TIDMPFD
RNS Number : 3468Y
Premier Foods plc
21 February 2013
21 February 2013
Premier Foods plc
Preliminary results for the year ended 31 December 2012
Delivering against strategic priorities
-- Underlying sales, excluding Milling, up 3.2%
-- Power Brand sales up 2.1%
-- Grocery Power Brand sales up 4.0%, delivering four successive quarters' growth
-- Underlying business Trading profit up 10.6% to GBP123.4m
-- Operating profit GBP96.3m
-- Planned disposal target exceeded by GBP40m and 20 months early
-- Cost reduction programme delivered GBP48m savings to date, ahead of plan
-- Net debt reduced to GBP950.7m
Premier Foods today announces its Preliminary results for 2012,
demonstrating the Company's continued delivery against the
strategic priorities it set out at the beginning of the year.
Gavin Darby, Chief Executive Officer of Premier Foods,
commented:
"Premier Foods has many strengths and great potential. The
management team did a great job in 2012 to lay the foundations for
future growth and I am very excited to be working with them to
develop and grow our Power Brands in the coming years. It's
important now to maintain continuity and focus on executing our
existing strategies to build further momentum in Grocery while
re-building value in Bread."
Commenting on 2012 results, Mark Moran, Chief Financial Officer,
said:
"In 2012 we delivered against all of our strategic priorities -
reducing Net debt levels, significantly reducing costs, building
more collaborative customer partnerships and generating growth in
our Power Brands. While it's clear that markets will remain
challenging in 2013, we believe we have the right strategies in
place, including the delivery of further overhead cost savings, to
make further progress this year."
2012 2011 Change
-------- -------- --------
Continuing operations
Sales (GBPm) 1,756.2 1,999.5 (12.2%)
Trading profit (GBPm) 154.7 188.3 (17.8%)
Operating profit/(loss) (GBPm) 96.3 (176.3) -
Adjusted profit before tax (GBPm) 85.2 72.6 17.4%
Adjusted earnings per share (pence) 26.8 22.3 20.5%
Basic earnings/(loss) per share
(pence) 11.0 (95.9) -
Underlying business
Sales (excl Milling) (GBPm) 1,353.8 1,311.7 3.2%
Power Brand sales (GBPm) 889.2 871.2 2.1%
Trading profit (GBPm) 123.4 111.6 10.6%
Measures above are defined on page 3 and reconciled to statutory
measures in the appendices, where necessary
A presentation to investors and analysts will take place today,
21 February 2013, at 9.00am at The Lincoln Centre, 18 Lincoln's Inn
Fields, London, WC2A 3ED. The presentation will be webcast at
www.premierfoods.co.uk. A recording of the webcast will be
available on the Company's website later in the day.
A factsheet of the Preliminary results is available at
www.premierfoods.co.uk/investor-relations/results-centre
For further information, please contact:
Institutional investors and analysts:
Mark Moran, Chief Financial Officer +44 (0) 1727 815 850
Richard Godden, Head of Investor Relations +44 (0) 1727 815 850
Media enquiries:
Lisa Attenborough, Director of Communications +44 (0) 1727 815 850
Maitland +44 (0) 20 7379 5151
Tom Buchanan
Tom Eckersley
- Ends -
Underlying business
The Company's results for the year ended 31 December 2012 are
presented on an 'Underlying business' basis, unless otherwise
stated. 'Underlying business' excludes the results of previously
announced business disposals, Milling (sales only), and non-core,
discrete contract losses. The tables below illustrate these items
for 2011 and 2012 results.
The purpose of using the 'Underlying business' basis for
measuring performance is to reflect the performance of the core
business of the Company. With the Company having undergone a year
of restructuring in 2012, this basis better reflects underlying
business performance.
'Continuing operations' includes the results of disposed
businesses for the respective periods until disposal was completed.
For example, the Vinegar and Sour Pickles business disposal
completed on 28 July; therefore the results of the continuing
operations include seven months results of the Vinegar and Sour
Pickles business.
GBPm Continuing Less: Sub-total Less: Sub-total Less: Less: Underlying
operations 2011 2012 Milling Contract business
Disposals Disposals sales(7) Loss(8)
----------- ------------ ----------- ---------- ----------- ---------- ---------- ---------- -----------
2012
Sales 1,756.2 (0.9) 1,755.3 (210.1) 1,545.2 (191.4) - 1,353.8
Trading
profit 154.7 (0.3) 154.4 (31.0) 123.4 N/A - 123.4
EBITDA(3) 194.3 (0.3) 194.0 (35.4) 158.6 N/A - 158.6
2011
Sales 1,999.5 (188.5) 1,811.0 (282.9) 1,528.1 (193.0) (23.4) 1,311.7
Trading
profit 188.3 (14.6) 173.7 (56.5) 117.2 N/A (5.6) 111.6
EBITDA(3) 230.1 (14.6) 215.5 (62.6) 152.9 N/A (5.6) 147.3
----------- ------------ ----------- ---------- ----------- ---------- ---------- ---------- -----------
Further disclosure on disposals can be found in the
appendices.
Notes to editors:
1. The accounting period is from 1 January 2012 to 31 December 2012.
2. Trading profit is defined as operating profit before
re-financing costs, restructuring costs, profits and losses
associated with divestment activity, amortisation and impairment of
intangible assets, the revaluation of foreign exchange and other
derivative contracts under IAS 39 and pension credits or charges in
relation to the difference between expected return on pension
assets, administration costs and interest costs on pension
liabilities.
3. EBITDA is Trading profit excluding depreciation
4. Adjusted profit before tax is defined as Trading profit less
net regular interest. Adjusted earnings per share is defined as
Adjusted profit before tax less a notional tax charge of 24.5%
(2011: 26.5%) divided by the weighted average of the number of
shares of 239.8 million. Net regular interest is defined as total
net interest excluding write-off of financing costs, fair value
adjustments on interest rate swaps and other financial liabilities
at fair value through profit or loss and the unwind of the discount
on provisions.
5. 2011 disposals are Canned grocery and Irish brands.
6. 2012 disposals are Vinegar and Sour Pickles, Elephant Atta
Ethnic Flour, Sweet Spreads and Jellies and Sweet Pickles and Table
Sauces.
7. Due to the cost plus pricing nature of the Milling business,
fluctuations in the cost of wheat have a direct impact on reported
sales, but not necessarily on Trading profit. As a result, the
Milling business is excluded from the definition of 'Underlying
business' for revenue only.
8. Non-core contract loss. In 2012, the Company lost a non-core
chocolate powder manufacturing contract and one other non-core
discrete contract. The discrete nature of these contracts explains
why they are excluded from 'Underlying business'.
A Premier Foods image gallery is available using the following
link:
www.premierfoods.co.uk/media/image-gallery/
Certain statements in this document are forward looking
statements. By their nature, forward looking statements involve a
number of risks, uncertainties or assumptions that could cause
actual results or events to differ materially from those expressed
or implied by those statements. Forward looking statements
regarding past trends or activities should not be taken as
representation that such trends or activities will continue in the
future. Accordingly, undue reliance should not be placed on forward
looking statements.
Operating review
Underlying business
Underlying business excludes all disposals announced in 2011 and
2012, non-core discrete contract losses and Milling sales. The
following commentary is based on Underlying business unless
otherwise stated.
GBPm 2012 2011 Change
Sales
Grocery 856.7 811.2 5.6%
Bread 497.1 500.5 (0.7%)
Total 1,353.8 1,311.7 3.2%
Grocery divisional contribution 195.5 206.9 (5.5%)
Bread divisional contribution 26.9 51.7 (48.0%)
SG&A (99.0) (147.0) (32.7%)
-------- --------
Total Trading profit 123.4 111.6 10.6%
--------------------------------- -------- -------- --------
Introduction
Underlying business sales increased by 3.2% to GBP1,353.8m in
the year, an increase of GBP42.1m compared to the prior year.
Underlying business Trading profit increased by GBP11.8m to
GBP123.4m in the year.
Grocery divisional contribution decreased by GBP11.4m to
GBP195.5m during the year, reflecting increased consumer marketing
investment partly offset by growth in Power Brand sales.
Bread divisional contribution declined by GBP24.8m to GBP26.9m
due to adverse customer mix, wheat quality affecting manufacturing
efficiencies and higher costs to serve.
Divisional contribution is the measure which the Company uses
for managing and reporting divisional performance and excludes all
selling, general and administrative (S,G&A) costs.
The Company exceeded its target to reduce S,G&A costs by
GBP40m in 2012, achieving total cost reductions of GBP48m by the
end of the year, contributing to the increase in Underlying Trading
Profit. As previously announced, a further GBP20m of overhead cost
savings are expected to be delivered in 2013.
In the year, the Company benefitted from pension credits of
approximately GBP32m. Additionally, the Company increased certain
balance sheet provisions on onerous lease provisions relating to
vacant properties held by the Company and cleaned up certain legacy
fixed assets. These items offset the pension credits recognised in
the year, and therefore the impact on Underlying business Trading
profit in the year is neutral.
Sales
GBPm 2012 2011 Change
Power Brands 889.2 871.2 2.1%
Support brands 227.2 233.9 (2.9%)
-------- -------- -------
Total Branded 1,116.4 1,105.1 1.0%
Non-branded 237.4 206.6 14.9%
-------- -------- -------
Group Sales 1,353.8 1,311.7 3.2%
-------- -------- -------
Total Underlying business sales increased by 3.2% to GBP1,353.8m
compared to 2011. Sales of the Company's Power Brands grew by 2.1%;
in line with the trend seen in the first three quarters of the
year.
In the support brand portfolio, sales declined by 2.9%
reflecting declines in Homebaking, owing to a highly competitive
business to business channel and lower promotional activity.
Consumer Marketing
GBPm 2012 2011 Change
Consumer Marketing 39.4 24.7 59.5%
Total consumer marketing investment increased by nearly GBP15m
in 2012 compared to the prior year, principally due to new TV
advertising campaigns for seven of the Company's Power Brands.
Investment in the Grocery Power Brands nearly doubled compared to
the prior year and included new campaigns for Sharwood's (Great
British Curry), Ambrosia (Picnic) and Bisto (Pledge).
The Company expects to continue to benefit from the significant
step-up in investment in 2012, with consumer marketing expenditure
expecting to remain at similar levels in 2013, but with greater
emphasis on Grocery marketing investment.
Grocery division
GBPm 2012 2011 Change
Branded sales 742.0 724.2 2.5%
Non-branded sales 114.7 87.0 31.8%
------ ------
Total sales 856.7 811.2 5.6%
Power Brands sales 533.1 512.6 4.0%
Divisional contribution 195.5 206.9 (5.5%)
Sales in the Grocery division increased by 5.6% to GBP856.7m
compared to GBP811.2m in 2011. Following recent disposals, this
business has increased its proportion of branded sales by over five
percentage points to 86.6% and retains strong EBITDA margins which
the Company believes it can build on.
Grocery Power Brand sales, in particular, continued to gather
momentum during the year increasing by 4.0%, demonstrating four
successive quarters of growth. This growth was driven by improved
customer collaboration and increased levels of consumer marketing
investment.
Marketing investment in the Grocery division increased by 96%
compared to the prior year, as consumer marketing spend rose by
around GBP16m reflecting higher spend across all the Grocery Power
Brands.
During the year, Sharwood's benefitted from the launch of Wrap
Kits, Batchelors growth was well supported by the new Deli Box
range and Ambrosia Rice pots performed well.
Consequently, Divisional contribution was GBP195.5m, a 5.5%
decrease on the previous year.
In the fourth quarter, the Company confirmed it has agreed an
extension to the licence it holds to produce Cadbury branded cakes
and ambient desserts until June 2017. The brand is the fastest
growing in the ambient cake category and the Company plans to work
closely with Cadbury to leverage the potential of other Cadbury
trademarks over time, where appropriate.
Non-branded sales in the Grocery division increased by 31.8% in
the year, due to contract gains in Cake and additional co-pack
arrangements following recent disposals.
Savings in manufacturing controllable costs are expected to
continue to deliver gross savings in 2013 through process
improvements at our manufacturing sites.
Bread division
GBPm 2012 2011 Change
Branded bread sales 374.4 380.9 (1.7%)
Non-branded bread
sales 122.7 119.6 2.6%
------ ------
Total bread sales 497.1 500.5 (0.7%)
Milling sales 191.4 193.0 (0.8%)
------ ------
Total sales 688.5 693.5 (0.7%)
------ ------
Divisional contribution 26.9 51.7 (48.0%)
Sales for the Bread division excluding Milling declined 0.7% to
GBP497.1m in the year while total sales for the division decreased
by 0.7% to GBP688.5m. Divisional contribution declined by GBP24.8m
to GBP26.9m in the year.
During the year, Hovis maintained its value market share in a
highly competitive market, where promotional activity levels remain
high.
However, changes in the customer and product mix during the
course of the year, as a result of a number of contract gains and
losses, have adversely impacted Divisional contribution.
Additionally, some of the contract gains require higher costs to
serve. Continued collaboration with our retail customers in 2013 is
expected to result in an improved mix impact year on year.
Adverse wheat quality following the worst harvest for 35 years
also affected manufacturing efficiencies and negatively impacted
Divisional contribution in the second half of the year. Price
increases were achieved in the Baking and Milling businesses in the
third quarter of 2012 to offset wheat price inflation following the
lower quality harvest seen during the year, and while the Company
has taken the decision to diversify its sources of wheat in the
short-term, it remains committed to supporting British farming.
As previously announced, the Company will lose a branded and
non-branded bread contract with a retail customer in the second
quarter of 2013, equivalent to approximately GBP75.0m of annual
sales. The lost volume and margin from this contract is expected to
be offset by manufacturing and distribution cost savings from the
previously announced closures of the Birmingham, Greenford and
Eastleigh bakeries and distribution centres at Mendlesham and
Plymouth. Additionally, the Company recently announced the proposed
closure of its Glasgow Mill to optimise capacity in its Milling
business in light of reduced volumes. As previously announced, the
cash costs associated with this restructuring are expected to be
approximately GBP28m in 2013.
Milling sales were GBP191.4m in 2012, down 0.9% compared to the
prior year, while margins were also affected by the lower wheat
quality from the 2012 harvest.
In 2013, the Company plans to re-build value in its Bread
division through focusing on reducing costs to serve, improving
profitability and targeting capital investment to enhance
flexibility, efficiency and customer service.
Cost Savings Programme and SG&A costs
GBPm 2012 2011 Change
Total SG&A 99.0 147.0 32.7%
The restructuring of the SG&A cost base announced at the
beginning of 2012 has delivered savings of GBP48m, ahead of plan.
This has been achieved through right-sizing both the commercial and
support functions to ensure the overhead cost base better reflects
the Company's scale following disposal activity.
As previously announced, a further GBP20m cost savings are
expected to be delivered in this area during 2013. The expected
costs to achieve the delivery of the total savings programme are
GBP32m, of which approximately GBP24m were taken in 2012 and a
further GBP8m are expected to be charged in 2013. The cash impact
of this programme is expected to be approximately GBP12m in
2013.
The Company will continue to explore further cost opportunities
to fuel branded growth.
Net regular interest
GBPm 2012 2011 Change
Term debt interest 36.0 40.1 10.2%
Swap contract interest 17.3 59.7 71.0%
Securitisation interest 3.1 2.5 (24.0%)
----- ------
56.4 102.3 44.9%
Amortisation and deferred
fees 13.1 13.4 2.2%
----- ------
Net regular interest 69.5 115.7 39.9%
----- ------
Net regular interest charge was GBP69.5m in the year, 39.9%
lower than the prior year, and compares to guidance of
GBP70-GBP75m. This lower charge was principally due to the
conversion of the higher rate interest rate swaps into additional
term loan at the end of March, at a significantly lower interest
rate and following completion of the previously announced
re-financing agreement. Term debt interest was lower reflecting
reduced levels of Net debt following the disposal of businesses
during the course of the year.
The Company expects Net regular interest for 2013 to be in the
range of GBP60-65 million, of which amortisation of deferred
financing fees are expected to be approximately GBP22 million.
Cash flow
GBPm 2012 2011
Underlying business Trading profit 123.4 111.6
Depreciation 37.5 39.0
Other non-cash items 8.8 (44.1)
Interest (52.5) (108.3)
Taxation 0.3 (2.4)
Pension contributions (17.7) (56.0)
Regular capital expenditure (56.4) (61.7)
Working capital 6.6 (0.1)
------- --------
Recurring cash inflow/(outflow) 50.0 (122.0)
------------------------------------ ------- --------
Group recurring cash inflow before non-recurring items such as
restructuring activity, financing fees and the impact of disposals
was GBP50.0m in the year.
Underlying business Trading profit was ahead of last year while
depreciation was GBP1.5m lower. Other non-cash items in 2012
largely reflect the add-back of share based payments.
Cash interest was significantly lower in the year owing to the
close out of the higher rate interest rate swaps following the
re-financing agreement announced in March 2012. A tax credit in the
year of GBP0.3m reflected tax relief from allowances on capital
expenditure, pension contributions and brought forward losses. Cash
tax in 2013 is expected to be minimal.
Pension deficit contribution payments to the Company schemes in
the year (including administrative costs) were GBP17.7m, compared
to GBP56.0m last year, owing to reduced pension deficit
contribution payments as agreed with the Trustees as part of the
re-financing agreement concluded earlier this year.
Regular capital expenditure was GBP56.4m, in line with guidance
of approximately 3% of sales. Capital expenditure for 2013 is
expected to be in the range 3-3.5% of sales.
GBPm 2012 2011
Recurring cash inflow/(outflow) 50.0 (122.0)
Trading profit & other cash flows
from disposed businesses 5.8 14.0
Restructuring activity (21.6) -
Operating cash flow from total Company 34.2 (108.0)
Disposal proceeds 312.2 400.2
Financing fees & finance leases (24.0) (7.3)
Free cash flow 322.4 284.9
---------------------------------------- ------- --------
Free cash flow, before repayment of borrowings, was GBP322.4m in
the year, compared to GBP284.9m in 2011. Restructuring activity
relating to disposed businesses, including costs related to the
cost savings programme, resulted in a cash outflow of GBP21.6m in
the year.
Disposal proceeds of GBP312.2m are from the sale of the Irish
brands, Vinegar & Sour Pickles, Elephant Atta Ethnic Flour and
Sweet Spreads & Jellies businesses. Cash paid due to fees
directly relating to the re-financing agreement concluded in March
2012 accounted for outflows of GBP24.0m.
Net debt
GBPm
Reported Net debt at 31 December
2011 995.1
Additional term loan 188.1
Securitised debtors programme 73.8
--------
Pro forma Net debt at 31 December
2011 1,257.0
Movement in cash 2012 (322.4)
Other non-cash items 16.1
--------
Reported Net debt at 31 December
2012 950.7
Group Net debt at 31 December 2012 was GBP950.7m.
Following the re-financing agreement announced in March 2012,
both the mark to market of interest rate swap liabilities and the
securitised debtors programme the Company participates in, are now
included in the definition of Net debt. The interest rate swap
liabilities have been restructured into an additional term loan as
part of the banking agreements. The securitised debtors programme
is excluded from the definition of Net debt for covenant
purposes.
Disposal proceeds received during the year amounted to
GBP312.2m. Additionally, proceeds from the Sweet Pickles and Table
Sauces disposal of GBP92.5m were received in February 2013.
Pensions
Cash paid to pension schemes in the year was GBP39.1m. This
comprised GBP21.4m regular contributions and GBP17.7m for deficit
contributions, administrative expenses and government levies. The
net IAS 19 deficit at 31 December 2012 was GBP466.8m, equivalent to
GBP352.4m net of deferred tax. The next triennial valuation date of
the Company pension schemes is on 5 April 2013, the outcome of
which is expected in early 2014.
Pensions (GBPm) 31 Dec 2012 31 Dec 2011
Assets
Equities 411.3 425.1
Government & Corporate bonds 1,197.7 1,077.4
Property 105.3 92.1
Absolute/Target returns 712.1 790.9
Swaps (169.0) 231.6
Cash 494.4 239.1
Other 457.5 299.8
------------ ------------
Total Assets 3,209.3 3,156.0
Liabilities
Discount rate 4.45% 4.80%
Inflation rate (RPI/CPI) 2.95%/2.15% 3.15%/1.95%
Total Liabilities (3,676.1) (3,438.4)
Gross deficit (IAS 19) (466.8) (282.4)
Deferred tax (24.5% 2012) 114.4 70.0
Net deficit (IAS 19) (352.4) (212.4)
---------------------------------- ------------ ------------
In the classification disclosed in the table above, 'Other'
includes investments in infrastructure assets and private equity
funds. The negative swaps valuation is due to these assets having
been re-couponed to release cash in 2012; this is reflected in the
higher cash asset balance compared to the prior year.
The Group acknowledges the significance of the current pension
deficit in determining a fair reflection of the Group's Enterprise
value. The Group's preferred approach is to discount the post tax
future cash flows of the agreed pension deficit contribution
schedule, which amount to approximately GBP275 million.
Business Disposals
During the course of the year, the Company was successful in
exceeding its planned disposals proceeds target by nearly GBP40
million and 20 months early, achieving total proceeds of GBP369.5
million. This has resulted in lower Net debt, allowing the Company
to focus on investing behind its Power Brands. The average EBITDA
multiple for the four transactions announced in 2012, based on
expected 2012 results and including additional GBP20m SG&A cost
savings recently announced, was 8.9x EBITDA.
Proceeds from Vinegar & Sour Pickles, Ethnic Flour and Sweet
Spreads & Jellies businesses are reflected in reported Net debt
as at 31 December 2012. The Sweet Pickles and Table Sauces
divestiture completed on 2 February 2013, therefore gross proceeds
of GBP92.5m will be included in reported Net debt in 2013.
Vinegar & Sour Elephant Sweet Spreads Sweet Pickles
Pickles Atta Ethnic & Jellies & Table Sauces
Flour
--------------- --------------- ------------- --------------- ----------------
Announcement 15 June 2012 6 July 2012 23 August 2012 30 October 2012
--------------- --------------- ------------- --------------- ----------------
Completion 28 July 2012 6 July 2012 27 October 2 February 2013
2012
--------------- --------------- ------------- --------------- ----------------
Gross Proceeds GBP41.0m GBP34.0m GBP202.0m GBP92.5m
--------------- --------------- ------------- --------------- ----------------
Outlook
In 2012, the Company delivered its strategic priorities to
stabilise the business, re-focus the portfolio and invest in its
future growth. Growth momentum was generated behind the Company's
Grocery Power Brands and strategic decisions were taken to re-build
value in Bread. While markets are expected to remain challenging in
2013, the Company believes the right strategies and plans are in
place, including the delivery of further cost savings, to make
progress in 2013.
Financial review
The Company presents its financial results for the year ended 31
December 2012 with comparative information for the year ended 31
December 2011.
Company structure
The Company completed the disposals of the following businesses
during the year: Irish brands, Vinegar and Sour Pickles, Elephant
Atta Ethnic Flour and Sweet Spreads and Jellies. Additionally, the
Company announced the disposal of the Sweet Pickles and Table
Sauces business on 30 October 2012, and completed this transaction
on 2 February 2013.
The Canned grocery operations business is treated as a
continuing operation in the financial statements and reported
separately as an operating segment, 'Disposed of Canning
Operations'.
All commentary on the performance of the Company included below
refers to continuing operations unless otherwise stated and
therefore reflects the respective periods that the Company
maintained ownership of the businesses disposed during the year.
For example, the Vinegar and Sour Pickles business disposal
completed on 28 July; therefore the results of the continuing
operations include seven months results of the Vinegar and Sour
Pickles business.
Income statement
Revenue from continuing operations was GBP1,756.2m, a decrease
of GBP243.3m compared to the prior year. The major driver of the
decline is attributed to the disposals of the Canned grocery
operations, Irish brands, Vinegar and Sour Pickles, Elephant Atta
Ethnic Flour and Sweet Spreads and Jellies businesses, partly
offset by Power Brands sales growth.
Operating profit
Operating profit for continuing operations was GBP96.3m,
compared to a prior year loss of (GBP176.3m).
Trading profit was GBP154.7m in the year, a decline of GBP33.6m,
principally reflecting the impact of the businesses disposed during
2011 and 2012. During the year, significant savings in the overhead
cost base were partly offset by increased consumer marketing
investment.
Restructuring costs and losses associated with disposal activity
were GBP46.1m in the year. These charges relate to access costs
associated with the Company's cost savings programme and
restructuring activity associated with the previously announced
closure of three bakeries and two distribution sites in the Bread
division.
Amortisation of intangible assets was GBP53.3m in year, a
reduction of GBP18.7m from the prior year. This reflects the
impairment of goodwill and the Hovis brand in 2011 and also the
impact of disposals made during 2012. Impairment charges in 2012
were GBP36.2m which relate to the write down of part of the
carrying value of the Bread business following the decision to
restructure the supply chain. This compares to a charge in 2011 of
GBP282.0m.
The pension financing credit was GBP12.5m in 2012, GBP4.5m lower
than the prior year, primarily due to lower expected asset
returns.
Finance expense
Net finance expense in the year to 31 December 2012 was
GBP91.9m, compared to GBP82.8m in the prior year. Net regular
interest reduced from GBP115.7m to GBP69.5m, due to the conversion
of higher rate interest rate swaps into additional term loan at a
significantly lower interest rate in addition to lower levels of
Net debt following the disposal of businesses during the course of
the year. Partly offsetting this reduction in net finance expense
is the year on year net movement of interest rate instruments. In
the prior year, there was a positive movement in the fair valuation
of interest rate derivatives of GBP36.9m, compared to a adverse
movement of GBP9.7m in the year to 31 December 2012. Additionally,
an exceptional write off of financing costs amounting to GBP10.8m
was recognised in the year, relating to debt issuance costs
associated with the previous financing agreement. This compares to
a GBP1.6m charge in the prior year.
Profit before taxation
The Company made a profit before tax of GBP4.4m, compared to a
prior year loss of GBP259.1m. Operating profit in the year was
GBP96.3m due to the reasons outline above and net finance expense
was GBP91.9m. The prior year loss of GBP259.1m was principally due
to impairment charges associated with goodwill in the Bread
division and the Hovis brand.
Taxation
The taxation credit for the year was GBP21.9m (31 December 2011:
GBP29.1m). The effective rate of corporation tax for the year was
24.5%. The taxation credit during the year is principally a result
of recognising a deferred tax asset for prior year tax losses.
The corporation tax rate for 2013 is expected to be 23.25%. The
deferred tax rate is expected to be 21.0% for the tax year ending 5
April 2014.
Earnings per share
Basic earnings per share of 11.0 pence for the year on
continuing operations is calculated by dividing the profit
attributed to ordinary shareholders of GBP26.3m (31 December 2011:
GBP230.0m loss) by the weighted number of shares in issue during
the year. This compares to a loss per share of 95.9p for the prior
year.
Adjusted earnings per share for continuing operations was 26.8
pence (31 December 2011: 22.3 pence). Adjusted earnings per share
on continuing operations has been calculated by dividing the
adjusted earnings (defined as Trading profit less net regular
interest payable and notional taxation) attributed to ordinary
shareholders of GBP85.2m (31 December 2011: GBP72.6m) by the
weighted number of ordinary shares in issue during each period.
These earnings have been calculated by reflecting tax at a notional
rate of 24.5% (31 December 2011: 26.5%).
At the Annual General Meeting held on 3 May 2012, a resolution
was passed for a 10:1 share consolidation of the issued share
capital of the Company. Accordingly, the weighted number of shares
in issue for the period reduced from 2,398.0 million to 239.8
million; the latter being used for earnings per share
calculations.
Cash flow and borrowings
Company net borrowings as at 31 December 2012 were GBP950.7m, a
decrease of GBP44.4m since 31 December 2011. Of the movement since
31 December 2011, the cash and non-cash elements were GBP250.0m
inflow and GBP205.6m outflow respectively. The non-cash movement
principally reflects the conversion of the previous mark to market
swap liabilities to additional term loan, which amounted to
GBP188.1m.
The cash inflow from operating activities to 31 December 2012
was GBP4.2m (31 December 2011: outflow of GBP29.1m). This included
cash inflow from continuing operations of GBP54.8m (31 December
2011: GBP134.6m) and cash inflow from discontinued operations of
GBP1.6m (31 December 2011: GBP47.9m outflow). Additionally, net
cash interest paid was GBP52.5m (31 December 2011: GBP113.4m) due
to lower bank margins following the re-financing agreement
concluded in March 2012. Tax received in the year was GBP0.3m (31
December 2011: GBP2.4m paid).
Sale of subsidiaries and property, plant and equipment in the
year amounted to GBP312.2m following the completed disposals
outlined above. Net capital expenditure on tangible and intangible
assets in the year was GBP66.4m (31 December 2011: GBP73.5m), of
which GBP56.4m relates to Underlying business.
Net proceeds from borrowings and the debtors securitisation
programme were GBP1.5m and GBP72.4m respectively, reflecting the
conversion of the debtors securitisation programme to Net debt.
Financing fees associated with the re-financing agreement in March
2012 were GBP24.0m.
Pension schemes
At 31 December 2012 the Company's pension schemes under the IAS
19 accounting valuation showed a gross deficit of GBP466.8m,
compared to GBP282.4m at 31 December 2011. The valuation at 31
December 2012 comprised a GBP131.6m deficit in respect of the RHM
schemes and a deficit of GBP335.2m in relation to the Premier Foods
schemes.
The deficit increase reflects an increase in the scheme
liabilities of GBP237.7m to GBP3,676.1m, partly offset by an
increase in the valuation of assets of GBP53.3m to GBP3,209.3m. The
adverse movement in liabilities is predominantly due a reduction in
the discount rate from 4.80% at 31 December 2011 to 4.45% at 31
December 2012. The increase in the valuation of the scheme assets
is due to investment performance.
In 2012, the Group and trustees of the RHM Pension Scheme agreed
to change the inflation assumption used in calculating certain
scheme liabilities, for the majority of scheme members, from an RPI
to CPI basis, following a similar move by the Premier Foods Schemes
in 2011. The impact of this change was to reflect a credit of
GBP44.0m, and is partially offset by an equalisation charge of
GBP12.3m, resulting in a net credit of GBP31.7m.
Following the refinancing package concluded with the banking
syndicate, swap counterparties and pension schemes in March 2012,
pension deficit contribution payments were suspended from March
2012 to December 2013; deficit contribution payments resume from
January 2014.
The next triennial actuarial valuation date of the pension
schemes is on 5 April 2013, the outcome of which is expected in
early 2014.
Mark Moran
Chief Financial Officer
APPENDICES
'Continuing operations' includes the results of disposed
businesses for the respective periods until disposal was
completed.
'Underlying business'excludes the results of previously
announced business disposals, Milling (sales only) and
non-core,discrete, contract losses.
Continuing operations earnings per share is calculated as set
out below:
2012 2011
GBPm GBPm
Continuing Trading profit 154.7 188.3
Amortisation of intangible assets (53.3) (72.0)
Foreign exchange valuation items 2.1 (1.7)
Pension financing credit 12.5 17.0
Restructuring costs relating to divestment
activity (46.1) (10.5)
Re-financing costs (1.1) (4.2)
Profit/(Loss) on disposal 63.7 (11.2)
Impairment of intangible and tangible
assets (36.2) (282.0)
------- --------
Operating profit 96.3 (176.3)
Net finance expense (91.9) (82.8)
Profit/(Loss) before tax 4.4 (259.1)
Taxation credit 21.9 29.1
------- --------
Profit/(loss) after tax 26.3 (230.0)
Divided by:
Average shares in issue (millions) 239.8 239.8
Basic earnings/(loss) per share 11.0p (95.9p)
Adjusted earnings per share is calculated as set out below:
2012 2011
GBPm GBPm
Continuing Trading profit 154.7 188.3
Less net regular interest (69.5) (115.7)
Adjusted profit before tax 85.2 72.6
Less notional tax at 24.5%/26.5% (20.9) (19.2)
------- --------
Adjusted profit after tax 64.3 53.4
Divided by:
Average shares in issue (millions) 239.8 239.8
Adjusted earnings per share 26.8p 22.3p
GBPm Continuing Less: Disposals Less: Less: Contract Underlying
operations Milling sales(7) Loss(8) business
2012
Sales 1,756.2 (211.0) (191.4) - 1,353.8
Trading
profit 154.7 (31.3) N/A - 123.4
EBITDA 194.3 (35.7) N/A - 158.6
2011
Sales 1,999.5 (471.4) (193.0) (23.4) 1,311.7
Trading
profit 188.3 (71.1) N/A (5.6) 111.6
EBITDA 230.1 (77.2) N/A (5.6) 147.3
--------- ------------ ---------------- ------------------ --------------- -----------
GBPm Disposed businesses(5,6) Total
-------------- --------------------------------------------------------------------------------------- ------
Announced in 2011 Announced in 2012
-------------- ------
Canned Irish Sub-total Vinegar Ethnic Sweet Sweet Sub-total
Grocery brands & Pickles Flour Spreads Pickles
-------------- --------- -------- ---------- ----------- ------- --------- --------- ---------- ------
2012
Sales 0.9 - 0.9 14.8 8.8 128.3 58.2 210.1 211.0
Trading
profit 0.3 - 0.3 0.5 3.3 23.1 4.1 31.0 31.3
EBITDA 0.3 - 0.3 0.9 3.3 24.8 6.4 35.4 35.7
Months owned 7 7 10 12
2011
Sales 166.7 21.8 188.5 34.0 17.8 165.1 66.0 282.9 471.4
Trading
profit 5.4 9.2 14.6 5.5 6.4 36.1 8.5 56.5 71.1
EBITDA 5.4 9.2 14.6 6.2 6.4 38.2 11.7 62.6 77.2
-------------- --------- -------- ---------- ----------- ------- --------- --------- ---------- ------
Consolidated income statement (unaudited)
Year Year
ended ended
31 Dec 31 Dec
2012 2011
(Restated)(1)
Note GBPm GBPm
----------------------------------------------------------- ------------- ------------------
Continuing operations
Revenue 3 1,756.2 1,999.5
Cost of sales (1,261.2) (1,445.0)
Gross profit 495.0 554.5
Selling, marketing and distribution costs (262.5) (263.3)
Administrative costs (132.2) (466.8)
Net other operating expense (4.0) (0.7)
Operating profit/(loss) 96.3 (176.3)
Before impairment and profit/(loss) on disposal
of operations 68.8 116.9
Impairment of intangible and tangible assets (36.2) (282.0)
Profit/(loss) on disposal of operations 8 63.7 (11.2)
------------------------------------------------------- ------------- ------------------
Finance cost 4 (86.3) (126.9)
Finance income 4 4.1 7.2
Net movement on fair valuation of interest
rate financial instruments 4 (9.7) 36.9
Profit/(loss) before taxation from continuing
operations 4.4 (259.1)
Taxation credit 5 21.9 29.1
Profit/(loss) after taxation from continuing
operations 26.3 (230.0)
Loss from discontinued operations 7 (13.5) (109.0)
Profit/(loss) for the year attributable to
owners of the Parent 12.8 (339.0)
Basic and diluted earnings/(loss) per share
(pence)(3) 6 5.3 (141.4)
Basic and diluted earnings/(loss) per share
(pence) - continuing(3) 6 11.0 (95.9)
Basic and diluted loss per share (pence) -
discontinued(3) 6 (5.6) (45.5)
Adjusted earnings per share (pence) - continuing(2,3) 6 26.8 22.3
(1.) Comparatives have been restated following an GBP8.9m reclassification
of certain costs to align categorisation across the Group.
(2) Adjusted earnings per share is defined as trading profit less
net regular interest payable, less a notional tax charge at 24.5%
(2011: 26.5%) divided by the weighted average number of ordinary
shares of the Company.
(3) 2011 comparatives have been restated following the
10:1 share consolidation effected during 2012.
Consolidated statement of comprehensive income (unaudited)
---------------------------------------------------------------------------
Year Year
ended ended
31 Dec 31 Dec
2012 2011
Note GBPm GBPm
------------------------------------------------ ----- -------- --------
Profit/(loss) for the year 12.8 (339.0)
Other comprehensive losses
Actuarial losses on pensions 11 (231.6) (79.3)
Deferred tax credit/(charge) 5 46.7 (4.1)
Exchange differences on translation - 0.4
------------------------------------------------ ----- -------- --------
Total other comprehensive losses for the year,
net of tax (184.9) (83.0)
Total comprehensive losses attributable to
owners of the Company (172.1) (422.0)
------------------------------------------------ ----- -------- --------
Consolidated balance sheet (unaudited)
As at As at
31 Dec 31 Dec
2012 2011
Note GBPm GBPm
------------------------------------------- ----- ----------------- -----------------
ASSETS:
Non-current assets
Property, plant and equipment 374.2 417.3
Goodwill 713.9 856.2
Other intangible assets 677.0 822.7
Deferred tax assets 71.9 -
1,837.0 2,096.2
Current assets
Assets held for sale 9 81.0 33.8
Inventories 116.2 136.8
Trade and other receivables 298.6 297.4
Financial assets - derivative financial
instruments 1.0 0.5
Current income tax assets - 0.5
Cash and bank deposits 12 53.2 45.8
550.0 514.8
------------------------------------------- ----- ----------------- -----------------
Total assets 2,387.0 2,611.0
------------------------------------------- ----- ----------------- -----------------
LIABILITIES:
Current liabilities
Liabilities held for sale 9 (3.4) -
Trade and other payables (406.8) (434.8)
Financial liabilities
- short-term borrowings 10 (229.8) (113.6)
- derivative financial instruments (19.6) (12.6)
- other financial liabilities at fair
value through profit or loss - (187.0)
Accrued interest payable (5.6) (0.9)
Provisions (25.6) (8.3)
Current income tax liabilities (0.8) -
(691.6) (757.2)
Non-current liabilities
Financial liabilities
- long-term borrowings 10 (774.1) (927.3)
Retirement benefit obligations 11 (466.8) (282.4)
Provisions (48.3) (38.6)
Other liabilities (1.3) (21.9)
Deferred tax liabilities - (10.9)
(1,290.5) (1,281.1)
------------------------------------------- ----- ----------------- -----------------
Total liabilities (1,982.1) (2,038.3)
------------------------------------------- ----- ----------------- -----------------
Net assets 404.9 572.7
------------------------------------------- ----- ----------------- -----------------
EQUITY:
Capital and reserves
Share capital 24.0 24.0
Share premium 1,124.7 1,124.7
Merger reserve 587.5 606.0
Other reserves (9.3) (9.3)
Profit and loss reserve (1,322.1) (1,172.8)
------------------------------------------- -----------------
Capital and reserves attributable to
owners of the Parent 404.8 572.6
Non-controlling interest 0.1 0.1
-------------------------------------------
Total equity 404.9 572.7
------------------------------------------- ----- ----------------- -----------------
Consolidated statement of cash flows (unaudited)
Year Year
ended ended
31 Dec 31 Dec
2012 2011
Note GBPm GBPm
------------------------------------------- --------------- ---------------
Cash generated from operating activities 12 56.4 86.7
Interest paid (56.8) (120.9)
Interest received 4.3 7.5
Taxation paid 0.3 (2.4)
--------------- ---------------
Cash inflow/(outflow) from operating
activities 4.2 (29.1)
Sale of subsidiaries/businesses 312.2 394.8
Purchase of property, plant and equipment (49.4) (58.0)
Purchase of intangible assets (17.2) (20.9)
Sale of property, plant and equipment 0.2 5.4
--------------- ---------------
Cash inflow from investing activities 245.8 321.3
Repayment of borrowings (312.2) (363.6)
Proceeds from borrowings 1.5 124.1
Proceeds from securitisation programme 72.4 -
Financing fees and other costs of finance (24.0) (1.6)
--------------- ---------------
Cash outflow from financing activities (262.3) (241.1)
Net (outflow)/inflow of cash and cash
equivalents (12.3) 51.1
Cash and cash equivalents at beginning
of year 22.1 (28.7)
Effect of movement in foreign exchange (0.1) (0.3)
------------------------------------------- ----- --------------- ---------------
Cash and cash equivalents at end of year 12 9.7 22.1
------------------------------------------- ----- --------------- ---------------
Consolidated statement of changes in equity (unaudited)
------------------------------------------------------------------------------------------------------
Note Share Share Merger Other Profit Non-controlling Total
capital premium reserve reserves and loss interest
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
At 1 January
2012 24.0 1,124.7 606.0 (9.3) (1,172.8) 0.1 572.7
Profit for the
year - - - - 12.8 - 12.8
Actuarial losses
on pensions 11 - - - - (231.6) - (231.6)
Deferred tax
credit 5 - - - - 46.7 - 46.7
Other
comprehensive
losses - - - - (184.9) - (184.9)
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
Total
comprehensive
losses - - - - (172.1) - (172.1)
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
Share-based
payments - - - - 4.3 - 4.3
Realisation of
merger reserve - - (18.5) - 18.5 - -
-----------------
At 31 December
2012 24.0 1,124.7 587.5 (9.3) (1,322.1) 0.1 404.9
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
At 1 January
2011 24.0 1,124.7 890.7 (9.3) (1,040.7) 0.1 989.5
Loss for the
year - - - - (339.0) - (339.0)
Actuarial losses
on pensions 11 - - - - (79.3) - (79.3)
Deferred tax
charge 5 - - - - (4.1) - (4.1)
Exchange
differences
on translation - - - - 0.4 - 0.4
Other
comprehensive
losses - - - - (83.0) - (83.0)
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
Total
comprehensive
losses - - - - (422.0) - (422.0)
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
Share-based
payments - - - - 5.2 - 5.2
Realisation of
merger reserve - - (284.7) - 284.7 - -
----------------- --------------
At 31 December
2011 24.0 1,124.7 606.0 (9.3) (1,172.8) 0.1 572.7
----------------- ----- ------------ --------- --------- ---------- ---------- ---------------- --------------
Notes to the financial information (unaudited)
1. Basis of preparation
The financial information in this announcement does not
constitute the Group's statutory accounts for the years ended 31
December 2012 or 2011. The preliminary results for the year ended
31 December 2012 have been extracted from unaudited consolidated
financial statements. The financial information for the year ended
31 December 2011 is derived from the statutory accounts for that
year after adjustment to align classification of certain costs
across the Group.
The consolidated financial statements of Premier Foods plc have
been prepared in accordance with International Financial Reporting
Standards ("IFRS") as endorsed by the European Union, International
Financial Reporting Interpretation Committee ("IFRIC")
interpretations, and the Companies Act 2006 applicable to Companies
reporting under IFRS and on the historical cost basis.
Basis for preparation of financial statements on a going concern
basis
In March 2012 the Group signed a re-financing package with its
banking syndicate, swap counterparties and pension schemes whereby
the term loan and revolving credit facility were extended from 31
December 2013 to 30 June 2016. The current margin of 2.25% will
increase to 3.25% on 1 January 2014.
This facility includes net debt/ EBITDA and EBITDA/interest
covenant tests and a requirement to realise disposal proceeds of
GBP330m by 30 June 2014. 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 their funding to the Group.
Following the completion of the disposal of the Sweet Pickles
and Table Sauces business on 2 February 2013 the Group has
successfully met the disposal proceeds target. It is also in
compliance with covenant tests at 31 December 2012. The Group's
forecasts, taking account of reasonably possible changes in trading
performance, show that the Group should be able to operate within
the level of its current facilities including covenant tests.
The Group meets its day-to-day working capital requirements
through its bank facilities. The current economic conditions
continue to create uncertainty particularly over (a) the level of
demand for the Group's products; and (b) the availability of bank
finance for the foreseeable future.
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in preparing
its consolidated financial statements.
2. Critical accounting estimates and judgements
The following are areas of particular significance to the
Group's financial statements and include the use of estimates and
the application of judgement.
Employee benefits
The present value of the Group's defined benefit pension
obligations depends on a number of actuarial assumptions. The
primary assumptions used include the discount rate applicable to
scheme liabilities, the long-term rate of inflation and estimates
of the mortality applicable to scheme members.
At each reporting date, and on a continuous basis, the Group
reviews the macro-economic, Company and scheme specific factors
influencing each of these assumptions, using professional advice,
in order to record the Group's ongoing commitment and obligation to
defined benefit schemes in accordance with IAS 19. Key assumptions
used are mortality rates, discount rates and inflation set with
reference to bond yields. If the Group's assumption on the
mortality of its members was amended to assume an increase of a
further one year improvement in mortality, total liabilities would
increase by approximately 3.1%. Each 0.1% decrease/ increase in
bond yields would increase/decrease the deficit by a further
GBP62m/GBP60m. Each 0.1% increase/ decrease in the assumed
inflation rate would increase/decrease the deficit by a further
GBP27m/GBP26m. Each of the underlying assumptions is set out in
more detail in note 11.
Goodwill and other intangible assets
Impairment reviews in respect of goodwill are performed annually
unless an event indicates that an impairment review is necessary.
Impairment reviews in respect of intangible assets are performed
when an event indicates that an impairment review is necessary.
Examples of such triggering events include a significant planned
restructuring, a major change in market conditions or technology,
expectations of future operating losses, or a significant reduction
in cash flows. The recoverable amounts of cash-generating units
("CGU's") are determined based on the higher of net realisable
value and value in use calculations. These calculations require the
use of estimates.
Acquired trademarks, brands, customer relationships, recipes and
similar assets are considered to have finite lives that range from
7 to 40 years. The determination of the useful lives takes into
account certain quantitative factors such as sales expectations and
growth prospects, and also many qualitative factors such as history
and heritage, and market positioning, hence the determination of
useful lives are subject to estimates and judgement.
Advertising and promotion costs
Trade spend and promotional activity is dependent on market
conditions and negotiations with customers. Trade spend is charged
to the income statement according to the substance of the
agreements with customers and the terms of any contractual
relationship. Promotional support is generally charged to the
income statement at the time of the relevant promotion. These costs
are accrued on best estimates. The actual costs may not be known
until subsequent years when negotiations with customers are
concluded. Such adjustments are recognised in the year when final
agreement is reached.
Expenditure on advertising is charged to the income statement
when incurred, except in the case of airtime costs when a
particular campaign is used more than once. In this case they are
charged in line with the airtime profile.
3. 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 Chief Executive
Officer and Chief Financial Officer as they are primarily
responsible for the allocation of resources to segments and the
assessment of performance of the segments.
The CODM has changed the measure used to assess segment
performance in 2012. Divisional contribution is defined as gross
profit after marketing and distribution costs and is a consistent
measure within the Group and reflects the segments' underlying
trading performance for the period under evaluation. The reporting
of this measure at the monthly business review meetings, which are
organised according to product types, has been used to identify and
determine the Group's operating segments. 2011 comparatives have
been restated using the new measure.
The Group continues to use trading profit to review overall
group profitability. Trading profit is defined as operating profit
before re-financing costs, restructuring costs, profits and losses
associated with divestment activity, amortisation and impairment of
intangible assets, the revaluation of foreign exchange and other
derivative contracts under IAS 39 and pension credits or charges in
relation to the difference between the expected return on pension
assets, administration costs and interest costs on pension
liabilities.
The Group's operating segments are "Grocery", "Bread" and
"Disposed of Canning Operations". In 2011 the Group completed its
disposal of the Meat-free business and the Retailer Branded Chilled
business which had previously been aggregated into an "Other"
segment, as they did not meet the relevant quantitative thresholds
and did not have similar economic characteristics and therefore
could not be aggregated into their own separate reporting segment
under IFRS 8. In 2011 these were presented as discontinued
operations.
During 2012 the Group completed the disposal of the four Irish
Brands (Chivers, Gateaux, McDonnells and the Erin licence), the
Elephant Atta Ethnic Flour Business, the Vinegar and Sour Pickles
business and the
Sweet Spreads and Jellies business; the results of these
businesses have not been reported separately as they were fully
integrated within the Grocery and Bread segments.
The Grocery segment sells ambient food products. The Bread
segment sells bread, morning goods, flour products and frozen pizza
bases and the Disposed of Canning Operations segment sold canned
goods.
The segment results for the year ended 31 December 2012 and for
the year ended 31 December 2011 and the reconciliation of the
segment measures to the respective statutory items included in the
consolidated financial statements are as follows:
Year ended 31 Dec
2012
------------------------------------- ----------------- ------------------ ----------------------------------------
Grocery Bread Disposed Total for
of Canning Group
Operations
GBPm GBPm GBPm GBPm
------------------------------------- ----------------- ------------------ ------------------ --------------------
Revenue from continuing operations
External 1,058.0 697.3 0.9 1,756.2
Inter-segment 0.5 21.2 - 21.7
------------------------------------- ----------------- ------------------ ------------------ --------------------
Result
Divisional contribution 223.7 30.2 0.2 254.1
------------------------------------- ----------------- ------------------ ------------------ --------------------
Total SG&A costs (99.4)
Trading profit 154.7
------------------------------------- ----------------- ------------------ ------------------ --------------------
Amortisation of intangible assets (53.3)
Fair value movements on foreign
exchange and other derivative
contracts 2.1
Restructuring costs associated
with divestment activity (46.1)
Refinancing costs (1.1)
Pension financing credit 12.5
------------------------------------- ----------------- ------------------ ------------------ --------------------
Operating profit before impairment
and profit on disposal of
operations 68.8
Impairment of property, plant
and equipment and intangible assets (36.2)
Profit on disposal of operations 63.7
------------------------------------- ----------------- ------------------ ------------------ --------------------
Operating profit 96.3
Finance cost (86.3)
Finance income 4.1
Net movement on fair valuation
of interest rate financial
instruments (9.7)
-------------------------------------
Profit before taxation from
continuing
operations 4.4
------------------------------------- ----------------- ------------------ ------------------ --------------------
Depreciation 21.6 18.0 - 39.6
Amortisation 50.5 2.8 - 53.3
Impairment of property, plant
and equipment and intangible assets - 36.2 - 36.2
------------------------------------- ----------------- ------------------ ------------------ --------------------
Balance sheet
Segment assets 1,750.0 380.3 - 2,130.3
Unallocated assets 256.7
-------------------------------------
Consolidated total assets 2,387.0
------------------------------------- ----------------- ------------------ ------------------ --------------------
Year ended 31 Dec
2011
(Restated)(1)
Grocery Bread Disposed Total for
of Canning Group
Operations
GBPm GBPm GBPm GBPm
--------------------------------- ---- ----------------- ----------------- ------------------ -------------------
Revenue from continuing operations
External 1,121.5 711.3 166.7 1,999.5
Inter-segment 2.5 26.6 - 29.1
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Result
Divisional contribution 253.2 58.1 5.7 317.0
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Total SG&A costs (128.7)
Trading profit 188.3
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Amortisation of intangible assets (72.0)
Fair value movements on foreign
exchange and other derivative
contracts (1.7)
Restructuring costs associated
with divestment activity (10.5)
Re-financing costs (4.2)
Pension financing credit 17.0
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Operating profit before impairment
and loss on disposal of operations 116.9
Impairment of goodwill and intangible
assets (282.0)
Loss on disposal of operations (11.2)
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Operating loss (176.3)
Finance cost (126.9)
Finance income 7.2
Net movement on fair valuation
of interest rate financial
instruments 36.9
---------------------------------------
Loss before taxation from continuing
operations (259.1)
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Depreciation 24.2 17.6 - 41.8
Amortisation 53.9 18.1 - 72.0
Impairment of property, plant
and equipment, goodwill and
intangible
assets - 282.0 - 282.0
--------------------------------------- ----------------- ----------------- ------------------ -------------------
Balance sheet
Segment assets 2,042.2 412.2 - 2,454.4
Unallocated assets 156.6
---------------------------------------
Consolidated total assets 2,611.0
--------------------------------------- ----------------- ----------------- ------------------ -------------------
(1) Comparatives have been restated to reflect a change
in the measure used to assess segment performance.
Revenues, on a continuing basis, of approximately GBP329.1m and
GBP213.1m (2011: GBP333.5m and GBP274.9m) are derived from two
external customers. These revenues are attributable across the
grocery and bread segments.
Inter-segment transfers or transactions are entered into under
the same terms and conditions that would be available to unrelated
third parties.
Segment assets comprise property, plant and equipment, goodwill
and intangible assets, inventories and receivables and exclude cash
and cash equivalents, derivative assets and certain Corporate
assets that are not able to be allocated to the Group's reporting
segments.
Unallocated assets comprise cash and cash equivalents, taxation
balances, derivative financial assets, Group-wide software and
hardware and head office assets.
The Group primarily supplies the UK market, although it also
supplies certain products to other European countries and a number
of other countries. 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.
Continuing operations - revenue Year Year
ended ended
31 Dec 31 Dec 2011
2012
GBPm GBPm
--------------------------------- -------- -------------
United Kingdom 1,697.4 1,880.8
Other Europe 36.5 87.4
Rest of world 22.3 31.3
---------------------------------- -------- -------------
Total 1,756.2 1,999.5
---------------------------------- -------- -------------
Non-current assets As at As at
31 Dec 31 Dec 2011
2012
GBPm GBPm
-------------------- ----------------- -------------
United Kingdom 1,837.0 2,066.1
Other Europe - 30.1
--------------------- ----------------- -------------
Total for Group 1,837.0 2,096.2
--------------------- ----------------- -------------
4. Finance income and costs
Year Year
ended ended
31 Dec 31 Dec
2012 2011
GBPm GBPm
----------------------------------------------- ------------------- -------------------
Interest payable on bank loans and overdrafts (10.3) (13.6)
Interest payable on term facility (24.6) (28.6)
Interest payable on revolving facility (9.4) (7.6)
Interest payable on interest rate derivatives (5.8) (19.1)
Interest payable on interest rate financial
liabilities designated as other financial
liabilities at fair value through profit
or loss (11.5) (40.6)
Unwind of discount on provisions (0.8) (2.4)
Amortisation of debt issuance costs
and deferred fees (13.1) (13.4)
(75.5) (125.3)
Write off of financing costs(1) (10.8) (1.6)
Total finance cost (86.3) (126.9)
----------------------------------------------- ------------------- -------------------
Interest receivable on bank deposits 4.1 7.2
Total finance income 4.1 7.2
----------------------------------------------- ------------------- -------------------
Movement on fair valuation of interest
rate derivatives (14.8) 17.6
Movement on fair valuation of interest rate
financial liabilities designated as other
financial liabilities at fair value through
profit or loss 5.1 19.3
Net movement on fair valuation of interest
rate financial instruments (9.7) 36.9
----------------------------------------------- ------------------- -------------------
Net finance cost (91.9) (82.8)
----------------------------------------------- ------------------- -------------------
(1) For 2012 this relates to the write-off of debt issuance costs
relating to the Group's previous financing agreement.
2012
The net movement on fair valuation of interest rate financial
instruments relates to GBP9.5m favourable movement on swaps held
before re-financing in March 2012 offset by adverse movement of
GBP19.2m on swaps entered into as part of the re-financing
package.
2011
The fair value of interest rate swaps and other financial
liabilities at fair value through profit or loss has decreased from
a GBP234.5m liability at 31 December 2010 to a GBP197.6m liability
at 31 December 2011 resulting in a net movement of GBP36.9m for the
year. The change in fair value in the year is due to a change in
the yield curve offset by amortisation. The liability at 31
December 2011 represents the net present value of the interest cash
flows calculated using the contracted fixed rates compared to the
net present value of interest cash flows that would arise if the
interest was calculated on a floating basis.
The total facility as at 31 December 2012 was GBP1,142.4m (2011:
GBP1,233m).
5. Taxation
Current tax
Analysis of the credit for the year:
Continuing Discontinued
operations operations Total
GBPm GBPm GBPm
------------------------- ------------------------- ----------------------
2012
Current tax
- Current year - - -
- Prior years 0.1 - 0.1
Overseas current tax
- Current year (1.1) - (1.1)
- Prior years - - -
Deferred tax
- Current year 31.4 4.0 35.4
- Prior years (13.9) - (13.9)
- Adjustment to restate opening
deferred tax at 23.0% 5.4 - 5.4
Income tax credit for the
year 21.9 4.0 25.9
------------------------------------ ------------------------- ------------------------- ----------------------
2011
Current tax
- Current year - - -
- Prior years 1.5 - 1.5
Overseas current tax
- Current year (1.2) - (1.2)
- Prior years - - -
Deferred tax
- Current year 20.6 11.5 32.1
- Prior years 0.3 - 0.3
- Adjustment to restate opening
deferred tax at 25.0% 7.9 0.7 8.6
Income tax credit for the
year 29.1 12.2 41.3
------------------------------------ ------------------------- ------------------------- ----------------------
Tax relating to items recorded in equity for continuing
operations was:
Year Year
ended ended
31 Dec 2012 31 Dec 2011
GBPm GBPm
-------------------------------------------------------- -------------------------- -----------------------
Deferred tax charge on reduction of corporate tax rate (4.5) (4.5)
Deferred tax credit on pension movements 43.6 0.4
Deferred tax credit on losses 7.6 -
46.7 (4.1)
-------------------------------------------------------- -------------------------- -----------------------
The tax credit for the year differs from the standard rate of
corporation tax in the United Kingdom of 24.5% (2011: 26.5%).The
reasons for this are explained below:
Year ended
Year ended 31 Dec
31 Dec 2012 2011
GBPm GBPm
--------------------------------------------- ---------------------- -------------------
Profit/(loss) before taxation
for continuing operations 4.4 (259.1)
Tax (charge)/credit at the domestic income
tax rate of 24.5% (2011: 26.5%) (1.1) 68.7
Tax effect of:
Non-deductible
items(2) 19.4 (47.8)
Other disallowable
items (0.2) (0.5)
Adjustment for overseas results
taxed at different rate (1.1) 1.4
Adjustment for share-based
payments (1.1) (1.3)
Previously unrecognised
losses utilised 11.6 16.3
Capital gain on disposal
of business (13.0) (16.3)
Adjustment due to current year deferred tax
being provided at 23.0% (2011: 25.0%) (1.0) (1.1)
Previously unrecognised 16.8 -
losses recognised
Adjustment to restate opening deferred tax
at 23.0% (2011: 25.0%) 5.4 7.9
Adjustments to prior
years(1) (13.8) 1.8
Income tax credit 21.9 29.1
--------------------------------------------- ---------------------- -------------------
(1) In 2012 this largely relates to a disclaim of capital allowances
in 2011 group accounts not repeated in the tax returns.
(2) Non-deductible items relates primarily to profits
made on the disposal of businesses during the year.
The Finance Act 2012, enacted on 3 July 2012, reduces the main
rate of corporation tax from 26% to 24% from 1 April 2012. This
gives rise to an effective rate of corporation tax for the year of
24.5%.
Deferred tax balances at 31 December 2011 were calculated at
25%, the rate applicable from 1 April 2011. The Finance Act 2012
also reduces the main rate of corporation tax to 23% from 1 April
2013. This 2% reduction for the 2012 financial year has been
reflected in the financial statements by restating the deferred tax
liability at 31 December 2011 giving a credit of GBP5.4m to
continuing operations, off-set by a charge to equity of GBP4.5m to
reflect where the charges and credits were originally made. In
addition, the deferred tax movements in the period have been
reflected at 23%, being the rate at which the liabilities are
expected to reverse, which has resulted in a GBP0.7m decrease to
the income tax credit.
A further 2% reduction to the main rate of corporation tax is
proposed to reduce the rate to 21% from 1 April 2014. However, as
this further reduction in the main rate of corporation tax was not
substantively enacted at the balance sheet date it is not reflected
in the deferred tax recognised on the balance sheet.
6. Earnings/(loss) per share
Basic earnings per share has been calculated by dividing the
profit attributable to owners of the Parent of GBP12.8m (2011:
GBP339.0m loss) by the weighted average number of ordinary shares
of the Company.
Year ended 31 Dec Year ended 31 Dec
2012 2011
(Restated)(1)
---------------------------- ------------ ----------- ------------ -------------------------------------
Dilutive Dilutive
effect effect
of share of share
Basic options Diluted Basic options Diluted
---------------------------- ------------ ----------- ------------ ----------- ----------- -----------
Continuing operations
Profit/(loss) after tax
(GBPm) 26.3 - 26.3 (230.0) - (230.0)
Weighted average number
of shares (m) 239.8 - 239.8 239.8 - 239.8
----------------------------
Earnings/(loss) per share
(pence) 11.0 - 11.0 (95.9) - (95.9)
---------------------------- ------------ ----------- ------------ ----------- ----------- -----------
Discontinued operations
Loss after tax (GBPm) (13.5) - (13.5) (109.0) - (109.0)
Weighted average number
of shares (m) 239.8 - 239.8 239.8 - 239.8
----------------------------
Loss per share (pence) (5.6) - (5.6) (45.5) - (45.5)
---------------------------- ------------ ----------- ------------ ----------- ----------- -----------
Total
Profit/(loss) after tax
(GBPm) 12.8 - 12.8 (339.0) - (339.0)
Weighted average number
of shares (m) 239.8 - 239.8 239.8 - 239.8
----------------------------
Earnings/(loss) per share
(pence) 5.3 - 5.3 (141.4) - (141.4)
---------------------------- ------------ ----------- ------------ ----------- ----------- -----------
(1) Comparatives have been restated following the 10:1 share consolidation
effected during 2012.
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. 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 subscription rights attached to
the outstanding share options.
For the years ended 31 December 2012 and 31 December 2011, there
is no dilutive effect as the outstanding share options that could
have been acquired at fair value is less than the monetary value of
the subscription rights attached to these options.
No adjustment is made to the profit or loss in calculating basic
and diluted earnings/(loss) per share.
2012 2011
Number Number (Restated)(1)
------------------------------------------------- ------------ ---------------------
Weighted average number of ordinary shares for
the purpose of basic earnings/(loss) per share 239,806,206 239,805,802
Effect of dilutive potential
ordinary shares:
- Share options - -
Weighted average number of ordinary shares for
the 239,806,206 239,805,802
purpose of diluted earnings/(loss) per share
------------------------------------------------- ------------ ---------------------
(1) Comparatives have been restated following the 10:1 share consolidation
effected during 2012.
Adjusted earnings per share ("Adjusted EPS")
Adjusted earnings per share is defined as trading profit less
net regular interest payable, less a notional tax charge at 24.5%
(2011: 26.5%) divided by the weighted average number of ordinary
shares of the Company. There is no difference between basic and
diluted adjusted EPS.
Trading profit is defined as operating profit before refinancing
costs, restructuring costs, profits and losses associated with
divestment activity, amortisation and impairment of intangible
assets, the revaluation of foreign exchange and other derivative
contracts under IAS 39 and pension credits or charges in relation
to the difference between the expected return on pension assets,
administration costs and interest costs on pension liabilities.
Net regular interest payable is defined as net interest after
excluding non-cash items, namely write-off of financing costs,
accelerated amortisation of debt issuance costs, fair value
adjustments on interest rate financial instruments and the unwind
of the discount on provisions.
Trading profit and Adjusted EPS have been reported as the
directors believe these provide an alternative measure by which the
shareholders can assess the Group's underlying trading
performance.
Year ended 31 Dec 2012
----------------------------------------------------------------------------------------------
Continuing Discontinued Total
GBPm GBPm GBPm
------------------------------------------------ ----------- ---------------------- -------
Operating profit/ (loss) 96.3 (17.5) 78.8
Impairment of property, plant and equipment
and intangible assets 36.2 - 36.2
Profit on disposal of operations (63.7) - (63.7)
Operating profit/(loss) before impairment
and profit on disposal of operations 68.8 (17.5) 51.3
Pension financing credit (12.5) - (12.5)
Fair value movements on foreign exchange
and other derivative contracts (2.1) - (2.1)
Amortisation of intangible assets 53.3 - 53.3
Restructuring costs associated with divestment
activity 46.1 - 46.1
Refinancing costs 1.1 - 1.1
----------- ---------------------- -------
Trading profit/(loss) 154.7 (17.5) 137.2
Less net regular interest payable (69.5) - (69.5)
----------- ---------------------- -------
Adjusted profit/(loss) before tax 85.2 (17.5) 67.7
Notional tax at 24.5% (20.9) 4.3 (16.6)
Adjusted profit/(loss) after tax 64.3 (13.2) 51.1
------------------------------------------------ ----------- ---------------------- -------
Average shares in issue (m) 239.8 239.8 239.8
Adjusted EPS (pence) 26.8 (5.5) 21.3
Net regular interest payable
Net interest payable (91.9) - (91.9)
Exclude write-off of financing costs and
other 11.9 - 11.9
Exclude fair value adjustments on interest
rate financial instruments 9.7 - 9.7
Exclude unwind of discount on provisions 0.8 - 0.8
Net regular interest payable (69.5) - (69.5)
------------------------------------------------ ----------- ---------------------- -------
Year ended 31 Dec 2011 (Restated)(1)
------------------------------------------------------------------------------------------
Continuing Discontinued Total
GBPm GBPm GBPm
------------------------------------------- ----------- ---------------------- --------
Operating loss (176.3) (106.5) (282.8)
Impairment of goodwill and intangible
assets 282.0 80.4 362.4
Loss on disposal of operations 11.2 - 11.2
----------- ---------------------- --------
Operating profit/(loss) before impairment
and loss on disposal of operations 116.9 (26.1) 90.8
Pension financing credit (17.0) - (17.0)
Fair value movements on foreign exchange
and other derivative contracts 1.7 - 1.7
Amortisation of intangible assets 72.0 11.9 83.9
Restructuring costs associated with
divestment activity 10.5 - 10.5
Re-financing costs 4.2 - 4.2
----------- ---------------------- --------
Trading profit/(loss) 188.3 (14.2) 174.1
Less net regular interest payable (115.7) (0.1) (115.8)
----------- ---------------------- --------
Adjusted profit/(loss) before tax 72.6 (14.3) 58.3
Notional tax at 26.5% (19.2) 3.8 (15.4)
Adjusted profit/(loss) after tax 53.4 (10.5) 42.9
------------------------------------------- ----------- ---------------------- --------
Average shares in issue (m) 239.8 239.8 239.8
Adjusted EPS (pence) 22.3 (4.4) 17.9
Net regular interest payable
Net interest payable (82.8) (0.1) (82.9)
Exclude write-off of financing costs 1.6 - 1.6
Exclude fair value adjustments on
interest rate financial instruments (36.9) - (36.9)
Exclude unwind of discount on provisions 2.4 - 2.4
Net regular interest payable (115.7) (0.1) (115.8)
------------------------------------------- ----------- ---------------------- --------
(1) Comparatives have been restated following the 10:1
share consolidation effected during 2012.
7. Discontinued operations
Discontinued operations in 2011 comprised the Meat-free business
and the Retailer Branded Chilled business which were sold in 2011.
Income and expenditure incurred in discontinued operations
throughout the year relates to operations that were disposed of in
previous years and predominantly comprises of past service costs in
relation to the Premier Foods pension scheme. There are no new
discontinued operations in 2012.
Year Year
ended ended
31 Dec 31 Dec
2012 2011
GBPm GBPm
------------------------------------------------ ------------------ --------------------
Revenue - 218.6
Operating expenses (17.5) (325.1)
------------------------------------------------ ------------------ --------------------
Operating loss before loss on disposal (17.5) (106.5)
Interest payable - (0.1)
------------------------------------------------ ------------------ --------------------
Loss before taxation (17.5) (106.6)
Taxation credit 4.0 12.2
------------------------------------------------
Loss after taxation on discontinued operations
for the year (13.5) (94.4)
------------------------------------------------ ------------------ --------------------
Loss on disposal - (14.6)
------------------ --------------------
Total loss arising from discontinued
operations (13.5) (109.0)
------------------
Included in the operating expenses for the year-end 31 December
2011 above is an impairment charge of GBP80.4m, recognised against
the assets allocated to the Retailer Branded Chilled CGU.
During the year, discontinued operations contributed to a net
inflow of GBP1.6m (2011: GBP47.9m outflow) to the Group's net
operating cash flows, and nil to investing activities (2011:
GBP6.9m outflow).
8. Disposal of businesses
Irish Brands
On 23 January 2012, the Group completed its sale of the four
Irish Brands (Chivers, Gateaux, McDonnells and the Erin Licence) to
The Boyne Valley Group for GBP34.7m (EUR41.4m) before disposal
costs.
Elephant Atta ethnic flours
On 6 July 2012, the Group completed its sale of the Elephant
Atta ethnic flour business to Westmill Foods (a subsidiary of
Associated British Foods) for GBP34.0m before disposal costs.
Vinegar and sour pickles
On 28 July 2012, the Group completed its sale of its Vinegar and
Sour Pickles business to the Mizkan Group for GBP41.0m before
disposal costs.
Sweet spreads and jellies
On 27 October 2012, the Group completed its sale of its Sweet
Spreads and Jellies business to the Hain Celestial Group for
GBP202.0m before disposal costs.
The results of all the businesses above are included within
continuing operations as they were integrated and reported as part
of the Grocery and Bread businesses.
Irish Elephant Vinegars Sweet Total
Brands Atta and sour spreads
pickles and jellies
GBPm GBPm GBPm GBPm GBPm
Net cash inflow arising
on disposal:
Initial consideration 34.7 34.0 41.0 202.0 311.7
Working capital adjustments
and disposal costs (1.3) (1.2) (1.9) (6.8) (11.2)
Net cash inflow for the
year 33.4 32.8 39.1 195.2 300.5
Property, plant and equipment - - 7.8 33.5 41.3
Intangible assets and goodwill 32.1 2.9 23.7 118.4 177.1
Inventories 1.4 - 5.6 17.4 24.4
Provisions and lease obligations - (0.7) (1.3) (4.0) (6.0)
Net assets disposed 33.5 2.2 35.8 165.3 236.8
(Loss)/profit on disposal (0.1) 30.6 3.3 29.9 63.7
9. Assets and liabilities held for sale
2012 2011
GBPm GBPm
Non-current assets:
Property, plant and equipment 37.6 -
Goodwill 31.1 31.2
Other intangible assets 3.1 0.9
Current assets:
Inventories 9.2 1.7
Total assets held for sale 81.0 33.8
Non-current liabilities:
Deferred tax liabilities (3.4) -
Total liabilities held for sale (3.4) -
Net assets and liabilities held for sale 77.6 33.8
As at 31 December 2012, the assets and associated liabilities
relating to the Sweet Pickles and Table Sauces business were held
for sale in light of the announcement of the conditional sale of
this business on 30 October 2012. The disposal completed on 2
February 2013 for consideration of GBP92.5m.
As at 31 December 2011, the assets and associated liabilities
relating to certain Irish Brands were held for sale in light of the
decision to sell this business. The disposal completed on 23
January 2012.
Both businesses are part of the Grocery segment.
10. Bank and other borrowings
2012 2011
GBPm GBPm
----------------- -----------------
Due within one year:
Secured Senior Credit Facility - Revolving (15.0) -
(note a)
Debt issuance costs 0.3 -
----------------- -----------------
(14.7) -
Secured Senior Credit Facility - Term
(note a) (77.4) (67.3)
Debt issuance costs 1.5 0.8
(75.9) (66.5)
Bank overdrafts (43.5) (23.7)
-----------------
Total bank borrowings due within one
year (134.1) (90.2)
Finance lease obligations (0.1) (0.2)
Other loans (note b) (95.6) (23.2)
-----------------
Total borrowings due within one year (229.8) (113.6)
-----------------
Due after more than one year:
Secured Senior Credit Facility - Revolving
(note a) (116.7) (276.1)
Debt issuance costs 7.7 6.5
-----------------
(109.0) (269.6)
----------------- -----------------
Secured Senior Credit Facility - Term
(note a) (677.8) (665.8)
Debt issuance costs 13.1 8.7
-----------------
(664.7) (657.1)
----------------- -----------------
Finance lease obligations (0.3) (0.5)
Other loans (note b) (0.1) (0.1)
-----------------
Total other (0.4) (0.6)
----------------- -----------------
Total borrowings due after one year (774.1) (927.3)
Total bank and other borrowings (1,003.9) (1,040.9)
The borrowings are secured by a floating charge over all assets
of the Group.
Cash and bank deposits and short-term borrowings have been
offset to the extent possible in accordance with the Group's
banking agreements.
(a) Senior Term Credit Facility and Revolving Credit Facility
Arrangement - 2012
In March 2012 the Group signed a re-financing package with its
banking syndicate, swap counterparties and pension schemes. This
amended certain terms of its Senior Term Credit Facility and
Revolving Credit Facility Arrangement of 16 March 2007.
The existing term loan and revolving credit facility, previously
due to mature on 31 December 2013, have been extended to a new
maturity date of 30 June 2016. The current applicable bank margin
of 2.25% will increase to 3.25% with effect from 1 January
2014.
Additionally, the current amortisation payment schedule has been
amended, with amortisations to occur semi-annually from 30 June
2014. Banking covenants of net debt / EBITDA and EBITDA / interest
remain in place; they will continue to be tested biannually and
have been re-set to reflect the Group's strategic plan.
The total interest rate swap portfolio, including previously
restructured swaps, was restructured into additional term loan
totalling GBP188m. Of this additional term loan, GBP106m of the
previously restructured swaps will be interest bearing with
immediate effect. The remaining GBP82m of previously restructured
swaps will attract interest from 1 January 2014. These new tranches
of additional term loan will attract the same interest margin as
the main term loan. The previously arranged agreed swap settlements
of GBP35m in 2012 and GBP82m in 2013 are no longer applicable. A
new floating to fixed amortising swap commencing in July 2012, with
an initial nominal value of GBP745m is in place, attracting a swap
rate of 1.59%.
All term loan and securitised debt attract interest charges
based on LIBOR.
A sliding scale of new deferred fees at market rates will be
applicable from 2014 through to 2016, which are payable on a
subsequent re-financing. Planned disposal proceeds are shared
between the banks in the banking syndicate (including those swap
counterparties whose swaps have been restructured into additional
term loans as described above).
(b) Other loans
Other loans falling due within one year includes amounts drawn
under the debtors securitisation facility, which in 2012 is secured
against the Group's trade receivables.
11. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of defined benefit schemes under
which employees are entitled to retirement benefits which are based
on career average salary on retirement. These are as follows:
(a) Premier schemes
The Premier Foods Pension Scheme ("PFPS") was the principal
funded defined benefit scheme within the old Premier Group which
also operated a smaller funded defined benefit scheme, the Premier
Ambient Products Pension Scheme ("PAPPS") for employees acquired
with the Ambrosia business in 2001. As a result of the acquisition
of Campbell's in 2006, the Group inherited the Premier Grocery
Products Pension Scheme ("PGPPS") covering the employees of
Campbell's UK business, and the Premier Grocery Products Ireland
Pension Scheme ("PGPIPS") covering the employees of Campbell's
Ireland. The Group also acquired two further schemes with the
acquisition of Chivers Ireland in January 2007, the Chivers 1987
Pension Scheme and the Chivers 1987 Supplementary Pension Scheme.
These schemes are presented together below as the Premier
schemes.
(b) RHM schemes
As a result of the acquisition of RHM plc, the Group also
acquired the RHM Pension Scheme, the Premier
Foods Ireland Pension Scheme (1994), the Premier Foods Ireland
Van Sales Scheme and the French Termination Indemnity Arrangements.
These schemes are presented together below as the RHM schemes, with
the exception of the French Termination Indemnity Arrangements
which were disposed of with the speciality bakery businesses in
2009, and the Premier Foods Ireland Van Sales Scheme which was
wound up in 2010.
The most recent full actuarial valuation of both the PFPS and
RHM pension schemes was carried out on 5 April 2010.
The exchange rates used to translate the overseas Euro based
schemes are GBP1.00 = 1.2317 Euros for the average rate during the
year, and GBP1.00 = 1.2257 Euros for the closing position at 31
December 2012.
Until 30 June 2011, the employees of the above schemes accrued
retirement benefits which varied as a percentage of final salary on
retirement. On 30 June 2011 the link to final salary was closed to
future accrual for UK schemes and members' retirement benefits will
now be linked to their salary on that date, index linked at Retail
Price Index (subject to a 5% cap) until retirement date. From 1
July 2011 employees accrued career average benefits or chose to
transfer to the new defined contribution scheme. Those contributing
members of the PAPPS and PGPPS choosing career average benefits
joined the PFPS on 1 July 2011 and transferred their past service
entitlements to the scheme. Membership of the Group's defined
benefit pension schemes is now closed to new employees, who are
entitled to join the Group's main defined contribution scheme, the
Group Personal Pension Plan. The closure of the final salary
schemes resulted in a past service credit of GBP12.1m in 2011.
In July 2010, the UK government announced changes to the
inflation index used for statutory pension increases (both for
pensions in payment and pensions in deferment) to apply to private
sector pension schemes. This resulted in a credit to past service
costs of GBP46.4m in respect of the RHM Pension scheme during the
year. In 2011 a credit of GBP29.9m in respect of the Premier
pension schemes was recognised.
In March 2012, as part of the Group's re-financing package,
trustees of the Group's UK pension schemes agreed to defer deficit
contribution payments until 1 January 2014.
The assets of all defined benefit schemes are held by the
trustees of the respective schemes and are independent of the
Group's finances.
The schemes invest through investment managers appointed by the
trustees in UK and European equities and in investment products
made up of a broader range of assets. The plan assets do not
include any of the Group's own financial instruments, nor any
property occupied by, or other assets used by, the Group. The
pension schemes hold a charge over the assets of the Group.
At the balance sheet date, the combined principal actuarial
assumptions used for all the schemes were as follows:
Premier RHM schemes
schemes
2012 2012
Discount rate 4.45% 4.45%
Inflation - RPI 2.95% 2.95%
Inflation - CPI 2.15% 2.15%
Expected salary increases 3.95% 3.95%
Future pension increases 2.05% 2.05%
2011 2011
Discount rate 4.80% 4.80%
Inflation - RPI 3.15% 3.15%
Inflation - CPI 1.95% n/a
Expected salary increases 4.15% 4.15%
Future pension increases 2.10% 2.10%
For the smaller overseas schemes the discount rate used was
3.40% (2011: 5.45%), expected salary increases of 3.00% (2011:
3.00%), and future pension increases of 1.75% (2011: 1.75%).
The mortality assumptions are based on standard mortality tables
which allow for future mortality improvements. The assumptions are
as follows:
2012
Premier RHM schemes Total
Life expectancy schemes
Male pensioner, currently aged 65 88.1 86.1 86.6
Female pensioner, currently aged 65 90.2 88.5 88.9
Male non-pensioner, currently aged
45 89.4 87.4 87.9
Female non-pensioner, currently aged
45 91.8 90.0 90.5
2011
Premier RHM schemes Total
Life expectancy schemes
Male pensioner, currently aged 65 87.9 86.0 86.5
Female pensioner, currently aged 65 90.1 88.4 88.8
Male non-pensioner, currently aged
45 89.3 87.3 87.8
Female non-pensioner, currently aged
45 91.7 90.0 90.4
The fair values of plan assets split by type of asset are as
follows:
Premier schemes % of total Expected RHM schemes % of total Expected Total % of total
Pension scheme return on return on
assets assets assets
GBPm % % GBPm % % GBPm
Assets at 31
December 2012
Equities 16.7 3.1 7.7 394.6 14.8 7.7 411.3 12.8
Corporate and
government bonds 102.0 19.0 4.2 1,095.7 40.9 4.2 1,197.7 37.3
Property 1.0 0.2 7.3 104.3 3.9 7.3 105.3 3.3
Absolute /target
return products 271.7 50.7 5.6 440.4 16.5 5.9 712.1 22.2
Interest rate and
inflation swaps 25.6 4.8 4.7 (194.6) (7.3) 3.1 (169.0) (5.3)
Cash 2.6 0.5 2.8 491.8 18.4 2.8 494.4 15.4
Other 116.3 21.7 9.0 341.2 12.8 7.7 457.5 14.3
Fair value of
scheme assets 535.9 100 6.1 2,673.4 100 5.5 3,209.3 100
Assets at 31
December 2011
Equities 27.4 5.3 6.8 397.7 15.1 7.8 425.1 13.5
Corporate and
government bonds 110.3 21.4 4.7 967.1 36.6 4.7 1,077.4 34.2
Property 1.0 0.2 7.3 91.1 3.4 7.3 92.1 2.9
Absolute / target
return products 338.8 65.9 7.6 452.1 17.1 5.8 790.9 25.0
Interest rate and
inflation swaps 25.5 5.0 5.2 206.1 7.8 3.1 231.6 7.3
Cash 1.9 0.4 2.8 237.2 9.0 2.8 239.1 7.6
Other 9.3 1.8 6.1 290.5 11.0 7.8 299.8 9.5
Fair value of
scheme assets 514.2 100 6.6 2,641.8 100 5.8 3,156.0 100
The schemes invest in interest rate and inflation swaps to
protect from fluctuations in interest and inflation.
The expected return on pension scheme assets above is based on
the long-term investment strategy set out in the Schemes' Statement
of Investment Principles at the start of the year.
The amounts recognised in the balance sheet arising from the
Group's obligations in respect of its defined benefit schemes is as
follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
2012
Present value of funded obligations (871.1) (2,805.0) (3,676.1)
Fair value of plan assets 535.9 2,673.4 3,209.3
Deficit in scheme (335.2) (131.6) (466.8)
2011
Present value of funded obligations (781.9) (2,656.5) (3,438.4)
Fair value of plan assets 514.2 2,641.8 3,156.0
Deficit in scheme (267.7) (14.7) (282.4)
2010
Present value of funded obligations (748.0) (2,372.3) (3,120.3)
Fair value of plan assets 512.8 2,286.6 2,799.4
Deficit in scheme (235.2) (85.7) (320.9)
2009
Present value of funded obligations (685.5) (2,273.0) (2,958.5)
Fair value of plan assets 477.1 2,052.9 2,530.0
Deficit in scheme (208.4) (220.1) (428.5)
2008
Present value of funded obligations (587.7) (1,952.1) (2,539.8)
Fair value of plan assets 415.4 2,112.9 2,528.3
(Deficit)/surplus in scheme (172.3) 160.8 (11.5)
The aggregate deficit has increased by GBP184.4m during the year
primarily due to a fall in discount rate assumption used, which is
based on the AA bond yield, from 4.80% to 4.45%, partly offset by
the reduction in RPI inflation assumption from 3.15% to 2.95%.
Experience gains/(losses) on the two schemes are as follows:
Premier schemes RHM schemes Total
GBPm GBPm GBPm
Assets Liabilities Assets Liabilities Assets Liabilities
2012 7.8 (9.0) (21.1) (24.6) (13.3) (33.6)
2011 (35.5) 3.3 261.9 0.2 226.4 3.5
2010 2.8 1.0 153.2 35.8 156.0 36.8
2009 42.5 6.4 (135.0) 2.4 (92.5) 8.8
2008 (131.6) (6.4) (50.3) (2.2) (181.9) (8.6)
Changes in the present value of the defined benefit obligation
were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
2012
Opening defined benefit obligation (781.9) (2,656.5) (3,438.4)
Current service cost (6.1) (11.2) (17.3)
Past service (cost)/credit (19.4) 33.4 14.0
Interest cost (37.5) (124.3) (161.8)
Actuarial loss (58.1) (160.2) (218.3)
Exchange differences 1.0 0.4 1.4
Curtailments/settlements 0.8 (1.8) (1.0)
Contributions by plan participants (3.8) (6.8) (10.6)
Benefits paid 33.9 122.0 155.9
Closing defined benefit obligation (871.1) (2,805.0) (3,676.1)
2011
Opening defined benefit obligation (748.0) (2,372.3) (3,120.3)
Current service cost (8.8) (9.6) (18.4)
Past service credit/(cost) 46.8 (4.8) 42.0
Interest cost (40.1) (126.9) (167.0)
Actuarial loss (58.8) (246.9) (305.7)
Exchange differences 0.9 0.5 1.4
Curtailments/settlements 0.3 (1.7) (1.4)
Contributions by plan participants (5.2) (13.2) (18.4)
Benefits paid 31.0 118.4 149.4
Closing defined benefit obligation (781.9) (2,656.5) (3,438.4)
Changes in the fair value of plan assets were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
2012
Opening fair value of plan assets 514.2 2,641.8 3,156.0
Expected return 32.2 150.1 182.3
Administrative and life insurance
costs (3.3) (4.7) (8.0)
Actuarial (loss)/gain 7.8 (21.1) (13.3)
Contributions by employer 16.1 23.0 39.1
Contributions by plan participants 3.8 6.8 10.6
Exchange differences (1.0) (0.5) (1.5)
Benefits paid (33.9) (122.0) (155.9)
Closing fair value of plan assets 535.9 2,673.4 3,209.3
2011
Opening fair value of plan assets 512.8 2,286.6 2,799.4
Expected return 39.5 151.6 191.1
Administrative and life insurance
costs (3.6) (3.5) (7.1)
Actuarial (loss)/gain (35.5) 261.9 226.4
Contributions by employer 27.5 50.8 78.3
Contributions by plan participants 5.2 13.2 18.4
Exchange differences (0.7) (0.4) (1.1)
Benefits paid (31.0) (118.4) (149.4)
Closing fair value of plan assets 514.2 2,641.8 3,156.0
Actuarial gains and losses are as follows:
Premier RHM Total
Schemes Schemes
GBPm GBPm GBPm
----------- ------------
2012
Actuarial loss on plan liabilities (58.1) (160.2) (218.3)
Actuarial gain/(loss) on plan assets 7.8 (21.1) (13.3)
----------- ------------
Net actuarial loss for the year (50.3) (181.3) (231.6)
----------- ------------
Cumulative actuarial loss (409.6) (198.0) (607.6)
2011
Actuarial loss on plan liabilities (58.8) (246.9) (305.7)
Actuarial gain on plan assets (35.5) 261.9 226.4
----------- ------------
Net actuarial (loss)/gain for the year (94.3) 15.0 (79.3)
----------- ------------
Cumulative actuarial loss (359.3) (16.7) (376.0)
The actual return on plan assets was a GBP169.0m loss (2011:
GBP417.5m gain), which is GBP13.3m less (2011: GBP226.4m more) than
the expected return on plan assets of GBP182.3m (2011: GBP191.1m)
at the start of the relevant periods.
The actuarial loss on liabilities of GBP218.3m (2011: GBP305.7m
loss) comprises a loss on member experience of GBP33.6m (2011:
GBP3.5m gain) and an actuarial loss due to changes in assumptions
of GBP184.7m (2011: GBP309.2m loss).
The net actuarial loss taken to the statement of comprehensive
income was GBP231.6m (2011: GBP79.3m loss). These were GBP192.5m
(2011: GBP83.4m) net of taxation (with tax at 24.0% for UK schemes,
and 12.5% for Irish schemes).
The Group expects to contribute approximately GBP25.6m (2012:
GBP31.9m) to its defined benefit plans in 2013, GBP23.6m (2012:
GBP26.4m) of regular contributions and expenses and GBP2.0m (2012:
GBP5.5m) of additional contributions to fund the scheme deficits.
The decrease in future deficit funding is a result of the revised
re-financing package whereby the Trustees of the Group's UK pension
schemes have agreed to the suspension of deficit contribution
payments until 1 January 2014.
The total amounts recognised in the Group's income statement are
as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
2012
Operating profit
Current service cost (6.1) (11.2) (17.3)
Past service (cost)/credit (19.4) 33.4 14.0
Gain/(loss) on curtailment 0.8 (1.8) (1.0)
Interest cost (37.5) (124.3) (161.8)
Expected return on plan assets 32.2 150.1 182.3
Administrative and life insurance
costs (3.3) (4.7) (8.0)
Total (33.3) 41.5 8.2
2011
Operating profit
Current service cost (8.8) (9.6) (18.4)
Past service credit/ (cost) 46.8 (4.8) 42.0
Gain/(loss) on curtailment 0.3 (1.7) (1.4)
Interest cost (40.1) (126.9) (167.0)
Expected return on plan assets 39.5 151.6 191.1
Administrative and life insurance
costs (3.6) (3.5) (7.1)
Total 34.1 5.1 39.2
Defined contribution schemes
A number of companies in the Group operate defined contribution
schemes, predominantly stakeholder arrangements. In addition a
number of schemes providing life assurance benefits only are
operated. The total expense recognised in the income statement of
GBP0.8m (2011: GBP0.3m) represents contributions payable to the
plans by the Group at rates specified in the rules of the
plans.
Other post retirement benefits
The Group does not provide any other post retirement
benefits.
12. Notes to the cash flow statement
Reconciliation of profit before tax to cash flows from operating
activities
Year ended Year ended
31 Dec 31 Dec
2012 2011
GBPm GBPm
----------------- -----------------
Continuing operations
Profit before taxation 4.4 (259.1)
Net finance cost 91.9 82.8
-----------------
Operating profit/(loss) 96.3 (176.3)
Depreciation of property, plant and equipment 39.6 41.8
Amortisation of intangible assets 53.3 72.0
(Profit)/loss on the sale of businesses (63.7) 11.2
Loss/(gain) on disposal of property, plant and
equipment 7.1 (0.9)
Impairment of property, plant and equipment 12.5 -
Loss on disposal of intangible assets 0.4 -
Impairment of intangible assets 23.7 282.0
Revaluation (gains)/losses on financial
instruments (2.1) 1.7
Share based payments 4.7 3.9
-----------------
Net cash inflow from operating activities
before interest and tax and movements
in working capital 171.8 235.4
Increase in inventories (11.3) (26.3)
(Increase)/decrease in trade and other
receivables (11.5) 53.8
Decrease in trade and other payables and provisions (30.2) (10.9)
Movement in retirement benefit obligations (64.0) (117.4)
-----------------
Cash generated from continuing operations 54.8 134.6
Discontinued operations 1.6 (47.9)
-----------------
Cash generated from operating activities 56.4 86.7
----------------- -----------------
Reconciliation of cash and cash equivalents to net
borrowings
Year ended Year ended
31 Dec 31 Dec
2012 2011
GBPm GBPm
------------------ -----------
Net (outflow)/inflow of cash and cash
equivalents (12.3) 51.1
Decrease in finance leases 0.3 18.4
Decrease in borrowings 262.0 221.3
Other non-cash movements (205.6) (5.9)
------------------ -----------
Decrease in borrowings net of cash 44.4 284.9
Total net borrowings at beginning of
year (995.1) (1,280.0)
------------------ -----------
Total net borrowings at end of year (950.7) (995.1)
Analysis of movement in borrowings
As at 1 Cash flow Other non-cash As at
Jan 2012 movements 31 Dec
2012
GBPm GBPm GBPm GBPm
Bank overdrafts (23.7) (19.8) - (43.5)
Cash and bank deposits 45.8 7.5 (0.1) 53.2
Net cash and cash equivalents 22.1 (12.3) (0.1) 9.7
Borrowings - term facilities(2) (733.1) 166.0 (188.1) (755.2)
Borrowings - revolving credit
facilities (276.1) 144.4 - (131.7)
Finance leases (0.7) 0.3 - (0.4)
Other (23.3) (72.4) - (95.7)
Gross borrowings net of
cash(1) (1,011.1) 226.0 (188.2) (973.3)
Debt issuance costs 16.0 24.0 (17.4) 22.6
Total net borrowings(1) (995.1) 250.0 (205.6) (950.7)
(1) Borrowings excludes derivative financial instruments and
other financial liabilities fair valued through profit or loss.
(2) Other non-cash movements relates to the restructuring of
existing swaps into additional term loan on re-financing in March
2012.
13. Contingencies
There were no material contingent liabilities at 31 December
2012.
14. Subsequent events
Disposal of the Sweet Pickles and Table Sauces business
The disposal of the Sweet Pickles and Table Sauces completed on
2 February 2013 for proceeds of GBP92.5m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TMMMTMBBTTRJ
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