.6%, Sweet Treats revenue up +5.4%
· Grocery market share(12) increased +113bps
· Trading profit +19.0%; margins continue to be in line with prior year
· Increased marketing investment across all major brands, expanding Best
Restaurant in Town campaign
· Strong International progress; Mr Kipling distribution building in USA and
further market share growth in Australia
· New categories revenue increased +21% led by continued momentum of Ambrosia
porridge pots
· The Spice Tailor continues to build distribution and on track to deliver
returns ahead of plan
· FUEL10K acquisition completed early in H2, accelerating expansion into
breakfast category
· FY23/24 Trading profit now expected to be in the region of 10% ahead of prior
year
Alex Whitehouse, Chief Executive Officer
"We've had a really good start to the year, making strong progress against all
our strategic pillars. We delivered branded revenue growth of nearly 16%,
again maintained our Trading profit margins and we continue to grow faster
than our markets, gaining 113 basis points of share in our Grocery categories.
This performance once again demonstrates the power of our branded growth model
and the capabilities of our team. New categories revenue increased by 21%,
driven by Ambrosia porridge pots and our International business grew by 19%,
with Mr Kipling building distribution in the USA and taking further market
share in Australia."
"We know how challenging the past year has been for many consumers and so it's
good to see the rate of input cost inflation falling. This has now given us
the opportunity to lower promotional prices across a number of our major
branded products such as Batchelors Super Noodles and Mr Kipling Slices."
"We're very pleased to have recently acquired the vibrant breakfast brand
FUEL10K, providing us with the ideal platform to accelerate our expansion into
breakfast and deploy our branded growth model, while The Spice Tailor is on
track this year to deliver returns ahead of our original acquisition plan.
With a strong first half behind us, a good start to quarter 3 and exciting
plans for the rest of the year, we are again raising our Trading profit
expectations for FY23/24, following our previous upgrade earlier this year."
Environmental, Social and Governance (ESG)
The Group continues to make strong progress against its 'Enriching Life Plan',
set out through the three key strategic pillars of Product, Planet and People.
As previously articulated, the Group has set out a series of major
sustainability targets under each pillar and reports progress on these
annually.
1. Product
In H1, Revenue growth from products with high nutritional standards (as
defined by UK Government) increased by 23% compared to the same period a year
ago. Additionally, 43% of the Group's products have an additional health or
nutrition benefit, such as added fibre or higher in vitamins. In terms of
packaging, 96% by weight of products are recyclable, reusable or compostable.
Ambrosia custard mini pots is an example of a reconfigured product which will
shortly use entirely recyclable materials.
2. Planet
The Group continues to make progress in reducing emissions, in line with its
target to reduce scope 1 and 2 by 2040. Scope 1 emissions are expected to be
approximately 4% lower in FY23/24 compared to the prior year, while a new
supplier engagement programme has recently been launched to drive lower scope
3 emissions.
3. People
Embracing diversity is an important part of the Premier Foods culture; 47% of
management colleagues are female and the Group is a key supporter of Grocery
Aid Diversity in Grocery. The five-year partnership with FareShare, now into
its second year, has seen over 500,000 meals donated in the first half of
FY23/24, while we have also increased our apprentice and graduate positions by
16% in the period.
Outlook
The Group has delivered a strong first half of FY23/24 and made a good start
to its third quarter, as it continues to implement its comprehensive programme
of brand investment, new product launches and impactful instore execution.
With this strong momentum, the Group now expects Trading profit this financial
year to be in the region of 10% ahead of last year. The full resolution of the
pension schemes is expected within three years and would open up a range of
value enhancing opportunities to further accelerate shareholder value over the
medium term.
Strategy overview
The Group's five pillar strategy drives growth and creates value, as 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 Group's branded growth model 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: H1 UK branded revenue growth of 15.5%.
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. We are also now investing in low energy
manufacturing solutions to drive scope 1 and 2 emission reductions, aligned to
our Enriching Life Plan.
Proof point: Significantly increasing capital investment in
FY23/24, focusing on efficiency and energy reduction
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
increased by 21% 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 & New Zealand, 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 19%(8) with further market share
growth of Australia cake and building distribution in US cake.
5. Inorganic opportunities
We are looking to acquire brands where we believe we can drive significant
value through the application of our branded growth model.
Proof point: Building distribution of The Spice Tailor, ahead of
original returns expectations this year and acquired FUEL10K, the vibrant
Breakfast brand.
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 2023, at 1:30pm GMT. Dial in details are outlined below:
Telephone: 0800 358 1035 (UK toll free)
+44 20 4587 0498 (standard international access)
Access code: 194392
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:
Sarah Henderson, 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 FY23/24 H1 FY22/23 H1 % change
Branded revenue 416.5 359.6 15.8%
Non-branded revenue 67.9 46.9 44.8%
Headline revenue 484.4 406.5 19.2%
Divisional contribution(2) 101.6 83.5 21.7%
Trading profit(1) 67.5 56.7 19.0%
Trading profit margin 13.9% 13.9% 0.0ppt
Adjusted EBITDA(3) 79.4 68.5 15.9%
Adjusted profit before tax(4) 56.9 47.0 21.2%
Adjusted earnings per share(7) (pence) 5.0 4.4 12.0%
Basic earnings per share (pence) 5.0 4.2 19.0%
Headline revenue excludes Knighton Foods, reconciliations are provided in the
appendices.
Headline Revenue, which excludes Knighton Foods, grew by 19.2% in the first
half of the year. Divisional contribution increased by 21.7% to £101.6m and
Trading profit increased by 19.0% to £67.5m. Group and corporate costs were
higher in the period due to investment to improve planning systems and support
strategic priorities, wage and salary inflation and wider management incentive
scheme costs. Trading profit margins of 13.9% were in line with the prior
period. Adjusted profit before tax increased by 21.2%, while adjusted earnings
per share grew by 12.0%, reflecting an increase in the UK corporation tax rate
from 19% to 25%. Basic earnings per share for FY23/24 H1 increased by 19.0% to
5.0p.
Statutory overview
£m FY23/24 H1 FY22/23 H1 % change
Grocery
Branded revenue 316.9 257.4 23.1%
Non-branded revenue 55.3 46.9 18.0%
Total revenue 372.2 304.3 22.3%
Sweet Treats
Branded revenue 99.6 102.2 (2.6%)
Non-branded revenue 22.3 13.4 66.0%
Total revenue 121.9 115.6 5.4%
Group
Branded revenue 416.5 359.6 15.8%
Non-branded revenue 77.6 60.3 28.7%
Statutory revenue 494.1 419.9 17.7%
Profit before tax 58.1 42.1 38.0%
Basic earnings per share (pence) 5.0 4.2 19.0%
The table above is presented including revenue from Knighton Foods.
Group revenue on a statutory basis increased by 17.7% in the period, with
branded revenue growing by 15.8% and non-branded revenue ahead 28.7%. Grocery
revenue was 22.3% higher than the prior period at £372.2m. Non-branded
Grocery revenue grew by 18.0% to £55.3m as price increases on existing
contracts were partly offset by managed contract exits associated with the
closure of Knighton Foods.
Trading performance
Grocery
£m FY23/24 H1 FY22/23 H1 % change
Branded revenue 316.9 257.4 23.1%
Non-branded revenue 45.6 33.5 36.2%
Total headline revenue 362.5 290.9 24.6%
Divisional contribution(2) 89.5 70.2 27.5%
Divisional contribution margin 24.7% 24.1% 0.6ppts
The table above is presented including the impact of The Spice Tailor
acquisition. Revenue excludes Knighton Foods.
On a headline basis (excluding Knighton Foods) Grocery revenue increased by
24.6% in the period to £362.5m, with Branded revenue up 23.1% to £316.9m.
Non-branded revenue increased by 36.2% to £45.6m. Market share(13) in the
Group's Grocery categories increased by 113 basis points in the first half of
the year, as the Group's brands continue to demonstrate their strength and
resilience in what has been a challenging consumer environment.
In the second quarter, Grocery revenue (on a headline basis) increased by
23.0%, with very strong growth in both branded and non-branded revenue.
Branded growth of 21.5% was due to the benefit of the Group's proven branded
growth model across the portfolio and price increases. Non-branded revenue
grew by 35.1% and was primarily due to pricing benefits in retailer branded
product categories compared to the prior period.
Divisional contribution increased by 27.5% to £89.5m; margins expanded by 60
basis points as the strong trading performance was partly offset by increased
brand investment and salary inflation.
Grocery volume trends improved in the second quarter, as elasticity effects of
price increases dissipated. Greater promotional investment across a range of
popular products in the second half is expected to further underpin these
volume trends.
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.
Consistent and effective application of this strategy has resulted in H1
Grocery branded revenue increasing by over 50% compared to five years ago,
translating into Trading profit growth of 8.6% per annum.
All the Group's Grocery brands reported strong growth in the period, due to
further momentum driven by the proven branded growth model. In the first half
of the year, the Group upweighted investment in its 'Best Restaurant in Town'
campaign, which highlights great value meal ideas across the Grocery
portfolio. The Grocery business's major brands, Ambrosia, Batchelors, Bisto,
Sharwood's, Oxo and Loyd Grossman all benefitted from this impactful campaign.
Oxo revenue in the first half of the year was particularly strong, benefitting
not only from increased brand advertising but also further expansion of new
Oxo Stock pots.
Nissin noodles ranges again demonstrated very strong growth in the period,
with revenue up nearly 50%, due to their strong consumer repeat rate and
launch of the Big Soba pots range. As part of our commitment to giving
consumers new healthier options, we launched Batchelors Pasta 'n' Sauce pots,
Sharwood's curry pastes and Homepride pasta bake sauces in the period. Under
the 'indulgence' trend, Ambrosia launched Deluxe creamed rice in can and pot
formats.
Another key element of the branded growth model is to build and maintain
strong, collaborative partnerships with customers. For example, Batchelors
extended its successful partnership with DC Warner Brothers in the period,
this time through its tie-up with Batman, producing some highly impactful
instore execution displays. Illustrating the effectiveness of this strategy,
the Group increased off shelf display by 56% in its Grocery categories during
the second quarter, driving significantly improved brand visibility and volume
trends. Additionally, total distribution of Grocery products increased by 2.6%
reflecting significant gains in recent range reviews.
One of the Group's key strategic pillars is expanding into adjacent
categories, leveraging the strong brand equities across its brand portfolio to
deliver further growth. Revenue in new categories increased by 21% in the
period and Ambrosia porridge pots was again one of the main drivers of this
progress. Market share grew to 6.2% in a category growing at around 20% and
sales nearly doubled compared to last year. In ice-cream, new distribution
into major multiple retailers was achieved in the second quarter, as it builds
on the success of its initial launch in 2022. These ranges exemplify the
brands' respective differentiators; Angel Delight ice-cream is available in
its iconic Butterscotch and Strawberry flavours and Mr Kipling Cherry Bakewell
ice-cream includes cherries and pieces of cake.
The Spice Tailor is now benefitting from the commercial capabilities and
category expertise of the Group which has resulted in improved retailer
distribution both in the UK and overseas and significantly enhanced instore
execution through more impactful product displays. The brand is well on track
to deliver returns ahead of its original plan for FY23/24 and there is a
strong pipeline of product innovation planned for the next 12 months.
New product development for the second half of the year includes Loyd Grossman
pesto sauces, Ambrosia plant-based custard and Plantastic Protein Boost curry
and rice pots.
Sweet Treats
£m FY23/24 H1 FY22/23 H1 % change
Branded revenue 99.6 102.2 (2.6%)
Non-branded revenue 22.3 13.4 66.0%
Total headline revenue 121.9 115.6 5.4%
Divisional contribution(2) 12.1 13.3 (8.8%)
Divisional contribution margin 9.9% 11.5% (1.6ppts)
Total revenue increased by 5.4% in Sweet Treats, with Branded revenue 2.6%
lower than the prior period and non-branded revenue up by 66.0% at £22.3m.
The non-branded revenue growth was due to a combination of contract wins in
pies and tarts and price increases on existing ranges.
Sweet Treats delivered Divisional contribution of £12.1m in the first half of
the year compared to £13.3m in the prior period. Investment in Mr Kipling
television media advertising, broadcasting the new 'Piano' advert,
demonstrates the Group's media approach of building emotional connections with
consumers and is weighted to the first half. Revenue growth included price
increases, sales from new products such as the Mr Kipling Deliciously Good
range and Signature Brownie Bites and offset by some lower promotional volumes
owing to price elasticity effects. Quarter 1 also benefitted from activity
commemorating the King's Coronation. In the second half of the year, the
Group's promotional pricing will be sharper, reflecting lower levels of input
cost inflation and which will assist in driving further volume recovery.
During the course of the first half, the Group focused on enhancing instore
execution of both Mr Kipling and Cadbury cake through developing innovative
branded displays to assist shoppers navigate the cake category with greater
ease. Additionally, the partnership with The Minions franchise was extended to
Mr Kipling in the period, with the opportunity for consumers to win prizes.
Looking forward to the second half of the year, innovation plans include Mr
Kipling launching its best ever, indulgent, all butter mince pies and Cadbury
cake is re-introducing Crème Egg cake bars.
International
Revenue overseas (on a constant currency basis) increased by 19%(8) compared
to the prior period. In the Group's strategic target markets, particularly
strong growth was delivered in USA (+53%), Europe (+39%) and Ireland (+27%).
In-market cake sales in Australia continue to be strong, however revenue was
impacted by reduced shipping times which in turn led to lower stock holdings
in the supply chain.
Building sustainable businesses in the Group's target markets continues to
progress strongly. The Mr Kipling and Cadbury cake brands again grew market
share in Australia, reaching a record 16.0%(14) and delivering retail sales
growth of 21.8%. The rollout of the Company's branded growth model is
developing well with both brand investment and new product development
launches for Mr Kipling in the first half of the year. Mr Kipling received TV
advertising in the form of the engaging 'Little Thief' advert and also
sponsored the Great Australian Bake Off, while new products launched in the
period included Caramel Bakewell Tarts and Salted Caramel Slices.
In the USA, the distribution of Mr Kipling to a range of retailers is building
well, with approximately 1,100 stores now stocking the Group's largest brand,
up from c.200 at the start of the year. Further store listings are planned for
the second half of the year, expected to reach over 1,900 in quarter three,
and will be accompanied by instore activation and social media campaigns.
Sales in Ireland were, like the UK, broad based with many brands delivering
double-digit sales growth; Ambrosia, Bisto and Oxo were particularly strong
performers due to pricing benefits and continued application of the branded
growth model. In Europe, Sharwood's sales were strong, reflecting increased
listings in major retailers in Germany and Netherlands.
Operating profit
Operating profit increased by £18.1m to £69.0m in the period. Trading profit
increased by 19.0% to £67.5m, as described above. Brand amortisation of
£10.5m was broadly in line with the prior year period. Net interest on
pensions and administrative expenses was a credit of £15.6m (FY22/23 H1:
£8.5m credit), due to an interest credit on the opening combined surplus of
the pension scheme of £18.1m, partly offset by £2.5m of administrative
expenses. Non-trading items of £3.7m were £1.0m lower than the prior period
and relate primarily to costs associated with the closure of the Knighton
manufacturing site.
Finance costs
Net finance cost was £10.9m in the first half of FY23/24, an increase of
£2.1m compared to FY22/23 H1. Net regular interest(5) increased by £0.9m to
£10.6m, due to a higher SONIA rate applicable to the Group's revolving credit
and debtors securitisation facilities. Interest on the Group's Senior secured
notes of £5.8m were in line with the prior period. Interest income was
£1.7m, £0.3m higher than the prior period reflecting higher interest rates
on cash reserves partly offset by the discount provision unwind which was
lower than FY22/23 H1.
Taxation
The taxation charge for the period was £15.4m (2022/23 H1: £6.0m) and was
largely due to a charge on operating activities of £14.5m (2022/23 H1:
£8.0m), reflecting an increase in the UK corporation tax rate from 19% to
25%. The Group has now recommenced paying cash tax, albeit at low absolute
levels, reflecting brought forward losses available to offset against future
tax liabilities.
Earnings per share
£m FY23/24 H1 FY22/23 H1 % change
Operating profit 69.0 50.9 35.6%
Net finance cost (10.9) (8.8) (23.9%)
Profit before taxation 58.1 42.1 38.0%
Taxation (15.4) (6.0) (156.7%)
Profit after taxation 42.7 36.1 18.3%
Average shares in issue (million) 862.5 860.3 0.3%
Basic Earnings per share (pence) 5.0 4.2 19.0%
The Group reported profit before tax of £58.1m in the first half of FY23/24,
a 38.0% increase on the prior period. Profit after tax increased by £6.6m to
£42.7m and basic earnings per share was 5.0 pence, an increase of 19.0%.
Cash flow
Net debt as at 30 September 2023 was £273.1m, a reduction of £64.6m compared
to the same point a year ago and £1.2m lower than 1 April 2023.
Trading profit was £67.5m, as described above, while depreciation and
software amortisation totalled £11.9m. An £11.0m outflow of working capital
was due to higher stock reflecting inflation of both raw materials and
finished goods and some stock build in advance of the Knighton site closure.
Pension deficit contribution payments of £16.7m reflected the recently agreed
reductions with the Pension Trustee and administration costs were £3.3m,
totalling a £20.0m cash outflow to the schemes. Non-trading items were £2.8m
and related to payments associated with closure of the Knighton manufacturing
site. In the Full year, the Group expects non-trading items to be
approximately £20m.
On a statutory basis, cash generated from operating activities was £34.8m
(FY22/23 H1: £6.9m) after deducting net interest paid of £9.7m (FY22/23 H1:
£9.7m). The Group paid Tax of £0.8m in the period (2022/23 H1: £0.4m).
Cash used in investing activities was £13.8m (FY22/23 H1: £50.1m), the
reduction primarily due to consideration paid for The Spice Tailor
acquisition in the prior period of £43.8m, partly offset by a planned
increase in capital expenditure in the period of £6.3m to £13.8m. In
FY23/24, the Group expects to increase its capital investment, as it looks to
accelerate investment across the supply chain and transfer some manufacturing
capability from the Knighton site to Ashford, Kent and Carlton, South
Yorkshire. Such investment includes both growth projects supporting the
Group's innovation strategy and cost release projects to deliver efficiency
savings. The strategy of investing in supply chain infrastructure represents a
virtuous cycle to provide the fuel for the Group's branded growth model. Other
examples include replacement of new air compressors across a number of sites
which have improved efficiency and will reduce scope 2 carbon emissions.
Future plans include the development of a new, innovative energy efficient
process to manufacture iced-topped cake products which will also increase line
efficiency and reduce carbon emissions.
Cash used in financing activities was £16.7m in the period (FY22/23 H1:
£12.7m generated) which included a £12.4m dividend payment to shareholders
(FY22/23 H1: £10.3m). A dividend match payment to the Group's pension schemes
of £3.7m was also made in the period. As at 30 September 2023, the Group held
cash and bank deposits of £67.7m and its £175m revolving credit facility was
undrawn.
Pensions
The Pension scheme has continued to make strong progress, benefiting from
a successful investment strategy for both the RHM and Premier Foods sections
since the segregated merger of the scheme in June 2020. As of March 2022,
the RHM section reported a buyout valuation in excess of £100m and the
deficit in the Premier Foods section continued to reduce. This investment
strategy continues to deliver, such that a full resolution of the pension
scheme deficit, where an RHM section surplus would offset a Premier Foods
section deficit, is now forecast within three years. This is expected
to result in the cessation of deficit contributions paid by the Company and
in turn, opens up broader, deeper, capital allocation opportunities.
IAS 19 Accounting Valuation (£m) 30 September 2023 1 April 2023
RHM Premier Foods Combined RHM Premier Foods Combined
Assets 2,903.6 503.1 3,406.7 3,240.2 552.6 3,792.8
Liabilities (2,077.2) (671.5) (2,748.7) (2,291.9) (735.4) (3,027.3)
Surplus/(Deficit) 826.4 (168.4) 658.0 948.3 (182.8) 765.5
Net of deferred tax (25%) 619.8 (126.3) 493.5 711.2 (137.1) 574.1
The Group's pension scheme reported a combined surplus of £658.0m as at 30
September 2023, a reduction of £107.5m compared to the prior period. This is
equivalent to a surplus of £493.5m net of a deferred tax charge of 25.0%.
Asset values fell in both sections of the schemes as a result of hedging in
place. The applicable discount rate used to value liabilities increased from
4.80% to 5.50%, as a result of further rises in UK corporate bond yields.
Accordingly, the value of liabilities fell by £278.6m to £2,748.7m. The RPI
inflation rate assumption used was unchanged at 3.30%. Asset values reduced by
£386.2m in the period and were lower in Government bonds and absolute return
products.
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.
As previously disclosed, the Company and Trustees of the pension scheme have
agreed to reduce the annual deficit contribution payments by £5m per annum to
£33m until FY25/26. Additionally, administrative expenses (including UK
Government levies) have reduced to c.£6m per annum. The net present value of
future pension contributions to the end of the respective recovery periods
remains unchanged at approximately £125m(15) and includes the benefit of a
c.£100m surplus (as at 31 March 2022) from the RHM section on a buyout
valuation basis.
Capital allocation
The Group is a highly cash generative business and has substantially reduced
its interest costs in recent years. Today, the allocation of capital is split
across pension contributions, capital investment and dividends. Additionally,
the Group continues to explore M&A opportunities. In the medium term,
pension contributions are expected to reduce further, freeing up more cash for
capital investment, M&A and dividends.
Principal risks and uncertainties
Strong risk management is key to delivery of the Group's strategic objectives.
It 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 were disclosed on page 60 to
66 of the annual report and accounts for the financial period ended 1 April
2023 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 nature and potential impact of the principal risks and uncertainties
facing the Group are considered essentially unchanged in the six months ended
30th September and are not expected to change during the second half of the
financial year.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
The Company's Half year results are presented for the 26 weeks ended 30
September 2023 and the comparative period, 26 weeks ended 1 October 2022. All
references to the 'period', unless otherwise stated, are for the 26 weeks
ended 30 September 2023 and the comparative periods, 26 weeks ended 1 October
2022.
All references to the 'quarter', unless otherwise stated, are for the 13 weeks
ended 30 September 2023 and the comparative periods, 13 weeks ended 1 October
2022.
Half year and Quarter 2 Revenue
Half year revenue (£m) FY23/24
Statutory revenue Knighton Foods Headline revenue Headline revenue % change vs prior year
Grocery
Branded 316.9 - 316.9 23.1%
Non-branded 55.3 (9.7) 45.6 36.2%
Total 372.2 (9.7) 362.5 24.6%
Sweet Treats
Branded 99.6 - 99.6 (2.6%)
Non-branded 22.3 - 22.3 66.0%
Total 121.9 - 121.9 5.4%
Group
Branded 416.5 - 416.5 15.8%
Non-branded 77.6 (9.7) 67.9 44.8%
Total 494.1 (9.7) 484.4 19.2%
Quarter 2 Revenue (£m) FY23/24
Statutory revenue Knighton Foods Headline revenue Headline revenue % change vs prior year
Grocery
Branded 167.8 - 167.8 21.5%
Non-branded 28.2 (4.9) 23.3 35.1%
Total 196.0 (4.9) 191.1 23.0%
Sweet Treats
Branded 49.4 - 49.4 (4.7%)
Non-branded 12.8 - 12.8 53.1%
Total 62.2 - 62.2 3.2%
Group
Branded 217.2 - 217.2 14.3%
Non-branded 41.0 (4.9) 36.1 40.7%
Total 258.2 (4.9) 253.3 17.4%
EBITDA to Operating profit reconciliation (£m) FY23/24 H1 FY22/23 H1
Adjusted EBITDA(3) 79.4 68.5
Depreciation (9.6) (9.3)
Software amortisation (2.3) (2.5)
Trading profit 67.5 56.7
Amortisation of brand assets (10.5) (10.3)
Fair value movements on foreign exchange & derivative contracts 0.1 0.7
Net interest on pensions and administrative expenses 15.6 8.5
Non-trading items - restructuring costs (3.7) (4.7)
Operating profit 69.0 50.9
Finance costs (£m) FY23/24 H1 FY22/23 H1 Change
Senior secured notes interest 5.8 5.8 -
Bank debt interest - net 3.9 3.0 (0.9)
9.7 8.8 (0.9)
Amortisation of debt issuance costs 0.9 0.9 -
Net regular interest(5) 10.6 9.7 (0.9)
Re-measurement due to discount rate change (0.1) (1.3) (1.2)
Other finance cost 0.4 0.4 -
Net finance cost 10.9 8.8 (2.1)
Adjusted earnings per share (£m) FY23/24 H1 FY22/23 H1 Change
Trading profit 67.5 56.7 19.0%
Less: Net regular interest(5) (10.6) (9.7) (8.5%)
Adjusted profit before tax 56.9 47.0 21.2%
Less: Notional tax (25%/19%) (14.2) (8.9) (59.6%)
Adjusted profit after tax(6) 42.7 38.1 12.2%
Average shares in issue (millions) 862.5 860.3 0.3%
Adjusted earnings per share (pence) 5.0 4.4 12.0%
Net debt (£m)
Net debt(11) at 1 April 2023 274.3
Movement in cash (4.3)
Movement in debt issuance costs 0.4
Movement in lease creditor 2.7
Net debt at 30 September 2023 273.1
Free cash flow (£m) FY23/24 H1 FY22/23 H1
Trading profit 67.5 56.7
Depreciation & software amortisation 11.9 11.8
Other non-cash items 2.5 1.8
Capital expenditure (13.8) (6.3)
Working capital (11.0) (28.6)
Operating cash flow(17) 57.1 35.4
Interest (9.7) (9.7)
Pension contributions (20.0) (20.7)
Free cash flow(12) 27.4 5.0
Non-trading items (2.8) (2.7)
Net share (repurchase)/issue (2.8) 0.1
Financing fees (0.5) (0.7)
Taxation (0.8) (0.4)
Dividend (including pensions match) (16.2) (13.0)
Acquisition - (43.8)
Movement in cash 4.3 (55.5)
Proceeds from borrowings - 25.0
Net increase in cash and cash equivalents 4.3 (30.5)
The following table outlines the basis on which the Group is reporting
headline revenue for FY23/24.
This includes The Spice Tailor but excludes sales from Knighton which is being
managed for exit during the course of FY23/24, following the decision to close
the site. In FY22/23, all Knighton revenue was all reported in Grocery -
Non-branded.
Group sales ex Knighton Foods (£m) FY22/23 revenue by quarter
Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
Group sales (including The Spice Tailor) 197.0 222.9 318.0 268.5 1,006.4
Knighton (6.2) (7.2) (9.8) (7.6) (30.8)
Group sales 190.8 215.7 308.2 260.9 975.6
(including The Spice Tailor, ex Knighton)
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.
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 finance cost 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 25.0% (2022/23 H1: 19.0%).
7. References to Adjusted earnings per share are on a non-diluted basis and is
calculated using Adjusted profit after tax as defined in (6) above divided by
the weighted average of the number of shares of 862.5 million (26 weeks ended
1 October 2022: 860.3 million).
8. International sales 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
FY23/24 H1 32.2 0.0 32.2
FY22/23 H1 27.1 N/A 27.1
Growth/(decline) % 18.9% N/A 19.0%
9. 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.
10. Software amortisation is the annual charge related to the amortisation of the
Group's software assets during the period.
11. Net debt is defined as total borrowings, less cash and cash equivalents and
less capitalised debt issuance costs.
12. 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, net proceeds from share issues, tax,
acquisitions and non-trading items.
13. Circana, 24 weeks ended 30 September 2023.
14. Circana, 52 weeks ended 10 September 2023
15. The schedule of future contributions are as agreed per the 2022 actuarial
funding valuation for the Premier Foods sections, discounted using the Company
post tax WACC of 9.1%.
16. Acquisition accounting pertaining to The Spice Tailor acquisition can be found
in Note 17.
17. 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 operating segment, 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 ended
30 September 2023 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 72-73 of the Premier
Foods plc annual report and accounts for the 52 weeks ended 1 April 2023, with
the exception of the resignation of Simon Bentley on 12 July 2023. A list of
current directors is maintained on the Premier Foods plc website:
www.premierfoods.co.uk
Approved by the Board on 16 November 2023 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 30 September 2023 (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 30 September 2023;
· 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 ("ISRE (UK) 2410"). 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 ISRE (UK) 2410. 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 2023
Condensed consolidated statement of profit or loss (unaudited)
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
Note £m £m
Revenue 4 494.1 419.9
Cost of sales (308.0) (274.3)
Gross profit 186.1 145.6
Selling, marketing and distribution costs (84.5) (62.2)
Administrative costs (32.6) (32.5)
Operating profit 4 69.0 50.9
Finance cost 5 (12.6) (10.2)
Finance income 5 1.7 1.4
Profit before taxation 58.1 42.1
Taxation 6 (15.4) (6.0)
Profit for the period attributable to owners of the parent 42.7 36.1
Basic earnings per share (pence) 7 5.0 4.2
Diluted earnings per share (pence) 7 4.8 4.1
Condensed consolidated statement of comprehensive income (unaudited)
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
Note £m £m
Profit for the period 42.7 36.1
Other comprehensive income, net of tax
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit schemes 8 (146.8) (15.7)
Deferred tax credit 31.1 -
Current tax credit on pension movements 4.8 3.5
Items that are or may be reclassified subsequently to profit or loss
Exchange differences on translation (0.3) 0.5
Other comprehensive income, net of tax (111.2) (11.7)
Total comprehensive income attributable to owners of the parent (68.5) 24.4
Condensed consolidated balance sheet (unaudited)
As at As at
30 Sep 2023 1 April 2023
Note £m £m
ASSETS:
Non-current assets
Property, plant and equipment 186.7 185.9
Goodwill 17 680.3 680.3
Other intangible assets 283.5 294.4
Deferred tax assets 21.1 22.4
Net retirement benefit assets 8 836.7 960.1
2,008.3 2,143.1
Current assets
Inventories 137.3 93.7
Trade and other receivables 111.0 103.9
Derivative financial instruments 10 0.7 0.8
Cash and cash equivalents 12 67.7 64.4
316.7 262.8
Total assets 2,325.0 2,405.9
LIABILITIES:
Current liabilities
Trade and other payables (296.1) (255.4)
Financial liabilities:
- short-term borrowings 9 - (1.0)
- derivative financial instruments 10 (0.3) (0.5)
Lease liabilities 9 (5.5) (2.1)
Provisions for liabilities and charges 11 (9.7) (13.3)
(311.6) (272.3)
Non-current liabilities
Long term borrowings 9 (324.8) (324.4)
Lease liabilities 9 (10.5) (11.2)
Net retirement benefit obligations 8 (178.7) (194.6)
Provisions for liabilities and charges 11 (7.1) (6.6)
Deferred tax liabilities (155.2) (177.9)
Other liabilities (12.4) (12.9)
(688.7) (727.6)
Total liabilities (1,000.3) (999.9)
Net assets 1,324.7 1,406.0
EQUITY:
Capital and reserves
Share capital 86.9 86.8
Share premium 2.6 2.5
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Retained earnings 892.8 974.3
Total equity 1,324.7 1,406.0
Condensed consolidated statement of cash flows (unaudited)
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
Note £m £m
Cash generated from operations 12 45.3 17.0
Interest paid (11.4) (9.9)
Interest received 1.7 0.2
Taxation paid (0.8) (0.4)
Cash generated from operating activities 34.8 6.9
Purchase of property, plant and equipment (10.8) (5.5)
Purchase of intangible assets (3.0) (0.8)
Acquisition of subsidiaries, net of cash acquired 17 - (43.8)
Cash used in investing activities (13.8) (50.1)
Proceeds from borrowings - 25.0
Principal element of lease payments (1.0) (1.4)
Financing fees(1) 9 (0.5) (0.7)
Dividends paid (12.4) (10.3)
Proceeds from share issue 0.2 0.1
Purchase of shares to satisfy share awards (3.0) -
Cash (used in)/generated from financing activities (16.7) 12.7
Net increase/(decrease) in cash and cash equivalents 4.3 (30.5)
Cash, cash equivalents and bank overdrafts at beginning of period 63.4 54.3
Cash, cash equivalents and bank overdrafts at end of period 12 67.7 23.8
(1 Payments in the current and prior period relate to the extension of the
revolving credit facility. See note 9 for further details.)
Condensed consolidated statement of changes in equity (unaudited)
Share capital Share premium Merger reserve Other reserves Retained earnings Total
equity
Note
£m £m £m £m £m £m
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)
Current tax credit on pension - - - - 3.5 3.5
movements
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
At 1 April 2023 86.8 2.5 351.7 (9.3) 974.3 1,406.0
Profit for the period - - - - 42.7 42.7
Remeasurements of defined benefit schemes 8 - - - - (146.8) (146.8)
Deferred tax credit - - - - 31.1 31.1
Current tax credit on pension - - - - 4.8 4.8
movements
Exchange differences on translation - - - - (0.3) (0.3)
Other comprehensive income - - - - (111.2) (111.2)
Total comprehensive income - - - - (68.5) (68.5)
Shares issued 0.1 0.1 - - - 0.2
Share-based payments - - - - 2.4 2.4
Purchase of shares to satisfy share - - - - (3.0) (3.0)
awards
Dividends 13 - - - - (12.4) (12.4)
At 30 Sep 2023 86.9 2.6 351.7 (9.3) 892.8 1,324.7
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 52 weeks ended 1 April 2023.
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 30 March
2024 will be prepared in accordance with UK-adopted international accounting
standards and with the requirements of the Companies Act 2006. 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 1 April 2023 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. These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006.
The financial information for the 26 weeks ended 30 September 2023 is
unaudited but has been subject to an independent review by
PricewaterhouseCoopers LLP.
The Group's statutory financial statements for the 52 weeks ended 1 April
2023, which were approved by the Board of Directors on 18 May 2023, were
reported on by PricewaterhouseCoopers 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 2023.
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 1 April 2023 and 30 September 2023.
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 30 September 2023, the Group had total assets less current liabilities of
£2,013.4m, net current assets of £5.1m and net assets of £1,324.7m.
Liquidity as at that date was £242.7m, made up of cash and cash equivalents,
and undrawn committed credit facilities of £175.0m expiring in May 2026. 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 inflationary pressures across the
industry and associated cost of living crisis, and have modelled a severe but
plausible downside case impacting future financial performance, cash flows and
covenant compliance, that covers a period of at least 12 months from the date
of approval of these interim 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
impact of climate change, cyber-attacks and changes in consumer preferences in
the downside case modelled and have assumed all scenarios within the downside
case impact concurrently during the period 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 and with covenants remaining
compliant. 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 condensed interim financial statements have been prepared in
accordance with the accounting policies adopted in the Group's most recent
annual financial statements for the 52 weeks ended 1 April 2023.
When preparing the Group condensed 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 condensed 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 1 April 2023.
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 Group's largest quarter in terms of Revenue is quarter three, reflecting
seasonality across both segments.
The segment results for the 26 weeks ended 30 September 2023 and 1 October
2022, and the reconciliation of the segment measures to the respective
statutory items included in the financial information, are as follows:
26 weeks ended 30 Sep 2023
Grocery Sweet Total
Treats
£m £m £m
Revenue 372.2 121.9 494.1
Divisional contribution 89.5 12.1 101.6
Group and corporate costs (34.1)
Trading profit 67.5
Amortisation of brand assets (10.5)
Fair value movements on foreign exchange and other derivative contracts 0.1
Net interest on pensions and administrative expenses 15.6
Non-trading items(1) (3.7)
Operating profit 69.0
Finance cost (12.6)
Finance income 1.7
Profit before taxation 58.1
(1Non-trading items relate primarily to the closure costs in relation to the
Knighton site and the subsequent asset restructure costs.)
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
(1Non-trading items relate primarily to M&A advisory costs, and expenses
due to a short term manufacturing interruption.)
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.
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
United Kingdom 461.9 392.9
Other Europe 15.2 11.9
Rest of world 17.0 15.1
Total 494.1 419.9
Non-current assets
As at As at
30 Sep 2023 1 Apr 2023
£m £m
United Kingdom 1,150.5 1,160.6
Non-current assets are all held in the United Kingdom and exclude deferred tax
assets and retirement benefit assets.
5. Finance income and costs
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Interest payable on bank loans and overdrafts (5.5) (3.0)
Interest payable on senior secured notes (5.8) (5.8)
Interest payable on revolving facility - (0.1)
Amortisation of debt issuance costs (0.9) (0.9)
Other interest payable(1) (0.4) (0.4)
Total finance cost (12.6) (10.2)
Interest receivable on bank deposits 1.6 0.1
Other finance income(2) 0.1 1.3
Total finance income 1.7 1.4
Net finance cost (10.9) (8.8)
(1 Other interest payable relates to the interest payable on finance leases.)
(2 Other finance income relates to the unwind of the discount on certain of
the Group's long term provisions and a change in the discount rates used.)
( )
6. Taxation
Current Tax
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Current tax
- Current period (5.7) (3.5)
Deferred tax
- Current period (9.7) (5.0)
- Prior periods - 0.1
- Changes in tax rate on the opening balances - 2.4
Income tax charge (15.4) (6.0)
Tax relating to items recorded in other comprehensive income included:
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Current tax (credit) / charge on pension movements (4.8) 3.5
Deferred tax credit on pension movements (31.1) -
Income tax charge (35.9) 3.5
The applicable rate of corporation tax for the period is 25%.
Tax charged for the 26 weeks ended 30 September 2023 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the 52 weeks ended 30 March 2024 using rates substantively enacted by 30
September 2023 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 25.0% (26 weeks ended 1 October 2022: 19.0%). The reasons
for this are explained below:
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Profit before taxation 58.1 42.1
Tax charge at the domestic income tax rate of 25.0% (26 weeks ended 1 October (14.5) (8.0)
2022: 19.0%)
Tax effect of:
Non-taxable items - 1.7
Other disallowable items (1.0) (1.1)
Disposal proceeds 0.1 -
Adjustment due to change in tax rate on the opening balances - 2.4
Difference between current and deferred tax - (1.1)
rate
Adjustments to prior periods - 0.1
Income tax charge (15.4) (6.0)
7. Earnings per share
Basic earnings per share has been calculated by dividing the profit for the 26
weeks ended 30 September 2023 attributable to owners of the parent of £42.7m
(26 weeks ended 1 October 2022: £36.1m profit) by the weighted average number
of ordinary shares of the Company.
26 weeks ended 26 weeks ended 1 Oct 2022
30 Sep 2023
Number Number
Weighted average number of ordinary shares for the purpose of basic earnings 862.5 860.3
per share (m)
Effect of dilutive potential ordinary shares (m) 22.5 21.3
Weighted average number of ordinary shares for the purpose of diluted earnings 885.0 881.6
per share
26 weeks ended 30 Sep 2023 26 weeks ended 1 Oct 2022
Basic Dilutive effect of share options Diluted Basic Dilutive effect of share options Diluted
Profit after tax (£m) 42.7 42.7 36.1 36.1
Weighted average number of shares (m) 862.5 22.5 885.0 860.3 21.3 881.6
Earnings per share (pence) 5.0 (0.2) 4.8 4.2 (0.1) 4.1
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 25.0% (26 weeks ended
1 October 2022: 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.
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Trading profit (note 4) 67.5 56.7
Less net regular interest (10.6) (9.7)
Adjusted profit before tax 56.9 47.0
Notional tax at 25% (26 weeks ended 1 October 2022: 19%) (14.2) (8.9)
Adjusted profit after tax 42.7 38.1
Average shares in issue (m) 862.5 860.3
Adjusted basic EPS (pence) 5.0 4.4
Net regular interest
Net finance cost (10.9) (8.8)
Exclude other interest payable 0.4 0.4
Exclude other finance income (0.1) (1.3)
Net regular interest (10.6) (9.7)
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
(b) The "RHM" Pension Schemes, which comprise:
RHM Section of the RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The exchange rates used to translate the overseas euro based schemes are
£1.00 = €1.15656 (26 weeks ended 1 October 2022: £1.00 = €1.1730) for
the average rate during the period, and £1.00 = €1.15285 (26 weeks ended 1
October 2022: £1.00 = €1.1388) for the closing position at 30 September
2023.
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 30 September 2023
Discount rate 5.50% 5.50%
Inflation - RPI 3.30% 3.30%
Inflation - CPI 2.90% 2.90%
Expected salary increases n/a n/a
Future pension increases
- RPI (min 0% and max 5%) 3.05% 3.05%
- CPI (min 3% and max 5%) 3.55% 3.55%
At 1 April 2023
Discount rate 4.80% 4.80%
Inflation - RPI 3.30% 3.30%
Inflation - CPI 2.85% 2.85%
Expected salary increases n/a n/a
Future pension increases
- RPI (min 0% and max 5%) 3.05% 3.05%
- CPI (min 3% and max 5%) 3.55% 3.55%
For the smaller overseas schemes, the discount rate used was 4.10% (52 weeks
ended 1 April 2023: 3.65%) and future pension increases were 2.40% (52 weeks
ended 1 April 2023: 2.45%).
The mortality assumptions are based on standard mortality tables. The
directors consider that use of the updated Continuous Mortality Improvement
CMI 2022 projections released in June 2023 for the future improvement
assumption is a reasonable approach, updated from the CMI 2021 projections
used in the previous reporting period. CMI 2022 uses the same underlying data
as CMI 2021 but makes some allowance for the expected negative long-term
impact of COVID-19 on life expectancy. As a result the 5% adjustment to the
scaling factors used to reflect the expected long-term impact of COVID-19
resulting from using CMI 2021 is no longer required and the overall impact on
life expectancy is lower.
The base mortality tables continue to use assumptions for the base tables
which are consistent with the latest scheme mortality studies commissioned by
the Trustees and have updated to allow for the latest expected longevity
projections in the UK. The life expectancies (assuming retirement at age 65)
are set out below.
The life expectancy assumptions are as follows:
Premier schemes RHM schemes
Life expectancy at 30 September 2023
Male pensioner, currently aged 65 86.2 84.5
Female pensioner, currently aged 65 88.0 86.9
Male non-pensioner, currently aged 45 87.1 85.7
Female non-pensioner, currently aged 45 89.4 88.7
Life expectancy at 1 April 2023
Male pensioner, currently aged 65 86.5 84.7
Female pensioner, currently aged 65 88.2 87.1
Male non-pensioner, currently aged 45 87.4 86.0
Female non-pensioner, currently aged 45 89.7 89.0
Premier schemes % of total RHM schemes % of total Total % of total
£m % £m % £m
Assets with a quoted price in an active market at 30 September 2023:
Government bonds 199.8 39.6 721.6 24.8 921.4 27.0
Cash 13.2 2.6 65.7 2.3 78.9 2.3
Assets without a quoted price in an active market at 30 September 2023:
UK equities - - 0.2 - 0.2 -
Global equities - - 3.6 0.1 3.6 0.1
Government bonds 27.5 5.5 2.2 0.1 29.7 0.9
Corporate bonds 6.7 1.3 4.6 0.2 11.3 0.3
Global Property 93.0 18.5 387.8 13.3 480.8 14.1
Absolute return products 5.9 1.2 312.9 10.8 318.8 9.4
Infrastructure funds 25.9 5.1 354.9 12.1 380.8 11.2
Interest rate swaps - - 251.5 8.7 251.5 7.4
Inflation swaps - - 33.5 1.2 33.5 1.0
Private equity 45.7 9.1 314.2 10.8 359.94 10.6
LDI - - 5.4 0.2 5.4 0.2
Global credit 3.3 0.7 181.5 6.3 184.8 5.4
Illiquid credit 78.3 15.6 197.3 6.8 275.6 8.1
Cash 3.4 0.7 0.8 - 4.2 0.1
Other 0.4 0.1 65.9 2.3 66.3 1.9
Fair value of scheme assets 503.1 100% 2,903.6 100% 3,406.7 100%
as at 30 September 2023
Assets with a quoted price in an active market at 1 April 2023:
Government bonds 197.8 35.8 815.1 25.2 1,012.9 26.7
Cash 8.2 1.5 59.1 1.8 67.3 1.8
Assets without a quoted price in an active market at 1 April 2023:
UK equities 0.1 0.0 - - 0.1 0.0
Global equities 2.3 0.4 4.6 0.1 6.9 0.2
Government bonds 30.5 5.5 2.1 0.1 32.6 0.9
Corporate bonds 7.4 1.4 4.9 0.2 12.3 0.3
Global Property 113.4 20.5 418.6 12.9 532.0 14.0
Absolute return products 6.8 1.2 426.6 13.2 433.4 11.4
Infrastructure funds 27.4 5.0 342.5 10.6 369.9 9.8
Interest rate swaps - - 286.6 8.8 286.6 7.6
Inflation swaps - - 43.4 1.3 43.4 1.1
Private equity 48.8 8.8 310.8 9.6 359.6 9.5
LDI - - 7.1 0.2 7.1 0.2
Global credit 4.3 0.8 205.9 6.4 210.2 5.5
Illiquid credit 101.4 18.3 227.5 7.0 328.9 8.7
Cash 0.5 0.1 0.1 0.0 0.6 0.0
Other 3.7 0.7 85.3 2.6 89.0 2.3
Fair value of scheme assets 552.6 100% 3,240.2 100% 3,792.8 100%
as at 1 April 2023
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 2023 valuations where
available. As is usual practice for pension assets where valuations at this
date were not available, the most recent valuations (predominantly at 30 June
2023) have been rolled forward for cash movements to 30 September 2023 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 30 September 2023 the financial statements include
£355.3m 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 30 September 2023
Present value of defined benefit obligation (671.5) (2,077.2) (2,748.7)
Fair value of plan assets 503.1 2,903.6 3,406.7
(Deficit)/surplus in schemes (168.4) 826.4 658.0
At 1 April 2023
Present value of defined benefit obligation (735.4) (2,291.9) (3,027.3)
Fair value of plan assets 552.6 3,240.2 3,792.8
(Deficit)/surplus in schemes (182.8) 948.3 765.5
The aggregate surplus of £765.5m has decreased to a surplus of £658.0m
during the 26 weeks ended 30 September 2023. The decrease of £107.5m (52
weeks ended 1 April 2023: £179.4m decrease) is primarily due to a lower
return on scheme assets partly offset by changes in financial assumptions,
largely the higher discount rate.
The disclosures in note 8 represent those schemes that are associated with
Premier Foods ('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 30 September 2023 At 1 April 2023
Premier Schemes RHM Total Premier RHM Total
Schemes Schemes Schemes
£m £m £m £m £m £m
Schemes in net asset position 10.3 826.4 836.7 11.8 948.3 960.1
Schemes in net liability position (178.7) - (178.7) (194.6) - (194.6)
Net (Deficit)/surplus in schemes (168.4) 826.4 658.0 (182.8) 948.3 765.5
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 2 April 2022 (1,020.2) (3,134.9) (4,155.1)
Interest cost (27.0) (83.9) (110.9)
Settlement 0.3 - 0.3
Remeasurement gain 271.9 787.3 1,059.2
Exchange differences (1.6) (1.1) (2.7)
Benefits paid 41.2 140.7 181.9
Defined benefit obligation at 1 April 2023 (735.4) (2,291.9) (3,027.3)
Interest cost (17.0) (53.1) (70.1)
Remeasurement gain 60.7 198.0 258.7
Exchange differences 0.5 0.3 0.8
Benefits paid 19.7 69.5 89.2
Defined benefit obligation at 30 September 2023 (671.5) (2,077.2) (2,748.7)
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 2 April 2022 826.3 4,273.7 5,100.0
Interest income on scheme assets 22.1 115.1 137.2
Remeasurement losses (295.7) (1,009.1) (1,304.8)
Administrative costs (4.2) (4.4) (8.6)
Settlement (0.3) - (0.3)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences 2.3 1.1 3.4
Benefits paid (41.2) (140.7) (181.9)
Fair value of scheme assets at 1 April 2023 552.6 3,240.2 3,792.8
Interest income on scheme assets 12.7 75.5 88.2
Remeasurement losses (62.5) (343.0) (405.5)
Administrative costs (1.0) (1.5) (2.5)
Contributions by employer 17.8 2.2 20.0
Additional employer contribution(1) 3.8 - 3.8
Exchange differences (0.6) (0.3) (0.9)
Benefits paid (19.7) (69.5) (89.2)
Fair value of plan assets at 30 September 2023 503.1 2,903.6 3,406.7
(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 surplus over the period is as
follows:
Premier RHM schemes Total
schemes
£m £m £m
(Deficit)/surplus in schemes at 2 April 2022 (193.9) 1,138.8 944.9
Amount recognised in profit or loss (9.1) 26.8 17.7
Remeasurements recognised in other comprehensive income (23.8) (221.8) (245.6)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences recognised in other comprehensive income 0.7 - 0.7
(Deficit)/surplus in schemes at 1 April 2023 (182.8) 948.3 765.5
Amount recognised in profit or loss (5.3) 20.9 15.6
Remeasurements recognised in other comprehensive income (1.8) (145.0) (146.8)
Contributions by employer 17.8 2.2 20.0
Additional employer contribution(1) 3.8 - 3.8
Exchange differences recognised in other comprehensive income (0.1) - (0.1)
(Deficit)/surplus in schemes at 30 September 2023 (168.4) 826.4 658.0
(1) (Contribution by the Group to the Premier schemes due to the payment of
dividends during the year.)
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 30 September 2023
Operating profit
Administrative costs (1.0) (1.5) (2.5)
Net interest (cost)/credit (4.3) 22.4 18.1
Total (cost)/credit (5.3) 20.9 15.6
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
52 weeks ended 1 April 2023
Operating profit
Administrative costs (4.2) (4.4) (8.6)
Net interest (cost)/credit (4.9) 31.2 26.3
Total (cost)/credit (9.1) 26.8 17.7
9. Bank and other borrowings
As at As at
30 Sep 2023 1 April 2023
£m £m
Current:
Bank overdrafts - (1.0)
Lease liabilities (5.5) (2.1)
Total borrowings due within one year (5.5) (3.1)
Non-current:
Lease liabilities (10.5) (11.2)
Transaction costs(1) 5.2 5.6
Senior secured notes (330.0) (330.0)
Total borrowings due after more than one year (335.3) (335.6)
Total bank and other borrowings (340.8) (338.7)
(1Included in transaction costs is £1.9m (1 April 2023: £1.7m) relating to
the revolving credit facility.)
Revolving credit facility
During the period, the Group extended the period of its £175m revolving
credit facility (RCF) by one year to May 2026. Transactions costs of £0.5m
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 and remain unchanged. The covenant package attached to
the revolving credit facility is:
Net debt / EBITDA(1) EBITDA / Interest(1)
2023/24 FY 3.50x 3.00x
2024/25 FY 3.50x 3.00x
(1Net 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 30 Sep 2023 As at 1 April 2023
Carrying amount Fair Carrying amount Fair
value value
£m £m £m £m
Loans and receivables:
Cash and cash equivalents 67.7 67.7 64.4 64.4
Financial assets at amortised cost:
Trade and other receivables 69.6 69.6 63.7 63.7
Financial assets at fair value through profit or loss:
Trade and other receivables 3.7 3.7 4.2 4.2
Derivative financial instruments
- Forward foreign currency exchange contracts 0.2 0.2 0.7 0.7
- Commodity and energy derivatives 0.5 0.5 0.1 0.1
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts (0.3) (0.3) (0.5) (0.5)
Other financial liabilities at fair value through profit or loss:
- Deferred contingent consideration (note 17) (8.2) (8.2) (8.2) (8.2)
Financial liabilities at amortised cost:
Trade and other payables (288.3) (288.3) (248.3) (248.3)
Senior secured notes (330.0) (299.5) (330.0) (297.8)
Senior secured credit facility - revolving - - (1.0) (1.0)
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 30 Sep 2023 As at 1 April 2023
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 - 2.2 1.5 - 1.8 2.4
Derivative financial instruments
- Forward foreign currency exchange contracts - 0.2 - - 0.7 -
- Commodity and energy derivatives - 0.5 - - 0.1 -
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - (0.3) - - (0.5) -
Other financial liabilities at fair value through profit or loss:
- Deferred contingent consideration (note 17) - - (8.2) - - (8.2)
Financial liabilities at amortised cost:
Senior secured notes (299.5) - - (297.8) - -
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.
The Group recognised other receivables with a fair value of £1.5m (1 April
2023: £2.4m) and deferred contingent consideration with a fair value of
£8.2m (1 April 2023: £8.2m) as a result of the acquisition in the prior
period 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 1 April 2023.
11. Provisions for liabilities and charges
As at As at
30 Sep 2023 1 Apr 2023
£m £m
Within one year (9.7) (13.3)
Between two and five years (5.2) (4.9)
After 5 years (1.9) (1.7)
Total (16.8) (19.9)
During the 26 weeks ended 30 September 2023 provisions for liabilities and
charges decreased by £3.1m. The decrease of £3.1m is due primarily to the
utilisation of the restructuring costs provision. Total provisions for
liabilities and charges of £16.8m (1 April 2023: £19.9m) comprise primarily
of provisions for restructuring costs and legal matters, dilapidations and
environmental liabilities related to leasehold properties.
12. Notes to the cash flow statement
Reconciliation of profit before taxation to cash flows from operating
activities
26 weeks ended 26 weeks ended
30 Sep 2023 1 Oct 2022
£m £m
Profit before taxation 58.1 42.1
Net finance cost 10.9 8.8
Operating profit 69.0 50.9
Depreciation of property, plant and equipment 9.6 9.3
Amortisation of intangible assets 12.8 12.7
Impairment of non-current assets 2.6 -
Fair value movements on financial instruments (0.1) (0.7)
Net interest on pensions and administrative expenses (15.6) (8.5)
Equity settled employee incentive schemes 2.4 1.8
Increase in stocks (43.6) (35.4)
(Increase)/decrease in trade and other receivables (7.2) 6.6
Increase in trade and other payables and provisions 39.2 3.7
Dividend match pension contribution(1) (3.8) (2.7)
Contribution to defined benefit pension schemes (20.0) (20.7)
Cash generated from operations 45.3 17.0
(1Contribution 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
1 April 2023 non-cash movements 30 Sept
2023
£m £m £m £m £m
Bank overdrafts (1.0) 1.0 - - -
Cash and bank deposits 64.4 3.3 - - 67.7
Net cash and cash equivalents 63.4 4.3 - - 67.7
Borrowings - Senior Secured Fixed Rate Notes maturing October 2026 (330.0) - - - (330.0)
Lease liabilities (IFRS 16) (13.3) 1.4 (0.4) (3.7) (16.0)
Gross borrowings net of cash(1) (279.9) 5.7 (0.4) (3.7) (278.3)
Debt issuance costs(2) 5.6 0.5 - (0.9) 5.2
Total net borrowings(1) (274.3) 6.2 (0.4) (4.6) (273.1)
(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
The following final dividends were declared and paid by the Group during the
period.
26 weeks 26 weeks
ended ended
30 Sep 2023 1 Oct 2022
£m £m
1.44 pence per ordinary share (26 weeks ended 1 October 2022: 1.2 pence) 12.4 10.3
A final dividend of 1.44 pence per share for the 52 weeks ended 1 April 2023
was approved by the shareholders at the Company's Annual General Meeting on 20
July 2023 and was subsequently paid on 28 July 2023.
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 30 September
2023 of £14.9m (1 April 2023: £8.9m).
15. Contingencies
There were no material contingent liabilities as at 30 September 2023 and 1
April 2023.
16. Related party transactions
The Group's related party transactions and relationships for the 52 weeks
ended 1 April 2023 were disclosed on page 168 of the annual report and
accounts for the 52 weeks ended 1 April 2023.
As at 30 September 2023 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 24.84% (1 April 2023: 24.86%) 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
30 Sep 2023 1 Oct 2022
£m £m
Sale of services:
- Nissin 0.1 0.1
Total sales 0.1 0.1
Purchase of goods:
- Nissin 15.1 10.8
Total purchases 15.1 10.8
Retirement benefit obligations
The Group has entered into an arrangement with the Pension Scheme Trustees as
part of the funding requirements for any actuarial deficit in the scheme.
17. Acquisition in 26 weeks ending 1 October 2022
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.
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 following table summarises the consideration paid 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)
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. 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 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 which were not included as part
of consideration transferred were 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 which was not
expected to be deductible for tax purposes and is allocated to the Group's
Grocery CGU.
The carrying amount of goodwill at the beginning and end of the period is as
follows:
£m
Carrying value
As at 4 April 2022 646.0
Acquisition of subsidiary 34.3
At 30 September 2023 and 1 October 2022 680.3
18. Subsequent events
On 29 October 2023 the Group acquired 100% of the ordinary share capital of
FUEL 10K Limited ('FUEL10K') for an enterprise value of £34.0m, with initial
consideration of £29.6m. FUEL10K is a differentiated, protein enriched
Breakfast brand which substantially increases the Group's position in the
Breakfast category. Had the acquisition occurred on 2 April 2023, on a pro
forma basis, the Group's Revenue for the 26 weeks ended 30 September 2023
would have been £504.0m and profit before taxation for the same period would
have been £58.0m. Given the proximity of the transaction completion date to
the announcement of the Group's interim results, the acquisition accounting
will follow with the Group's full year results for the 52 weeks ended 30 March
2024.
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