TIDMPFD
RNS Number : 9261M
Premier Foods plc
22 July 2014
22 July 2014
Premier Foods plc ("the Company")
Half Year results for the six months to 30 June 2014
Trading profit increased 2.1% in challenging markets
-- Underlying business Trading profit up 2.1% to GBP48.1m
-- Sales 6.1% lower due to challenging market conditions in our categories
-- Strong second half programme of consumer marketing and new product introductions
-- Continued progress on cost reduction and business simplification
-- Trading profit expectations for the Full Year unchanged
-- Category review confirms long-term potential for value
creation through investment in brands, innovation, supply chain and
people
Premier Foods today announces its Half Year results to 30 June
2014.
Gavin Darby, Chief Executive Officer, said:
"I'm pleased to report a modest increase in Trading profit in
the first half of the year, despite a fall in sales volumes which
reflects the challenging market conditions in our categories.
"We are adapting quickly to the changing external environment
through retaining a tight control of costs and margins and have a
strong programme of consumer marketing and new product
introductions planned for the second half of the year. Assuming
normal weather patterns, we expect an improved second half branded
sales performance and our Trading profit expectations for the year
remain unchanged.
"Following an update of our category plans, we remain convinced
of the medium and long-term potential for our brands to deliver
profitable growth. We plan to continue investing in innovation,
marketing, our supply chain capabilities and our people to create
long-term shareholder value."
GBPm 2014 H1 2013 H1 Change
-------- -------- ---------
Underlying business
Sales 364.4 387.9 (6.1%)
Power Brand sales 240.8 253.2 (4.9%)
Trading profit 48.1 47.1 2.1%
Continuing operations
Sales 364.7 393.5 (7.3%)
Gross profit 126.3 130.5 (3.2%)
Trading profit 48.6 48.5 0.1%
Adjusted profit before tax 17.8 21.2 (16.0%)
Adjusted earnings per share (pence) 2.4 6.8 (64.7%)
Basic loss per share (pence) (8.8) (3.9) (125.6%)
Continuing operations include one months' results of the
previously disposed Sweet Pickles and Table Sauces business in the
comparative period.
A presentation to analysts will take place today, 22 July 2014,
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 relating to the Half Year results is available
at:
www.premierfoods.co.uk/investor-relations/results-centre
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
- Ends -
Underlying business
The Company's results for the Half Year to 30 June 2014 are
presented on an 'Underlying business' basis, unless otherwise
stated. 'Underlying business' excludes the results of previously
completed business disposals(5) . The tables below illustrate these
items for 2014 and 2013 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.
'Continuing operations' includes one month's results of the
previously disposed Sweet Pickles and Table Sauces business in
2013, which completed on 2 February 2013.
GBPm Continuing Less: Disposals Underlying
operations(5) Business
------------------- --------------- ---------------- -----------
2014 H1
Sales 364.7 (0.3) 364.4
Trading profit(2) 48.6 (0.5) 48.1
EBITDA(3) 56.1 (0.5) 55.6
2013 H1
Sales 393.5 (5.6) 387.9
Trading profit(2) 48.5 (1.4) 47.1
EBITDA(3) 57.2 (1.4) 55.8
------------------- --------------- ---------------- -----------
Notes to editors:
1. The accounting period is from 1 January 2014 to 30 June 2014.
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, profits and losses from associate
companies and pension administration costs and net interest
on the net defined benefit liability.
3. EBITDA is Trading profit before 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
21.50% (2013 H1: 23.25%) divided by the weighted average of
the number of shares of 588.2 million (2013 H1: 239.8 million).
Net regular interest is defined as total net interest excluding
non-cash items such as write-off of financing costs, fair
value adjustments on interest rate financial instruments and
other interest.
5. Continuing operations for 2013 include one month's results
for the disposed of Sweet Pickles and Table Sauces business.
The results of the Powdered Desserts and Beverages business
are included in both Continuing operations and Underlying
business for the six months to 30 June 2014.
6. Measures on page 1 are defined above and reconciled to statutory
measures in the appendices, where necessary.
7. The Company's financial year end is moving from 31 December
to a March year end, and therefore the next audited report
and accounts will be for the fifteen months to 4 April 2015.
The Company has committed to releasing a more comprehensive
Interim Management Statement in January 2015 to provide a
review of its performance for the twelve months ended 31 December
2014.
8. All references to the Full Year refer to the twelve months
ended 31 December 2014, unless otherwise stated.
A Premier Foods image gallery is available using the following
link:
www.premierfoods.co.uk/news-&-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 previously completed
disposals(5) ; the following commentary is set out on this basis,
unless otherwise stated.
GBPm 2014 H1 2013 H1 Change
Sales
Power Brands 240.8 253.2 (4.9%)
Support brands 83.3 91.8 (9.2%)
-------- -------- -------
Total branded 324.1 345.0 (6.1%)
Non-branded 40.3 42.9 (6.0%)
-------- -------- -------
Total Sales 364.4 387.9 (6.1%)
-------- -------- -------
Trading profit 48.1 47.1 2.1%
Introduction
Total Underlying business sales were down 6.1% at GBP364.4m
compared to the first half of 2013. Sales of the Company's Power
Brands declined by 4.9%, while non-branded sales were 6.0% lower.
Support brands decreased by GBP8.5m to GBP83.3m.
Underlying business Trading profit increased by 2.1% to GBP48.1m
in the period, reflecting good cost control and margins along with
re-phasing of some consumer marketing expenditure to the second
half of the year.
First Half Sales Performance
The weak sales performance in the first half was caused by a
combination of market and Company specific factors. The most
significant of these were weather and the Company's more
disciplined approach to promotional activity.
Market Factors
The overall ambient grocery market in the UK decreased in value
by 1.3% in the first half of 2014, while the categories which the
Company participates in declined by 4.0%. The Company recognises
the changing nature of the grocery market and is continually
adjusting priorities to reflect this challenging environment.
The most significant element of the market decline was caused by
milder weather, with 20 of the 26 weeks in the first half recording
higher average temperatures than their respective weeks in the
prior year. Volume movements in the Company's categories are
particularly sensitive to changes in temperature, with Flavourings
& Seasonings and Easy Eating being particularly affected. The
warm weather at Easter, which fell late this year, also resulted in
a lower than expected seasonal uplift.
A further (and smaller) element of market volume decline is
non-weather related. In previous reporting periods, the impact of
lower volumes on market value has been partly or completely offset
by price inflation. However, price inflation in the company's
markets has fallen progressively every month since the start of
2014, partly reflecting a benign input cost environment. The
company believes that it can drive volume growth back into the
relevant markets through its category based strategies.
An additional element in the market value decline is consumers
switching away from traditional multiple retailers towards "hard"
discounters due to the lower consumer selling prices in this
channel. These retailers stock 75%-90% private label, which reduces
the sales opportunity for the Company's brands. Conversely, 'High
Street Discounters' typically stock predominantly branded products
which presents a growth opportunity. The Company continues to
develop differentiated offerings specifically tailored for the
discounter channel.
Overall in the major multiple retailers, the Company's
categories have not seen a significant level of switching between
branded and non-branded products.
Company Specific Factors
During the first half of 2014 the Company reviewed its
promotional strategy, with a particular focus on eliminating
deep-cut, loss-making promotions. In most categories this has
reduced both the average depth and volume uplift per promotion, and
while this strategy has the effect of reducing volumes and sales,
is more profitable with average return on investment increasing
from 36% to 48% compared to the same period last year.
New product introductions were very limited in the first half,
with a much stronger programme of launches planned for the rest of
the year. For operational reasons, some media spend has also been
rephased from the first to the second half, notably in the cake
category. Finally, in an environment of robust competitor activity,
the Company chose to protect margins over sales, with some
consequential loss of share.
Brand review
Loyd Grossman sauces continued their good performance following
on from a good first quarter, growing sales with strong execution
instore, while Sharwood's sales were lower due to competitive
pressures in the category. Bisto consolidated its category position
growing both share and sales and will benefit from some exciting
new products due to launch into market in the second half of the
year, while the Batchelors brand was affected both by the milder
weather and the increasingly competitive Easy Eating category.
Mr. Kipling also gained market share in the period, due to
increased sales of Snackpack slices and improved the Company's
share of the cake category to 26.0%, and while sales of Ambrosia
were lower; this reflected a more disciplined approach to
promotional activity.
In support brands, Cadbury and Lyons cakes were down due to
lower promotional sales and Bird's custard and McDougall's also
underperformed although Paxo saw increased sales from its focus on
launching new product formats into the discounter channel.
Non-branded sales declined by 6.0% in the first half, and
benefitted in the second quarter from some one-off business to
business contracts and the anniversary of some desserts and
beverages contract exits. The Company will continue to take a
disciplined approach in this area and expects non-branded sales to
decline over the medium-term.
Second Half Plans
The second half of the year will see a number of new product
launches, including Bisto gravy pastes, Bisto Simply Casserole
pastes, Oxo Herbs & More, Batchelors Deli-Box Cous Cous,
Sharwood's Mini Poppadoms and Cadbury sponge pudding desserts.
Increasing the proportion of its sales from new products is central
to the Company's strategy of driving category growth, alongside
sustained and increased levels of consumer marketing investment.
The Company is building its innovation pipeline and expects to
continue this level of momentum as it increases resources to
facilitate this growth.
In addition to the innovation launches, Mr. Kipling cake will
benefit from a major re-launch in the third quarter of this year.
This will include a new packaging design which includes significant
impact for seasonal lines, a major television advertising campaign
with prime time media slots and associated outdoor and social media
support to engage consumers at every opportunity. Additionally,
there will be a strong instore marketing campaign across all major
retailers which will be aligned to the consumer marketing activity
to ensure maximum returns for the Company's biggest brand.
The Company expects consumer marketing to be double its first
half expenditure and materially greater than the prior year in the
second half and aligned to communication of new product
introductions and the Mr. Kipling re-launch. There will also be a
full television advertising campaign for Homepride to support its
recent packaging re-design and new flavour formulations and is the
first major campaign for Homepride in ten years.
Category update
During the first half of the year, the Company updated its
category plans, focussing on the opportunities to drive organic
growth in its branded portfolio. This review highlighted robust
growth opportunities which are consistent with the medium term
sales guidance previously announced.
As a result of this process, the company now has refreshed
category plans with clear priorities for investment. In particular,
this review confirmed opportunities in the cake category, where the
company is currently investing GBP20m on a new snack-pack line.
This new snack-pack line will expand the packaging format varieties
available to the Company and provides the opportunity to extend
sales distribution beyond the mainstream retailers into convenience
and impulse channels.
Important to the delivery of the Company's category based
strategy is an effective category management function. Building on
excellent work over the last two years, the Company will be
investing further in its category management team, increasing
resources to serve the growth channels such as convenience and
improve merchandising of our brands on shelf. The Company has also
recently added additional resource to its innovation team as it
looks to increase both the speed and quantum of new product
introductions to market. Innovation is one of the Company's central
themes in developing the potential for delivering category growth,
and investment in this area is expected to deliver good
returns.
International opportunities
This work has also highlighted significant opportunities to grow
our categories in certain geographies, notably China, USA, Canada
and Australia through Sharwood's, Mr. Kipling and Ambrosia. As a
result, the Board has agreed to long-term investment in
international opportunities through the creation of a dedicated
business unit. This business unit will focus on long term business
development as distinct from tactical export opportunities.
Cost reduction and business simplification
In the first half of the year, SG&A costs were slightly
reduced. Over the medium term, the Company will be selectively
investing further in its international, innovation and category
management teams, to reflect its strategy of driving category
growth. This focus on enhancing our capabilities in these areas
will be offset by cost savings elsewhere in the overhead cost
base.
During the period the Company completed the joint venture
transaction of Knighton Foods with its partner Specialty Powders
Holdings Limited. As a result of this transaction, the Company will
transfer two production lines to its Ashford site, which will
result in significant further efficiencies in the broader Grocery
manufacturing infrastructure.
The Company's focus on de-complexity continues to deliver
results; it remains well on track to reduce the number of product
codes to less than 1,100 by the end of 2014 and good progress has
also been made on the supplier reduction programme. The number of
suppliers is planned to reduce by over half to a new level of
1,350; a lower target which reflects the supplier base following
the completion of the Bread joint venture transaction.
Over recent months, we have identified a number of previously
deferred capital expenditure projects across the supply chain which
offer attractive financial paybacks. These projects will support
the Company's ongoing initiative to reduce manufacturing costs
without excessively increasing capital expenditure. Capital
expenditure for the year to December 2014 is expected to be around
GBP40m-GBP45m and GBP20m-GBP25m in 2015.
The Company is nearing the end of its SAP implementation
programme; the Moreton and Andover sites have gone live on SAP in
the first half of this year and the last two sites, Stoke and
Carlton (Barnsley) are expected to conclude by the end of 2014.
In June the Company won The Grocer Gold award alongside its
logistics partner Jigsaw, for the innovative way it has improved
the efficiency and sustainability of its transport operations. The
Company continues to receive increasingly strong feedback from
customers as a result of its progress in improving its customer
service key performance indicators.
Net regular interest
GBPm 2014 H1 2013 H1 Change
Bank debt interest 11.1 12.1 8.4%
Bond interest 8.9 - -
Swap contract interest 1.7 3.7 52.9%
Securitisation interest 1.6 1.7 5.9%
-------- -------- --------
23.3 17.5 (33.1%)
Amortisation and deferred
fees 7.5 9.8 23.6%
-------- -------- --------
Net regular interest 30.8 27.3 (12.8%)
-------- -------- --------
Net regular interest charge was GBP30.8m in the period, GBP3.5m
higher than the prior year. This was partly due to the dual running
of the old bank term loan and new senior secured fixed and floating
notes, when for a period of approximately one month, both tranches
of debt attracted interest. The run rate exiting the first half is
lower than the GBP30.8m reported for net regular interest, and
therefore the second half charge is expected to be lower than the
first six months of the year.
The Company's expects net regular interest for 2014 to be a
minimum of around GBP50m, with cash interest no more than GBP45m.
Within net regular interest, amortisation of financing fees is
expected to be around GBP10m.
Cash flow
Group recurring cash flow before non-recurring items such as
restructuring activity, financing fees, the impact of disposals and
equity proceeds was an outflow of GBP30.2m in the first half of the
year.
The pension deficit contribution payments to the Company pension
schemes are weighted to the first half of the year and were
GBP34.3m in the period. Additionally, payments are made by the
Company to cover the schemes' administration and standard
government levies, which amounted to GBP2.9m. In the full year,
deficit contributions to the pension schemes will be GBP35m and
administrative costs and government levies a further GBP8-10m.
GBPm 2014 H1 2013
H1
Trading profit 48.1 47.1
Depreciation 7.5 8.7
Other non-cash items 2.1 1.4
Interest (21.4) (22.6)
Taxation - -
Pension contributions (37.2) (3.4)
Capital expenditure (19.4) (15.2)
Working capital (9.9) (14.9)
---------- -------
Recurring cash outflow (30.2) 1.1
---------- -------
Underlying business Trading profit was ahead of last year while
depreciation was GBP7.5m, lower than the prior year charge of
GBP8.7m. Other non-cash items of GBP2.1m were largely due to the
add-back of share based payments.
Cash interest was GBP21.4m, in line with expectations, and cash
tax was nil in line with current year and medium-term guidance.
Capital expenditure in the period was GBP19.4m and is expected to
be GBP40m-GBP45m in the full year.
The working capital outflow in the period of GBP9.9m reflects
normal seasonal inventory rebuilding in the Grocery business, as
well as higher creditor payments and reduced debtor receipts in
January.
GBPm 2014 H1 2013 H1
Recurring cash outflow (30.2) 1.1
Disposed businesses cash flows (1.1) (3.5)
Restructuring activity (3.7) (25.3)
-------- --------
Operating cash flow from total
Company (35.0) (27.7)
Disposal proceeds 16.3 90.8
Financing fees & other costs
of finance (57.6) 0.1
Loan notes (15.7) -
Purchase of own shares (1.5) -
Net equity proceeds 340.3 -
-------- --------
Free cash flow 246.8 63.2
-------- --------
Free cash flow, before repayment of borrowings, was GBP246.8m in
the first half of the year, compared to GBP63.2m in the comparative
period. Restructuring activity relating to disposed businesses,
resulted in a cash outflow of GBP3.7m, compared to GBP25.3m in the
prior year and is expected to be a maximum of GBP10m for the full
year. The disposed businesses cash out flow of GBP1.1m reflects
both the return to average working capital levels for the Bread
business after 31 December 2013 and the subsequent working capital
inflow resulting from the completion of the transaction with the
Gores Group.
Disposal proceeds in the period were GBP16.3m, of which GBP15.0m
related to proceeds received from the Bread business joint venture
transaction. The prior year proceeds of GBP90.8m refer to the sale
of the Sweet Pickles & Table Sauces business which completed in
February 2013. Loan notes amounted to GBP15.7m associated with the
Bread joint venture transaction are as previously disclosed.
Financing fees and other costs of finance relate to the capital
refinancing plan which concluded in the first half of the year and
were GBP57.6m in the period. Following the completion of the
capital refinancing plan, the Company concluded that due to the
significantly smaller banking facilities agreed as part of this
plan, its plain vanilla interest rate swap of 1.59% was no longer
appropriate. Consequently, this swap arrangement has been closed
and replaced with a much smaller and more appropriate nominal swap
of GBP150m. The Company chose to settle the GBP7.1m swap closure
cost in cash.
Net equity proceeds of GBP340.3m were received in the period
following the completion of the placing and rights issue
transactions and are stated after underwriting and advisory
fees.
Net debt
GBPm
Net debt at 31 December 2013 830.8
Movement in cash 2014 H1 (246.8)
Other cash and non-cash items (12.1)
----------
Net debt at 30 June 2014 571.9
Net debt at 30 June 2014 was GBP571.9m. Other cash and non-cash
items include the net of financing fees associated with the
completed capital refinancing plan of GBP28.7m and write-off of
previous debt issuance costs and amortisation costs of GBP16.6m.
Recurring cash flow in the six months to 30 June 2014 was an
outflow of GBP30.2m. The Company maintains its medium-term leverage
target of 2.5x Net debt/EBITDA.
Pensions
Pensions (GBPm) 30 June 30 June 31 Dec 2013
2014 2013
Assets
Equities 307.9 278.2 299.7
Government bonds 396.9 558.8 515.7
Corporate bonds 314.7 388.7 384.1
Property 169.7 136.5 181.7
Absolute/Target returns 1,217.2 1,144.3 1,268.2
Swaps (16.9) (121.5) (116.6)
Cash 355.6 493.1 192.3
Other 620.2 380.7 493.3
------------ ---------- ------------
Total Assets 3,365.3 3,258.8 3,218.4
Liabilities
Discount rate 4.20% 4.70% 4.40%
Inflation rate (RPI/CPI) 3.25%/2.15% 3.3%/2.3% 3.35%/2.35%
Total Liabilities (3,901.5) (3,653.5) (3,821.7)
Gross deficit (536.2) (394.7) (603.3)
Deferred tax (21.5%/23.25%) 115.3 91.8 140.3
------------ ---------- ------------
Net deficit (420.9) (302.9) (463.0)
------------ ---------- ------------
Cash paid by the Company to the pension schemes in the period
was GBP37.2m. This comprised GBP34.3m of deficit contributions in
line with the recently concluded capital restructuring. The net IAS
19 deficit at 30 June 2014 was GBP536.2m, equivalent to GBP420.9m
net of deferred tax and is GBP67.1m lower than six months ago, due
to improved performance of the schemes' assets.
In the classification disclosed in the table above, 'Other'
includes investments in infrastructure assets and private equity
funds.
The Company acknowledges the significance of the current pension
deficit in determining a fair reflection of its Enterprise value.
While there are a number of different methodologies to value a
pension scheme deficit, the Group notes that one approach is to
discount the post tax future cash flows of the revised pension
deficit contribution schedule. On this basis, the valuation of the
pension schemes deficit is approximately GBP391m. This is based on
the assumption that the Group has a tax shield available to it in
the early years of an agreed 19 year recovery period. Details of
the revised pension deficit contribution schedule are outlined in
the Company's annual report and accounts for the year ended 31
December 2013.
Corporate transactions
On 26 April 2014, the Company completed the joint venture
transaction relating to its Bread business with The Gores Group.
The ongoing results of the 49% holding of this joint venture have
been included in the Company's financial statements as an associate
Company.
On 28 June 2014, the Company completed the joint venture
transaction relating to its powdered beverages and desserts
business. The joint venture will be known as Knighton Foods and the
ongoing results of the 49% holding of this joint venture will also
be included as an associate in the Company's financial
statements.
Capital Structure
Earlier this year, the Company completed a transformational
capital restructuring including an equity issue of GBP340m (net of
underwriting and advisory fees), a senior secured notes issuance of
GBP500m, a new revolving credit facility of GBP272m and a new
pensions framework agreement. This capital re-financing agreement
completed on 14 April 2014.
Outlook & Guidance
The Company expects the consumer environment to remain
challenging. In the second half of 2014, we expect an improvement
in sales performance reflecting new product introductions, consumer
marketing investment and assumed average temperatures. With our
strong supply chain capabilities retaining a tight control on
costs, and selected investment in key strategic areas, our Trading
profit expectations for the year remain unchanged. A detailed
review of the Company's categories confirms the medium and long
term value opportunity that these categories present. The Company
retains its medium term Net debt / EBITDA target of 2.5x.
Financial review
The Company presents its financial results for the Half year to
30 June 2014 with comparative information for the Half year to 30
June 2013.
Company structure
The company completed two joint venture transactions in the
period; the bread business on 26 April 2014 and the powdered
beverages and desserts business on 28 June 2014. The bread business
is reported as an associate in the financial statements for the six
months ending 30 June 2014 and the powdered beverages and desserts
business will be reported as an associate thereafter. On 2 February
2013, the Company completed the disposal of the Sweet Pickles and
Table Sauces business.
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 GBP364.7m, a decrease of
GBP28.8m compared to the prior year. The major driver of the
decline is attributed to weaker performance of the categories in
which the Company participates as a result of milder weather, lower
promotional sales due to a more disciplined but profitable approach
and channel mix effects. One month sales' of the disposed of Sweet
Pickles and Table Sauce business also accounted for GBP5.6m
revenue.
Operating profit
The company made an Operating loss in the period of GBP10.1m,
compared to a profit of GBP5.2m in the prior period.
Trading profit was GBP48.6m in the period, compared to GBP48.5m
in the prior year. The modest increase in Trading profit was due to
tight control of costs, illustrated by an increase in Gross profit
margin from 33.2% to 34.6%, partly offset by lower consumer
marketing and one months' results of the Sweet Pickles and Table
Sauces business in 2013.
Amortisation of intangible assets was GBP20.0m in the period, a
reduction of GBP3.5m from the first six months of 2013. Net
interest on pensions and administrative expenses were GBP17.3m in
the Half Year compared to a restated charge of GBP12.7m in 2013.
These charges reflect a revised 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. Costs associated with administering the Company
pension schemes and payments to the government pension protection
fund levy were GBP4.7m of this GBP17.3m charge.
The Company recognised impairment in the period of GBP16.0m
relating to the write off of certain fixed assets at its Lifton
site. A loss on disposal of operations of GBP6.1m was due to the
Powdered Beverages and Desserts business transaction which
completed on 28 June 2014.
Finance expense
Net finance expense for the Half year ended 30 June 2014 was
GBP44.9m, compared to GBP20.9m in the prior year. Net regular
interest increased by GBP3.5m to GBP30.8m, due to the dual running
of previous term loan interest and new senior secured fixed and
floating rate notes for a period of approximately one month. Net
finance expense in the period also included GBP14.6m 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 a positive
movement of GBP0.6m in the current year.
Profit before taxation
The Company made a loss before tax of GBP54.9m, compared to a
loss of GBP15.7m in the prior period. The Operating loss in the six
months of GBP10.1m was due to the reasons outlined above and net
finance expense was GBP44.9m. The loss of GBP54.9m in the six
months to 30 June 2014 was principally due to the impairment in the
period, the write off of financing costs and the non-repeat of a
positive movement in fair valuation of interest rate financial
instruments.
Taxation
The taxation credit for the period was GBP3.0m (30 June 2013:
GBP6.4m). The effective rate of corporation tax in the first six
months was 21.5% (2013: 23.25%). A deferred tax asset of GBP69.8m
is recognised in the financial statements; a reduction of GBP2.9m
from 31 December 2013. The corporation tax rate for the remainder
of the calendar year is expected to be 21.5%.
Earnings per share
Basic loss per share of 8.8 pence for the six months to 30 June
2014 on continuing operations is calculated by dividing the loss
attributed to ordinary shareholders of GBP51.9m (30 June 2013:
GBP9.3m) by the weighted number of shares in issue during the year.
This compares to a loss per share of 3.9 pence for the prior
period.
Adjusted earnings per share for continuing operations was 2.4
pence (30 June 2013: 6.8 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 GBP14.0m (30 June 2013: GBP16.3m) 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 21.5% (30
June 2013: 23.25%).
Following the equity issuance placing and rights issue, the
weighted number of shares in issue for the period increased from
239.8 million in the prior year to 588.2 million in the six months
to 30 June 2014.
Cash flow and borrowings
Company net borrowings as at 30 June 2014 were GBP571.9m, a
decrease of GBP258.9m since 31 December 2013. Of the movement since
31 December 2013, the cash and non-cash elements were a GBP275.5m
inflow and a GBP16.6m outflow respectively. The major cash inflows
were the net proceeds of the share issuance in the period of
GBP340.3m.
The cash outflow from operating activities in the six months to
30 June 2014 was GBP15.6m (30 June 2013: outflow of GBP8.2m). This
included cash generated from continuing operations of GBP8.4m (30
June 2013: GBP28.7m) and cash outflow from discontinued operations
of GBP2.6m (30 June 2013: GBP14.3m). Following the Bread business
transaction with the Gores Group, the average stock holding as a
proportion of Group sales is higher for the retained Grocery
business than was previously the case. Net cash interest paid was
GBP21.4m (30 June 2013: GBP22.6m) and no tax was paid in the period
or prior period.
Sale of subsidiaries and property, plant and equipment in the
first half was GBP16.3m (30 June 2013: GBP90.9m) following the
completion of the Bread business transaction. Net capital
expenditure on tangible and intangible assets was GBP19.4m and in
line with the prior period.
During the period, the Company completed a capital refinancing
plan which significantly altered its capital structure. As a
result, it repaid its previous banking agreement term loan and
revolving credit facilities and received proceeds from the launch
of senior secured fixed and floating rate notes and from the issue
of new equity. The proceeds received from the senior secured fixed
and floating rate notes were GBP500m and the net proceeds from the
equity issuance were GBP340.3m. Repayment of borrowings from the
previous banking facilities amounted to GBP756.0m. Financing fees,
principally associated with the completion of this capital
refinancing were GBP57.6m. Loan notes of GBP15.7m were issued in
the period to the Bread business transaction with the Gores
Group.
Pension schemes
At 30 June 2014 the Company's pension schemes under the IAS 19
accounting valuation showed a gross deficit of GBP536.2m, compared
to GBP603.3m at 31 December 2013. The valuation at 30 June 2014
comprised a GBP151.2m deficit in respect of the RHM schemes and a
deficit of GBP385.0m in relation to the Premier Foods schemes.
The deficit decrease principally reflects a positive movement in
the RHM deficit of GBP66.6m from GBP217.8m to GBP151.2m. Asset
values in the RHM scheme increased by GBP131.8m due to an increase
in the value of cash held, emerging market debt and swap assets
while liabilities increased by GBP65.2m, due to an decrease in the
discount rate of 0.20% since 31 December 2013. The Premier schemes
deficit was broadly unchanged at GBP385.0m (31 December 2013:
GBP385.5m).
Alastair Murray
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, except for the results of the
Powdered Desserts and Beverages business.
Continuing operations earnings per share is calculated as set
out below:
2014 H1 2013 H1
GBPm GBPm
Continuing Trading profit 48.6 48.5
Amortisation of intangible assets (20.0) (23.5)
Foreign exchange valuation items 0.3 0.3
Restructuring costs relating to disposal
activity 0.4 (4.5)
Re-financing costs - (0.1)
Net interest on pensions and administrative
expenses (17.3) (12.7)
Impairment of intangible and tangible
assets (16.0) (0.4)
Loss on disposal (6.1) (2.4)
Operating (loss)/profit (10.1) 5.2
Net finance expense (44.9) (20.9)
Share of profit from associates 0.1 -
Loss before tax (54.9) (15.7)
Taxation 3.0 6.4
-------- -----------
Loss after tax (51.9) (9.3)
Divided by:
Average shares in issue (millions) 588.2 239.8
Basic loss per share (8.8p) (3.9p)
Adjusted earnings per share is calculated as set out below:
2014 H1 2013 H1
GBPm GBPm
Underlying Trading profit 48.1 47.1
Less net regular interest (30.8) (27.3)
Adjusted profit before tax 17.3 19.8
Less notional tax at 21.5%/23.25% (3.7) (4.6)
-------- --------
Adjusted profit after tax 13.6 15.2
Divided by:
Average shares in issue (millions) 588.2 239.8
Adjusted earnings per share 2.3p 6.3p
Retained Grocery business summary P&L
The following table is provided and is stated after excluding
the Knighton Foods transaction
GBPm 2012 2013
-------------------- ------ ------
Power Brands sales 533.1 543.5
Support brands
sales 205.3 194.9
Total branded
sales 738.4 738.4
Non-branded sales 110.3 94.0
Total sales 848.7 832.4
Trading profit 132.0 139.5
EBITDA 150.1 155.9
-------------------- ------ ------
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
2013. On 1 May 2014, David Wild resigned from the board as
non-executive director following his appointment as permanent Chief
Executive Officer of Domino's Pizza Group plc
and Ian Krieger was appointed as senior non-executive director
with immediate effect.
By order of the Board
21 July 2014
Gavin Darby Alastair Murray
Chief Executive Officer Chief Financial Officer
Independent review report to Premier Foods plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements, defined below, in the half year results of Premier
Foods plc for the six months ended 30 June 2014. Based on our
review, nothing has come to our attention that causes us to believe
that the condensed consolidated interim financial statements are
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.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which
are prepared by Premier Foods plc, comprise:
-- the condensed consolidated balance sheet as at 30 June 2014;
-- the condensed consolidated statement of profit or loss and
statement of comprehensive income for the period then ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
As disclosed in note 2, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The condensed consolidated interim financial statements included
in the half-year results have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
What a review of condensed consolidated financial statements
involves
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 scopethan 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.
We have read the other information contained in the half year
results and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
Responsibilities for the condensed consolidated interim
financial statements and the review
Our responsibilities and those of the directors
The half-year results, including the condensed consolidated
interim financial statements, are the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the half year results in accordance with the Disclosure
and Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements 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 complying with the Disclosure and
Transparency Rules of the Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 July 2014
(a) The maintenance and integrity of the Premier Foods 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 statements 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
ended ended
30 Jun 2014 30 Jun 2013
(Restated)(1)
Note GBPm GBPm
--------------------------------------------------------- ----------- -------------
Continuing operations
Revenue 4 364.7 393.5
Cost of sales (238.4) (263.0)
----------------------------------------------------- ----------- -------------
Gross profit 126.3 130.5
Selling, marketing and distribution costs (54.1) (56.6)
Administrative costs (82.3) (69.2)
Net other operating income - 0.5
----------------------------------------------------- ----------- -------------
Operating (loss)/profit 4 (10.1) 5.2
Before impairment and loss on disposal of operations 12.0 8.0
Impairment of intangible assets and property,
plant and equipment 10 (16.0) (0.4)
Loss on disposal of operations 9 (6.1) (2.4)
----------------------------------------------------- ----------- -------------
Finance cost 5 (46.2) (30.1)
Finance income 5 0.7 1.7
Net movement on fair valuation of interest rate
financial instruments 5 0.6 7.5
Share of profit from associates 0.1 -
----------------------------------------------------- ----------- -------------
Loss before taxation from continuing operations (54.9) (15.7)
Taxation credit 6 3.0 6.4
----------------------------------------------------- ----------- -------------
Loss after taxation from continuing operations (51.9) (9.3)
Loss from discontinued operations 8 (17.3) (6.2)
----------------------------------------------------- ----------- -------------
Loss for the period attributable to owners of
the Parent (69.2) (15.5)
----------------------------------------------------- ----------- -------------
Basic and diluted loss per share
From continuing operations (pence) 7 (8.8) (3.9)
From discontinued operations (pence) 7 (2.9) (2.6)
----------------------------------------------------- ----------- -------------
From loss for the period (11.7) (6.5)
----------------------------------------------------- ----------- -------------
Adjusted earnings per share(2)
From continuing operations (pence) 7 2.4 6.8
----------------------------------------------------- ----------- -------------
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
(2) Adjusted earnings per share is defined as trading profit less net
regular interest payable, less a notional tax charge at 21.5%
(2013: 23.25%) divided by the weighted average number of ordinary shares
of the Company.
The notes form an integral part of the condensed consolidated interim
financial information.
Condensed consolidated statement of comprehensive income (unaudited)
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
Note GBPm GBPm
------------------------------------------------- ---- ----------- -----------
Loss for the period (69.2) (15.5)
Other comprehensive income/(losses)
Items that will never be reclassified to profit
or loss
Remeasurements of defined benefit liability 17 39.7 81.4
Deferred tax charge (7.7) (18.7)
Items that are or may be reclassified to profit
or loss
Exchange differences on translation (1.5) (0.4)
------------------------------------------------- ---- ----------- -----------
Other comprehensive income, net of tax 30.5 62.3
------------------------------------------------- ---- ----------- -----------
Total comprehensive (losses)/income attributable
to owners of the parent (38.7) 46.8
------------------------------------------------- ---- ----------- -----------
The notes form an integral part of the condensed consolidated interim
financial information.
Condensed consolidated balance sheet (unaudited)
As at As at
30 Jun 2014 31 Dec 2013
Note GBPm GBPm
-------------------------------------------------------- ------- ----------- -----------
ASSETS:
Non-current assets
Property, plant and equipment 10 172.1 196.3
Goodwill 713.9 713.9
Other intangible assets 552.6 575.5
Investments in associates 11 24.1 -
Loans to associates 12 19.2 -
Deferred tax assets 69.8 72.7
-------------------------------------------------------- ------- ----------- -----------
1,551.7 1,558.4
Current assets
Assets held for sale 13 - 26.8
Inventories 73.3 68.9
Trade and other receivables 133.7 248.3
Financial assets - derivative financial instruments 15 0.2 0.5
Cash and cash equivalents 19 69.1 157.0
-------------------------------------------------------- ------- ----------- -----------
276.3 501.5
-------------------------------------------------------- ------- ----------- -----------
Total assets 1,828.0 2,059.9
-------------------------------------------------------- ------- ----------- -----------
LIABILITIES:
Current liabilities
Liabilities held for sale 13 - (1.4)
Trade and other payables (244.6) (336.7)
Financial liabilities
- short-term borrowings 14 (40.3) (169.1)
- derivative financial instruments 15 (1.2) (9.5)
Provisions for liabilities and charges 16 (11.1) (15.0)
Current income tax liabilities (0.9) (0.7)
-------------------------------------------------------- ------- ----------- -----------
(298.1) (532.4)
Non-current liabilities
Financial liabilities - long-term borrowings 14 (600.7) (818.7)
Retirement benefit obligations 17 (536.2) (603.3)
Provisions for liabilities and charges 16 (59.2) (57.2)
Other liabilities 18 (13.8) (30.4)
-------------------------------------------------------- ------- ----------- -----------
(1,209.9) (1,509.6)
-------------------------------------------------------- ------- ----------- -----------
Total liabilities (1,508.0) (2,042.0)
-------------------------------------------------------- ------- ----------- -----------
Net assets 320.0 17.9
-------------------------------------------------------- ------- ----------- -----------
EQUITY:
Capital and reserves
Share capital 82.4 24.0
Share premium 1,406.6 1,124.7
Merger reserve 404.7 404.7
Other reserves (9.3) (9.3)
Profit and loss reserve (1,564.4) (1,526.3)
-------------------------------------------------------- ------- ----------- -----------
Capital and reserves attributable to owners of
the Parent 320.0 17.8
Non-controlling interest - 0.1
-------------------------------------------------------- ------- ----------- -----------
Total equity 320.0 17.9
-------------------------------------------------------- ------- ----------- -----------
The notes form an integral part of the condensed consolidated interim
financial information.
Condensed consolidated statement of cash flows (unaudited)
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
Note GBPm GBPm
---------------------------------------------------- ------- -------------- -----------
Cash generated from operating activities 19 5.8 14.4
Interest paid (22.1) (24.0)
Interest received 0.7 1.4
-------------- -----------
Cash utilised by operating activities (15.6) (8.2)
Sale of subsidiaries/businesses 15.0 90.8
Purchase of property, plant and equipment (19.3) (17.2)
Purchase of intangible assets (0.1) (2.3)
Sale of property, plant and equipment 1.3 0.1
-------------- -----------
Cash (utilised by)/generated from investing
activities (3.1) 71.4
Repayment of borrowings (756.0) (90.8)
Proceeds from borrowings 500.0 104.6
Movement in securitisation funding programme (79.5) (19.0)
Financing fees and other costs of finance (57.6) (0.1)
Proceeds from share issue 353.4 -
Share issue costs (13.1) -
Purchase of own shares (1.5) -
Loan notes issued (15.7) -
-------------- -----------
Cash utilised by financing activities (70.0) (5.3)
Net (outflow)/inflow of cash and cash equivalents (88.7) 57.9
Cash, cash equivalents and bank overdrafts
at beginning of period 157.0 9.7
Effect of movement in foreign exchange - 0.1
---------------------------------------------------- ------- -------------- -----------
Cash, cash equivalents and bank overdrafts
at end of period 19 68.3 67.7
---------------------------------------------------- ------- -------------- -----------
The notes form an integral part of the condensed consolidated interim
financial information.
Condensed consolidated statement of changes in equity (unaudited)
Note Share Share Merger Other Profit Non-controlling Total
capital premium reserve reserves and loss interest equity
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ---- -------- -------- -------- --------- --------- --------------- -------
At 1 January 2014 24.0 1,124.7 404.7 (9.3) (1,526.3) 0.1 17.9
Loss for the period - - - - (69.2) - (69.2)
Remeasurements of defined
benefit liability 17 - - - - 39.7 - 39.7
Deferred tax charge - - - - (7.7) - (7.7)
Exchange differences on
translation - - - - (1.5) - (1.5)
-------------------------------- -------- -------- -------- --------- --------- --------------- -------
Other comprehensive
income - - - - 30.5 - 30.5
-------------------------- ---- -------- -------- -------- --------- --------- --------------- -------
Total comprehensive
losses - - - - (38.7) - (38.7)
-------------------------- ---- -------- -------- -------- --------- --------- --------------- -------
Shares issued 58.4 295.0 - - - - 353.4
Cost of shares issued - (13.1) - - - - (13.1)
Share-based payments - - - - 1.7 - 1.7
Own shares acquired and
held as
Treasury shares - - - - (1.1) - (1.1)
Disposal of non-controlling
interest - - - - - (0.1) (0.1)
-------------------------------- -------- -------- -------- --------- --------- --------------- -------
At 30 June 2014 82.4 1,406.6 404.7 (9.3) (1,564.4) - 320.0
-------------------------- ---- -------- -------- -------- --------- --------- --------------- -------
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 of defined
benefit liability 17 - - - - 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
-------------------------- ---- -------- -------- -------- --------- --------- --------------- -------
The notes form an integral part of the condensed consolidated interim
financial information.
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 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
2013.
2. Significant accounting policies
Basis of preparation
The condensed consolidated financial information ("financial
information") for the period ended 30 June 2014 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 2014 should be read in
conjunction with the Group's financial statements for the year
ended 31 December 2013 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 2013, 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.
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 2013, which were approved by the
Board of Directors on 4 March 2014, have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The
auditor's report of the financial statements contained an
unmodified audit opinion and did not contain any statement under
section 498 (2) or (3) of the Companies Act 2006. However, it did
include an emphasis of matter in respect of going concern which
related to the Shareholder vote required to approve the fully
underwritten rights issue that was due to take place at the General
Meeting on 8 April 2014 and, at the time of the approval of the
financial statements, this indicated the existence of a material
uncertainty which may have casted doubt over the Group's ability to
continue as a going concern. The Shareholders subsequently voted in
favour of
the rights issue and there is therefore no material uncertainty
which may cast doubt over the Group's ability to continue as a
going concern at the date of approval of this financial
information.
This financial information was approved for issue on 21 July
2014.
Basis for preparation of financial statements on a going concern
basis
On 4 March 2014, the Group announced its proposal to diversify
its sources of finance to provide a solid foundation on which it
can drive future growth through its category-based strategy and
leveraging its strengths. This transformational capital restructure
included a fully underwritten equity offering of GBP353m (gross of
fees) through a placing and rights issue, the issue of GBP500m
senior secured loan notes and a new GBP272m revolving credit
facility with a smaller bank syndicate. Significantly, the Group
also reached a pensions framework agreement with the respective
Pension Scheme trustees following the triennial actuarial
valuation, which provided the platform for this new capital
structure to be put in place. Following the Shareholder vote at the
General Meeting on 8 April 2014 the Board were authorised to allot
shares in the Company under the placing and the rights issue and
the capital restructuring was completed in April 2014. The Group
therefore continues to adopt the going concern basis in preparing
its condensed consolidated interim financial information.
3. Critical accounting policies, 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 the 2013 year end.
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. Each of the underlying
assumptions is set out in more detail in note 17.
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 CGU's are determined
based on the higher of net realisable value and value in use
calculations. These calculations require the use of estimates.
The Group has considered the impact of the assumptions used on
the calculations and has conducted sensitivity analysis on the
impairment tests of the CGU's carrying values.
Acquired trademarks, brands and customer relationships 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 the
liability becomes probable.
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 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, profits and losses from
associate companies, pension administration costs and net interest
on the net defined benefit liability.
The Group's operating segment is 'Grocery'. The Grocery segment,
which has been redefined to include all continuing operations,
sells both sweet and savoury ambient food products. Comparative
figures for half year 2013 have been restated to reflect this.
The segment results for the half years ended 30 June 2014 and 30
June 2013 and the reconciliation of the segment measures to the
respective statutory items included in the financial information
are as follows:
Half year
ended 30
Jun 2014
-------------------------------------------------------------- ---------
Grocery
GBPm
-------------------------------------------------------------- ---------
Revenue 364.7
Trading profit 48.6
-------------------------------------------------------------- ---------
Amortisation of intangible assets (20.0)
Fair value movements on foreign exchange and other derivative
contracts 0.3
Restructuring costs associated with divestment
activity 0.4
Net interest on pensions and administrative expenses (17.3)
-------------------------------------------------------------- ---------
Operating profit before impairment and loss on
disposal of operations 12.0
Impairment (16.0)
Loss on disposal of operations (6.1)
-------------------------------------------------------------- ---------
Operating loss (10.1)
Finance cost (46.2)
Finance income 0.7
Net movement on fair valuation of interest rate
financial instruments 0.6
Share of profit from associates 0.1
-------------------------------------------------------------- ---------
Loss before taxation (54.9)
-------------------------------------------------------------- ---------
Depreciation (7.5)
Half year
ended 30
Jun 2013
(Restated)(1)
------------------------------------------------------- -------------
Grocery
GBPm
------------------------------------------------------- -------------
Revenue 393.5
Trading profit 48.5
------------------------------------------------------- -------------
Amortisation of intangible assets (23.5)
Fair value movements on foreign exchange and other
derivative contracts 0.3
Restructuring costs associated with divestment
activity (4.5)
Refinancing costs (0.1)
Net interest on pensions and administrative expenses (12.7)
------------------------------------------------------- -------------
Operating profit before impairment and loss on
disposal of operations 8.0
Impairment (0.4)
Loss on disposal of operations (2.4)
------------------------------------------------------- -------------
Operating profit 5.2
Finance cost (30.1)
Finance income 1.7
Net movement on fair valuation of interest rate
financial instruments 7.5
------------------------------------------------------- -------------
Loss before taxation (15.7)
------------------------------------------------------- -------------
Depreciation (8.7)
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
Inter-segment transfers or transactions are entered into under
the same terms and conditions that would be available to unrelated
third parties.
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.
The Group primarily supplies the UK market, although it also
supplies certain products to other European countries and a number
of other countries. The following table provides an analysis of the
Group's revenue, which is allocated on the basis of geographical
market destination and an analysis of the Group's non-current
assets by geographical location.
Continuing operations - revenue
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
(Restated)(1)
GBPm GBPm
--------------------------------------- -------------- ---------------
United Kingdom 348.3 375.8
Other Europe 9.4 9.7
Rest of world 7.0 8.0
--------------------------------------- -------------- ---------------
Total 364.7 393.5
--------------------------------------- -------------- ---------------
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
5. Finance income and costs
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
GBPm GBPm
-------------------------------------------------------- ----------- -----------
Interest payable on bank loans and overdrafts (3.6) (4.3)
Interest payable on term facility (7.2) (8.6)
Interest payable on senior secured notes (8.9) -
Interest payable on revolving facility (2.6) (2.6)
Interest payable on interest rate derivatives (1.7) (3.7)
Other interest payable (0.1) (1.1)
Amortisation of debt issuance costs and deferred
fees (7.5) (9.8)
-------------------------------------------------------- ----------- -----------
(31.6) (30.1)
Write off of financing costs(1) (14.6) -
-------------------------------------------------------- ----------- -----------
Total finance cost (46.2) (30.1)
-------------------------------------------------------- ----------- -----------
Interest receivable on bank deposits 0.7 1.7
-------------------------------------------------------- ----------- -----------
Total finance income 0.7 1.7
-------------------------------------------------------- ----------- -----------
Movement on fair valuation of interest rate derivatives 0.6 7.5
-------------------------------------------------------- ----------- -----------
Net movement on fair valuation of interest rate
financial instruments 0.6 7.5
-------------------------------------------------------- ----------- -----------
Net finance cost (44.9) (20.9)
-------------------------------------------------------- ----------- -----------
(1) Relates to the write-off of debt issuance costs relating to the
Group's previous financing arrangements.
6. Taxation
The taxation credit on continuing operations of GBP3.0m (30 June
2013: GBP6.4m credit) relates to a credit on operating activities
based upon managements best estimate of the effective annual income
tax rate expected for the full financial year. The taxation credit
on discontinued operations of GBP1.8m (30 June 2013: GBP1.9m
credit) relates to a credit on the disposal of the Bread
business.
7. Earnings/(loss) per share
Basic loss per share has been calculated by dividing the loss
attributable to owners of the parent of GBP69.2m (2013: GBP15.5m
loss) by the weighted average number of ordinary shares of the
Company.
Half year ended 30 Half year ended 30
Jun 2014 Jun 2013
(Restated)(1)
--------------------------------- ------- --------- ------- ---------------------------
Basic Dilutive Diluted Basic Dilutive Diluted
effect effect
of share of share
options options
--------------------------------- ------- --------- ------- ------- --------- -------
Continuing operations
Loss after tax (GBPm) (51.9) (51.9) (9.3) (9.3)
Weighted average number of
shares (m) 588.2 - 588.2 239.8 - 239.8
--------------------------------- ------- --------- ------- ------- --------- -------
Loss earnings per share (pence) (8.8) - (8.8) (3.9) - (3.9)
--------------------------------- ------- --------- ------- ------- --------- -------
Discontinued operations
Loss after tax (GBPm) (17.3) (17.3) (6.2) (6.2)
Weighted average number of
shares (m) 588.2 - 588.2 239.8 - 239.8
--------------------------------- ------- --------- ------- ------- --------- -------
Loss per share (pence) (2.9) - (2.9) (2.6) - (2.6)
--------------------------------- ------- --------- ------- ------- --------- -------
Total
Loss after tax (GBPm) (69.2) (69.2) (15.5) (15.5)
Weighted average number of
shares (m) 588.2 - 588.2 239.8 - 239.8
--------------------------------- ------- --------- ------- ------- --------- -------
Loss per share (pence) (11.7) - (11.7) (6.5) - (6.5)
--------------------------------- ------- --------- ------- ------- --------- -------
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
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 2014 and 30 June 2013, 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 EPS")
Adjusted earnings per share is defined as trading profit less
net regular interest payable, less a notional tax charge at 21.5%
(2013: 23.25%) 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, such as write-off of financing costs,
fair value adjustments on interest rate financial instruments and
other interest.
Trading profit and Adjusted EPS have been reported as the
directors believe these provide an alternative measure by which the
shareholders can better assess the Group's underlying trading
performance.
Half year
ended 30
Jun 2014
-------------------------------------------------------------- ---- ----------
Continuing
Note GBPm
-------------------------------------------------------------- ---- ----------
Operating loss 4 (10.1)
Impairment of property, plant and equipment and intangible
assets 4 16.0
Loss on disposal of operations 4 6.1
-------------------------------------------------------------- ---- ----------
Operating profit before impairment and loss on disposal
of operations 4 12.0
Net interest on pension and administrative expenses 4 17.3
Fair value movements on foreign exchange and other derivative
contracts 4 (0.3)
Amortisation of intangible assets 4 20.0
Restructuring costs associated with divestment activity 4 (0.4)
-------------------------------------------------------------- ---- ----------
Trading profit 4 48.6
Less net regular interest payable (30.8)
-------------------------------------------------------------- ---- ----------
Adjusted profit before tax 17.8
Notional tax at 21.5% (3.8)
-------------------------------------------------------------- ---- ----------
Adjusted profit after tax 14.0
-------------------------------------------------------------- ---- ----------
Average shares in issue (m) 588.2
Adjusted EPS (pence) 2.4
Net regular interest payable
Net interest payable 5 (44.9)
Exclude fair value adjustments on interest rate financial
instruments 5 (0.6)
Exclude write off of financing costs 5 14.6
Exclude other interest 5 0.1
-------------------------------------------------------------- ---- ----------
Net regular interest payable (30.8)
-------------------------------------------------------------- ---- ----------
Half year
ended 30
Jun 2013
(Restated)(1)
-------------------------------------------------------------- -------------
Continuing
GBPm
-------------------------------------------------------------- -------------
Operating profit 4 5.2
Impairment of property, plant and equipment and intangible
assets 4 0.4
Loss on disposal of operations 4 2.4
-------------------------------------------------------------- -------------
Operating profit before impairment and loss on disposal
of operations 4 8.0
Net interest on pension and administrative expenses 4 12.7
Fair value movements on foreign exchange and other derivative
contracts 4 (0.3)
Amortisation of intangible assets 4 23.5
Restructuring costs associated with divestment activity 4 4.5
Re-financing costs 4 0.1
-------------------------------------------------------------- -------------
Trading profit 4 48.5
Less net regular interest payable (27.3)
-------------------------------------------------------------- -------------
Adjusted profit before tax 21.2
Notional tax at 23.25% (4.9)
-------------------------------------------------------------- -------------
Adjusted profit after tax 16.3
-------------------------------------------------------------- -------------
Average shares in issue (m) 239.8
Adjusted EPS (pence) 6.8
Net regular interest payable
Net interest payable 5 (20.9)
Exclude fair value adjustments on interest rate financial
instruments 5 (7.5)
Exclude other interest 5 1.1
-------------------------------------------------------------- -------------
Net regular interest payable (27.3)
-------------------------------------------------------------- -------------
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
8. Discontinued operations
Income and expenditure incurred on discontinued operations
during the year comprises the Bread business, in light of the
completion of the sale of the Group's majority share in this
business on 26 April 2014.
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
GBPm GBPm
----------------------------------------------- ----------- -----------
Revenue 178.1 348.7
Operating expenses (178.1) (356.5)
----------------------------------------------- ----------- -----------
Operating loss before impairment and loss on
disposal of operations - (7.8)
Impairment (11.6) (0.3)
Loss on disposal of operations (7.0) -
----------------------------------------------- ----------- -----------
Operating loss (18.6) (8.1)
Finance cost (0.5) -
----------------------------------------------- ----------- -----------
Loss before taxation (19.1) (8.1)
----------------------------------------------- ----------- -----------
Taxation credit 1.8 1.9
----------------------------------------------- ----------- -----------
Loss after taxation on discontinued operations
for the year (17.3) (6.2)
----------------------------------------------- ----------- -----------
9. Disposal of businesses
On 26 April 2014 the Group completed the transaction with the
Gores Group which led to the disposal of the Group's majority share
in the Bread business. The Bread business is classified as a
discontinued operation for the period up to the date of sale and
the loss on disposal is included in discontinued operations.
On 28 June 2014 the Group completed the transaction with
Specialty Powders Holdings Limited which led to the disposal of the
Group's majority share in the Powdered Beverages and Desserts
business. This is not a discontinued operation as it was previously
integrated and reported as part of the Grocery business. The loss
on disposal is included within continuing operations.
Bread Powdered
Beverages
and Desserts
GBPm GBPm
-------------------------------------------------- ------ -------------
Net cash flow arising on disposal:
Initial consideration 15.0 -
Working capital adjustments and transaction costs (12.1) (0.7)
Net cash inflow/(outflow) for the year 2.9 (0.7)
-------------------------------------------------- ------ -------------
Property, plant and equipment 2.4 13.8
Inventories 22.5 4.5
Trade and other receivables 0.6 -
Trade and other payables (1.2) -
-------------------------------------------------- ------ -------------
Net assets disposed 24.3 18.3
-------------------------------------------------- ------ -------------
Investments in associates 14.4 9.6
Loans to associates - 3.3
Loss on disposal before tax (7.0) (6.1)
-------------------------------------------------- ------ -------------
10. Property, plant and equipment
During 2014 an impairment of GBP16.0m has been made to property,
plant and equipment relating to a reduction in the recoverable
value of certain assets in the Grocery business.
11. Investment in associates
As disclosed in note 9, the Group disposed of its majority
interest in the Bread business and Powdered Beverages and Desserts
business in 2014. The Group's retained interest in the share
capital of these businesses has been recognised as an investment in
associates. The carrying value at 30 June 2014 is GBP14.5m for the
Bread business and GBP9.6m for the Powdered Beverages and Desserts
business.
12. Loans to associates
The Group issued a loan note to Hovis Limited in 2014 for
GBP15.7m. The value as at 30 June 2014 of GBP15.9m includes
interest accrued to date. As part of the Powdered Beverages and
Desserts business disposal transaction, the Group holds a
promissory note of GBP3.3m.
13. Assets and liabilities held for sale
As at 31 December 2013, the assets and associated liabilities
relating to the Bread business were held for sale in light of the
announcement of the conditional sale of the Group's majority share
in this business on 27 January 2014. The disposal completed on 26
April 2014. On recognition of the assets and liabilities as held
for sale, an impairment loss of GBP234.4m was recognised in order
to write down the disposal group to fair value less costs to sell.
Management has assessed fair value less costs to sell based on the
initial cash consideration of GBP15.0m being received for 51% of
the business, less estimated costs to sell.
As at As at
30 Jun 2014 31 Dec 2013
GBPm GBPm
----------------------------------------- ----------- -----------
Current assets:
Inventories - 25.0
Trade and other receivables - 1.8
----------------------------------------- ----------- -----------
Total assets held for sale - 26.8
----------------------------------------- ----------- -----------
Current liabilities:
Trade and other payables - (1.4)
----------------------------------------- ----------- -----------
Total liabilities held for sale - (1.4)
----------------------------------------- ----------- -----------
Net assets and liabilities held for sale - 25.4
----------------------------------------- ----------- -----------
14. Bank and other borrowings
As at As at
30 Jun 2014 31 Dec 2013
GBPm GBPm
---------------------------------------------- ----------- -----------
Current:
Secured Senior Credit Facility - Revolving - (17.6)
Transaction costs - 0.3
---------------------------------------------- ----------- -----------
- (17.3)
Secured Senior Credit Facility - Term - (32.4)
Transaction costs - 0.6
- (31.8)
Bank overdrafts (0.8) -
---------------------------------------------- ----------- -----------
Total bank borrowings due within one year (0.8) (49.1)
Securitisation Facility (40.5) (120.0)
Transaction costs 1.0 -
---------------------------------------------- ----------- -----------
(39.5) (120.0)
Total borrowings due within one year (40.3) (169.1)
---------------------------------------------- ----------- -----------
Non-current:
Secured Senior Credit Facility - Revolving (128.0) (186.9)
Transaction costs 9.1 3.4
-----------
(118.9) (183.5)
Secured Senior Credit Facility - Term - (647.1)
Transaction costs - 11.9
---------------------------------------------- -----------
- (635.2)
Senior Secured Notes (500.0) -
Transaction costs 18.2 -
---------------------------------------------- -----------
(481.8) -
Total borrowings due after more than one year (600.7) (818.7)
Total bank and other borrowings (641.0) (987.8)
---------------------------------------------- ----------- -----------
Following completion of the recapitalisation in 2014, the
Group's previous term loan and revolving credit facilities were
repaid to the respective lenders and replaced by a revolving credit
facility and senior secured notes.
Revolving Credit Facility
The revolving credit facility of GBP272m is due to mature in
March 2019 and attracts an initial bank margin of 3.50% above
LIBOR. Banking covenants of net debt / EBITDA and EBITDA / interest
are in place and are tested biannually.
The Group entered into a 3 year floating to fixed interest rate
swap in June 2014, with a nominal value of GBP150m amortising to
GBP50m, attracting a swap rate of 1.44%.
Securitisation Facility
The debtor's securitisation facility is secured against the
Group's trade receivables. It is a three year programme maturing in
December 2016, with a GBP120m facility priced at 2.75% above the
cost of commercial paper.
Senior Secured Notes
The senior secured notes totalling GBP500m are split between
fixed and floating tranches. The fixed note of GBP325m matures in
March 2021 and attracts an interest rate 6.50%. The floating note
of GBP175m floating matures in March 2020 and attracts an interest
rate of 5.00% above LIBOR.
15. 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.
As at As at
30 Jun 2014 31 Dec 2013
Book & Market Book & Market
Value Value
GBPm GBPm
------------------------------------------------------- ------------- -------------
Loans and receivables:
Cash and cash equivalents 69.1 157.0
Trade and other receivables 107.5 235.0
Financial assets at fair value through profit
or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts/currency
options 0.1 0.2
- Commodity and energy derivatives - 0.3
- Interest rate swaps 0.1 -
Financial liabilities at fair value through
profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts/currency
options (1.2) (1.9)
- Interest rate swaps - (7.6)
Financial liabilities at amortised cost:
Trade and other payables (234.6) (320.4)
Bank Term Loan - (679.5)
Bank Revolver Facility (Drawn down) (128.0) (204.5)
Senior Secured Notes (500.0) -
Bank overdraft (0.8) -
Securitisation Facility (40.5) (120.0)
------------------------------------------------------- ------------- -------------
The following table presents the Group's assets and liabilities
that are measured at fair value 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).
As at As at
30 Jun 2014 31 Dec 2013
------------------------------------------------------- ----------- -----------
Financial assets at fair value through profit Level 2 Level 2
or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts/currency
options 0.1 0.2
- Commodity and energy derivatives - 0.3
- Interest rate swaps 0.1 -
Financial liabilities at fair value through
profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts/currency
options (1.2) (1.9)
- Interest rate swaps - (7.6)
------------------------------------------------------- ----------- -----------
16. Provisions for liabilities and charges
Restructuring provisions at 30 June 2014 primarily relate to
provisions for non-operational leasehold properties. Restructuring
provisions at 30 June 2013 primarily relate to provisions in
respect of the restructuring of the Bread business and programmes
aimed at reducing the Group's overhead cost base.
Other provisions at 30 June 2014 and 2013 primarily relate to
insurance claims, dilapidations against leasehold properties and
environmental liabilities. 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 0.81% and 3.62%. The unwinding of the
discount is charged to the statement of profit or loss under
interest payable.
17. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of defined benefit schemes under
which current and former employees have built up an entitlement to
pension benefits on their retirement. These are as follows:
(a) The Premier schemes, which comprise:
Premier Foods Pension Scheme ("PFPS")
Premier Grocery Products Pension Scheme ("PGPPS")
Premier Grocery Products Ireland Pension Scheme ("PGPIPS")
Chivers 1987 Pension Scheme
Chivers 1987 Supplementary Pension Scheme.
(b) The RHM schemes, which comprise:
RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The most recent full actuarial valuation of the PFPS, the PGPPS
and RHM pension schemes was carried out on 31 March 2013 / 5 April
2013 to establish ongoing funding arrangements. Deficit recovery
plans have been agreed with the Trustees of each of the schemes.
Actuarial valuations for the schemes based in Ireland take place
during the course of 2014.
The exchange rates used to translate the overseas Euro based
schemes are GBP1.00 = 1.2196 Euros for the average rate during the
period, and GBP1.00 = 1.2505 Euros for the closing position at 30
June 2014.
On 30 September 2013 the Group's UK defined benefit pension
schemes closed to future accrual. The future pension provision for
these members is now made through the Group's defined contribution
pension scheme. In accordance with IAS 19 (Revised), the scheme
obligations were re-valued by the scheme actuaries immediately
prior to the change and assumptions reviewed at that date. The
resulting change of GBP18.2m was credited to the income statement
within past service costs.
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
2014 2013 2013
--------------------------- -------- -------- ------
GBPm GBPm GBPm
--------------------------- -------- -------- ------
Premier & RHM
Discount rate 4.20% 4.70% 4.40%
Inflation- RPI 3.25% 3.30% 3.35%
Inflation- CPI 2.15% 2.30% 2.35%
Expected salary increases n/a 4.30% n/a
--------------------------- -------- -------- ------
For the smaller overseas schemes the discount rate used was
3.50% (2013: 3.50%) and future pension increases of 1.75% (2013:
1.75%).
The fair values of plan assets split by type of asset are as
follows:
Premier % of total RHM % of total Total % of total
Pension scheme assets schemes schemes
GBPm % GBPm % GBPm
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
Assets with a quoted price in an active market at 30 June 2014:
UK equities 1.7 0.3 46.9 1.7 48.6 1.4
Global equities 19.4 3.5 239.9 8.5 259.3 7.7
Government bonds 17.7 3.2 379.2 13.5 396.9 11.8
Corporate bonds 28.6 5.2 286.1 10.1 314.7 9.4
Property 6.7 1.2 163.0 5.8 169.7 5.0
Absolute return products 371.4 68.1 845.8 30.0 1,217.2 36.1
Cash 10.7 2.0 344.9 12.2 355.6 10.6
Other 90.3 16.5 - - 90.3 2.7
Assets without a quoted price in an active market at 30 June 2014:
Infrastructure funds - - 191.3 6.8 191.3 5.7
Swaps - - (16.9) (0.6) (16.9) (0.5)
Private equity - - 203.8 7.2 203.8 6.1
Other - - 134.8 4.8 134.8 4.0
Fair value of scheme assets
as at 30 June 2014 546.5 100 2,818.8 100 3,365.3 100
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
Assets with a quoted price in an active market at 31 December 2013:
UK equities 0.9 0.2 46.6 1.7 47.5 1.5
Global equities 19.3 3.6 232.9 8.8 252.2 7.8
Government bonds 12.1 2.3 503.6 18.7 515.7 16.0
Corporate bonds 60.3 11.3 323.8 12.1 384.1 11.9
Property 0.9 0.2 180.8 6.7 181.7 5.6
Absolute return products 370.2 69.7 898.0 33.4 1,268.2 39.4
Cash 9.1 1.7 183.2 6.8 192.3 6.0
Other 58.6 11.0 0.1 - 58.7 1.8
Assets without a quoted price in an active market at 31 December 2013:
Infrastructure funds - - 193.5 7.2 193.5 6.0
Swaps - - (116.6) (4.3) (116.6) (3.6)
Private equity - - 190.2 7.1 190.2 5.9
Other - - 50.9 1.8 50.9 1.7
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
Fair value of scheme assets
as at 31 Dec 2013 531.4 100 2,687.0 100 3,218.4 100
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
The schemes invest in interest rate and inflation swaps to
protect from fluctuations in interest and inflation.
The amounts recognised in the balance sheet arising from the
Group's obligations in respect of its defined benefit schemes are
as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
------------------------------------- --------- ---------- ----------
As at 30 June 2014
Present value of funded obligations (931.5) (2,970.0) (3,901.5)
Fair value of plan assets 546.5 2,818.8 3,365.3
------------------------------------- --------- ---------- ----------
Deficit in scheme (385.0) (151.2) (536.2)
------------------------------------- --------- ---------- ----------
As at 31 December 2013
Present value of funded obligations (916.9) (2,904.8) (3,821.7)
Fair value of plan assets 531.4 2,687.0 3,218.4
------------------------------------- --------- ---------- ----------
Deficit in scheme (385.5) (217.8) (603.3)
------------------------------------- --------- ---------- ----------
The aggregate deficit has decreased by GBP67m during the half
year (2013 full year: GBP137m increase) primarily due to asset
performance in the period.
Changes in the present value of the defined benefit obligation
were as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
------------------------------------ --------- ---------- ----------
2014
Opening defined benefit obligation (916.9) (2,904.8) (3,821.7)
Current service cost - - -
Past service credit - - -
Interest cost (19.6) (62.4) (82.0)
Remeasurement losses (14.9) (70.3) (85.2)
Exchange differences 1.9 0.9 2.8
Contributions by plan participants - - -
Benefits paid 18.0 66.6 84.6
------------------------------------ --------- ---------- ----------
Closing defined benefit obligation
as at 30 June 2014 (931.5) (2,970.0) (3,901.5)
------------------------------------ --------- ---------- ----------
2013
Opening defined benefit obligation (871.1) (2,805.0) (3,676.1)
Current service cost (3.4) (7.6) (11.0)
Past service credit 17.7 18.3 36.0
Interest cost (37.3) (121.3) (158.6)
Remeasurement losses (56.6) (118.4) (175.0)
Exchange differences (1.3) (0.4) (1.7)
Contributions by plan participants (2.2) (4.0) (6.2)
Benefits paid 37.3 133.6 170.9
------------------------------------ --------- ---------- ----------
Closing defined benefit obligation
as at 31 Dec 2013 (916.9) (2,904.8) (3,821.7)
------------------------------------ --------- ---------- ----------
Changes in the fair value of plan assets were as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
------------------------------------ --------- --------- --------
2014
Opening fair value of plan assets 531.4 2,687.0 3,218.4
Interest income on plan assets 11.4 58.0 69.4
Remeasurement gains 9.6 115.3 124.9
Administrative costs (3.4) (1.3) (4.7)
Contributions by employer 17.3 27.3 44.6
Contributions by plan participants - - -
Exchange differences (1.8) (0.9) (2.7)
Benefits paid (18.0) (66.6) (84.6)
------------------------------------ --------- --------- --------
Closing fair value of plan assets
as at 30 June 2014 546.5 2,818.8 3,365.3
------------------------------------ --------- --------- --------
2013
Opening fair value of plan assets 535.9 2,673.4 3,209.3
Interest income on plan assets 22.9 116.1 139.0
Remeasurement gains 2.1 20.2 22.3
Administrative costs (5.9) (5.7) (11.6)
Contributions by employer 10.8 12.1 22.9
Contributions by plan participants 2.2 4.0 6.2
Exchange differences 0.7 0.5 1.2
Benefits paid (37.3) (133.6) (170.9)
------------------------------------ --------- --------- --------
Closing fair value of plan assets
as at 31 Dec 2013 531.4 2,687.0 3,218.4
------------------------------------ --------- --------- --------
The reconciliation of the net defined benefit liability over the
period is as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
--------------------------------------- --------- --------- --------
2014
Deficit in schemes at beginning of
period (385.5) (217.8) (603.3)
Amount recognised in profit or loss (11.6) (5.7) (17.3)
Remeasurements recognised in other
comprehensive income (5.3) 45.0 39.7
Contributions by employer 17.3 27.3 44.6
Currency gains 0.1 - 0.1
Deficit in schemes as at 30 June 2014 (385.0) (151.2) (536.2)
--------------------------------------- --------- --------- --------
2013
Deficit in schemes at beginning of
period (335.2) (131.6) (466.8)
Amount recognised in profit or loss (6.0) (0.2) (6.2)
Remeasurements recognised in other
comprehensive income (54.5) (98.2) (152.7)
Contributions by employer 10.8 12.1 22.9
Currency (losses)/gains (0.6) 0.1 (0.5)
Deficit in schemes as at 31 Dec 2013 (385.5) (217.8) (603.3)
--------------------------------------- --------- --------- --------
Remeasurements recognised in the consolidated statement of
comprehensive income are as follows:
Premier RHM Total
Schemes Schemes
GBPm GBPm GBPm
----------------------------------------------- -------- -------- --------
30 June 2014
Remeasurement loss on plan liabilities (14.9) (70.3) (85.2)
Remeasurement gain on plan assets 9.6 115.3 124.9
----------------------------------------------- -------- -------- --------
Net remeasurement (loss)/gain for the period (5.3) 45.0 39.7
----------------------------------------------- -------- -------- --------
30 June 2013
Remeasurement (loss)/gain on plan liabilities (1.9) 34.4 32.5
Remeasurement (loss)/gain on plan assets (2.7) 51.6 48.9
----------------------------------------------- -------- -------- --------
Net remeasurement (loss)/gain for the period (4.6) 86.0 81.4
31 December 2013
Remeasurement loss on plan liabilities (56.6) (118.4) (175.0)
Remeasurement gain on plan assets 2.1 20.2 22.3
----------------------------------------------- -------- -------- --------
Net remeasurement loss for the year (54.5) (98.2) (152.7)
----------------------------------------------- -------- -------- --------
The total amounts recognised in the consolidated statement of
profit or loss are as follows:
Premier RHM Total
schemes schemes
GBPm GBPm GBPm
---------------------- --------- --------- -------
30 June 2014
Operating profit
Current service cost - - -
Past service credit - - -
Administrative costs (3.4) (1.3) (4.7)
Net interest cost (8.2) (4.4) (12.6)
---------------------- --------- --------- -------
Total for the period (11.6) (5.7) (17.3)
---------------------- --------- --------- -------
30 June 2013
Operating profit
Current service cost (2.5) (5.2) (7.7)
Past service credit 0.5 - 0.5
Administrative costs (1.1) (1.4) (2.5)
Net interest cost (7.4) (2.8) (10.2)
Total for the period (10.5) (9.4) (19.9)
---------------------- --------- --------- -------
31 December 2013
Operating profit
Current service cost (3.4) (7.6) (11.0)
Past service credit 17.7 18.3 36.0
Administrative costs (5.9) (5.7) (11.6)
Net interest cost (14.4) (5.2) (19.6)
---------------------- --------- --------- -------
Total for the year (6.0) (0.2) (6.2)
---------------------- --------- --------- -------
Defined contribution schemes
The Group operates defined contribution schemes in the UK and
Ireland. In addition the Group has effected a number of life
assurance schemes providing lump sum death benefits for employees
who are members of the pension schemes. The total expense
recognised by the Group in the statement of profit or loss in the
period of GBP4.4m (30 June 2013: GBP0.7m) represents contributions
payable to the plans by the Group at rates specified in the rules
of the plans.
18. Other liabilities
Deferred financing fees held on the balance sheet at 31 December
2013 at GBP15.8m in relation to the previous financing arrangements
were paid in the period as a result of the capital
restructuring.
19. Notes to the cash flow statement
Reconciliation of loss before taxation to cash flows from operating
activities
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
(Restated)(1)
GBPm GBPm
---------------------------------------------------- ----------- -------------
Continuing operations
Loss before taxation (54.9) (15.7)
Net finance cost 44.9 20.9
Share of profit from associates (0.1) -
---------------------------------------------------- ----------- -------------
Operating (loss)/profit (10.1) 5.2
Depreciation of property, plant and equipment 7.5 8.7
Amortisation of intangible assets 20.0 23.5
Loss on disposal of operations 6.1 2.4
Loss on disposal of property, plant and equipment - 1.0
Impairment of property, plant and equipment 16.0 0.4
Revaluation gains on financial instruments (0.3) (0.3)
Employee incentive schemes 2.1 1.8
---------------------------------------------------- ----------- -------------
Net cash inflow from operating activities before
interest, tax and
movements in working capital 41.3 42.7
Increase in inventories (15.8) (9.5)
Decrease in trade and other receivables 28.8 29.8
Decrease in trade and other payables and provisions (23.7) (43.6)
Movement in retirement benefit obligations (22.2) 9.3
---------------------------------------------------- ----------- -------------
Cash generated from continuing operations 8.4 28.7
Discontinued operations (2.6) (14.3)
---------------------------------------------------- ----------- -------------
Cash generated from operating activities 5.8 14.4
---------------------------------------------------- ----------- -------------
(1) Comparatives have been restated to reflect the reclassification
of the Bread business as a discontinued operation.
Reconciliation of cash and cash equivalents to
net borrowings
Half year Half year
ended ended
30 Jun 2014 30 Jun 2013
GBPm GBPm
-------------------------------------------------- ----------- -----------
Net (outflow)/inflow of cash and cash equivalents (88.7) 57.9
Decrease in finance leases - 0.4
Decrease in borrowings 364.2 5.2
Other non-cash movements (16.6) (3.2)
-------------------------------------------------- ----------- -----------
Decrease in borrowings net of cash 258.9 60.3
Total net borrowings at beginning of period (830.8) (950.7)
-------------------------------------------------- ----------- -----------
Total net borrowings at end of period (571.9) (890.4)
-------------------------------------------------- ----------- -----------
Analysis of movement in borrowings
As at Cash flow Other As at
1 Jan 2014 non-cash 30 Jun 2014
movements
GBPm GBPm GBPm GBPm
----------------------------------- ----------- --------- ---------- ------------
Bank overdrafts - (0.8) - (0.8)
Cash and bank deposits 157.0 (87.9) 69.1
----------------------------------- ----------- --------- ---------- ------------
Net cash and cash equivalents 157.0 (88.7) - 68.3
Borrowings - term facilities (679.5) 679.5 - -
Borrowings - revolving credit
facilities (204.5) 76.5 - (128.0)
Borrowings - bond - (500.0) - (500.0)
Securitisation facility (120.0) 79.5 - (40.5)
----------------------------------- ----------- --------- ---------- ------------
Gross borrowings net of cash(1) (847.0) 246.8 - (600.2)
Debt issuance costs 16.2 28.7 (16.6) 28.3
----------------------------------- ----------- --------- ---------- ------------
Total net borrowings(1) (830.8) 275.5 (16.6) (571.9)
----------------------------------- ----------- --------- ---------- ------------
(1) Borrowings excludes derivative financial
instruments.
20. Contingencies
There were no material contingent liabilities as at 30 June
2014.
21. Related party transactions
As at 30 June 2014 the following are considered to be related
parties under the Listing Rules due to their shareholdings
exceeding 10% of the Group's total issued share capital:
- Warburg Pincus LLC
- Schroders plc
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.
22. Subsequent events
There were no subsequent events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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