TIDMPFD
RNS Number : 7440P
Premier Foods plc
07 October 2011
PREMIER FOODS PLC
INTERIM MANAGEMENT STATEMENT FOR THE THREE MONTHS ENDED 30
SEPTEMBER 2011
7 OCTOBER 2011
Premier Foods today reports trading results for the three months
ending 30 September 2011.
-- Group results for Q3 significantly below our expectations
o Group total sales of GBP477m down 3.6%
o Value market share in Q3 declined by 1.9%
-- Full Year trading profit expected to be below market
expectations
-- Constructive dialogue with banks on refinancing
-- New CEO outlines initial steps to restore profitable
growth
Michael Clarke, Chief Executive Officer, comments:
"I've covered a lot of ground during my first weeks with Premier
Foods and am convinced that there are substantial opportunities
here but there are also significant challenges that we have to
overcome. We have brands that consumers like and talented,
passionate people who are determined to turn the business
around.
"While the current trading performance continues to be
disappointing and significantly behind our expectations, we have
already identified a number of steps to build a more profitable
business. These include focusing on 8 'Power Brands', strengthening
our sales and marketing execution and reducing our cost
structure.
"Our immediate priority is to conclude discussions with the
banks to revise our banking covenants and put in place refinancing
facilities. This process is well underway and we are hoping to
reach a successful conclusion in due course.
"I will share further details about our key priorities at our
Full Year results presentation, early in 2012."
New CEO Key Priorities
We have established five key priorities for the business in the
short-term:
1. Agree re-financing plan.
We are in constructive dialogue with the banks both to maintain
appropriate headroom against our banking covenants and put in place
refinancing facilities beyond their current maturity of December
2013.
2. Invest behind 8 'Power Brands'.
We have identified 8 'Power Brands' that we feel have the best
growth prospects going forward. These are Ambrosia, Batchelor's,
Bisto, Hovis, Loyd Grossman, Mr.Kipling, Oxo and Sharwood's. By
focusing our resources behind these brands, we will drive the
future growth of the Group.
3. Improve sales and marketing execution.
We will move away from concentrating too much on short-term
tactical trading activities. We will work more collaboratively with
our customer partners to deliver category growth through greater
and more focused product innovation, improved in-store marketing,
promotional planning and other brand-building initiatives.
4. Reduce the size of our portfolio.
To enable us to focus our resources on our 8 Power Brands, we
will actively seek to dispose of businesses. This will also allow
us to deleverage.
5. Right-size and reduce our cost base.
As a consequence of reducing the scope of our business, we will
significantly exceed the GBP20m cost saving target by 2013 that we
announced at the Half Year.
Further details about future plans will be shared in early 2012
at our Full Year results presentation.
Q3 Trading Update
Our performance in Q3 has been significantly below expectations.
While market trends have improved, we have under-performed versus
the market. Our volumes have yet to fully recover from the slower
than expected re-building of in-store presence following a customer
dispute earlier in the year. Additionally, the Q3 promotional
programme has not delivered the results expected, reflecting an
intensely competitive consumer environment. In the three months to
30 September 2011, Group sales were GBP477m, down 3.6% on the prior
year. Volumes were down 8.0% in the quarter with price and mix
contributing 4.4%. This represents a loss of market share of around
1.9pp in value and 2.1pp in volume. Premier Foods' non-branded
sales were up 1.2%, whereas branded sales were down 6.0% reflecting
a market shift towards non-branded products.
Grocery
While market volumes have improved compared to the trends seen
earlier in the year, Grocery sales were down 5.0% in the quarter
and, within this, branded sales were down 6.0%. The benefits of
pricing earlier in the year were absorbed by higher promotional
costs and adverse mix effects. Additional promotional activity
failed to deliver the volume momentum anticipated and branded
volumes declined by 6.6% in the quarter. Volume share also fell by
2.3pp in the period reflecting the continued loss of momentum from
our first half pricing negotiations and consequent customer
dispute.
Hovis
The bread market declined by 1.8% in volume terms in the period
but, in value terms, the market is improving versus the steep first
half decline. Bakery sales were, however, down 7.6% in the period,
with Hovis down 6.2% driven by intense competition. Hovis volumes
declined 13.5% and margins suffered as a result of higher
promotional activity, industry-wide pricing pressure and customer
mix. Sales in Milling increased 27.2% on the same period last year,
largely due to inflationary effects as volumes declined 4.3% year
on year.
Brookes Avana
In the quarter, Brookes Avana sales declined 13.2% compared to
the prior year. As previously announced, the company lost a
significant pie contract at the RF Brookes site in Leicester.
Although we have seen some new business wins since this time, these
gains have been smaller contracts at lower margins.
Financial Position
We remain cash generative and continue to invest in our
operations. As a result of the Q3 trading performance, we now
expect net debt at the year end to be higher than current market
expectations. However, we need to ensure that appropriate banking
covenant headroom is maintained. We are, therefore, in discussions
with the banks to reset banking covenants to maintain appropriate
headroom and also put in place facilities beyond their current
maturity of December 2013. The discussions are constructive and we
believe an appropriate agreement can be concluded.
Outlook
The continued trend in performance in Q3 shows that the consumer
environment remains challenging. In Grocery, the Q3 performance
will mean that we will now not meet last year's profit in the
second half as previously expected. The loss of volume and margin
pressure in Hovis is likely to mean that the rate of profit decline
year on year will accelerate in the second half. Brookes Avana's
trading is not improving as previously expected and the loss in the
second half is likely to be similar to that in the first half. Q4,
in which the Group traditionally makes half of its annual profit,
will continue to be influential in determining the year end
outturn. Nevertheless, based on Q3 trading performance, we now
expect that Full Year trading profit will be below the range of
market expectations* with the extent of the shortfall dependent on
the Christmas trading period.
Quarter 3 Brand Analysis (On-going business)
Q3 2011 Sales Q3 2011 v Q3 2010
Value Volume Market Volume
GBP % % %
Drive 171 (6.7) (11.1) (0.7)
Core 68 (7.5) (2.3) 0.7
Defend 72 (2.7) (11.5) 1.9
-------------- ------ ------- --------------
Total branded 311 (6.0) (10.4) (0.1)
Non-branded 166 1.2 (6.0) 3.9
-------------- ------ ------- --------------
Total Sales 477 (3.6) (8.0) (0.1)
-------------- ------ ------- --------------
Quarter 3 Divisional Analysis
Q3 2011 Sales Q3 2011 v Q3 2010
Non- Non-
Branded branded Total Branded branded Total
GBPm GBPm GBPm % % %
Grocery 216 48 264 (6.0) 0.2 (5.0)
Bakery 88 29 117 (7.3) (8.7) (7.6)
Milling 7 48 55 13.3 29.4 27.2
-------- ------------ ------ -------- ------------ -------
Hovis 95 77 172 (6.2) 11.9 1.2
Brookes
Avana 0 41 41 0 (13.2) (13.2)
Total
On-going 311 166 477 (6.0) 1.2 (3.6)
-------- ------------ ------ -------- ------------ -------
Canning 6 11 17 (82.0) (75.6) (78.4)
Meat-free 0 0 0 0 0 0
-------- ------------ ------ -------- ------------ -------
Total 317 177 494 (20.2) (15.3) (18.5)
-------- ------------ ------ -------- ------------ -------
YTD Brand Analysis (On-going business)
Q3 YTD 2011
Sales Q3 YTD 2011 v 2010
Value Volume Market Volume
GBP % % %
Drive 525 (2.5) (7.1) (3.1)
Core 209 (7.3) (7.1) (1.7)
Defend 209 (4.8) (9.8) (1.8)
------------ ------ ------- --------------
Total branded 943 (4.1) (7.8) (2.7)
Non-branded 508 2.9 (4.4) (1.5)
------------ ------ ------- --------------
Total Sales 1,451 (1.8) (6.0) (2.7)
------------ ------ ------- --------------
YTD Divisional Analysis
Q3 YTD 2011 Sales Q3 YTD 2011 v 2010
Branded Non branded Total Branded Non branded Total
GBPm GBPm GBPm % % %
Grocery 645 139 784 (6.3) (4.1) (6.0)
Bakery 278 97 375 0.1 (8.9) (2.4)
Milling 19 139 158 14.8 30.6 28.5
-------- ------------ ------ -------- ------------ -------
Hovis 297 236 533 1.0 10.9 5.1
Brookes
Avana 1 133 134 - (2.1) (2.1)
Total
On-going 943 508 1,451 (4.1) 2.9 (1.8)
-------- ------------ ------ -------- ------------ -------
Canning 67 104 171 (36.3) (23.9) (29.3)
Meat-free 21 0 21 (78.2) (77.7) (78.2)
-------- ------------ ------ -------- ------------ -------
Total 1,031 612 1,643 (13.1) (2.9) (9.6)
-------- ------------ ------ -------- ------------ -------
For further information, please contact:
Premier Foods Plc +44 (0) 1727 815 850
Jim Smart, Chief Financial Officer
Richard Godden, Head of Investor Relations
Maitland +44 (0) 20 7379 5151
Neil Bennett
Tom Buchanan
Emma Burdett
Conference Call
A conference call for analysts and investors will be held today
at 9:00am.
Telephone number: +44 20 3003 2666
Password: Premier Foods
1. Source: Symphony IRI Group, Total Grocery Outlets, 12 weeks
ending 3 September 2011.
2. All sales data for Premier Foods is for the 3 months to 30
September 2011 or 30 September 2010 as appropriate. All data
excludes Meat-free and Canning unless otherwise indicated.
*The current range of market expectations for 2011 Full Year
trading profit on an on-going business basis, compiled by the
company from 10 analysts is from GBP214m to GBP232m.
Notes for editors:
Premier Foods is the UK's largest food producer, which
manufactures, sells and distributes a wide range of branded and
retailer branded foods. We supply a broad range of customers
including the major multiple retailers, wholesalers, foodservice
providers and other food manufacturers. Premier Foods owns iconic
British brands such as Ambrosia, Batchelor's, Bisto, Hovis, Loyd
Grossman, Mr.Kipling, Oxo and Sharwood's and many more. The
business employs around 13,000 people and operates from over 50
sites across the UK and Ireland.
For high resolution images, please go to:
www.premierfoods.co.uk/media/image-gallery/
This information is provided by RNS
The company news service from the London Stock Exchange
END
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