TIDMPFD
RNS Number : 3803F
Premier Foods plc
24 April 2014
24 April 2014
Premier Foods plc (the "Company")
Interim Management Statement for the three months ended
31 March 2014
Transformational capital restructuring completed and full year
expectations unchanged
Premier Foods today reports the Company's Interim Management
Statement for the three months ended 31 March 2014.
-- Transformational capital restructuring completed in the quarter
-- Hovis Limited joint venture to complete shortly
-- Power Brands sales decreased 3.5% as expected and Grocery sales decreased 6.2%
-- Full year expectations unchanged
-- Branded sales mix increased to nearly 90%
-- Business de-complexity, costs and efficiency programme on track
Gavin Darby, Chief Executive Officer of Premier Foods said:
"As expected, we had a softer first quarter due to the subdued
grocery retail environment, a later Easter and the impact of milder
weather. Having announced the Hovis joint venture and a major and
transformational new capital structure during the quarter, we can
now focus all our energies on delivering our category growth
strategy.
"Our expectations for the Full Year are unchanged. While trading
conditions are expected to remain challenging for the remainder of
the year, we have a strong programme of new product launches and
consumer marketing planned for the second half of the year building
on our enhanced customer partnerships with retailers and supported
by continuing initiatives to reduce costs, complexity and improve
efficiency."
Grocery Quarter 1 Sales
GBPm 2014 Q1 2013 Q1 Change
Power Brands 123.7 128.2 (3.5%)
Support brands 42.8 47.8 (10.4%)
-------- -------- --------
Total branded 166.5 176.0 (5.4%)
Non-branded 19.8 22.7 (12.9%)
-------- -------- --------
Total sales(1) 186.3 198.7 (6.2%)
-------- -------- --------
Grocery
Grocery Power Brands sales declined by 3.5% in the first quarter
of the year, in line with the Company's expectations. This decline
reflects the timing of Easter, milder weather compared to the same
period last year and a subdued grocery retail environment. Total
Grocery sales were down 6.2% in the period, due to the Power Brand
performance and also lower support brands and non-branded sales.
The Company's branded mix of sales increased from 88.6% to 89.4% in
the quarter. Grocery gross margins were up in the quarter compared
to the prior year.
Sales of Loyd Grossman sauces grew during the quarter, supported
by the new Lasagne sauce pouches product while Sharwood's sales
were down reflecting a particularly competitive cooking sauces and
accompaniments category. In Ambient Desserts, our strategy to
develop the higher value-added pot segment of the market saw the
launch of the new Ambrosia 'Mini-pots' range and larger 'Devon
Dream' pots at the end of the period helping drive new usage
occasions. Mr. Kipling increased its leading market share position
in the quarter with further brand activity planned for the rest of
the year. The Company's major investment in the new Mr. Kipling
Snackpack line at its factory in Barnsley is also developing well,
with production expected to commence in early 2015.
A strong programme of additional new product launches are
planned for the second half of the year in line with the Company's
strategy of driving category growth through marketing and
innovation. Consequently, consumer marketing is expected to build
during the year and be higher in the second half, aligned to the
phasing of new product launches. For example, Batchelors Deli-Box
is being advertised on TV for the first time during the second
quarter with the new 'Awesome Mums' campaign to be followed by
other Power Brand advertising later in the quarter and the second
half of the year.
Support brands sales declined by 10.4% which was principally due
to lower Cadbury cake sales as a result of Easter falling in the
Company's second quarter this year. Plans are in place to help
reverse this decline during the remainder of the year focusing on
new Cadbury product launches and support for Homepride cooking
sauces following the recent re-launch with refreshed and more
contemporary flavours and packaging.
Non-branded sales were down 12.9% due to the impact of contract
withdrawals in lower margin Desserts and powdered beverage
contracts, and as a result of the disciplined approach taken in
this area. This downward trend is expected to be less marked in the
second quarter, reflecting the anniversary of the commencement of
these contract withdrawals.
Business de-complexity, costs and efficiency
The focus on reducing business complexity continues to deliver
good results. The number of suppliers has now reduced by over 38%
since the beginning of 2013 to 2,040 which supports our cost
efficiency targets. Consequently, we are well on track to meet the
supplier numbers target of 1,660 by the end of 2014. The product
code reduction programme is also progressing well and in line with
plan; we expect to have taken out 700 product codes by the end of
2014, representing a 41% reduction since the start of this
programme.
While total capex guidance remains unchanged, the Company is
also looking more closely at a number of capital projects across
its portfolio which will deliver improved efficiencies and so
deliver strong paybacks. While the input cost inflation environment
is relatively benign, the Company continues to improve efficiencies
with its strong track record in reducing manufacturing controllable
costs. Additionally, further innovative opportunities are currently
being reviewed to maximise value and efficiencies from the Grocery
infrastructure.
The Company has delivered significant SG&A cost savings over
the last two years, and will continue to identify ways to further
reduce cost in this area, for instance through recent arrangements
in facilities management services and human resources providers
such as recruitment and training.
Bread
On 28 January 2014, the Company announced a joint venture for
its Hovis baking and milling business ("Hovis Limited"), with The
Gores Group which received shareholder approval on 20 March 2014.
The Company will retain a 49% holding of Hovis Holdings Limited on
completion of the transaction which is expected to take place on 26
April 2014. The Bread joint venture will be treated as a
discontinued operation in the Company's financial statements until
the transaction's completion and as an associate thereafter.
Financial Position
On 14 April 2014, the Company announced the completion of a
transformational capital restructuring. This included a landmark
new pensions framework agreement, a GBP353m equity issue, GBP500m
high yield bond and a new GBP272m revolving credit facility. The
equity issuance completed on 8 April 2014 with net proceeds
received of GBP344m and the old term loan and revolving credit
facilities have been cancelled. The high yield bond includes two
components; GBP325m senior secured notes with a fixed coupon of
6.50% and GBP175m senior secured floating rate notes attracting
5.00% above LIBOR. The agreement with the Pension Schemes includes
a reduction in pension deficit cash contributions of GBP156m over
the next three years compared to the previous funding schedule.
The Company will continue to focus on cash generation and our
expectation for recurring cash flow in 2014 is unchanged as is the
medium-term leverage target of 2.5x Net debt/EBITDA.
Outlook
The Company's expectations for the Full Year remain unchanged.
While trading conditions are expected to remain challenging, we
have a strong programme of new product launches and consumer
marketing planned for the second half of the year building on our
enhanced customer partnerships with retailers and supported by
continuing initiatives to reduce costs, complexity and improve
efficiency.
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
Liz Morley
Tom Eckersley
Conference Call
A conference call for investors and analysts will take place on
24 April 2014 at 9.30am, details of which are outlined below. A
replay of the conference call will be available on the Company's
website later in the day.
www.premierfoods.co.uk/investor-relations/results-centre/
Telephone number: +44 20 3003 2666
Telephone number (UK Toll free) 0808 109 0700
Password: Premier Foods
Notes to editors:
1. All sales data for Premier Foods is for the three months to
31 March 2014 or 31 March 2013 as appropriate.
Certain statements in this Interim Management Statement 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.
A Premier Foods image gallery is available using the following
link:
www.premierfoods.co.uk/news-&-media/image-gallery/
This information is provided by RNS
The company news service from the London Stock Exchange
END
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