TIDMPFD
RNS Number : 8163R
Premier Foods plc
31 October 2013
31 October 2013
Premier Foods plc
Interim Management Statement for the three months ending
30 September 2013
Grocery Power Brands growth continued, good progress on
strategic priorities and full year expectations unchanged
Premier Foods today reports the Company's Interim Management
Statement for the three months ending 30 September 2013.
Highlights
-- Grocery Power Brands up 2.0% in Q3 and 3.3% year to date
-- Total underlying sales down 3.2%
-- Good progress on strategic priorities, including cost savings
initiatives as outlined at Half year
-- Full year expectations unchanged
Gavin Darby, Chief Executive Officer said:
"Overall, I'm encouraged by the progress we are making in what
continues to be a highly competitive market. The intensity of
promotional activity in our markets remains high while our
categories were significantly impacted by the hotter weather in
July and early August.
"We continue to make good progress against our strategic
priorities supporting our category based approach. We have grown
our Grocery Power Brands for a further quarter, completed a major
restructuring of our Bread supply chain and our plans to reduce
complexity across the business remain on track.
"Against this backdrop, and as the Company enters the important
Christmas trading period, expectations for the full year remain
unchanged."
Introduction
Sales(1,2) for the three months to 30 September 2013 decreased
by 3.2% to GBP283m compared with the prior year while Grocery Power
Brands sales increased by 2.0%. On a year to date basis, Branded
sales were up 0.5%, primarily reflecting the continued good Grocery
Power Brands performance, which were ahead 3.3%.
Support brand sales decreased by 9.8% in the quarter while lower
margin, non-branded sales were down 11.4%. We expect the decline in
support brand sales to be reduced in future through further focus
on this part of the portfolio across all channels.
Quarter 3 Sales
GBPm 2013 Q3 2012 Q3 Change
Power Brands 197.7 196.9 0.4%
Support brands 45.6 50.4 (9.8%)
-------- --------- --------
Total branded 243.2 247.4 (1.7%)
Non-branded 40.0 45.1 (11.4%)
-------- --------- --------
Total sales(1,2)
(ex. Milling) 283.2 292.5 (3.2%)
-------- --------- --------
Grocery Power Brands 125.9 123.5 2.0%
Quarter 3 Year to Date Sales
GBPm 2013 Q3 2012 Q3 Change
YTD YTD
Power Brands 626.0 612.0 2.3%
Support brands 146.2 156.6 (6.6%)
-------- -------- --------
Total branded 772.2 768.7 0.5%
Non-branded 132.2 150.6 (12.2%)
-------- -------- --------
Total sales(1,2)
(ex. Milling) 904.4 919.3 (1.6%)
-------- -------- --------
Grocery Power Brands 379.1 367.1 3.3%
Grocery
Grocery Power Brands sales increased by 2.0% in the third
quarter of the year and were ahead 3.3% year to date. Total Grocery
sales were down 4.0% in the quarter, as a result of lower Support
Brand and Non-branded sales.
Overall the quarter started slowly as the hotter than average
summer significantly impacted a number of the categories in which
the Company competes, although this was less marked in desserts and
cake. In particular, Ambrosia performed well, growing share in an
expanding market, reflecting strong and effective back to school
promotional campaigns and growth in the discounters channel. Sales
of Mr. Kipling returned to growth in the period, delivering its
highest share position for over two years driven by continued
momentum behind the 'snackpack' format.
In stocks and gravies, sales of Bisto were ahead of last year
partly as a result of new listings in high growth channels,
although this was partly offset by softer sales of Oxo. Sales of
Sharwood's and Batchelors were impacted by a combination of hotter
weather in July and early August and competitive market conditions.
Sharwood's is back on television with a new advertising campaign in
the final quarter this year, while the new Oxo 'Shake &
Flavour' product has just been fully launched into market supported
by a major advertising campaign.
Support brands were lower in the quarter with Homepride sales in
particular impacted by a strongly competitive promotional
environment in the cooking sauces category. In line with the
Company's focus on driving total category growth, we are beginning
to build distribution for our support brands across all channels
including the growing discounter channel. The Company has strong
plans in place to deliver an improved performance for Support
brands in 2014.
With branded sales now 90% of total Grocery sales, non-branded
sales represent an increasingly small proportion of Grocery
divisional contribution. Lower margin, non-branded sales were down
in the quarter due to contract withdrawals in Desserts and powdered
Beverages, a continuation of the trend seen in the first half of
the year.
In line with our category based strategy, we are working on
driving improved category returns across our promotional investment
programmes. Although total consumer marketing expenditure is
expected to be lower in overall terms this year, we continue to
improve the efficiency of our marketing investment. Over the medium
term, the Company remains committed to both increasing the quantum
and improving the efficiency of consumer marketing to support
growth in its branded portfolio.
Bread
Sales(2) in the Bread business (excluding Milling and a high
cost to serve contract exited in April) were 1.5% behind the same
period last year reflecting a slower start to the quarter as a
result of the hotter July weather. However, performance improved
through the quarter, supported by progressively stronger customer
partnerships. In particular, we are starting to benefit from
substantial increases in space and distribution across both the
larger supermarket and convenience formats of major customers.
The yield and quality of the UK wheat harvest has also improved
compared to last year, and reflect long-term average outputs.
This year, the Bread business has focused on a major
restructuring programme, involving the closure of three bakeries,
two mills and a significantly reconfigured logistics network. The
Greenford bakery closed in the third quarter and production at the
Barry Mill finished in October. Restructuring costs associated with
this programme are unchanged and expect to be approximately GBP28
million in the full year.
Milling sales were up 15.1% in the quarter, largely reflecting
higher pricing compared to the same period last year.
Strategic Priorities Progress
At the Half Year, the Company outlined a number of strategic
priorities as part of its broader category based approach. These
included a major focus on reducing complexity from which the
Company identified GBP10 million of incremental cost savings in the
second half of the year. During the quarter we made good progress
in pruning the number of lower margin products (SKU's) in the
Grocery business by over 270, representing a reduction of more than
15% since the beginning of the year. In addition, the Company is
tracking ahead of its plan to halve the number of suppliers by the
end of 2014 with 83% of total procurement expenditure now with just
250 lead suppliers.
During the period, the Company also consolidated its Grocery
logistics operation through moving to a Regional Distribution
Centre approach, reducing the number of hubs from three to two,
with the additional benefit of improving customer service. Further
opportunities are being reviewed to maximise value from the Grocery
fixed cost base.
In line with our strategy to expand the customer base beyond our
existing channels, and where appropriate across geographies, the
Company recently signed a ten year partnership agreement with Swire
Foods Holdings Ltd, to distribute Ambrosia rice pudding pots in
China. This agreement, while initially focusing on Ambrosia, may
extend to other Power Brands in the portfolio in due course.
Financial Position
The Company's financial position and Net debt expectations for
2013 remain unchanged, with recurring free cash flow generation in
the year expected to be in the range of GBP50-70m.
During the quarter, the Company completed the closure of its
defined benefit pension schemes to future accrual. All current and
future employees are now able to participate in the Company's
defined contribution pension schemes only.
Outlook
The Company is encouraged by the strategic progress it is making
in what continues to be competitive market conditions. Against this
market backdrop, the Company has a well planned and solid programme
of activity in place for the important Christmas trading period and
expectations for the full year remain unchanged.
Ends
For further information, please contact:
Institutional investors and analysts:
Alastair Murray, Chief Financial Officer +44 (0) 1727 815 850
Richard Godden, Head of Investor Relations +44 (0) 1727 815 850
Media enquiries:
Richard Johnson, Group Corporate Affairs Director +44 (0) 1727 815 850
Maitland +44 (0) 20 7379 5151
Tom Buchanan
Tom Eckersley
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