TIDMPFD
RNS Number : 8864J
Premier Foods plc
23 July 2013
23 July 2013
Premier Foods plc
Half Year results for the six months to 30 June 2013
Trading profit up 50%, Full Year expectations raised
-- Grocery Power Brand sales up 4.0%, delivering six successive quarters' growth
-- Underlying business Trading profit up 50% to GBP47.4m
-- Bread restructuring programme well ahead of plan
-- GBP20m SG&A cost savings activity delivered
-- Additional GBP10m annualised complexity cost savings to be delivered in H2
-- FY 2013 Trading profit expected to be around the top end of market expectations
-- Recurring cash flow guidance for 2013 raised to GBP50-70m
Premier Foods today announces its Half Year results for 2013,
demonstrating continued strong momentum against its strategies.
Gavin Darby, Chief Executive Officer, said:
"A 50% increase in Trading profit is a very encouraging result
given the highly competitive environment. This shows that our
turnaround strategy is delivering at the bottom line. We have now
grown sales in our Grocery Power Brands for six consecutive
quarters as we continue to build partnerships with our customers,
deepen our understanding of consumers and invest more effectively
in supporting our brands.
"We have already completed the actions to deliver the promised
GBP20m of overhead cost savings for 2013 and continue to keep a
tight control over costs. The restructuring of our bread and
milling business is ahead of plan and we are taking the decisions
necessary to create a more sustainable platform for this
business.
"The second half will see further plans to grow our Power
Brands, in addition to a new GBP10m of cost savings that we have
now identified from our efforts to reduce complexity. As a result,
we now expect Full Year Trading Profit to be around the top of
market expectations.
"Looking further forward, we will continue to drive profitable
top-line growth by focusing on growing our categories supported by
ongoing cost savings from reducing complexity. At the right time,
we will address our capital structure - from a position of growing
strength given the delivery of our turnaround plan and the
performance of our Power Brands. I am excited by the potential
offered by Premier Foods in the longer term."
2013 H1 2012 H1 Change
-------- -------- --------
Underlying business
Sales (excl Milling) (GBPm) 621.2 626.8 (0.9%)
Grocery Power Brand sales (GBPm) 253.2 243.6 4.0%
Trading profit (GBPm) 47.4 31.6 50.2%
Continuing operations
Sales (GBPm) 742.2 852.8 (13.0%)
Trading profit (GBPm) 48.9 72.4 (32.4%)
Adjusted profit before tax (GBPm) 21.6 30.1 (28.2%)
Basic (loss) per share (pence) (6.4) (17.2) 62.8%
A presentation to analysts will take place today, 23 July 2013,
at 9.00am at the London Stock Exchange, 10 Paternoster Square,
London, EC4M 7LS. Attendance is by invitation only. 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 Half Year to 30 June 2013 are
presented on an 'Underlying business' basis, unless otherwise
stated. 'Underlying business' excludes the results of previously
announced business disposals, Milling (sales only), and strategic
contract withdrawals. The tables below illustrate these items for
2013 H1 and 2012 H1 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 major restructuring in 2012, this basis better reflects the
underlying performance of the business.
'Continuing operations' includes the results of disposed
businesses for the respective periods until disposal was completed.
For example, the Sweet Pickles and Table Sauces business disposal
completed on 2 February 2013; therefore the results of the
continuing operations for the Half Year 2013 include one month's
results of this disposed business.
GBPm Continuing Less: Disposals Less: Less: Contract Less: 2012 Underlying
operations Milling Withdrawals(7) Other credits Business
sales(6) (Pension)(8)
---------------- ------------ ---------------- ---------- ---------------- --------------- -----------
2013 H1
Sales 742.2 (5.7) (115.3) - - 621.2
Trading profit 48.9 (1.5) N/A - - 47.4
EBITDA(3) 65.3 (1.5) N/A - - 63.8
2012 H1
Sales 852.8 (124.5) (86.7) (14.8) - 626.8
Trading profit 72.4 (20.8) N/A (1.0) (19.0) 31.6
EBITDA(3) 92.5 (23.3) N/A (1.0) (19.0) 49.2
---------------- ------------ ---------------- ---------- ---------------- --------------- -----------
Notes to editors:
1. The accounting period is from 1 January 2013 to 30 June 2013.
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 administration costs
and net interest on the net defined benefit liability.
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 23.25%
(2012 H1: 24.5%) 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. 2012 disposals are Vinegar and Sour Pickles, Elephant Atta
Ethnic Flour, Sweet Spreads and Jellies and Sweet Pickles and Table
Sauces.
6. 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.
7. Strategic contract withdrawals. In 2013, the Company withdrew
from a high cost to serve Bread contract and in 2012, one other
non-core discrete contract. This contract finished at the end of
April 2013, and therefore 2 months results of this contract are
excluded from underlying business in 2012.
8. 2012 Other credits (Pensions) reflects the net credit
following the decision by the RHM pension scheme to change the
inflation assumption in evaluating scheme liabilities from RPI to
CPI.
9. Measures on page 1 are defined above and reconciled to
statutory measures in the appendices, where necessary
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 completed disposals, strategic
contract withdrawals and Milling sales. The following commentary is
based on Underlying business unless otherwise stated.
GBPm 2013 H1 2012 H1 Change
Sales
Grocery 380.6 384.5 (1.0%)
Bread 240.6 242.3 (0.7%)
Total 621.2 626.8 (0.9%)
Grocery divisional contribution 77.4 77.2 0.3%
Bread divisional contribution 14.3 18.7 (23.8%)
Total SG&A (44.3) (64.3) 31.1%
-------- --------
Trading profit 47.4 31.6 50.2%
--------------------------------- -------- -------- --------
GBPm 2013 H1 2012 H1 Change
Power Brands 428.3 415.1 3.2%
Support brands 100.7 106.1 (5.1%)
-------- --------
Total Branded 529.0 521.2 1.5%
Non-branded 92.2 105.6 (12.7%)
-------- --------
Total Sales 621.2 626.8 (0.9%)
-------- --------
Grocery Power Brands 253.2 243.6 4.0%
-------- --------
Introduction
Total Underlying business sales were down 0.9% at GBP621.2m
compared to the first half of 2012. Sales of the Company's Power
Brands grew by 3.2%, while sales of the Grocery Power Brands
increased by 4.0%. This was offset by a sales decline of 5.1% in
lower margin support brands.
Underlying business Trading profit increased by 50.2% to
GBP47.4m in the period, predominantly driven by lower SG&A
costs of GBP20.0m.
Grocery division
GBPm 2013 H1 2012 H1 Change
Branded sales 343.8 339.3 1.3%
Non-branded sales 36.8 45.2 (18.5%)
-------- --------
Total sales 380.6 384.5 (1.0%)
-------- --------
Power Brands sales 253.2 243.6 4.0%
Divisional contribution 77.4 77.2 0.3%
Branded sales in the Grocery division increased by 1.3% to
GBP343.8m compared to GBP339.3m in 2012, driven by Grocery Power
Brands sales growth of 4.0%. Total Grocery sales declined by 1.0%
owing to a decrease in non-branded sales. Branded sales now account
for over 90% of divisional sales while Grocery Power Brand sales
comprise 66.5% of sales.
Grocery Power Brands grew by 4.4% in the second quarter this
year - the sixth consecutive quarter, demonstrating the benefits of
strategic focus, alongside sustained consumer marketing investment
and consistently improving our customer partnerships. In the first
six months of 2013, we led 100% more range reviews than the same
period in 2012 which has resulted in over 37,000 incremental
distribution points together with high distribution of new product
launches across our customers' estates.
Ambrosia benefitted from a new marketing campaign on the core
range while the new Devon Dream product was launched towards the
end of the period, also supported by an advertising campaign. Bisto
and Oxo performed well in the first six months of the year,
reflecting their leading positions in a growing gravy and stocks
category. Elsewhere the Deli-Box range, successfully launched last
year, continues to contribute to the strong performance of
Batchelors. We are also addressing growth opportunities in growing
sales channels such as the discounter sector, through leveraging
differentiated and affordable pack formats.
Divisional contribution performance was GBP77.4m, slightly ahead
of the prior year. Consumer marketing activity is expected to be
more equally balanced through 2013 compared to the prior year. The
Grocery Power Brands benefitted from seven TV advertising campaigns
in the period, including two for Ambrosia.
Total Grocery branded sales grew by 1.3% with the strong Power
Brand performance partly offset by weaker support brand sales.
While sales of Bird's custard have performed well in
value-orientated channels, this has been offset by lower sales in
Homebaking, Cadbury cake and Homepride cooking sauces. Over the
medium term, support brands will become a more integral part of the
Group's new focus on growing its categories.
Non-branded sales in the Grocery division decreased by 18.5% in
the period, due to contract withdrawals in Desserts and powdered
Beverages and stronger relative performance in branded Cake
compared to non-branded.
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 2013 H1 2012 H1 Change
Branded bread sales 185.2 181.9 1.8%
Non-branded bread
sales 55.4 60.4 (8.3%)
-------- --------
Total bread sales 240.6 242.3 (0.7%)
Milling sales 115.3 86.7 33.0%
-------- --------
Total sales 355.9 329.0 8.2%
-------- --------
Divisional contribution 14.3 18.7 (23.8%)
Sales for the Bread division increased by 8.2% to GBP355.9m in
the half year to the end of June, while sales excluding Milling
declined 0.7% to GBP240.6m in the period. Milling sales were
GBP115.3m in the first six months of 2013, up 33.0% compared to the
prior year, principally reflecting higher pricing realised
following the 2012 harvest. Divisional contribution declined by
GBP4.4m to GBP14.3m in the half year to 30 June 2013.
Following the previously announced loss of a branded and
non-branded bread contract, the Bread business is undergoing a year
of major restructuring which is progressing well ahead of plan. In
the first half of the year, the Eastleigh and Birmingham bakeries
and Glasgow mill have all closed. The bakery in Greenford, West
London, is expected to close in August. Additionally, the
reconfiguration of our logistics network is now complete with the
implementation of significant simplification of our direct to store
delivery network.
The lost volume and margin from this contract is expected to be
offset by manufacturing and distribution cost savings from the site
closures and reconfigured logistics network. The full year cash
costs associated with our restructuring programme are expected to
be approximately GBP28m, of which GBP15.9m was incurred in the
first half of the year. The Group expects to receive total cash
proceeds relating to these site closures of GBP10-15m in 2014.
The Bread business now has a focused and dedicated
organisational structure and has been relocated to our High Wycombe
offices. Additionally and as previously announced, we are
reconfiguring our Milling business unit to establish a separate
business unit focused on our free trade customers which will be
serviced by our Southampton, Manchester and Newbridge mills.
Alongside this, we are vertically integrating our Mills at Andover,
Gainsborough, Selby and Wellingborough into our Baking and Grocery
businesses. The costs associated with the proposed closure of the
Barry mill will be absorbed within the full year GBP28m
restructuring costs.
In this year of restructuring, marketing investment is more
focused, with the imminent launch of new Hovis packaging formats
and improved Best of Both recipe formulation. Additionally, we have
recently announced a five year licensing agreement for Hovis
Breakfast Bakes, as we seek to build the Hovis brand in adjacent
categories.
We are also delivering significant improvements in our plant
capability through the roll out of a major refurbishment programme,
resulting in increased capital investment levels per bakery.
Cost Savings Programme and SG&A costs
GBPm 2013 H1 2012 H1 Change
Total SG&A 44.3 64.3 31.1%
The previously announced SG&A cost savings programme has
progressed very well with all activity now complete. The full
savings of GBP20m will flow through during the remainder of the
year. The SG&A cost base reduced by GBP20.0m in the first half
of the year to GBP44.3m compared to GBP64.3m in the same period
last year.
The restructuring of the SG&A cost base announced at the
beginning of 2012 will have delivered annual run-rate savings in
excess of GBP70m by the end of this year. This represents a
reduction of nearly 50% on the 2011 exit position of approximately
GBP155m per annum. 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 the major
disposal activity in 2012.
The costs to achieve the delivery of the savings programme in
the first half of this year were GBP9.9m, with a further GBP1m
expected to come through in the second half of the year.
As previously indicated, the Group continues to review ways to
reduce complexity across the organisation. Initial efforts have
focused on reducing the number of product units (or SKUs), working
with fewer suppliers on more strategic partnerships and a planned
consolidation of the Grocery logistics network this year. As a
result, the Group expects a further GBP10m annualised savings will
be delivered in the second half of 2013. Additional savings across
the Group are expected in future periods as we progress with
business complexity reduction.
Consumer Marketing
GBPm 2013 H1 2012 H1 Change
Consumer Marketing 17.1 23.5 27.3%
Total consumer marketing investment in the first half of the
year was GBP6.4m lower than the prior year at GBP17.1m. During a
year focusing on restructuring the Bread business, the Hovis brand
has received more selected levels of brand investment in the first
half, while Mr. Kipling and Cadbury cake have campaigns weighted
more to the second half of 2013. While total spend is lower than
2012, our advertising media spend efficiency has improved by 40% in
the period.
Six of the seven Grocery Power Brands have been advertised on TV
in the first half of 2013 including the Ambrosia Devon Dream
launch, the first Batchelors TV advertising in five years and
strong support for the Bisto Stock Melts launch.
As previously indicated, consumer marketing activity is expected
to be more equally balanced through 2013 compared to the prior
year.
Net regular interest
GBPm 2013 H1 2012 H1 Change
Bank debt interest 12.1 19.1 36.6%
Swap contract interest 3.7 14.3 74.1%
Securitisation interest 1.7 1.2 (41.7%)
-------- --------
17.5 34.6 49.4%
Amortisation and deferred
fees 9.8 7.7 (27.3%)
-------- --------
Net regular interest 27.3 42.3 35.5%
-------- --------
Net regular interest charge was GBP27.3m in the period, 35.5%
lower than the prior year. 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 2012, 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 2012.
The Company's Net regular interest guidance for 2013 of GBP60-65
million remains unchanged. Within this, the amortisation of
deferred financing fees is expected to be approximately GBP22
million.
Cash flow
GBPm 2013 H1 2012
H1
Underlying business Trading profit 47.4 31.6
Underlying Trading profit adjustments - 20.0
Depreciation 16.4 17.6
Other non-cash items 2.2 (19.6)
Interest (22.6) (34.8)
Taxation - -
Pension contributions (3.4) (10.7)
Capital expenditure (15.2) (27.4)
Working capital (29.8) (22.2)
---------- -------
Recurring cash outflow (5.0) (45.5)
--------------------------------------- ---------- -------
Group recurring cash flow before non-recurring items such as
restructuring activity, financing fees and the impact of disposals
was an outflow of GBP5.0m in the period.
Underlying business Trading profit was ahead of last year while
depreciation was slightly lower at GBP16.4m. Other non-cash items
in 2013 largely reflect the add-back of share based payments.
Cash interest was significantly lower in the first half of the
year owing to the close out of the higher rate interest rate swaps
in the second quarter of the prior year following the re-financing
agreement announced in March 2012. Cash tax was nil in the period
and is expected to be minimal in the full year.
Pension deficit contribution payments to the Company schemes in
the period (including administrative costs) were GBP3.4m, compared
to GBP10.7m last year, owing to reduced pension deficit
contribution payments as agreed with the Trustees as part of the
re-financing agreement in 2012.
Capital expenditure was GBP15.2m in the first six months of the
year, and GBP12.2m lower than the comparative period. As a
consequence, capital expenditure for 2013 is expected to be
approximately 2.5% of Group sales and therefore lower than
previously guided.
The working capital outflow in the period of GBP29.8m was
greater than the prior year however this is expected to be broadly
neutral in the second half of the year.
GBPm 2013 H1 2012 H1
Recurring cash outflow (5.0) (45.5)
Disposed businesses cash flows 2.6 22.9
Restructuring activity (25.3) (9.1)
-------- -------------
Operating cash flow from total Company (27.7) (31.7)
Disposal proceeds 90.8 34.5
Financing fees & finance leases 0.1 (25.1)
-------- -------------
Free cash flow 63.2 (22.3)
---------------------------------------- -------- -------------
Free cash flow, before repayment of borrowings, was GBP63.2m in
the period, compared to an outflow of GBP22.3m in 2012 H1.
Restructuring activity relating to disposed businesses, including
costs related to the cost savings programme, resulted in a cash
outflow of GBP25.3m in the period.
Disposal proceeds of GBP90.8m in the period were from the sale
of the Sweet Pickles & Table Sauces business, net of fees and a
working capital adjustment. Prior year disposal proceeds of
GBP34.7m from the sale of the Irish brands business were partly
offset by smaller items.
Net debt
GBPm
Net debt at 31 December 2012 950.7
Movement in cash 2013 H1 (63.2)
Other non-cash items 2.9
----------
Net debt at 30 June 2013 890.4
Group Net debt at 30 June 2013 was GBP890.4m. Recurring cash
flow in the six months to 30 June 2013 was an outflow of GBP5.0m
and the Company expects recurring cash flow guidance for the year
now to be in the range of GBP50-70m, higher than guided to
previously.
Pensions
Cash paid to pension schemes in the period was GBP11.1m. This
included GBP7.7m of regular contributions. The net IAS 19 deficit
at 30 June 2013 was GBP394.7m, equivalent to GBP302.9m net of
deferred tax and is GBP72.1m lower than six months ago, principally
due to the increase in the discount rate from 4.45% to 4.70%. The
latest triennial evaluation is ongoing, the outcome of which is
expected in early 2014.
Pensions (GBPm) 30 June 2013 30 June 2012 31 Dec 2012
Assets
Equities 278.2 433.7 411.3
Government & Corporate bonds 1,207.2 1,162.8 1,197.7
Property 136.5 89.3 105.3
Absolute/Target returns 773.4 662.3 712.1
Swaps (82.0) 164.2 (169.0)
Cash 488.9 202.6 494.4
Other 456.6 476.1 457.5
------------- ------------- ------------
Total Assets 3,258.8 3,191.0 3,209.3
Liabilities
Discount rate 4.70% 4.70% 4.45%
Inflation rate (RPI/CPI) 3.3%/2.3% 2.9%/1.7% 2.95%/2.15%
Total Liabilities (3,653.5) (3,463.6) (3,676.1)
Gross deficit (IAS 19) (394.7) (272.6) (466.8)
Deferred tax (23.25%) 91.8 65.4 114.4
Net deficit (IAS 19) (302.9) (207.2) (352.4)
---------------------------------- ------------- ------------- ------------
In the classification disclosed in the table above, 'Other'
includes investments in infrastructure assets and private equity
funds.
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 GBP290 million.
Business Disposals
On 2 February 2013, the Group completed the disposal of the
Sweet Pickles and Table Sauces business for gross proceeds of
GBP92.5m, the net proceeds of which were used to pay down debt.
No other disposal activity took place in the period.
Capital Structure
The Group's bank debt and revolving credit facilities are in
place until mid 2016. At this stage, no decisions have been made
about the timing or composition of the Company's future capital
structure. However, the Board continues to review the full range of
options available to the Company and this will be addressed at the
right time.
Outlook & Guidance
The consumer environment remains highly competitive. Looking
forward, the Company will drive profitable top-line growth by
focusing on growing our categories supported by ongoing cost
savings from reducing complexity. The SG&A cost savings
programme activity from right-sizing the business following
non-core disposals is complete, the Bread restructuring programme
is well ahead of plan and the Company expects to deliver Trading
profit for 2013 around the top end of market expectations, also
raising recurring free cash flow guidance.
Financial review
The Company presents its financial results for the Half year to
30 June 2013 with comparative information for the Half year to 30
June 2012.
Company structure
The Company completed the disposal of the Sweet Pickles and
Table Sauces business on 2 February 2013.
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 Sweet Pickles and Table Sauces business disposal
completed on 2 February; therefore the results of the continuing
operations for the Half year ended 2013 include one months' results
of this disposed business.
Statement of profit or loss
Revenue from continuing operations was GBP742.2m, a decrease of
GBP110.6m compared to the prior year. The major driver of the
decline is attributed to the disposals of the Irish brands, Vinegar
and Sour Pickles, Elephant Atta Ethnic Flour, Sweet Spreads and
Jellies businesses and Sweet Pickles and Table Sauces partly offset
by Power Brands sales growth.
Operating profit
The company made an Operating loss in the period of (GBP2.6m),
compared to a prior year profit of GBP15.1m.
Trading profit was GBP48.9m in the period, compared to GBP72.4m
in the prior year. This decline principally reflected the impact of
the businesses disposed during 2012. During the first six months of
the year, the Company delivered significant savings in the SG&A
overhead cost base. The prior year period also included other
credits of GBP19.0m relating to pension credits arising from the
decision of the RHM pension scheme trustees to change the inflation
assumption in evaluating scheme liabilities from RPI to CPI.
Restructuring costs and losses associated with divestment
activity were GBP12.4m in the period compared to GBP17.9m in the
prior year period. 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 GBP23.6m in the period, a
reduction of GBP2.5m from the prior year. The net interest on
pensions and administrative expenses of GBP12.7m in the Half Year
compares to a restated charge of GBP11.5m in 2012. These charges
are due to a new accounting standard, effective from 1 January
2013, whereby interest income on plan assets is calculated using
the discount rate rather than a higher expected asset return
value.
A loss on disposal of operations of GBP2.4m in the period
related to the disposal of the Sweet Pickles and Table Sauces
business.
Finance expense
Net finance expense in the Half year ended 30 June 2013 was
GBP20.9m, compared to GBP60.9m in the prior year. Net regular
interest reduced by GBP15.0m to GBP27.3m, 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. The prior year included a charge of GBP10.8m relating to
the acceleration of write-off of financing costs associated with
the previous bank facilities. Additionally, the period to 30 June
2013 benefitted from a positive movement in the fair valuation of
interest rate derivatives of GBP7.5m, compared to an adverse
movement of GBP7.4m in the prior year.
Profit before taxation
The Company made a loss before tax of GBP23.5m, compared to a
prior year loss of GBP45.8m. Operating loss in the year was GBP2.6m
due to the reasons outline above and net finance expense was
GBP20.9m. The prior year loss of GBP45.8m was principally due to
higher net finance expense, partly offset by profits attributable
to non-core disposed of businesses.
Taxation
The taxation credit for the period was GBP8.2m (30 June 2012:
GBP4.5m). The effective rate of corporation tax in the first six
months was 23.25%.
The corporation tax rate for the remainder of the year is
expected to be 23.25%. The deferred tax rate is expected to be
23.0% for the tax year ending 5 April 2014.
Earnings per share
Basic loss per share of 6.4 pence for the year on continuing
operations is calculated by dividing the loss attributed to
ordinary shareholders of GBP15.3m (30 June 2012: GBP41.3m) by the
weighted number of shares in issue during the year. This compares
to a loss per share of 17.2p for the prior year.
Adjusted earnings per share for continuing operations was 6.9
pence (30 June 2012: 9.5 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 GBP16.6m (30 June 2012: GBP22.7m) 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 23.25% (30
June 2012: 24.5%).
The weighted number of shares in issue for the period was 239.8
million.
Cash flow and borrowings
Company net borrowings as at 30 June 2013 were GBP890.4m, a
decrease of GBP60.3m since 31 December 2012. Of the movement since
31 December 2012, the cash and non-cash elements were a GBP63.2m
inflow and a GBP2.9m outflow respectively.
The cash outflow from operating activities to 30 June 2013 was
GBP8.2m (30 June 2012: outflow of GBP70.4m). This included cash
generated from continuing operations of GBP12.7m (30 June 2012:
GBP37.2m outflow) and cash inflow from discontinued operations of
GBP1.7m (30 June 2012: GBP1.6m). Additionally, net cash interest
paid was GBP22.6m (30 June 2012: GBP34.8m) due to lower bank
margins following the re-financing agreement concluded in March
2012. Tax paid in the period was nil (30 June 2012: nil).
Sale of subsidiaries and property, plant and equipment in the
first half was GBP90.8m (30 June 2012: GBP34.7m) following the
completion of the Sweet Pickles and Table Sauces disposal. Net
capital expenditure on tangible and intangible assets in the period
was GBP19.4m (30 June 2012: GBP36.1m).
Repayment of borrowings of GBP90.8m is due to the pay down of
bank debt following the receipt of the Sweet Pickles and Table
Sauces disposal. Proceeds from borrowings reflect utilisation of
the revolving credit facility in the period.
Pension schemes
At 30 June 2013 the Company's pension schemes under the IAS 19
accounting valuation showed a gross deficit of GBP394.7m, compared
to GBP466.8m at 31 December 2012. The valuation at 30 June 2013
comprised a GBP48.1m deficit in respect of the RHM schemes and a
deficit of GBP346.6m in relation to the Premier Foods schemes.
The deficit decrease principally reflects a positive movement in
the RHM deficit of GBP83.5m from GBP131.6m to GBP48.1m. Asset
values in the RHM scheme increased by GBP55.3m due to an increase
in the value of property, absolute return and swap assets while
liabilities decreased by GBP28.2m, due to an increase in the
discount rate of 0.25% since 31 December 2012.
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 current triennial actuarial valuation is ongoing and the
outcome 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
completed business disposals, Milling (sales only) and strategic
contract withdrawals.
Continuing operations earnings per share is calculated as set
out below:
2013 H1 2012 H1
GBPm GBPm
Continuing Trading profit 48.9 72.4
Amortisation of intangible assets (23.6) (26.1)
Foreign exchange valuation items 0.3 (0.9)
Restructuring costs relating to divestment
activity (12.4) (17.9)
Re-financing costs (0.1) (1.2)
Net interest on pensions and administrative
expenses (12.7) (11.5)
Impairment of intangible and tangible (0.6) -
assets
(Loss)/Profit on disposal (2.4) 0.3
Operating (loss)/profit (2.6) 15.1
Net finance expense (20.9) (60.9)
Loss before tax (23.5) (45.8)
Taxation 8.2 4.5
-------- --------
Loss after tax (15.3) (41.3)
Divided by:
Average shares in issue (millions) 239.8 239.8
Basic loss per share (6.4p) (17.2p)
Adjusted earnings per share is calculated as set out below:
2013 H1 2012 H1
GBPm GBPm
Continuing Trading profit 48.9 72.4
Less net regular interest (27.3) (42.3)
Adjusted profit before tax 21.6 30.1
Less notional tax at 23.25%/24.5% (5.0) (7.4)
-------- --------
Adjusted profit after tax 16.6 22.7
Divided by:
Average shares in issue (millions) 239.8 239.8
Adjusted earnings per share 6.9p 9.5p
The Directors confirm to the best of their knowledge that this
condensed consolidated interim financial information has been
prepared in accordance with IAS 34, Interim Financial Reporting as
adopted by the European Union, and that the interim management
report herein includes a fair review of the information required by
the Disclosure and Transparency Rules ("DTR") 4.2.7 and DTR 4.2.8
namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial information, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
The Directors of Premier Foods plc are listed in the Premier
Foods plc annual report and accounts for the year ended 31 December
2012. Since that date Ian McHoul retired from the board as
non-executive director with effect from 25 April 2013 and Pam
Powell joined the board as a non-executive director from 7 May
2013.
By order of the Board
22 July 2013
Gavin Darby Mark Moran
Chief Executive Officer Chief Financial Officer
Independent review report to Premier Foods plc
Introduction
We have been engaged by the Company to review the condensed
financial information in the half-yearly financial report for the
six months ended 30 June 2013, which comprises the condensed
consolidated statement of profit or loss, condensed consolidated
statement of comprehensive income, condensed consolidated balance
sheet, condensed consolidated statement of cash flows, condensed
consolidated statement of changes in equity and related notes. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed financial information.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed financial information included in
this half-yearly financial report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed financial information in the half-yearly financial
report based on our review. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of
the Disclosure and Transparency Rules of the Financial Conduct
Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in
writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed financial information in
the half-yearly financial report for the six months ended 30 June
2013 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
PricewaterhouseCoopers LLP
London
Chartered Accountants 22 July 2013
Notes
(a) The maintenance and integrity of the Premier Foods plc
website is the responsibility of the Directors; the work carried
out by the auditors does not involve consideration of these matters
and, accordingly, the auditors accept no responsibility for any
changes that may have occurred to the financial information since
they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Condensed consolidated statement of profit or loss (unaudited)
----------------------------------------------------------------------------------------
Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1,2) (Restated)(2)
Note GBPm GBPm GBPm
------------------------------------------------ ----- ------------- ---------------- --------------
Continuing operations
Revenue 4 742.2 852.8 1,756.2
Cost of sales (542.6) (611.8) (1,261.2)
------------------------------------------------ ----- ------------- ---------------- --------------
Gross profit 199.6 241.0 495.0
Selling, marketing and distribution costs (115.1) (136.0) (262.5)
Administrative costs (87.5) (88.0) (172.4)
Net other operating income/(expense) 0.4 (1.9) (4.0)
------------------------------------------------ ----- ------------- ---------------- --------------
Operating (loss)/profit 4 (2.6) 15.1 56.1
Before disposal of operations and impairment
and disposal of assets 0.4 14.8 28.6
Impairment and disposal of intangible
and tangible assets (0.6) - (36.2)
(Loss)/profit on disposal of operations 9 (2.4) 0.3 63.7
------------- ---------------- --------------
Finance cost 5 (30.1) (56.1) (86.3)
Finance income 5 1.7 2.6 4.1
Net movement on fair valuation of interest
rate financial instruments 5 7.5 (7.4) (9.7)
------------------------------------------------ ----- ------------- ---------------- --------------
Loss before taxation for continuing operations (23.5) (45.8) (35.8)
Taxation credit 6 8.2 4.5 31.4
------------------------------------------------ ----- ------------- ---------------- --------------
Loss after taxation for continuing operations (15.3) (41.3) (4.4)
Loss from discontinued operations 8 (0.2) (12.4) (13.5)
------------------------------------------------ ----- ------------- ---------------- --------------
Loss for the period attributable to equity
shareholders (15.5) (53.7) (17.9)
------------------------------------------------ ----- ------------- ---------------- --------------
Basic and diluted loss per share (pence) 7 (6.5) (22.4) (7.5)
Basic and diluted loss per share (pence)
- continuing 7 (6.4) (17.2) (1.8)
Basic and diluted loss per share (pence)
- discontinued 7 (0.1) (5.2) (5.6)
Adjusted earnings per share (pence) (3)
- continuing 7 6.9 9.5 26.7
(1) Comparatives have been restated following an GBP12.8m reclassification
of certain costs to align categorisation across the group.
(2) Comparatives have been restated to
reflect the adoption of IAS19 Revised.
(3) Adjusted earnings per share is defined as trading profit less net
regular interest payable, less a notional tax charge at 23.25% (2012:
24.5%) divided by the weighted average number of ordinary shares of
the company.
Condensed consolidated statement of comprehensive income (unaudited)
------------------------------------------------------------------------------------------------------
Half Half Year
year year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1) (Restated)(1)
Note GBPm GBPm GBPm
---------------------------------------------------- ----- ------- -------------- ----------------
Loss for the period (15.5) (53.7) (17.9)
Other comprehensive income
Remeasurements 12 81.4 (16.5) (191.4)
Deferred tax (charge)/credit (18.7) (4.1) 37.2
---------------------------------------------------- ----- ------- -------------- ----------------
Items that will not be reclassified to
profit or loss 62.7 (20.6) (154.2)
Exchange differences on translation (0.4) (0.3) -
---------------------------------------------------- ----- ------- -------------- ----------------
Items that are or may be subsequently reclassified
to profit or loss (0.4) (0.3) -
---------------------------------------------------- ----- ------- -------------- ----------------
Total other comprehensive income/(losses)
for the period 62.3 (20.9) (154.2)
---------------------------------------------------- ----- ------- -------------- ----------------
Total comprehensive income/(losses) attributable
to owners of the Company 46.8 (74.6) (172.1)
---------------------------------------------------- ----- ------- -------------- ----------------
(1) Comparatives have been restated to reflect the adoption of IAS19
Revised
Condensed consolidated balance sheet (unaudited)
As at As at As at
30 Jun 30 Jun 31 Dec
2013 2012 2012
Note GBPm GBPm GBPm
---------------------------------------- ----- ------------------ -------------- --------------
ASSETS:
Non-current assets
Property, plant and equipment 366.5 464.8 374.2
Goodwill 714.0 838.4 713.9
Other intangible assets 658.8 751.5 677.0
Deferred tax assets 61.5 - 71.9
Retirement benefit assets 12 - 12.0 -
------------------
Total non-current assets 1,800.8 2,066.7 1,837.0
Current assets
Assets held for sale 10 - 34.9 81.0
Inventories 114.5 149.1 116.2
Trade and other receivables 259.6 274.2 298.6
Financial assets - derivative
financial instruments 11 1.3 0.3 1.0
Cash and bank deposits 67.7 48.7 53.2
Total current assets 443.1 507.2 550.0
---------------------------------------- ----- ------------------ -------------- --------------
Total assets 2,243.9 2,573.9 2,387.0
---------------------------------------- ----- ------------------ -------------- --------------
LIABILITIES:
Current liabilities
Trade and other payables (343.0) (351.7) (406.8)
Financial liabilities
- short term borrowings (101.2) (185.1) (229.8)
- derivative financial instruments 11 (12.2) (19.5) (19.6)
Accrued interest payable (0.7) (0.9) (5.6)
Provisions 13 (12.9) (12.8) (25.6)
Current income tax liabilities (0.8) (0.8) (0.8)
Liabilities held for sale 10 - (2.4) (3.4)
------------------
Total current liabilities (470.8) (573.2) (691.6)
Non-current liabilities
Financial liabilities
- long term borrowings (856.9) (1,133.0) (774.1)
Retirement benefit obligations 12 (394.7) (284.6) (466.8)
Provisions 13 (47.9) (53.6) (48.3)
Other liabilities (20.7) (26.6) (1.3)
Deferred tax liabilities - (2.8) -
Total non-current liabilities (1,320.2) (1,500.6) (1,290.5)
---------------------------------------- ----- ------------------ -------------- --------------
Total liabilities (1,791.0) (2,073.8) (1,982.1)
---------------------------------------- ----- -------------- --------------
Net assets 452.9 500.1 404.9
---------------------------------------- ----- ------------------ -------------- --------------
EQUITY:
Capital and reserves
Share capital 24.0 24.0 24.0
Share premium 1,124.7 1,124.7 1,124.7
Merger reserve 587.5 606.0 587.5
Other reserves (9.3) (9.3) (9.3)
Profit and loss reserve (1,274.1) (1,245.4) (1,322.1)
----------------------------------------
Capital and reserves attributable
to owners of the Parent 452.8 500.0 404.8
Non-controlling interest 0.1 0.1 0.1
------------------
Total equity 452.9 500.1 404.9
---------------------------------------- ----- ------------------ -------------- --------------
Condensed consolidated statement of cash flows (unaudited)
------------------------------------------------------------------------------------------------------------
Half year Half year Year
ended ended Ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
Note GBPm GBPm GBPm
------------------------------------------ ------------------ ------------------ -----------------
Cash generated from operating activities 14 14.4 (35.6) 56.4
Interest paid (24.0) (37.6) (56.8)
Interest received 1.4 2.8 4.3
Taxation (paid)/ received - - 0.3
------------------ ------------------ -----------------
Cash (outflow)/inflow from operating
activities (8.2) (70.4) 4.2
Sale of subsidiaries 90.8 34.7 312.2
Purchase of property, plant and
equipment (17.2) (31.6) (49.4)
Purchase of intangible assets (2.3) (4.5) (17.2)
Sale of property, plant and equipment 0.1 - 0.2
------------------ ------------------ -----------------
Cash inflow/(outflow) from investing
activities 71.4 (1.4) 245.8
Repayment of borrowings (90.8) - (312.2)
Proceeds from borrowings 104.6 73.2 1.5
Movement in securitisation programme
funding (19.0) - 72.4
Financing costs (0.1) (23.7) (24.0)
------------------ ------------------ -----------------
Cash (outflow)/inflow from financing
activities (5.3) 49.5 (262.3)
Net inflow/(outflow) of cash and
cash equivalents 14 57.9 (22.3) (12.3)
Cash and cash equivalents at beginning
of period 9.7 22.1 22.1
Effect of movement in foreign exchange 0.1 (0.1) (0.1)
------------------------------------------ ----- ------------------ ------------------ -----------------
Cash and cash equivalents at end
of period 67.7 (0.3) 9.7
------------------------------------------ ----- ------------------ ------------------ -----------------
Condensed consolidated statement of changes in equity (unaudited)
----------------------------------------------------------------------------------------------------------------
Profit Non-controlling Total
Share Share Merger Other and loss interest
capital premium reserve reserves reserve
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
At 1 January 2013 24.0 1,124.7 587.5 (9.3) (1,322.1) 0.1 404.9
Loss for the
period - - - - (15.5) - (15.5)
Remeasurements 12 - - - - 81.4 - 81.4
Deferred tax
charge - - - - (18.7) - (18.7)
Exchange
differences
on translation - - - - (0.4) - (0.4)
Other
comprehensive
income - - - - 62.3 - 62.3
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Total
comprehensive
income - - - - 46.8 - 46.8
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Share based
payments - - - - 1.2 - 1.2
At 30 June 2013 24.0 1,124.7 587.5 (9.3) (1,274.1) 0.1 452.9
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
At 1 January 2012 24.0 1,124.7 606.0 (9.3) (1,172.8) 0.1 572.7
Loss for the
period - - - - (53.7) - (53.7)
Remeasurements(1) 12 - - - - (16.5) - (16.5)
Deferred tax
charge(1) - - - - (4.1) - (4.1)
Exchange
differences
on translation - - - - (0.3) - (0.3)
Other
comprehensive
losses - - - - (20.9) - (20.9)
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Total
comprehensive
losses - - - - (74.6) - (74.6)
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Share based
payments - - - - 2.0 - 2.0
-------------------
At 30 June 2012 24.0 1,124.7 606.0 (9.3) (1,245.4) 0.1 500.1
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
At 1 January 2012 24.0 1,124.7 606.0 (9.3) (1,172.8) 0.1 572.7
Loss for the year - - - - (17.9) - (17.9)
Remeasurements(1) 12 - - - - (191.4) - (191.4)
Deferred tax
credit(1) - - - - 37.2 - 37.2
Other
comprehensive
losses - - - - (154.2) - (154.2)
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Total
comprehensive
losses - - - - (172.1) - (172.1)
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
Realisation of
merger reserve - - (18.5) - 18.5 - -
Share based
payments - - - - 4.3 - 4.3
-------------------
At 31 December
2012 24.0 1,124.7 587.5 (9.3) (1,322.1) 0.1 404.9
------------------- ----- ----------- ------------ ------------ ------------ ---------- ----------------- -----------
(1) Comparatives have been restated to reflect the adoption of IAS19
Revised
Notes to the financial information (unaudited)
1. General information
Premier Foods plc (the "Company") is a public limited Company
incorporated and domiciled in England and Wales, registered number
5160050 with its registered office and principal place of business
at Premier House, Centrium Business Park, Griffiths Way, St Albans,
Hertfordshire AL1 2RE. The principal activity of the Company and
its subsidiaries (the "Group") is the manufacture and distribution
of branded and own label food and beverage products as described in
note 16 of the Group's annual financial statements for the year
ended 31 December 2012.
2. Significant accounting policies
Basis of preparation
The condensed consolidated financial information ("financial
information") for the period ended 30 June 2013 has been prepared
in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority and with IAS 34, "Interim Financial
Reporting" as adopted by the European Union. The financial
information for the period ended 30 June 2013 should be read in
conjunction with the Group's financial statements for the year
ended 31 December 2012 which have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") as adopted by
the European Union. They have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the Company's published consolidated financial statements for the
year ended 31 December 2012, except where new or revised accounting
standards have been applied. There has been no significant impact
on the Group profit or net assets on adoption of new or revised
accounting standards in the period other than on adoption of IAS
19(R) as set out in note 12.
The financial information does not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006. The
financial information is unaudited but has been subject to an
independent review by the auditor. The Group's financial statements
for the year ended 31 December 2012, which were approved by the
Board of Directors on 1 March 2013, have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
report of the auditors was unqualified, did not contain a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain any
statement under section 498 (2) or (3) of the Companies Act
2006.
Consumer demand for convenience products tends to be higher in
colder months of the year. Sales of certain products may therefore
be affected by unseasonable weather conditions. Also certain
products experience increased sales during the pre-Christmas period
and this has an impact on working capital as production is higher
and stock levels build in the run up to this period. Consequently,
the results of operations for the half year periods are not
necessarily indicative of the results to be expected for the full
year.
This financial information was approved for issue on 22 July
2013.
Basis for preparation of financial information 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.
The 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 30 June 2013. The Group's
forecast, 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 banking 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 condensed consolidated interim financial information.
Principal risks and uncertainties
The principal risks and uncertainties which could impact the
Group for the remainder of the current financial year are those
detailed on pages 48 to 51 of the Group's annual financial
statements for 31 December 2012. The Directors have considered the
principal risks and uncertainties and believe that these have not
changed in the interim period. These include, amongst others:
failure to execute cost saving initiatives, inability to respond to
the competitive environment, change in cost and availability of raw
materials, ability to meet banking covenants and disruption to the
systems infrastructure.
3. Critical accounting estimates and judgements
The following are areas of particular significance to the
Group's interim financial information and include the use of
estimates and the application of judgement, which is fundamental to
the completion of this condensed consolidated interim financial
information. There are no significant changes to critical estimates
and judgements since year end 2012.
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 (Revised). Key
assumptions used are mortality rates, discount rates and inflation
set with reference to bond yields.
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 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 statement of profit or loss according to the substance of
the agreements with customers and the terms of any contractual
relationship. Promotional support is generally charged to the
statement of profit or loss 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 statement of profit
or loss 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.
4. Segmental analysis
IFRS 8 requires operating segments to be determined based on the
Group's internal reporting to the Chief Operating Decision Maker
("CODM"). The CODM has been determined to be the 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 uses divisional contribution as the key measure of the
segments' results; it 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.
The Group uses 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 administration costs
and net interest on the net defined benefit liability.
The Group's operating segments are "Grocery" and "Bread".
The Grocery segment sells ambient food products and the Bread
segment sells bread, morning goods, flour products and frozen pizza
bases.
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 and during
2013, the Group completed the disposal of the Sweet Pickles and
Table Sauces business; the results of these businesses have not
been reported separately as they were fully integrated within the
Grocery and Bread segments.
The segment results for the half years ended 30 June 2013 and 30
June 2012 and for the year ended 31 December 2012 and the
reconciliation of the segment measures to the respective statutory
items included in the interim financial information are as
follows:
Half year ended 30 Jun
2013
------------------------------------------------- ----------------------------------------------------
Grocery Bread Total
for Group
GBPm GBPm GBPm
------------------------------------------------- ---------------- ---------------- ----------------
Revenue from continuing operations
External 387.4 354.8 742.2
Inter-segment - 11.0 11.0
------------------------------------------------- ---------------- ---------------- ----------------
Result
Divisional contribution 79.9 14.3 94.2
------------------------------------------------- ---------------- ---------------- ----------------
SG&A costs (45.3)
Trading profit 48.9
------------------------------------------------- ---------------- ---------------- ----------------
Amortisation of intangible assets (23.6)
Fair value movements on foreign exchange
and other derivative contracts 0.3
Restructuring costs relating to divestment
activity (12.4)
Re-financing costs (0.1)
Net interest on pensions and administrative
expenses (12.7)
------------------------------------------------- ---------------- ---------------- ----------------
Operating profit before impairment and disposal
of operations 0.4
Impairment and disposal of tangible assets (0.6)
Loss on disposal of operations (2.4)
------------------------------------------------- ---------------- ---------------- ----------------
Operating loss (2.6)
Finance cost (30.1)
Finance income 1.7
Net movement on fair valuation of interest
rate financial instruments 7.5
-------------------------------------------------
Loss before taxation for continuing operations (23.5)
------------------------------------------------- ---------------- ---------------- ----------------
Half year ended 30 Jun
2012 (Restated)(1)
------------------------------------------------ -----------------------------------------------------
Grocery Bread Total
for Group
GBPm GBPm GBPm
------------------------------------------------ ----------------- ---------------- ----------------
Revenue from continuing operations
External 504.5 348.3 852.8
Inter-segment 1.4 10.0 11.4
------------------------------------------------ ----------------- ---------------- ----------------
Result
Divisional contribution 95.8 22.5 118.3
------------------------------------------------ ----------------- ---------------- ----------------
Total SG&A costs (45.9)
Trading profit 72.4
------------------------------------------------ ----------------- ---------------- ----------------
Amortisation of intangible assets (26.1)
Fair value movements on foreign exchange
and other derivative contracts (0.9)
Restructuring costs relating to divestment
activity (17.9)
Re-financing costs (1.2)
Net interest on pensions and administrative
expenses (11.5)
------------------------------------------------ ----------------- ---------------- ----------------
Operating profit before disposal of operations 14.8
Profit on disposal of operations 0.3
------------------------------------------------ ----------------- ---------------- ----------------
Operating profit 15.1
Finance cost (56.1)
Finance income 2.6
Net movement on fair valuation of interest
rate financial instruments (7.4)
------------------------------------------------
Loss before taxation for continuing operations (45.8)
------------------------------------------------ ----------------- ---------------- ----------------
(1) Comparatives have been restated to reflect the adoption of IAS19
Revised
Year ended 31 Dec 2012
(Restated)(1)
------------------------------------------------- -----------------------------------------------------
Grocery Bread Total
for Group
GBPm GBPm GBPm
------------------------------------------------- ----------------- ---------------- ----------------
Revenue from continuing operations
External 1,058.9 697.3 1,756.2
Inter-segment 0.5 21.2 21.7
------------------------------------------------- ----------------- ---------------- ----------------
Result
Divisional contribution 223.9 30.2 254.1
------------------------------------------------- ----------------- ---------------- ----------------
Total SG&A costs (99.9)
Trading profit 154.2
------------------------------------------------- ----------------- ---------------- ----------------
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)
Re-financing costs (1.1)
Net interest on pensions and administrative
expenses (27.2)
-------------------------------------------------
Operating profit before impairment and disposal
of operations 28.6
Impairment of property, plant and equipment
and intangible assets (36.2)
Profit on disposal of operations 63.7
------------------------------------------------- ----------------- ---------------- ----------------
Operating profit 56.1
Finance cost (86.3)
Finance income 4.1
Net movement on fair valuation of interest
rate financial instruments (9.7)
-------------------------------------------------
Loss before taxation for continuing operations (35.8)
------------------------------------------------- ----------------- ---------------- ----------------
(1) Comparatives have been restated to reflect the adoption of IAS19
Revised
Inter-segment transfers or transactions are entered into under
the same terms and conditions that would be available to unrelated
third parties.
The Group primarily supplies the UK market, although it also
supplies certain products to other 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.
Continuing operations - revenue Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBPm GBPm GBPm
--------------------------------- ---------- ---------- --------
United Kingdom 722.5 819.4 1,697.4
Other Europe 11.7 23.7 36.5
Rest of world 8.0 9.7 22.3
--------------------------------- ---------- ---------- --------
Total for Group 742.2 852.8 1,756.2
--------------------------------- ---------- ---------- --------
5. Finance income and expense
Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBPm GBPm GBPm
----------------------------------------------- -------------- ---------------- ------------
Interest payable on bank loans and overdrafts (4.3) (5.8) (10.3)
Interest payable on term facility (8.6) (12.1) (24.6)
Interest payable on revolving facility (2.6) (5.0) (9.4)
Interest payable on interest rate derivatives (3.7) (4.5) (5.8)
Interest payable on interest rate financial
liabilities designated as other liabilities
at fair value through profit or loss - (9.8) (11.5)
Other interest (1.1) (0.4) (0.8)
Amortisation of debt issuance costs
and deferred fees (9.8) (7.7) (13.1)
(30.1) (45.3) (75.5)
Write-off of financing costs - (10.8) (10.8)
Total financing cost (30.1) (56.1) (86.3)
----------------------------------------------- -------------- ---------------- ------------
Interest receivable on bank deposits 1.7 2.6 4.1
Total finance income 1.7 2.6 4.1
----------------------------------------------- -------------- ---------------- ------------
Movement on fair valuation of interest
rate derivatives 7.5 (12.5) (14.8)
Movement on fair valuation of interest rate
financial liabilities designated as other
financial liabilities at fair value through
profit or loss - 5.1 5.1
Net movement on fair valuation of interest
rate financial instruments 7.5 (7.4) (9.7)
----------------------------------------------- -------------- ---------------- ------------
Net finance cost (20.9) (60.9) (91.9)
----------------------------------------------- -------------- ---------------- ------------
6. Taxation
The taxation credit for the first half of 2013 is GBP8.2m (June
2012: GBP4.5m credit).
The credit on continuing operations of GBP8.2m comprises of a
credit on operating activities of GBP4.7m, based upon managements
best estimate of the effective annual income tax rate expected for
the full financial year and a credit of GBP3.5m arising on the
disposal of the Sweet Pickles and Table Sauces business.
7. Earnings/(loss) per share
Basic loss per share has been calculated by dividing the loss
attributable to ordinary shareholders of GBP15.5m by the weighted
average shares of the Company.
Half year ended 30 Jun 2013 Half year ended Year ended 31 Dec
30 Jun 2012 2012
(Restated)(1)
-------------------------------------------------
(Restated)(1)
----------- ----------- ----------- ------------- -------------------------------------------- ------------ -------------- -------------------
Dilutive Dilutive Dilutive
effect effect effect
of share of share of share
Basic options Diluted Basic options Diluted Basic options Diluted
----------- ----------- ----------- ------------- ------------- ------------ --------------- ------------ -------------- -------------------
Continuing
operations
Loss after
tax (GBPm) (15.3) - (15.3) (41.3) - (41.3) (4.4) - (4.4)
Weighted
average
number of
shares
(m) 239.8 - 239.8 239.8 - 239.8 239.8 - 239.8
---------------
Loss per
share (pence) (6.4) - (6.4) (17.2) - (17.2) (1.8) - (1.8)
--------------- ----------- ----------- ------------- ------------- ------------ --------------- ------------ -------------- -------------------
Discontinued operations
Loss after
tax (GBPm) (0.2) - (0.2) (12.4) - (12.4) (13.5) - (13.5)
Weighted
average
number of
shares
(m) 239.8 - 239.8 239.8 - 239.8 239.8 - 239.8
---------------
Loss per
share
(pence) (0.1) - (0.1) (5.2) - (5.2) (5.6) - (5.6)
--------------- ----------- ----------- ------------- ------------- ------------ --------------- ------------ -------------- -------------------
Total
Loss after
tax (GBPm) (15.5) - (15.5) (53.7) - (53.7) (17.9) - (17.9)
Weighted
average
number of
shares
(m) 239.8 - 239.8 239.8 - 239.8 239.8 - 239.8
---------------
Loss per
share
(pence) (6.5) - (6.5) (22.4) - (22.4) (7.5) - (7.5)
--------------- ----------- ----------- ------------- ------------- ------------ --------------- ------------ -------------- -------------------
(1) Comparatives have been restated to
reflect the adoption of IAS19 Revised
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 half years ended 30 June 2013 and 30 June 2012, 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 loss per share.
Adjusted earnings per share
Adjusted earnings per share ("Adjusted EPS") is defined as
trading profit less net regular interest payable, less a notional
tax charge at 23.25% (2012: 24.5%) divided by the weighted average
number of ordinary shares of the Company.
Net regular interest payable is defined as net interest after
excluding non-cash items, including 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.
Half year ended 30 June
2013
------------------------------------------------- ------------------------------------------------
Continuing Discontinued Total
GBPm GBPm GBPm
------------------------------------------------- ------------- ------------------------ -------
Operating loss (2.6) (0.3) (2.9)
Loss on disposal of operations 2.4 - 2.4
Impairment and disposal of tangible assets 0.6 - 0.6
------------------------------------------------- ------------- ------------------------ -------
Operating profit/(loss) before loss on disposal
of operations and impairment and disposal
of tangible assets 0.4 (0.3) 0.1
Amortisation of intangible assets 23.6 - 23.6
Fair value movements on foreign exchange
and other derivative contracts (0.3) - (0.3)
Restructuring costs relating to divestment
activity 12.4 - 12.4
Re-financing costs 0.1 - 0.1
Net interest on pensions and administrative
expenses 12.7 - 12.7
------------- ------------------------ -------
Trading profit/(loss) 48.9 (0.3) 48.6
Less net regular interest payable (27.3) - (27.3)
------------------------------------------------- ------------- ------------------------ -------
Adjusted profit/(loss) before tax 21.6 (0.3) 21.3
Notional tax at 23.25% (5.0) 0.1 (4.9)
Adjusted profit/(loss) after tax 16.6 (0.2) 16.4
------------------------------------------------- ------------- ------------------------ -------
Average shares in issue (m) 239.8 239.8 239.8
Adjusted EPS (pence) 6.9 (0.1) 6.8
Net regular interest payable
Net interest payable (20.9) - (20.9)
Exclude fair value adjustments on interest
rate financial instruments (7.5) - (7.5)
Exclude other interest 1.1 - 1.1
Net regular interest payable (27.3) - (27.3)
------------------------------------------------- ------------- ------------------------ -------
Half year ended 30 June 2012
(Restated)(1)
------------------------------------------------ -------------------------------------------
Continuing Discontinued Total
GBPm GBPm GBPm
------------------------------------------------ ----------- --------------------- -------
Operating profit/(loss) 15.1 (16.3) (1.2)
Profit on disposal of operations (0.3) - (0.3)
----------- --------------------- -------
Operating profit/(loss) before profit on
disposal of operations 14.8 (16.3) (1.5)
Amortisation of intangible assets 26.1 - 26.1
Fair value movements on foreign exchange
and other derivative contracts 0.9 - 0.9
Restructuring costs relating to divestment
activity 17.9 - 17.9
Re-financing costs 1.2 - 1.2
Net interest on pensions and administrative
expenses 11.5 - 11.5
----------- --------------------- -------
Trading profit/(loss) 72.4 (16.3) 56.1
Less net regular interest payable (42.3) - (42.3)
------------------------------------------------ ----------- --------------------- -------
Adjusted profit/(loss) before tax 30.1 (16.3) 13.8
Notional tax at 24.5% (7.4) 4.0 (3.4)
Adjusted profit/(loss) after tax 22.7 (12.3) 10.4
------------------------------------------------ ----------- --------------------- -------
Average shares in issue (m) 239.8 239.8 239.8
Adjusted EPS (pence) 9.5 (5.1) 4.4
Net regular interest payable
Net interest payable (60.9) - (60.9)
Exclude exceptional write-off of financing
costs 10.8 - 10.8
Exclude fair value adjustments on interest
rate financial instruments 7.4 - 7.4
Exclude unwind of discount on provisions 0.4 - 0.4
Net regular interest payable (42.3) - (42.3)
------------------------------------------------ ----------- --------------------- -------
(1) Comparatives have been restated to reflect
the adoption of IAS19 Revised
Year ended 31 December 2012
(Restated)(1)
--------------------------------------------- -------------------------------------------
Continuing Discontinued Total
GBPm GBPm GBPm
--------------------------------------------- ----------- --------------------- -------
Operating profit/(loss) 56.1 (17.5) 38.6
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 28.6 (17.5) 11.1
Amortisation of intangible assets 53.3 - 53.3
Fair value movements on foreign exchange
and other derivative contracts (2.1) - (2.1)
Restructuring costs relating to divestment
activity 46.1 - 46.1
Re-financing costs 1.1 - 1.1
Net interest on pensions and administrative
expenses 27.2 - 27.2
----------- --------------------- -------
Trading profit/(loss) 154.2 (17.5) 136.7
Less net regular interest payable (69.5) - (69.5)
----------- --------------------- -------
Adjusted profit/(loss) before tax 84.7 (17.5) 67.2
Notional tax at 24.5% (20.8) 4.3 (16.5)
Adjusted profit/(loss) after tax 63.9 (13.2) 50.7
--------------------------------------------- ----------- --------------------- -------
Average shares in issue (m) 239.8 239.8 239.8
Adjusted EPS (pence) 26.7 (5.5) 21.2
Net regular interest payable
Net interest payable (91.9) - (91.9)
Exclude exceptional 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)
--------------------------------------------- ----------- --------------------- -------
(1) Comparatives have been restated to reflect the adoption of IAS19
Revised
8. Discontinued operations
Income and expenditure incurred on discontinued operations
during the year relates to operations that were disposed of in
prior years. There were no new operations discontinued in 2012 or
2013.
Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBPm GBPm GBPm
------------------------------------------------ ------------------- ------------------- --------------
Operating expenses (0.3) (16.3) (17.5)
------------------------------------------------ ------------------- ------------------- --------------
Loss before taxation (0.3) (16.3) (17.5)
Taxation credit 0.1 3.9 4.0
------------------------------------------------ -------------------
Loss after taxation on discontinued operations
for the year (0.2) (12.4) (13.5)
------------------------------------------------ ------------------- ------------------- --------------
During the period to 30 June 2013, discontinued operations
contributed to a net inflow of GBP1.7m (June 2012: GBP1.6m inflow)
to the Group's net operating cash flows, and a nil cash flow to
investing activities (June 2012: nil outflow).
9. Disposal of businesses
On 2 February 2013, the Group completed its sale of the Sweet
Pickles and Table Sauces business to Mizkan for GBP92.5m before
disposal costs. This is not a discontinued operation as it was
previously integrated and reported as part of the Grocery
business.
Half year ended
30 June
2013
GBPm
Net cash inflow arising on disposal:
Initial consideration 92.5
Proceeds deferred, working capital adjustments
and disposal costs (17.8)
Net cash inflow for the year 74.7
------------------------------------------------- ----------------
Property, plant and equipment 37.6
Intangible assets and goodwill 34.2
Inventories 8.7
Provisions and lease obligations (3.4)
------------------------------------------------- ----------------
Net assets disposed 77.1
Loss on disposal before tax (2.4)
------------------------------------------------- ----------------
10. Assets held for sale
At 31 December 2012, the assets and liabilities relating to the
Sweet Pickles and Table Sauces business were held for sale in light
of the decision to sell the business. The sale was completed on 2
February 2013.
At 30 June 2012, assets relating to the Vinegar and Sour Pickles
business were held for sale prior to the completion of the sale to
Mizkan Limited on 28 July 2012. In addition the assets relating to
the Elephant Atta ethnic flour business were also held for sale
following completion on 6 July 2012.
Year
Half year Half year ended
ended ended 31
30 Jun 30 Jun Dec
2013 2012 2012
GBPm GBPm GBPm
------------------------------------- --------------- ------------------- ------------
Non-current assets:
Property, plant and equipment - 6.6 37.6
Goodwill - 17.8 31.1
Other intangible assets - 5.0 3.1
Current assets:
Inventories - 5.5 9.2
Total assets held for sale - 34.9 81.0
------------------------------------- --------------- ------------------- ------------
Non-current liabilities:
Deferred tax liabilities - (2.4) (3.4)
Total liabilities held for sale - (2.4) (3.4)
------------------------------------- --------------- ------------------- ------------
Net assets and liabilities held for
sale - 32.5 77.6
------------------------------------- --------------- ------------------- ------------
11. Financial Instruments
Fair value
The following table shows the carrying amounts (which
approximate to fair value) of the Group's financial assets and
financial liabilities. Fair value is the amount at which a
financial instrument could be exchanged in an arm's length
transaction between informed and willing parties, other than a
forced or liquidation sale and excludes accrued interest. Set out
below is a summary of methods and assumptions used to value each
category of financial instrument.
Half year Half year Year ended
ended 30 ended 30 31 December
June 2013 June 2012 2012
Book & Market Book & Market Book & Market
Value Value Value
GBPm GBPm GBPm
---------------------------------------- ------------------------- ------------------------- --------------
Loans and receivables:
Cash and bank deposits 67.7 48.7 53.2
Trade and other
receivables 222.0 236.2 264.2
Financial assets at fair value through
profit or loss:
Derivative financial instruments
- Forward foreign currency exchange
contracts/currency options 1.3 0.3 0.7
- Commodity and energy
derivatives - - 0.3
Financial liabilities at fair value
through profit or loss:
Derivative financial
instruments
- Forward foreign currency exchange
contracts/currency options (0.3) (1.5) (0.3)
- Commodity and energy
derivatives (0.3) (1.2) (0.1)
- Interest rate
swaps (11.6) (16.8) (19.2)
Financial liabilities
at amortised cost:
Trade and other
payables (331.0) (339.7) (393.7)
Bank Term
Loan (680.8) (919.3) (755.2)
Bank Revolver Facility
(Drawn down) (220.0) (312.2) (131.7)
Bank overdraft - (49.0) (43.5)
Finance leases - (0.4) (0.4)
Other loans (76.7) (62.8) (95.7)
Interest payable (0.7) (0.9) (5.6)
----------------------------------------- ------------------------- ------------------------- --------------
The following table presents the Group's assets and liabilities
that are measured at fair value at 30 June 2013 using the following
fair value measurement hierarchy:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
Half year Half year Year ended
ended 30 ended 30 31 December
June 2013 June 2012 2012
---------------------------------------- ---------------------- ------------------------ -------------
Financial assets at fair value through
profit or loss: Level 2 Level 2 Level 2
Derivative financial
instruments
- Forward foreign currency exchange
contracts/currency options 1.3 0.3 0.7
- Commodity and energy
derivatives - - 0.3
Financial liabilities at fair value
through profit or loss:
Derivative financial
instruments
- Forward foreign currency exchange
contracts/currency options (0.3) (1.5) (0.3)
- Commodity derivatives (0.3) (1.2) (0.1)
- Interest rate
swaps (11.6) (16.8) (19.2)
----------------------------------------- ---------------------- ------------------------ -------------
12. Retirement 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 the
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 was disposed of
with the speciality bakery businesses in 2009 and the Premier Foods
Ireland Van Sales Scheme which was wound up in 2010.
The exchange rates used to translate the overseas Euro based
schemes are GBP1.00 = 1.1775 Euros for the average rate during the
period, and GBP1.00 = 1.16593 Euros for the closing position at 30
June 2013.
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. During half year 2012 a credit to past
service costs of GBP46.4m was recognised in relation to members of
the RHM pension scheme.
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.
IAS 19 (Revised) has been applied retrospectively from 1 January
2012. The principal change is that, expected returns on plan assets
of defined benefit plans are not recognised in profit or loss.
Instead, interest on net defined benefit obligation is recognised
in profit or loss, calculated using the discount rate used to
measure the net pension obligation or asset. In addition certain
administration expenses are recognised in profit or loss rather
than being deducted from the return on plan assets under the
previous standard. Comparatives, have been restated for the impact
of the adoption of IAS 19 (Revised).
Impact of transition to IAS19 Revised
Impact on condensed consolidated statement of
profit or loss
As at As at As at
30 30 31
Jun Jun Dec
2013 2012 2012
----------------------------------------------- ----------- ----------- -----------
GBPm GBPm GBPm
Increase in P&L expense (18.1) (18.5) (40.2)
Decrease in current tax expense - 5.0 9.5
------------------------------------------------
Net decrease profit for the year (18.1) (13.5) (30.7)
================================================ =========== =========== ===========
Attributable to equity holders of the parent (18.1) (13.5) (30.7)
Non-controlling interest - - -
Increase in actuarial movements in OCI 18.1 18.5 40.2
Increase in tax effect on actuarial movements
in OCI - (5.0) (9.5)
Net increase in OCI, net of tax 18.1 13.5 30.7
------------------------------------------------ ----------- ----------- -----------
Net increase in total comprehensive income - - -
================================================ =========== =========== ===========
Attributable to equity holders of parent - - -
Non-controlling interest - - -
------------------------------------------------ ----------- ----------- -----------
There was no material impact on the Group's condensed
consolidated statement of cash flows and condensed consolidated
balance sheet.
At the balance sheet date, the combined principal actuarial
assumptions used for all the schemes were as follows:
As at As at As at
30 Jun 30 Jun 31
Dec
2013 2012 2012
--------------------------- -------- -------- ------
GBPm GBPm GBPm
--------------------------- -------- -------- ------
Premier
Discount rate 4.70% 4.70% 4.45%
Inflation- RPI 3.30% 2.90% 2.95%
Inflation- CPI 2.30% 1.70% 2.15%
Expected salary increases 4.30% 3.90% 3.95%
Future pension increases 2.15% 2.00% 2.05%
--------------------------- -------- -------- ------
RHM
Discount rate 4.70% 4.70% 4.45%
Inflation- RPI 3.30% 2.90% 2.95%
Inflation- CPI 2.30% 1.70% 2.15%
Expected salary increases 4.30% 3.90% 3.95%
Future pension increases 2.15% 2.00% 2.05%
--------------------------- -------- -------- ------
The amounts recognised in the balance sheet arising from the
Group's obligations in respect of its defined benefit schemes are
as follows:
As at As at As at
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBPm GBPm GBPm
------------------------------------- ---------- ---------- ----------
Premier
Present value of funded obligations (876.7) (805.5) (871.1)
Fair value of plan assets 530.1 520.9 535.9
------------------------------------- ---------- ----------
Deficit in scheme (346.6) (284.6) (335.2)
------------------------------------- ---------- ---------- ----------
RHM
Present value of funded obligations (2,776.8) (2,658.1) (2,805.0)
Fair value of plan assets 2,728.7 2,670.1 2,673.4
------------------------------------- ---------- ----------
(Deficit)/surplus in scheme (48.1) 12.0 (131.6)
------------------------------------- ---------- ---------- ----------
TOTAL
Present value of funded obligations (3,653.5) (3,463.6) (3,676.1)
Fair value of plan assets 3,258.8 3,191.0 3,209.3
-------------------------------------
Deficit in scheme (394.7) (272.6) (466.8)
------------------------------------- ---------- ---------- ----------
The reduction in the aggregate deficit since the year end is as
a result of favourable asset movements and a higher discount
rate.
Changes in the fair value of plan liabilities were as
follows:
As at As at As at
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1) (Restated)(1)
GBPm GBPm GBPm
------------------------------------------- ------------------- -------------- --------------
Premier
Opening defined benefit obligation (871.1) (781.9) (781.9)
Current service cost (2.5) (3.5) (6.3)
Past service credit/(cost) 0.5 (18.0) (18.6)
Interest cost (18.8) (18.7) (37.3)
Remeasurements (1.9) (0.2) (58.1)
Exchange differences (2.5) 1.5 1.0
Contributions by plan participants (1.4) (2.0) (3.8)
Benefits paid 21.0 17.3 33.9
-------------------------------------------
Closing defined benefit obligation (876.7) (805.5) (871.1)
------------------------------------------- ------------------- -------------- --------------
RHM
Opening defined benefit obligation (2,805.0) (2,656.5) (2,656.5)
Current service cost (5.2) (5.9) (11.5)
Past service credit - 41.4 31.6
Interest cost (61.0) (62.5) (124.0)
Remeasurements 34.4 (30.8) (160.2)
Exchange differences (1.1) 0.6 0.4
Contributions by plan participants (2.9) (3.7) (6.8)
Benefits paid 64.0 59.3 122.0
------------------------------------------- ------------------- --------------
Closing defined benefit obligation (2,776.8) (2,658.1) (2,805.0)
------------------------------------------- ------------------- -------------- --------------
TOTAL
Opening defined benefit obligation (3,676.1) (3,438.4) (3,438.4)
Current service cost (7.7) (9.4) (17.8)
Past service credit 0.5 23.4 13.0
Interest cost (79.8) (81.2) (161.3)
Remeasurements 32.5 (31.0) (218.3)
Exchange differences (3.6) 2.1 1.4
Contributions by plan participants (4.3) (5.7) (10.6)
Benefits paid 85.0 76.6 155.9
-------------------------------------------
Closing defined benefit obligation (3,653.5) (3,463.6) (3,676.1)
------------------------------------------- ------------------- -------------- --------------
(1) Comparatives have been restated
to reflect the adoption of IAS19 Revised
Changes in the fair value of plan assets were as follows:
As at As at As at
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1) (Restated)(1)
GBPm GBPm GBPm
--------------------------------------------------------------- --------------
Premier
Opening fair value of plan assets 535.9 514.2 514.2
Interest income on plan assets 11.4 12.3 24.4
Remeasurements (2.7) 0.7 14.1
Administrative costs (1.1) (1.1) (1.8)
Contributions by employer 4.1 11.4 16.1
Contributions by plan participants 1.4 2.0 3.8
Exchange differences 2.1 (1.3) (1.0)
Benefits paid (21.0) (17.3) (33.9)
---------------------------------------------------------------
Closing fair value of plan assets 530.1 520.9 535.9
---------------------------------------------------------------
RHM
Opening fair value of plan assets 2,673.4 2,641.8 2,641.8
Interest income on plan assets 58.2 62.6 124.4
Remeasurements 51.6 13.8 12.8
Administrative costs (1.4) (4.1) (12.9)
Contributions by employer 7.0 12.2 23.0
Contributions by plan participants 2.9 3.7 6.8
Exchange differences 1.0 (0.6) (0.5)
Benefits paid (64.0) (59.3) (122.0)
---------------------------------------------------------------
Closing fair value of plan assets 2,728.7 2,670.1 2,673.4
---------------------------------------------------------------
TOTAL
Opening fair value of plan assets 3,209.3 3,156.0 3,156.0
Interest income on plan assets 69.6 74.9 148.8
Remeasurements 48.9 14.5 26.9
Administrative costs (2.5) (5.2) (14.7)
Contributions by employer 11.1 23.6 39.1
Contributions by plan participants 4.3 5.7 10.6
Exchange differences 3.1 (1.9) (1.5)
Benefits paid (85.0) (76.6) (155.9)
---------------------------------------------------------------
Closing fair value of plan assets 3,258.8 3,191.0 3,209.3
---------------------------------------------------------------
(1) Comparatives have been restated to reflect the adoption of IAS19 Revised
The amounts recognised in the statement of profit or loss were
as follows:
Half Year Half Year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1) (Restated)(1)
GBPm GBPm GBPm
Premier
Current service cost (2.5) (3.5) (6.3)
Past service credit/(cost) 0.5 (18.0) (18.6)
Administrative costs (1.1) (1.1) (1.8)
Interest cost (18.8) (18.7) (37.3)
Interest income on plan assets 11.4 12.3 24.4
Total charge (10.5) (29.0) (39.6)
RHM
Current service cost (5.2) (5.9) (11.5)
Past service credit - 41.4 31.6
Administrative costs (1.4) (4.1) (12.9)
Interest cost (61.0) (62.5) (124.0)
Interest income on plan assets 58.2 62.6 124.4
Total (charge)/credit (9.4) 31.5 7.6
Total
Current service cost (7.7) (9.4) (17.8)
Past service credit 0.5 23.4 13.0
Administrative costs (2.5) (5.2) (14.7)
Interest cost (79.8) (81.2) (161.3)
Interest income on plan assets 69.6 74.9 148.8
Total (charge)/credit (19.9) 2.5 (32.0)
(1) Comparatives have been restated to
reflect the adoption of IAS19 Revised
Defined contribution schemes
A number of companies in the Group operate defined contribution
schemes which are predominantly stakeholder arrangements. In
addition a number of schemes are operated providing only life
assurance benefits. The total expense recognised in the statement
of profit or loss of GBP0.7m (30 June 2012: GBP0.5m) represents
contributions payable to the plans by the Group at rates specified
in the rules of the schemes.
13. Provisions
Total provisions have decreased from GBP73.9m at 31 December
2012 to GBP60.8m at 30 June 2013. Provisions comprise restructuring
provisions of GBP29.9m and other provisions of GBP30.9m.
Restructuring provisions primarily represent provisions in
respect of the restructuring of the Bread business and programmes
aimed at reducing the Group's overhead cost base.
Other provisions primarily relate to insurance claims and
dilapidations against leasehold properties. The costs relating to
dilapidation provisions will be incurred over a number of years in
accordance with the length of the leases. These provisions have
been discounted at rates between 0.87% and 3.61%. The unwinding of
the discount is charged to the statement of profit or loss under
interest payable.
The decrease in provisions since year end is primarily due to
the utilisation of the provision in respect of the Bread business
restructuring.
14. Notes to the cash flow statement
Reconciliation of operating profit to cash generated from
operating activities
Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
(Restated)(1) (Restated)(1)
GBPm GBPm GBPm
Continuing operations
Loss before taxation (23.5) (45.8) (35.8)
Net finance cost 20.9 60.9 91.9
Operating (loss)/profit (2.6) 15.1 56.1
Depreciation of property, plant
and equipment 16.4 20.1 39.6
Amortisation of other intangible
assets 23.6 26.1 53.3
Loss/(profit) on the sale of businesses 2.4 (0.3) (63.7)
Loss on disposal of property, plant
and equipment 0.6 0.6 7.1
Impairment of property, plant and
equipment 0.3 - 12.5
Loss on disposal of intangible
assets - 0.4 0.4
Impairment of intangible assets - - 23.7
Revaluation (gains)/losses on financial
instruments (0.3) 0.9 (2.1)
Share based payments 1.8 2.3 4.7
Net cash inflow from operating
activities before interest and
tax and movements in working capital 42.2 65.2 131.6
Decrease/(increase) in inventories 2.1 (17.3) (11.3)
Decrease/(increase) in trade and
other receivables 33.7 15.1 (11.5)
Decrease in trade and other payables
and provisions (74.6) (57.8) (30.2)
Movement in retirement benefit
obligations 9.3 (42.4) (23.8)
Cash generated from continuing
operations 12.7 (37.2) 54.8
Discontinued operations 1.7 1.6 1.6
Cash generated from operating activities 14.4 (35.6) 56.4
(1) Comparatives have been restated to reflect
the adoption of IAS19 Revised.
Reconciliation of cash and cash equivalents to net
borrowings
Half year Half year Year
ended ended ended
30 Jun 30 Jun 31 Dec
2013 2012 2012
GBPm GBPm GBPm
Net inflow/(outflow) of cash and
cash equivalents 57.9 (22.3) (12.3)
Decrease in finance leases 0.4 0.3 0.3
Decrease/(increase) in borrowings 5.2 (49.8) 262.0
Other non-cash changes (3.2) (202.5) (205.6)
Decrease/(increase) in borrowings
net of cash 60.3 (274.3) 44.4
Total net borrowings at beginning
of the period (950.7) (995.1) (995.1)
Total net borrowings at end of
the period (890.4) (1,269.4) (950.7)
Analysis of movement in borrowings
As at Other As at
1 Jan non-cash 30 Jun
2013 Cash flow changes 2013
GBPm GBPm GBPm GBPm
Bank overdrafts (43.5) 43.5 - -
Cash and bank deposits 53.2 14.4 0.1 67.7
Net cash and cash equivalents 9.7 57.9 0.1 67.7
Borrowings - term facilities (755.2) 74.4 - (680.8)
Borrowings - revolving credit
facilities (131.7) (88.3) - (220.0)
Finance leases (0.4) 0.1 0.3 -
Other (95.7) 19.0 - (76.7)
Gross borrowings
net of cash(1) (973.3) 63.1 0.4 (909.8)
Debt issuance costs 22.6 0.1 (3.3) 19.4
Total net borrowings(1) (950.7) 63.2 (2.9) (890.4)
(1) Borrowings excludes derivative
financial instruments.
15. Related parties
WP X Investments Limited ("Warburg Pincus") is considered to be
a related party of the Group by virtue of its 17.3% equity
shareholding in Premier Foods plc and its power to appoint a member
to the Board of Directors under the relationship agreement between
Warburg Pincus and the Company. There have been no transactions
during the year.
There have been no related party transactions during the period
or changes in the make up of the Group's related parties as
described in the last annual report, other than as described above,
that could have a material effect on the financial position or
performance of the Group during the period.
16. Contingencies
There were no material contingent liabilities at 30 June
2013.
17. Subsequent events
On 10 July 2013 the Company announced a reorganisation of its UK
milling business into two distinct parts to strengthen focus on its
free trade (3(rd) party) customer base while integrating the
remaining milling operations into its baking and grocery
businesses. As part of this reorganisation it is proposed that the
Company's mill in Barry will close, resulting in the loss of around
43 employees plus a small number of local contractors.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VLLFLXDFEBBX
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