TIDMPFD TIDMIRSH
RNS Number : 7518E
Premier Foods plc
10 November 2020
10 November 2020
Premier Foods plc (the "Group" or the "Company")
Half year results for the 26 weeks ended 26 September 2020
Exceptionally strong results delivering accelerated
deleveraging; raising full year Trading profit outlook
Headline results FY20/21 H1 FY19/20 H1 Change
Revenue (GBPm) 421.5 366.7 +15.0%
Trading profit(1) (GBPm) 65.8 51.1 +28.7%
Adjusted profit before taxation
(GBPm) 47.7 31.7 +50.2%
Adjusted earnings per share(7)
(pence) 4.5 3.0 +49.6%
Net debt (pre-IFRS 16)(9,11)
(GBPm) (382.8) (470.7) +GBP87.9m
Net debt/EBITDA(11,13) 2.3 3.2
Statutory measures FY20/21 H1 FY19/20 H1 Change (GBPm)
Operating profit (GBPm) 65.2 35.9 +29.3
Profit before taxation (GBPm) 50.5 15.0 +35.5
Basic earnings per share (pence) 5.1 1.5 +3.6p
Net debt(9) (GBPm) (403.1) (492.9) +89.8
Non-GAAP measures above are defined and reconciled to statutory
measures throughout
Net debt/EBITDA is EBITDA on an adjusted basis as defined in the
appendices
Financial headlines
====================
-- Group revenue up +15.0%; Q2 Group revenue up +8.1%
-- Branded revenue up +18.6%; Q2 branded revenue up +11.0%
-- Trading profit increased +28.7% to GBP65.8m after increased
marketing investment and incremental Covid costs
-- Adjusted profit before tax up +50.2% to GBP47.7m; adjusted
earnings per share(7) up +49.6% to 4.5p
-- Statutory profit before tax increased GBP35.5m to GBP50.5m;
profit after tax up GBP31.1m to GBP43.4m
-- Net debt reduced by GBP87.9m on pre-IFRS 16 basis to
GBP382.8m; Net debt on post-IFRS basis GBP403.1m
-- Net debt/EBITDA,(3,11) reduced to 2.3x compared to 2.7x six months earlier
-- Combined pensions surplus of GBP516.5m reduced from
GBP1,230.4m at 28 March 2020 due to discount rate decrease
Strategic & operational headlines
==================================
-- Exceptional trading throughout H1, delivering strong profit
growth and accelerated Net debt reduction
-- Priority of protecting colleagues through COVID-19 pandemic and keeping shelves stocked
-- Growing faster than the market; share gains in all our categories
-- Online performance +112% and ahead of this fast growing
channel, increasing market share by 260bps
-- Grocery brands household penetration up over 3%, attracting 1.1 million new consumers
-- Significantly increased consumer marketing investment planned
for FY20/21; six major brands on TV
-- Branded revenue growth more than offsets Non-branded revenue
declines in B2B out of home volumes
-- Cost savings programme to deliver ahead of GBP5m target
-- Announced repayment in aggregate of GBP120m callable Floating
rate notes in FY20/21 reducing interest costs by GBP6m p.a.
-- Credit ratings upgrades received from both S&P and Moody's
-- Hovis disposal completed 5 November, raising proceeds of GBP37.3m
Alex Whitehouse, Chief Executive Officer
"In the first half of the year, demand for our branded product
ranges has been exceptional, particularly in our Grocery businesses
which have helped deliver strong profit growth, accelerated debt
reduction and a lowest ever Net debt/EBITDA ratio of 2.3x. We have
seen many more meal occasions being consumed at home, particularly
in the first quarter, followed by a transition towards more normal
levels of demand through quarter two. During this entire time, we
have continued to drive our branded growth model, launching
insightful new products and supporting our three biggest brands
with above the line advertising. Consequently, we have continued to
grow faster than all our categories, increasing market share in
each one; a reflection not only of our strong brands but also the
amazing performance of our supply chain colleagues to ensure
product availability. In online, we have grown +112% which is again
ahead of channel growth, leading to a market share gain of 260
basis points."
"During recent months, the health and wellbeing of all our
colleagues has remained our top priority. We put in place a wide
variety of measures across our locations at a very early stage to
help keep our colleagues safe and all these measures will remain in
place until we are certain they're no longer required. I am
extremely proud of the collective efforts of all our colleagues
during this very testing period. Over recent months, we have also
supported our communities by delivering nearly 9,000 cases of
products to 28 hospitals and over 400,000 meals to those in need
via Fareshare, the charitable food redistributor."
"Looking to the second half of the financial year, we expect to
see continued revenue growth driven by further new product
innovation, strong commercial plans and increased marketing
investment for our brands, with six major brands planned to be
advertised on TV. We also now expect to see an increase in demand
for our brands due to the impact of recently increased government
restrictions on eating out. The longevity of this increased demand
is likely to be linked to the duration of these new measures, and
although we have tougher comparatives in the fourth quarter, we
anticipate that Trading profit for the full year will be ahead of
current market expectations. Additionally, following both our
recent progress in accelerating leverage reduction along with
proceeds received from the Hovis transaction, we are today
announcing a new medium-term target for Net debt/EBITDA of
approximately 1.5x."
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Further information
====================
A presentation to investors and analysts will be webcast today
at 9:00am GMT.
To register for the webcast follow the link:
www.premierfoods.co.uk/investors/investor-centre
A recording of the webcast will be available on the Company's
website later in the day.
A conference call for bond investors and analysts will take
place today, 10 November 2020, at 1:30pm GMT. Dial in details are
outlined below:
Telephone: 0800 376 7922 (UK toll free)
+44 20 7192 8000 (standard international
access)
Conference ID: 2984918
A factsheet with highlights of the Half year results is
available at:
www.premierfoods.co.uk/investors/results-centre
A Premier Foods image gallery is available using the following
link:
www.premierfoods.co.uk/media/image-gallery/
Contacts:
Institutional investors and analysts:
Duncan Leggett, Chief Financial
Officer +44 (0) 1727 815 850
Richard Godden, Director of Investor
Relations & Treasury +44 (0) 1727 815 850
Media enquiries:
Hannah Collyer, Corporate Affairs
Director +44 (0) 1727 815 850
Headland
Ed Young +44 (0) 7884 666830
Francesca Tuckett +44 (0) 7884 667661
- Ends -
This announcement may contain "forward-looking statements" that
are based on estimates and assumptions and are subject to risks and
uncertainties. Forward-looking statements are all statements other
than statements of historical fact or statements in the present
tense, and can be identified by words such as "targets", "aims",
"aspires", "assumes", "believes", "estimates", "anticipates",
"expects", "intends", "hopes", "may", "would", "should", "could",
"will", "plans", "predicts" and "potential", as well as the
negatives of these terms and other words of similar meaning. Any
forward-looking statements in this announcement are made based upon
Premier Foods' estimates, expectations and beliefs concerning
future events affecting the Group and subject to a number of known
and unknown risks and uncertainties. Such forward-looking
statements are based on numerous assumptions regarding the Premier
Foods Group's present and future business strategies and the
environment in which it will operate, which may prove not to be
accurate. Premier Foods cautions that these forward-looking
statements are not guarantees and that actual results could differ
materially from those expressed or implied in these forward-looking
statements. Undue reliance should, therefore, not be placed on such
forward-looking statements. Any forward-looking statements
contained in this announcement apply only as at the date of this
announcement and are not intended to give any assurance as to
future results. Premier Foods will update this announcement as
required by applicable law, including the Prospectus Rules, the
Listing Rules, the Disclosure and Transparency Rules, London Stock
Exchange and any other applicable law or regulations, but otherwise
expressly disclaims any obligation or undertaking to update or
revise any forward-looking statement, whether as a result of new
information, future developments or otherwise.
Financial results
==================
Revenue
Group revenue (GBPm) Grocery Sweet Treats Group
Branded 273.1 94.2 367.3
Non-branded 43.6 10.6 54.2
-------- ------------- -------
Total 316.7 104.8 421.5
% change
Branded +25.2% +3.0% +18.6%
Non-branded (4.7%) (5.8%) (4.9%)
-------- ------------- -------
Total +20.0% +2.0% +15.0%
Group revenue for the 26 weeks to 26 September 2020 was
GBP421.5m, an increase of +15.0% on the same period a year ago.
Branded revenue increased by +18.6% to GBP367.3m while Non-branded
revenue declined (4.9%) to GBP54.2m. In the second quarter, Group
revenues grew by +8.1% to GBP207.4m. Within this, the Group's
branded revenues increased +11.0% in Q2.
The Group employs a branded growth model strategy which
leverages the strength of its market leading brands, launching
insightful new product innovation, supporting with emotionally
engaging advertising and building strategic retail partnerships. In
following this strategy, revenues in the UK have displayed growth
for the last thirteen quarters. The Group grew faster than all its
categories during the period, continuing the trajectory from the
previous financial year, delivering 75 basis points of share growth
for the 26 weeks to 26 September 2020.
In recent months, the Group has demonstrated its resilience as
it has sought to counteract the threats presented by the Covid-19
pandemic. A portfolio of brands with strong category positions has
been an important cornerstone as consumers have turned to brands
they recognise and trust. With a significant rise in the number of
meals eaten at home this year due to government restrictions,
households have looked to expand their repertoire of meals and this
has resulted in millions of new consumers purchasing the Group's
brands. Consequently, household penetration - the number of
households purchasing a brand in a given period of time - has
increased for all the Group's major brands in the period.
Additionally, the Group has delivered market share gains not only
due to its strong category positions but also due to ensuring
availability of its product ranges through its robust manufacturing
and logistics operations.
The Group has observed several different phases of growth during
the first half of the year. In the first quarter, as the
Government's pandemic lockdown restrictions were at their most
stringent, volumes grew very strongly as eating at home occasions
increased; consequently, for example, Grocery branded sales
increased +39.2% compared to the prior year. As these restrictions
eased in July, this volume peak declined, assisted by the
Government's August Eat Out To Help Out scheme. Volumes then
returned to relatively more normal levels before starting to
increase again in late September as additional restrictions were
implemented across parts of the UK. As a result of these movements,
Group sales increased +8.1% in the second quarter.
Grocery
Grocery branded revenue grew +25.2% to GBP273.1m in the period
and increased +13.0% in Q2. The Grocery brands benefitted from the
Group's innovation strategy, increasing consumer marketing
investment behind emotionally engaging advertising and increased
volumes from consumers eating more meals at home. All the major
Grocery brands grew in strong double-digit terms during the first
half of the year, with Bisto, Batchelors, Oxo, Ambrosia,
Sharwood's, McDougall's and Nissin all stand out performers.
Grocery innovation in H1 included some new healthier choice
ranges from Sharwood's such as 30% less fat Butter Chicken, and
low-fat Naan breads, following the success of previously launched
Sharwood's healthier options. Oxo meat free Beef flavoured stock
cubes, suitable for a vegan diet, have also proved to be very
popular with consumers. Bisto and Batchelors both benefitted from
TV advertising in the first half of the year; bringing forward
Bisto's usual October start date for media investment.
During the first half of this financial year, the Grocery
business's brands have grown strongly, as UK consumers increased
the proportion of meals eaten in the home. The Group maintains
number one positions in all the categories in which it plays, and
with these strong brand equities, it has been evident that with the
market share gains seen in the period, consumers have turned to
brands they can trust during this time. This trend is demonstrated
not only with respect to market share gains, but also with
reference to household penetration, which measures the number of UK
households which purchase a brand at least once in a given
timeframe. In the 24 weeks to 4 October, the Group's Grocery
categories gained over 3% of household penetration overall,
equivalent to approximately 1.1 million new UK households. The
Flavourings and Seasonings and Desserts categories reported
household penetration gains in excess of five percentage
points.
A key growth area throughout this period has been the online
channel with the major retailers who operate ecommerce platforms.
The overall market grew significantly during this period, and the
Group's categories have grown ahead of this, with sales increasing
by +112%, equating to a market share gain of 260 basis points. The
Group has been developing its online capabilities over the last
three years, increasing resource in this area to ensure maximum
benefits from the growth potential in this channel. For example,
this has ensured the Group's brands are promoted and displayed
using pertinent techniques for the online channel.
In the second half of this financial year, the Grocery business
will be launching a number of new product ranges as part of its
healthier choices strategy. For example, building on its convenient
gravy pots microwaveable product range, Bisto is launching a new
30% less salt version to market. Additionally, Batchelors is
introducing a range of new cup a soups 'Filled with Goodness', made
with natural ingredients. Under the Sharwood's brand, 30% less
sugar cooking sauce pouches will be available in Sweet & Sour,
Sweet Chilli & Garlic and Chow Mein flavour variants.
Additionally, the Group is pleased to become the UK's sole
distributor for the high quality Cape Herb and Spice flavourings
and seasonings range, distributed under licence. The roll out of
Cape Herb and Spice; a range of new rubs, chilli tins and seasoning
grinders designed to help inspire consumers looking for exciting
flavours on a wide variety of dishes, will be part of the
Flavourings and Seasonings category and includes seasoning flavours
such as Louisiana Cajun, Sriracha Chilli and Chipotle Chilli.
Sweet Treats
Sweet Treats revenue growth during the first half of the
financial year was more modest compared to the Grocery business.
Total revenue was GBP104.8m, an increase of 2.0%; within this,
branded revenue grew 3.0% and Non-branded revenue was (5.8%) lower.
The first quarter saw Sweet Treats revenue grow by +0.7% as
consumers focused on purchasing staple goods as the UK entered
stringent lockdown restrictions. In the second quarter, revenue
grew by +3.2% to GBP52.7m, of which branded growth was +5.5% and
Non-branded declined (12.2%). In overall terms, the Group's brands
delivered 154 basis points of market share gain in the period
despite the cake category not displaying volume growth over recent
months.
The Group's largest brand, Mr Kipling, delivered yet another
good revenue performance, following its strong progress over the
last two years since its brand relaunch. This reflected new product
development such as the premium Signature range, Mini pies and
tarts collections, and a strong response to the 30% less sugar
slices ranges. Mr Kipling also benefitted from a TV advertising
campaign for a total of twelve weeks during the summer months with
the popular 'Little Thief' advertisement. Mr Kipling continues to
be a great example of the Group's branded growth model strategy,
through its new product development programme, emotionally engaging
advertising and strategically aligned retailer partnerships.
Cadbury cake also grew revenue in the first half of the year
owing to very robust volumes from the core Mini Rolls range. The
Group maintains its longstanding relationship with Cadbury owner,
Mondel ē z International; its licence for cake and ambient desserts
is due to run until 2025.
Looking to the second half of the year, the Group will be
investing in further TV advertising for Mr Kipling and has some
further exciting innovation, expanding the Mr Kipling signature
range with Deluxe Viennese Whirls and After Dinner Chocolate and
Orange Fancies. Cadbury cake sees the extension of its cake bars
range with new Oreo, Fudge and Crunchie variants and also sees the
launch of Dairy Milk cup cakes. As part of the Group's commitment
to offer better for you choices and following the success of Mr
Kipling 30% less sugar slices, Mr Kipling 30% less sugar Viennese
Whirls will also be launched in H2.
International
The International business returned to growth in the period, as
revenue increased 14%(8) following a disappointing FY19/20. The
Group recently reviewed its International strategy and is adopting
a new approach to deliver sustainable profitable growth as
evidenced in the UK. A new Head of International has been appointed
to lead this new approach. The business has moved to a new
organisational structure where locally based market heads have
replaced function heads; a switch of resources from the UK to
relevant markets. There is now a change of emphasis underpinned by
strong focus on in-market execution, which involves ensuring the
right products are presented to the shopper at the right price,
combined with an optimum promotional strategy. Route to market
solutions include using carefully chosen local partners with
appropriate capabilities.
This strategy is displaying early indications of progress. For
example, in Ireland, a change in promotional strategy with the
wholesale distributor for cake has resulted in a strong sales
uplift in the period compared to the previous promotional
mechanics.
One of the objectives in Ireland is to replicate the successful
and proven branded growth model established in the UK. In this
context, the first half of the year has seen Mr Kipling receive TV
advertising for the first time in many years and in conjunction
with an integrated promotional campaign enabled double-digit
revenue growth in the period. Ireland will also benefit from
entering new categories for the first time; in particular the Group
is entering the Quick Meals, Snacks & Soups category for the
first time with the launch of the premium offerings of Nissin Soba
and Cup Noodle ranges. In Australia, a new head of market has been
appointed with a new locally based team with strong consumer sector
backgrounds. In North America, the Group is close to appointing a
new distribution partner in the USA and has a market test for Mr
Kipling cake underway in Canada.
Non-branded
In the Grocery business, Non-branded revenue declined (4.7%) in
the period to GBP43.6m while Sweet Treats saw revenue fall by
(5.8%) to GBP10.6m. Grocery saw an increase in revenue for its
retailer brand contracts, but this was more than offset by a fall
in revenue for business to business units such as Knighton Foods
and Charnwood Foods due to reduced eating out of home in the
period. In Sweet Treats, the sales decline reflected contract exits
for cake slices and later sell in of seasonal product lines
compared to the prior year.
In overall terms, the Group's Non-branded business is one which
plays an important and supportive role. The principles used are: to
deploy low levels of capital investment; support the recovery of
manufacturing overheads and apply strict financial hurdles on new
contracts.
Trading profit
GBPm FY20/21 FY19/20 Change
H1 H1
Divisional contribution(2)
Grocery 78.5 59.3 32.2%
Sweet Treats 9.1 10.4 (12.5%)
-------- -------- --------
Total 87.6 69.7 25.6%
Group & corporate costs (21.8) (18.6) (17.2%)
-------- -------- --------
Trading profit 65.8 51.1 28.7%
The Group delivered Trading profit of GBP65.8m in the first half
of FY20/21, up 28.7% on the same period last year. Divisional
contribution increased by GBP17.9m to GBP87.6m and Group &
corporate costs were GBP3.2m higher than the comparative period.
The increase in Divisional contribution was due to strong growth in
the Grocery business, up 32.2% to GBP78.5m, slightly offset by
Sweet Treats which declined by (12.5%) to GBP9.1m.
Grocery benefitted from strong performances across its branded
portfolio, as the substantial increase in volumes seen during the
first half of the year saw the impacts of operational leverage feed
through to Divisional contribution. The supply chain incurred
incremental costs during the first half of the year associated with
enhanced hygiene and social distancing measures and temporary
labour as a result of the Covid-19 pandemic. Additionally, the
Group increased its consumer marketing expenditure as both
Batchelors and Bisto were recipients of television advertising in
the period, reflecting the Group's branded growth model strategy of
increasing its brand investment.
In Sweet Treats, Divisional contribution was GBP1.3m lower than
the prior year. Divisional contribution was impacted by incremental
Covid-19 related costs in a similar way to the Grocery business,
although the requirements for additional social distancing measures
and temporary labour was more pronounced in Sweet Treats than
Grocery. Additionally, marketing investment for Mr Kipling was
higher in the period, as the Group's largest brands benefitted from
twelve weeks on air of the popular 'Little Thief' television
advert.
Consumer marketing investment is planned to increase further in
FY20/21 with up to six of the Group's largest brands in line to
benefit from media advertising in the year, with the continued
focus on delivering strong branded revenue growth. This includes
the desserts category leader, Ambrosia, which will be on air for
the first time in many years. In the first half of the year, the
Group also benefitted from generally lower market rates for media
slots and accordingly was able to purchase more television
advertising time.
Group & corporate costs increased by GBP3.2m in the period
to GBP21.8m. This was largely as a result of higher Group wider
management incentive schemes costs, covering a management
population of nearly 500 colleagues and to a lesser extent, a
provision for an asset write off relating to an item of cake
manufacturing equipment no longer required.
Operating profit
GBPm FY20/21 FY19/20 Change
H1 H1
Adjusted EBITDA(3) 74.9 60.5 14.4
Depreciation 9.1 9.4 0.3
Trading profit 65.8 51.1 14.7
Amortisation of intangible assets (13.5) (14.9) 1.4
Fair value movements on foreign
exchange & derivatives (0.3) 1.3 (1.6)
Reversal of impairment loss of Loan
receivable 15.7 - 15.7
Non-trading items:
Restructuring costs (2.6) (0.7) (1.9)
Net interest on pensions and administrative
expenses 0.1 (0.1) 0.2
Other non-trading - (0.8) 0.8
Operating profit 65.2 35.9 29.3
------- ------- ------
Operating profit increased by GBP29.3m, or 81.6%, to GBP65.2m in
the first half of the year. This growth was largely due to the
Trading profit performance as described above, a lower charge for
amortisation of intangible assets and the reversal of the
impairment loss on the Hovis loan note principal.
Amortisation of intangible assets was GBP13.5m in H1 compared to
GBP14.9m in FY19/20 H1. This reduction was largely due to certain
SAP software modules at the Group's main manufacturing sites
becoming fully amortised in the period. Fair valuation of foreign
exchange and derivatives resulted in an adverse movement of GBP1.6m
against the comparative period. An impairment reversal of GBP15.7m
was recognised in the period in respect of the Hovis loan note
previously written off, reflecting the reassessment of the loan
note's recoverability.
Net interest on pensions and administrative expenses was
GBP0.1m. Expenses for operating the Group's pension schemes were
GBP6.9m in the period, offset by a net interest credit of GBP9.3m
due to an opening surplus of the Group's combined pension schemes.
Also included is a charge of GBP3.3m which reflects settlement
costs associated with enhanced transfer value payments made to
certain RHM scheme deferred members.
Non-trading restructuring costs were GBP2.6m in H1, a GBP1.9m
increase on the comparative period. This increase was due to costs
associated with advisory work on the segregated merger pensions
agreement announced on 20 April 2020.
Finance costs
GBPm FY20/21 H1 FY19/20 Change
H1
Senior secured notes interest 13.8 15.5 1.7
Bank debt interest - net 2.7 2.2 (0.5)
16.5 17.7 1.2
Amortisation of debt issuance costs 1.6 1.7 0.1
---------- ------- -------
Net regular interest(5) 18.1 19.4 1.3
---------- ------- -------
Write-off of financing costs 0.6 0.0 (0.6)
Discount unwind 0.1 1.0 0.9
Other finance cost 0.5 0.5 0.0
Other finance income (4.6) - 4.6
---------- ------- -------
Net finance cost 14.7 20.9 6.2
---------- ------- -------
Net finance cost was GBP14.7m in the first half of the year, a
decrease of GBP6.2m compared to the comparative period. Net regular
interest in H1 was GBP18.1m, a reduction of GBP1.3m compared to the
prior year. This reduction was due to lower Senior secured notes
interest charges, partly offset by slightly higher bank debt
interest. Senior secured notes interest declined by GBP1.7m,
reflecting lower LIBOR rates compared to the prior year and the
GBP80m partial redemption of the Group's Floating Rate Notes (FRN)
which completed on 17 June 2020.
Bank debt interest of GBP2.7m was GBP0.5m higher due to
temporary increased drawings on the revolving credit facility (RCF)
during April and May. The RCF was repaid during Q1 and remained
undrawn at the half year.
Following the GBP80m partial redemption of the FRN, write off of
financing fees amounting to GBP0.6m were incurred in the period.
Financing fees are often incurred when financial instruments such
as this FRN are first issued; these fees are then spread across the
life of the instrument. As the FRN is due to mature in July 2022,
this GBP0.6m relates to the proportion of financing fees associated
with the GBP80m partial redemption not yet incurred.
A charge of GBP0.1m in the period related to a discount unwind
associated with properties held by the Group. Other finance income
of GBP4.6m relates to the reversal of the impairment on interest on
the Hovis loan note, reflecting the reassessment of the loan note's
recoverability.
Taxation
The taxation charge for the period ended 26 September 2020 of
GBP7.1m (2019/20: GBP2.7m charge) predominantly comprises a charge
on operating activities of GBP7.0m (2019/20: GBP2.7m charge) based
upon managements best estimate of the effective annual income tax
rate expected for the full financial year.
The Group currently retains brought forward losses which it can
utilise to offset against future tax liabilities. Due to changes in
tax legislation with respect to tax shields, the Group may
recommence paying cash tax in low single digit GBPmillions in the
medium term.
Earnings per share
Earnings per share (GBPm) FY20/21 FY19/20 Change
H1 H1
Operating profit 65.2 35.9 29.3
Net finance cost (14.7) (20.9) 6.2
Profit before taxation 50.5 15.0 35.5
Taxation (7.1) (2.7) (4.4)
-------- -------- -------
Profit after taxation 43.4 12.3 31.1
Average shares in issue 849.6 846.1 3.5m
-------- -------- -------
Basic Earnings per share
(pence) 5.1 1.5 3.6
The Group reported a profit before tax of GBP50.5m in the
period, an increase of GBP35.5m compared to FY19/20 H1. Profit
after tax in the first half of the year grew by GBP31.1m from
GBP12.3m to GBP43.4m.
Adjusted earnings per share FY20/21 FY19/20 Change
(GBPm) H1 H1 (%)
Trading profit 65.8 51.1 28.7%
Less: Net regular interest (18.1) (19.4) 6.6%
-------- -------- --------
Adjusted profit before
tax 47.7 31.7 50.2%
Less: Notional tax (19%) (9.1) (6.0) (50.2%)
-------- -------- --------
Adjusted profit after tax(6) 38.6 25.7 50.2%
Average shares in issue
(millions) 849.6 846.1 0.4%
Adjusted earnings per share
(pence) 4.5 3.0 49.6%
Adjusted profit before tax increased by 50.2% in the period to
GBP47.7m, reflecting both Trading profit growth in the period and
lower net regular interest costs as described above. Adjusted
profit after tax also increased by 50.2%, to GBP38.6m in the first
half of the year after deducting a notional 19.0% tax charge of
GBP9.1m. Based on average shares in issue of 849.6 million shares,
adjusted earnings per share grew +49.6% to 4.5p.
Loan to associate
In April 2014, the Group entered into a partnership with The
Gores Group LLC in respect of Hovis Holdings Limited ("Hovis").
This partnership, of which the Group held a 49% equity interest,
was subsequently written off in FY 2015/16. On 5 November 2020, the
Group completed the sale of its interest in Hovis to Endless LLP.
As part of the sale, the group has received a total consideration
of GBP37.3m, of which GBP17.0m was in respect of equity and
GBP20.3m reflected the settlement of the outstanding loan to
associate.
Free cash flow
GBPm FY20/21 FY19/20
H1 H1
Statutory cash flow statement
Cash generated from operating activities 35.1 8.3
Cash used in investing activities (7.1) (8.0)
Cash (used in)/generated from financing
activities (165.5) 0.6
-------- --------
Net (decrease)/increase in cash & cash
equivalents (137.5) 0.9
Cash, cash equivalents and bank overdrafts
at beginning of period 177.9 27.8
-------- --------
Cash, cash equivalents and bank overdrafts
at end of period 40.4 28.7
-------- --------
On a statutory basis, cash generated from operations was
GBP52.6m compared to GBP25.9m in the comparative period. Cash
generated from operating activities was GBP35.1m after deducting
net interest paid of GBP17.5m. Cash used in financing activities
was (GBP165.5m) in the period versus GBP0.6m cash generated in the
prior year, which was due to two main actions. Firstly, the Group
repaid a drawdown of GBP85.0m on its committed revolving credit
facility in the first quarter of the year. This followed an earlier
prudent decision by the Group at the end of the previous financial
year to draw this GBP85.0m sum, reflecting early stage wider
uncertainties associated with the COVID-19 pandemic. Secondly, the
Group used cash generated during FY19/20 to fund an GBP80.0m part
redemption of its FRN on 17 June 2020.
GBPm FY20/21 H1 FY19/20 H1
Trading profit 65.8 51.1
Depreciation 9.1 9.4
Other non-cash items 1.4 1.2
Interest (17.5) (17.6)
Pension contributions (26.3) (24.2)
Capital expenditure (7.1) (8.1)
Working capital & other 4.5 (8.3)
Non-trading items (3.2) (3.3)
Proceeds from share issue 0.8 0.6
Sale of property, plant & equipment - 0.1
Free cash flow(10) 27.5 0.9
----------- -----------
The Group reported an inflow of Free cash in the period of
GBP27.5m despite seasonal stock build versus a broadly flat
position in the previous year. Trading profit of GBP65.8m was ahead
of the prior year for the reasons outlined above, while
depreciation of GBP9.1m was broadly in line with the prior year
period. Other non-cash items of GBP1.4m was predominantly due to
share based payments.
Net interest paid of GBP17.5m was GBP0.1m lower than the prior
year. As with the prior year period, no taxation was paid in the
period due to the availability of brought forward losses and
capital allowances.
Total pension contributions in the period were GBP26.3m (2019/20
H1: GBP24.2m), due to previously agreed planned increases in
deficit contribution payments to the Premier Foods pension scheme.
Of this, pension deficit contribution payments were GBP20.1m and
administration costs including pension levy costs were GBP6.2m.
Capital expenditure in the first half of the year was GBP7.1m,
slightly lower than both the prior year and original expectations.
This is partly due to restricted access for contractors to work on
capital projects at the Group's sites in light of more stringent
safety measures implemented due to COVID-19 precautions. In the
full year, the Group expects to increase its capital expenditure to
c.GBP25m to fund investment in both growth projects supporting the
Group's innovation strategy and cost release projects to deliver
efficiency savings.
The first half of the year saw a working capital inflow of
GBP4.5m compared to an outflow of (GBP8.3m) in FY19/20 H1. This is
largely due to a timing benefit between Debtors and Creditors so is
expected to unwind. Non-trading items of GBP3.2m were paid in the
first half of the year and comprise the final tranche of advisory
costs associated with the Group's strategic review and costs
relating to restructuring of the International business.
Net debt and sources of finance
GBPm Pre-IFRS 16 Post-IFRS
16
Net debt at 28 March 2020 408.1 429.6
Free cash inflow in period (27.5) (27.5)
Movement in debt issuance
costs 2.2 2.2
Movement in lease creditor - (1.2)
Net debt at 26 September 2020 382.8 403.1
Adjusted EBITDA (12 months
rolling) 164.5 166.9
Net debt / EBITDA 2.3x 2.4x
------------------------------- ------------ ----------
Net debt at 26 September 2020 was GBP403.1m, a reduction of
GBP26.5m compared to the previous year end and GBP89.8m lower than
the same point a year ago. On a pre-IFRS 16 basis, Net debt was
GBP382.8m which is GBP25.3m lower than the previous year end and
GBP87.9m lower than FY19/20 H1. Free cash inflow in the period was
GBP27.5m and the movement in debt issuance costs was GBP2.2m.
On a pre-IFRS 16 Leases basis, Net debt / EBITDA was 2.3x; on a
reported basis, Net debt / EBITDA was 2.4x. Under the Group's
financing documents with its bank lending group, the Company is
restricted from making a distribution to shareholders until its Net
debt / EBITDA ratio is less than 3.0x. The definition of this ratio
is slightly different to the reported ratio, the main difference
includes adding back the Group's invoice discounting facility of
GBP30m to Net debt.
There were no changes to the Group's committed bank lending
facilities in the period. As at 26 September 2020, the Group held
cash and bank deposits of GBP40.4m. On 17 June 2020, the Group
repaid GBP80m of its GBP210m Senior Secured FRN due July 2022. On 6
October 2020, the Group announced it will repay a further GBP40m of
the outstanding FRN on 1 December 2020. From 1 December, the
outstanding FRN will therefore be GBP90m. There have been no
changes to the GBP300m Senior Secured Fixed Rate Notes due October
2023 in the period.
The Directors, having reviewed financial forecasts and financing
arrangements, consider that the Group has adequate resources to
continue as a going concern for at least the next 12 months from
the date of this report and are satisfied that it is appropriate to
adopt the going concern basis in preparing the financial
information at 26 September 2020. Further detail of this analysis
is disclosed in Note 2 of this report.
Pensions
Pensions agreement overview
Following an extensive strategic review which explored all
options available to the Group, on 20 April 2020 the Board
announced a landmark agreement with its pension schemes which is
transformational for both the Group and its pension scheme members
by significantly improving its long standing pension funding
situation. In particular, the Board expects this will provide
greater funding certainty for Premier Foods pension schemes members
by leveraging the strength of the successful RHM pension scheme
investment strategy. Alongside the strong progress the Group has
delivered through its branded growth model strategy, this new
pensions agreement provides the platform for further value creation
for all stakeholders. The Group has now agreed and signed legal
documentation with the scheme trustees for the merger which was
implemented as planned on 30 June 2020.
IAS 19 results and commentary
IAS 19 Accounting 26 September 2020 28 March 2020
Valuation (GBPm)
RHM Premier Combined RHM Premier Combined
Foods Foods
Assets 4,637.3 839.4 5,476.7 4,745.3 774.7 5,520.0
Liabilities (3,715.8) (1,244.4) (4,960.2) (3,240.0) (1,049.6) (4,289.6)
---------- ---------- ---------- ----------
Surplus/(Deficit) 921.5 (405.0) 516.5 1,505.3 (274.9) 1,230.4
Net of deferred
tax (19.0%) 746.4 (328.0) 418.4 1,219.3 (222.7) 996.6
The IAS 19 pension schemes valuation reported a surplus for the
combined RHM and Premier Foods' pension schemes at 26 September
2020 of GBP516.5m, GBP713.9m lower than 28 March 2020 and
equivalent to GBP418.4m net of a deferred tax charge of 19.0%. The
major driver behind the reduction in the surplus compared to six
months ago is a 95 basis point reduction in the discount rate
assumption for valuing scheme liabilities. At the same equivalent
point a year ago, the combined pensions surplus was GBP588.7m,
GBP72.2m higher than at 26 September 2020.
A deferred tax rate of 19.0% is deducted from the IAS19
retirement benefit valuation of the Group's schemes to reflect the
fact that pension deficit contributions made to the Group's pension
schemes are allowable for tax. A decrease in the RHM surplus from
GBP1,505.3m to GBP921.5m was a major factor behind the decline in
the combined surplus, although the Premier Foods deficit increased
by GBP130.1m to GBP405.0m.
Assets in the combined schemes decreased by GBP43.3m, or by
0.8%, to GBP5,476.7m in the period. RHM scheme assets decreased by
GBP108.0m to GBP4,637.3m while the Premier Foods' schemes assets
increased by GBP64.7m to GBP839.4m.
The major movement in the combined surplus, however, can be
attributed to the movement in the value of scheme liabilities. In
the combined schemes, liabilities increased by GBP670.6m in the
period to GBP4,960.2m. The value of liabilities associated with the
RHM scheme increased by 14.7% to GBP3,715.8m, while the Premier
Foods scheme liabilities increased by 18.6% to GBP1,244.4m. The
increase in both schemes' liabilities is largely due to the
reduction in the discount rate used to value these liabilities from
2.5% to 1.55%. Additionally, the RPI inflation rate assumption used
increased by twenty basis points to 2.85% which also contributed to
the increase in the valuation of liabilities.
Combined pensions schemes 26 September 28 March 2020
(GBPm) 2020
Assets
Equities 13.6 11.5
Government bonds 1,675.9 1,802.6
Corporate bonds 8.3 25.3
Property 433.7 445.2
Absolute return products 1,208.1 1,198.2
Cash 171.8 32.4
Infrastructure funds 315.5 309.8
Swaps 499.7 487.1
Private equity 460.7 510.1
LDI 346.9 268.3
Other 342.5 429.5
------------- --------------
Total Assets 5,476.7 5,520.0
Liabilities
Discount rate 1.55% 2.50%
Inflation rate (RPI/CPI) 2.85%/1.85% 2.65%/1.65%
The net present value of future deficit payments, to the end of
the respective recovery periods remains at c.GBP300-320m. However,
following the transformational agreement agreed with the pension
Trustees as described above, the net present value of future
deficit payments is projected to reduce by up to 45% to GBP175-185m
in future years.
ESG
====
The Group is committed to doing business responsibly and in a
way that is sustainable for the business, its communities and the
planet. It has a five pillar responsibility strategy which enables
it to focus efforts on addressing the issues that are most relevant
to people and the planet, now and in the future.
These five pillars are: (i) encourage healthier choices; (ii)
realise people's potential; (iii) support our communities; (iv)
drive ethical sourcing and (v) reduce our environmental footprint.
All these pillars are treated with equal prominence, although
supporting the Group's communities is one area which has come to
the fore in the first half of FY20/21. During the COVID-19
pandemic, the Group has donated over 440,000 meals to those in need
via Fareshare, the charitable food redistributor. Additionally,
196,000 products have been donated to 28 NHS hospitals over the
same period of time.
Encouraging healthier choices is an important part of not only
the Group's ESG strategy but also its innovation agenda. The Group
has three approaches in this area. Firstly, it aims to enhance the
nutritional profile of its existing range through the reduction of
salt, sugar and fat in its products. Secondly, through the Group's
innovation strategy, to extend the range of its portfolio to
include more better for you options. Lastly, it targets the
education of consumers and colleagues as to healthier choices in
their diets through advocating clear and transparent labelling
across the portfolio and through the Healthy Eating in the
Workplace programme across all its sites.
Further details on all five pillars are available in the Group's
2020 Annual Report for the 52 weeks ended 28 March 2020.
EU exit
========
The UK is due to exit the European Union's free trade
arrangements on 31 December 2020. The Group has been preparing for
a range of potential implications of this event for many months.
Areas of planning include, but are not limited to, the outcome on
tariffs, identifying and preparing for additional stock holding of
materials and finished goods, identification of high risk materials
and supply routes, regulatory changes on packaging and customs
certification and declarations.
Principal risks and uncertainties
==================================
The Group's principal risks and uncertainties were disclosed on
page 38 to 43 of the annual report and accounts for the financial
period ended 28 March 2020 and these remain relevant for the
current period. The major strategic and operational risks are
summarised under the headings of Macroeconomic and geopolitical
instability, Market and retailer actions, Operational integrity,
Technology, Legal compliance, Product portfolio, HR and employee
risk, Strategy delivery, International expansion, and Treasury
& pensions.
Outlook
========
In the second half of FY20/21, the Group expects to see
continued revenue growth driven by further new product innovation,
strong commercial plans and increased marketing support, with six
major brands planned to be advertised on TV. This includes the
desserts category leader, Ambrosia, which will be on air for the
first time in many years. The Group also expects to see a rise in
demand for its branded portfolio due to the impact of recently
increased government restrictions on eating out. The longevity of
this increased demand is likely to be linked to the duration of
these new measures, and although the Group faces strong quarter 4
comparatives, it now anticipates Trading profit for the full year
will be ahead of current market expectations. Additionally, and
following the Group's recent strong progress in both accelerating
leverage reduction and receipt of Hovis disposal proceeds, it today
announces a new medium target for Net debt/EBITDA of approximately
1.5x.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
===========
The Company's preliminary results are presented for the 26 weeks
ended 26 September 2020 and the comparative period, 26 weeks ended
28 September 2019. All references to the 'quarter', unless
otherwise stated, are for the 13 weeks ended 26 September 2020 and
the comparative period, 13 weeks ended 28 September 2019.
Quarter 2 Sales
================
Q2 Sales (GBPm) Grocery Sweet Treats Group
Branded 131.4 47.0 178.4
Non-branded 23.3 5.7 29.0
-------- ------------- -------
Total 154.7 52.7 207.4
% change
Branded +13.0% +5.5% +11.0%
Non-branded (5.0%) (12.2%) (6.4%)
-------- ------------- -------
Total +9.9% +3.2% +8.1%
Notes and definitions of non-GAAP measures
===========================================
The Company uses a number of non-GAAP measures to measure and
assess the financial performance of the business. The Directors
believe that these non-GAAP measures assist in providing additional
useful information on the underlying trends, performance and
position of the Group. These non-GAAP measures are used by the
Group for reporting and planning purposes and it considers them to
be helpful indicators for investors to assist them in assessing the
strategic progress of the Group.
1. The Group uses Trading profit to review overall Group
profitability. Trading profit is defined as profit/(loss) before
tax before net finance costs, amortisation of intangible assets,
non-trading items (items requiring separate disclosure by virtue of
their nature in order that users of the financial statements obtain
a clear and consistent view of the Group's underlying trading
performance) , fair value movements on foreign exchange and other
derivative contracts, net interest on pensions and administration
expenses and past service costs.
2. Divisional contribution refers to Gross Profit less selling,
distribution and marketing expenses directly attributable to the
relevant business unit.
3. Adjusted EBITDA is Trading profit as defined in (1) above excluding depreciation.
4. Adjusted profit before tax is Trading profit as defined in
(1) above less net regular interest.
5. Net regular interest is defined as net finance cost after
excluding write-off of financing costs, other interest payable and
other finance income.
6. Adjusted profit after tax is Adjusted profit before tax as
defined in (4) above less a notional tax charge of 19.0% (2018/19:
19.0%).
7. Adjusted earnings per share is Adjusted profit after tax as
defined in (6) above divided by the weighted average of the number
of shares of 849.6 million (26 weeks ended 28 September 2019: 846.1
million).
8. International sales remove the impact of foreign currency
fluctuations and adjusts prior year sales to ensure comparability
in geographic market destinations. The constant currency
calculation is made by adjusting the current year's sales to the
same exchange rate as the prior year.
9. Net debt is defined as total borrowings, less cash and cash
equivalents and less capitalised debt issuance costs.
10. Free cash flow is defined as the change in Net debt as
defined in (9) above before the movement in debt issuance
costs.
11. Net debt on a pre-IFRS 16 basis, which excludes lease liabilities.
12. Assumptions on future deficit contributions subject to: (i)
Investment returns of RHM scheme; (ii) no change to deficit
recovery period length. Also subject to future actuarial valuations
and associated negotiations.
13. EBITDA on a rolling 12 month basis
Additional notes:
-- The Directors believe that users of the financial statements
are most interested in underlying trading performance and cash
generation of the Group. As such intangible asset amortisation and
impairment are excluded from Trading profit because they are
non-cash items.
-- Restructuring costs have been excluded from Trading profit
because they are incremental costs incurred as part of specific
initiatives that may distort a user's view of underlying trading
performance.
-- Net regular interest is used to present the interest charge
related to the Group's ongoing financial indebtedness, and
therefore excludes non-cash items and other credits/charges which
are included in the Group's net finance cost.
-- Group & corporate costs refer to group and corporate
expenses which are not directly attributable to a business unit and
are reported at total Group level.
-- In line with accounting standards, the International and
Knighton business units, the results of which are aggregated within
the Grocery business unit, are not required to be separately
disclosed for reporting purposes.
Responsibility Statement of the Directors
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first twenty-six weeks of the financial year and their impact on
the condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first
twenty-six weeks of the current financial year and that have
materially affected the financial position or performance of the
entity during that period; and any changes in the related party
transactions described in the last annual report that could do
so.
The Directors of Premier Foods plc are listed on pages 44-45 of
the Premier Foods plc annual report and accounts for the financial
period ended 28 March 2020.
Approved by the Board on 10 November 2020 and signed on its
behalf by:
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
INDEPENT REVIEW REPORT TO PREMIER FOODS PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 26 September 2020 which comprises the condensed
consolidated balance sheet, the related condensed consolidated
statement of profit and loss, condensed consolidated statement of
comprehensive income, condensed consolidated statement of cash
flows and condensed consolidated statement of changes in equity and
the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 26
September 2020 is not prepared, in all material respects, in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU and the Disclosure Guidance and Transparency Rules ("the
DTR") of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. 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. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) 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.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 2, the annual financial statements of the
group are prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted by the EU.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Zulfikar Walji
for and on behalf of KPMG LLP
15 Canada Square
London
E14 5GL
10 November 2020
Condensed consolidated statement of profit
or loss (unaudited)
26 weeks 26 weeks
ended ended
26 Sept 2020 28 Sept 2019
Note GBPm GBPm
-------------------------------------------- ----- ------------------------ ----------------------
Revenue 4 421.5 366.7
Cost of sales (274.9) (240.9)
-------------------------------------------- ----- ------------------------ ----------------------
Gross profit 146.6 125.8
Selling, marketing and distribution costs (59.1) (56.1)
Administrative costs (38.0) (33.8)
Reversal of impairment losses on financial 4,
assets 10 15.7 -
-------------------------------------------- ----- ------------------------ ----------------------
Operating profit 4 65.2 35.9
Finance cost 5 (20.1) (22.0)
Finance income 5 5.4 1.1
Profit before taxation 50.5 15.0
Taxation charge 6 (7.1) (2.7)
-------------------------------------------- ----- ------------------------ ----------------------
Profit for the period attributable to
owners of the parent 43.4 12.3
-------------------------------------------- ----- ------------------------ ----------------------
Basic earnings per share (pence) 7 5.1 1.5
-------------------------------------------- ----- ------------------------ ----------------------
Diluted earnings per share (pence) 7 5.0 1.4
-------------------------------------------- ----- ------------------------ ----------------------
Adjusted earnings per share(1) (pence) 7 4.5 3.0
-------------------------------------------- ----- ------------------------ ----------------------
(1) Adjusted earnings per share is defined as trading profit less
net regular interest payable, less a notional tax charge at 19.0%
(2019/20: 19.0%) divided by the weighted average number of ordinary
shares of the Company.
Condensed consolidated statement of comprehensive income
(unaudited)
26 weeks ended 26 weeks ended
26 Sept 2020 28 Sept 2019
Note GBPm GBPm
----------------------------------------------- -------------------------- -------------------------
Profit for the period 43.4 12.3
Other comprehensive income/(losses)
Items that will never be reclassified
to profit or loss
Remeasurements of defined benefit schemes 8 (740.4) 191.3
Deferred tax credit/(charge) 137.9 (33.5)
Current tax credit on pensions 3.6 -
Items that are or may be reclassified
to profit or loss
Exchange differences on translation 0.3 0.1
Other comprehensive income, net of tax (598.6) 157.9
-------------------------------------------- -------------------------- -------------------------
Total comprehensive income attributable
to owners of the parent (555.2) 170.2
-------------------------------------------- -------------------------- -------------------------
Condensed consolidated balance sheet (unaudited)
As at As at
26 Sept 28 Mar
2020 2020
Note GBPm GBPm
-------------------------------------------------- ----- ------------------- -----------------
ASSETS:
Non-current assets
Property, plant and equipment 189.1 194.0
Goodwill 646.0 646.0
Other intangible assets 330.4 341.3
Net retirement benefit assets 8 932.8 1,512.6
-----------------
2,098.3 2,693.9
Current assets
Inventories 95.3 68.0
Trade and other receivables 86.7 89.1
Financial assets:
- loans to associate 10 20.3 -
- derivative financial instruments 10 0.7 0.9
Cash and cash equivalents 12 40.4 177.9
-------------------
243.4 335.9
-------------------------------------------------- ----- ------------------- -----------------
Total assets 2,341.7 3,029.8
-------------------------------------------------- ----- ------------------- -----------------
LIABILITIES:
Current liabilities
Trade and other payables (280.5) (249.7)
Financial liabilities:
- short-term borrowings 9 - (85.0)
- derivative financial instruments 10 (0.9) (0.8)
- lease liabilities 9 (2.4) (2.5)
Provisions for liabilities and charges 11 (6.8) (6.4)
-------------------
(290.6) (344.4)
Non-current liabilities
Financial liabilities
- long term borrowings 9 (423.2) (501.0)
- lease liabilities 9 (17.9) (19.0)
Net retirement benefit obligations 8 (416.3) (282.2)
Provisions for liabilities and charges 11 (9.2) (9.6)
Deferred tax liabilities (49.2) (184.9)
Other liabilities (7.6) (8.7)
-------------------
(923.4) (1,005.4)
-------------------------------------------------- ----- ------------------- -----------------
Total liabilities (1,214.0) (1,349.8)
-------------------------------------------------- ----- ------------------- -----------------
Net assets 1,127.7 1,680.0
-------------------------------------------------- ----- ------------------- -----------------
EQUITY:
Capital and reserves
Share capital 85.2 84.8
Share premium 1,409.8 1,409.4
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Profit and loss reserve (709.7) (156.6)
-------------------------------------------------- ------------------- -----------------
Total equity 1,127.7 1,680.0
-------------------------------------------------- ----- ------------------- -----------------
Condensed consolidated statement of cash flows
(unaudited)
26 weeks
26 weeks ended ended
26 Sept 2020 28 Sept 2019
Note GBPm GBPm
-------------------------------------------- ----- ------------------------ ----------------------
Cash generated from operations 12 52.6 25.9
Interest paid (18.0) (18.8)
Interest received 0.5 1.2
-------------------------------------------- ----- ------------------------ ----------------------
Cash generated from operating activities 35.1 8.3
Purchase of property, plant and equipment (6.2) (6.3)
Purchase of intangible assets (0.9) (1.8)
Sale of property, plant and equipment - 0.1
-------------------------------------------- ----- ------------------------ ----------------------
Cash used in investing activities (7.1) (8.0)
Repayment of borrowings (165.0) -
Repayment of lease liabilities (1.1) -
Proceeds from share issue 0.8 0.6
Purchase of shares to satisfy share awards (0.2) -
Cash generated (used in)/from financing
activities (165.5) 0.6
Net (decrease)/increase of cash and cash
equivalents (137.5) 0.9
Cash, cash equivalents and bank overdrafts
at beginning of period 177.9 27.8
--------------------------------------------------- ------------------------ ----------------------
Cash, cash equivalents and bank overdrafts
at end of period 12 40.4 28.7
-------------------------------------------- ----- ------------------------ ----------------------
Condensed consolidated statement of changes in equity (unaudited)
Profit
Share Share Merger Other and loss Total
capital premium reserve reserves reserve equity
Note GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
At 31 March 2019 84.5 1,408.6 351.7 (9.3) (872.7) 962.8
Implementation of IFRS 16 (net
of tax) - - - - 12.7 12.7
Adjusted balance at 31 March
2019 84.5 1,408.6 351.7 (9.3) (860.0) 975.5
Profit for the period - - - - 12.3 12.3
Remeasurements of defined benefit
schemes - - - - 191.3 191.3
Deferred tax charge - - - - (33.5) (33.5)
Exchange differences on translation - - - - 0.1 0.1
Other comprehensive income - - - - 157.9 157.9
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
Total comprehensive income - - - - 170.2 170.2
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
Shares issued 0.2 0.4 - - - 0.6
Share-based payments - - - - 1.0 1.0
At 29 September 2019 84.7 1,409.0 351.7 (9.3) (688.8) 1,147.3
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
At 29 March 2020 84.8 1,409.4 351.7 (9.3) (156.6) 1,680.0
Profit for the period - - - - 43.4 43.4
Remeasurements of defined
benefit schemes 8 - - - - (740.4) (740.4)
Deferred tax credit - - - - 137.9 137.9
Current tax credit 3.6 3.6
Exchange differences on translation - - - - 0.3 0.3
Other comprehensive income - - - - (598.6) (598.6)
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
Total comprehensive income - - - - (555.2) (555.2)
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
Shares issued 0.4 0.4 - - - 0.8
Share-based payments - - - - 1.0 1.0
Purchase of shares to satisfy
share awards - - - - (0.2) (0.2)
Deferred tax movements on share-based
payments - - - - 1.3 1.3
At 26 September 2020 85.2 1,409.8 351.7 (9.3) (709.7) 1,127.7
---------------------------------- ----- --------- --------- --------- ---------- ---------- --------
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 products as described in the Group's annual report and
accounts for the financial period ended 28 March 2020.
2. Significant accounting policies
Basis of preparation
The condensed consolidated financial information ("financial
information") for the period ended 26 September 2020 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 26 weeks ended 26 September 2020
should be read in conjunction with the Group's financial statements
for the 52 weeks ended 28 March 2020 , 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 as applied in the
preparation of the Group's published consolidated financial
statements for the 52 weeks ended 28 March 2020, 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 for the period ended 26 September 2020
is unaudited but has been subject to an independent review by KPMG
LLP.
The Group's financial statements for the 52 weeks ended 28 March
2020, which were approved by the Board of Directors on 24 June
2020, were reported on by KPMG LLP and delivered to the Registrar
of Companies. The report of the auditor was unqualified, did not
contain a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and
did not contain any statement under section 498 (2) or (3) of the
Companies Act 2006.
This financial information was approved for issue on 10 November
2020.
Basis for preparation of financial information on a going
concern basis
The Group's revolving credit facility includes net debt/EBITDA
and EBITDA/interest covenants. In the event these covenants are not
met then the Group would be in breach of its financing agreement
and, as would be the case in any covenant breach, the banking
syndicate could withdraw funding to the Group. The Group was
compliant with its covenant tests as at 28 March 2020 and 26
September 2020.
Having undertaken a robust assessment of the Group's forecasts
with specific consideration to the trading performance of the
Group, cashflows and covenant compliance in the context of the
current COVID-19 pandemic and EU exit outcome, the Directors have
reasonable expectation that the Group is able to operate within the
level of its current facilities including covenant tests and has
adequate resources to continue in operational existence for the
next 12 months. The Group therefore continues to adopt the going
concern basis in preparing its consolidated financial information
for the reasons set out below:
At 26 September 2020, the Group had total assets less current
liabilities of GBP2,051m and net assets of GBP1,128m. Liquidity as
at that date was GBP217m, made up of cash and cash equivalents, and
undrawn committed credit facilities of GBP177m. In all scenarios
modelled liquidity requirements are within the GBP177m RCF
facility.
To date the Group has experienced no net adverse financial
impact of the COVID-19 pandemic with elevated levels of demand seen
and the Group's first priority remains the health and wellbeing of
its colleagues, customers and other stakeholders. Nevertheless, the
full impact of the COVID-19 pandemic remains unknown at this time
and the Group takes its responsibility as a major UK food
manufacturer very seriously, working closely with its customers to
ensure maximum availability of its Grocery product ranges for
consumers.
The Directors have rigorously reviewed both the situation
relating to COVID-19 and potential outcomes of the EU exit from 1
January 2021, and have modelled a series of 'downside case'
scenarios that cover the next 12-18 months. These downside cases
represent severe but plausible scenarios and include assumptions
relating to estimation of the impact of both tariff and non-tariff
measures in relation to the EU exit outcome and estimation of the
impact of the closure of all manufacturing sites due to colleague
absence as opposed to Government imposed guidelines, considering
that to date there have been no manufacturing site closures.
Whilst these downside scenarios are severe but plausible, each
is considered by the Directors to be very prudent, having an
adverse impact on Revenue, margin and cash flow. The Directors, in
response, have identified mitigating actions, that would reduce
costs, optimising cashflow and liquidity. Amongst these are the
following actions: reducing capital expenditure, reducing marketing
spend and delaying or cancelling discretionary spend.
The Group operates in the Food Manufacturing industry,
considered an essential during the current pandemic, and whilst
uncertainty exists in respect of the potential impact of COVID-19,
more meals are being eaten at home than usual due to measures set
out by HM Government and hence increased demand for the Group's
product ranges. If outcomes are unexpectedly significantly worse,
the Directors would need to consider what additional mitigating
actions were needed. Consequently, the Directors have concluded
that to stress test a level of increased severity beyond these
scenarios that may create circumstances that represent a material
uncertainty and which may cast significant doubt about the Group's
ability to continue as a going concern, is not currently
reasonable.
The Directors believe that the risk of enforced site closures is
low and have implemented additional health and safety measures in
all factories to minimise the risk of a major supply disruption.
The Directors have assumed no significant structural changes to the
business will be needed in any of the scenarios modelled.
The Directors, after reviewing financial forecasts and financing
arrangements, consider that the Group has adequate resources at the
date of approval of this report. Accordingly, the Directors are
satisfied that it is appropriate to adopt the going concern basis
in preparing its consolidated financial information.
3. Critical accounting policies, estimates and judgements
The following are areas of particular significance to the
Group's interim financial information and may include the use of
estimates, which is fundamental to the compilation of this
financial information. Results may differ from actual amounts.
Critical accounting policies
The following are considered to be the critical accounting
policies:
Deferred tax
Deferred tax arises due to certain temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and those for taxation purposes. The Group has a
significant loss related to prior periods. The deferred tax assets
and liabilities on a gross basis are material to the financial
information.
Deferred tax is measured at the tax rates that are expected to
apply in the periods in which the asset or liability is settled
based on tax rates (and tax laws) that have been enacted or
substantively enacted as at the balance sheet date.
For the purpose of recognising deferred tax on the pension
scheme surplus, withholding tax (at 35%) would apply for any
surplus being refunded to the Group at the end of the life of the
scheme. Corporation tax (at 19%) would apply for any surplus
expected to unwind over the life of the scheme.
The directors have concluded that the corporation tax rate
should apply to the recognition of deferred tax on the pension
scheme surplus, reflecting the directors' intention regarding the
manner of recovery of the deferred tax asset.
Deferred tax is recognised in the statement of profit or loss
except when it relates to items credited or charged directly to
OCI, in which case the deferred tax is also recognised in
equity.
When calculating the value of the deferred tax asset or
liability, consideration is given to the size of gross deferred tax
liabilities and deferred tax assets available to offset this. To
the extent that deferred tax assets exceed liabilities, estimation
is required around the level of asset that can be supported. The
following factors are taken into consideration.
- Historic business performance
- Projected profits or losses and other relevant information
that allow profits chargeable to corporation tax to be derived
- The total level of recognised and unrecognised losses that can
be used to reduce future forecast taxable profits
- The period over which there is sufficient certainty that
profits can be made that would support the recognition of an
asset
Estimates
The following are considered to be the key estimates within the
financial information:
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. Each of the
underlying assumptions is set out in more detail in note 8.
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).
Plan assets of the defined benefit schemes include a number of
assets for which quoted prices are not available. At each reporting
date, the Group determines the fair value of these assets with
reference to most recently available asset statements from fund
managers.
Where statements are not available at the reporting date a roll
forward of cash transactions between statement date and balance
sheet date is performed.
Goodwill
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. In performing its impairment analysis, the Group
takes into consideration these indicators including the difference
between its market capitalisation and net assets.
The Group has considered the impact of the assumptions used on
the calculations and conducts sensitivity analysis on the value in
use calculations of the CGUs carrying values for the purposes of
testing goodwill.
Commercial arrangements
Sales rebates and discounts are accrued on each relevant
promotion or customer agreement and are charged to the statement of
profit or loss at the time of the relevant promotional buy-in as a
deduction from revenue. Accruals for each individual promotion or
rebate arrangement are based on the type and length of promotion
and nature of customer agreement. At the time an accrual is made
the nature, funding level and timing of the promotion is typically
known. Areas of estimation are sales volume/activity, phasing and
the amount of product sold on promotion.
For short term promotions, the Group performs a true up of
estimates where necessary on a monthly basis, using real time
customer sales information where possible and finally on receipt of
a customer claim which typically follows 1-2 months after the end
of a promotion. For longer term discounts and rebates the Group
uses actual and forecast sales to estimate the level of rebate.
These accruals are updated monthly based on latest actual and
forecast sales.
Judgements
The following are considered to be the key judgements within the
financial information:
Non-trading items
Non-trading items have been presented separately throughout the
financial information. These are items that management believes
require separate disclosure by virtue of their nature in order that
the users of the financial information obtain a clear and
consistent view of the Group's underlying trading performance. In
identifying non-trading items, management have applied judgement
including whether i) the item is related to underlying trading of
the Group; and/or ii) how often the item is expected to occur.
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 Executive
Leadership Team as it is primarily responsible for the allocation
of resources to segments and the assessment of performance of the
segments.
The Group's operating segments are defined as "Grocery", "Sweet
Treats", "International" and "Knighton". The Grocery segment
primarily sells savoury ambient food products and the Sweet Treats
segment sells sweet ambient food products. The International and
Knighton segments have been aggregated within the Grocery segment
for reporting purposes as revenue is below 10 percent of the
Group's total revenue and the segments are considered to have
similar characteristics to that of Grocery. This is in accordance
with the criteria set out in IFRS 8.
The CODM uses Divisional contribution as the key measure of the
segments' results. Divisional contribution is defined as gross
profit after selling, marketing and distribution costs. Divisional
contribution is a consistent measure within the Group and reflects
the segments' underlying trading performance for the period under
evaluation.
The Group uses Trading profit to review overall Group
profitability. Trading profit is defined as profit/loss before tax
before net finance costs, amortisation of intangible assets,
non-trading items, fair value movements on foreign exchange and
other derivative contracts and net interest on pensions,
administrative expenses and past service costs.
The segment results for the period ended 26 September 2020 and
28 September 2019, and the reconciliation of the segment measures
to the respective statutory items included in the financial
information, are as follows:
26 weeks ended 26 Sept
2020
---------------------------------------------- --------------------------------------------
Grocery Sweet Total
Treats
GBPm GBPm GBPm
---------------------------------------------- -------- --------------- -----------------
Revenue 316.7 104.8 421.5
---------------------------------------------- -------- --------------- -----------------
Divisional contribution 78.5 9.1 87.6
Group and corporate costs (21.8)
---------------------------------------------- -------- --------------- -----------------
Trading profit 65.8
Amortisation of intangible assets (13.5)
Fair value movements on foreign exchange and other
derivative contracts (0.3)
Reversal of impairment losses on financial
assets(1) 15.7
Non-trading items:
Restructuring costs (2.6)
Net interest on pensions and administrative
expenses 0.1
---------------------------------------------- -------- --------------- -----------------
Operating profit 65.2
Finance cost (20.1)
Finance income(2) 5.4
Profit before taxation 50.5
---------------------------------------------- -------- --------------- -----------------
Depreciation (5.1) (4.0) (9.1)
---------------------------------------------- -------- --------------- -----------------
(1) Remeasurement of the loss allowance against a Loan to Associates.
(2) Finance income includes GBP4.6m (2019/20: nil) reversal of the
impairment of the interest on the Hovis loan note.
26 weeks ended 28
Sept 2019
----------------------------------
Grocery Sweet Total
Treats
GBPm GBPm GBPm
---------------------------------------------- -------- --------------- -----------------
Revenue 264.0 102.7 366.7
---------------------------------------------- -------- --------------- -----------------
Divisional contribution 59.3 10.4 69.7
Group and corporate costs (18.6)
---------------------------------------------- -------- --------------- -----------------
Trading profit 51.1
Amortisation of intangible assets (14.9)
Fair value movements on foreign exchange and
other derivative contracts 1.3
Non-trading items:
Restructuring costs (0.7)
Other non-trading (0.8)
Net interest on pensions and administrative
expenses (0.1)
---------------------------------------------- -------- --------------- -----------------
Operating profit 35.9
Finance cost (22.0)
Finance income 1.1
Profit before taxation 15.0
---------------------------------------------- -------- --------------- -----------------
Depreciation (5.4) (4.0) (9.4)
---------------------------------------------- -------- --------------- -----------------
Inter-segment transfers or transactions are entered into under
the same terms and conditions that would be available to unrelated
third parties.
5. Finance income and costs
26 weeks ended 26 weeks
ended
26 Sept 2020 28 Sept 2019
GBPm GBPm
----------------------------------------------- --------------- ------------------------
Interest payable on bank loans and overdrafts (2.9) (3.3)
Interest payable on senior secured notes (13.8) (15.5)
Interest payable on revolving facility (0.6) -
Amortisation of debt issuance costs (1.6) (1.7)
(18.9) (20.5)
Write off of financing costs(1) (0.6) -
Other interest payable(2) (0.6) (1.5)
Total finance cost (20.1) (22.0)
----------------------------------------------- --------------- ------------------------
Interest receivable on bank deposits 0.8 1.1
Other finance income(3) 4.6 -
Total finance income 5.4 1.1
----------------------------------------------- --------------- ------------------------
Net finance cost (14.7) (20.9)
----------------------------------------------- --------------- ------------------------
(1) Relates to write off of the financing costs
for the GBP80m floating rate note redeemed in June
2020.
(2) Included in other interest payable is GBP0.5m (2019/20: GBP0.5m)
relating to non-cash interest costs arising following the adoption
of IFRS 16 and GBP0.1m (2019/20: GBP1.0m) relating to the discount
on certain of the Group's long term provisions.
(3) Other finance income of GBP4.6m (2019/20: GBPnil) relates
to the reversal of the impairment of the interest on the Hovis
loan note.
6. Taxation
The taxation charge for the period ended 26 September 2020 of
GBP7.1m (2019/20: GBP2.7m charge) comprises of a charge on
operating activities of GBP7.0m (2019/20: GBP2.7m charge) based
upon managements best estimate of the effective annual income tax
rate expected for the full financial year. In addition, a charge of
GBP0.1m (2019/20: GBPnil) relating to adjustments to prior
years.
7. Earnings per share
Basic earnings per share has been calculated by dividing the
profit for the period ended 26 September 2020 attributable to
owners of the parent of GBP43.4m (2019/20: GBP12.3m profit) by the
weighted average number of ordinary shares of the Company.
26 weeks ended 26 weeks ended
26 Sept 2020 28 Sept 2019
Number Number
------------------------------------------------ ----------------------- -----------------------
Weighted average number of ordinary shares for
the purpose of basic earnings per share (m) 849.6 846.1
Effect of dilutive potential ordinary shares
(m) 14.9 10.9
----------------------- -----------------------
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 864.5 857.0
------------------------------------------------ ----------------------- -----------------------
26 weeks ended 26 Sept 26 weeks ended 28 Sept
2020 2019
Dilutive Dilutive
effect effect
of share of share
Basic options Diluted Basic options Diluted
----------------------------- ----------- ------------ ----------- ----------- ------------ -----------
Profit after tax (GBPm) 43.4 43.4 12.3 12.3
Weighted average number of
shares (m) 849.6 14.9 864.5 846.1 10.9 857.0
----------------------------- -----------
Earnings per share (pence) 5.1 (0.1) 5.0 1.5 (0.1) 1.4
----------------------------- ----------- ------------ ----------- ----------- ------------ -----------
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 and share awards. A calculation is performed to determine
the number of shares that could have been acquired at fair value
(determined as the average period market share price of the
Company's shares) based on the monetary value of the share awards
and the subscription rights attached to the outstanding share
options.
No adjustment is made to the profit or loss in calculating basic
and diluted earnings 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 19.0%
(2019/20: 19.0%) divided by the weighted average number of ordinary
shares of the Company.
Net regular interest is defined as net finance cost after
excluding write-off of financing costs, other interest payable and
other finance income.
Trading profit and Adjusted EPS have been reported as the
directors believe these assist in providing additional useful
information on the underlying trends and performance of the
Group.
26 weeks ended 26 weeks ended
26 Sept 2020 28 Sept 2019
GBPm GBPm
-------------------------------------- -------------------------- -----------------------
Trading profit 65.8 51.1
Less net regular interest (18.1) (19.4)
-------------------------- -----------------------
Adjusted profit before tax 47.7 31.7
Notional tax at 19% (2019/20: 19%) (9.1) (6.0)
-------------------------------------- -------------------------- -----------------------
Adjusted profit after tax 38.6 25.7
Average shares in issue (m) 849.6 846.1
Adjusted EPS (pence) 4.5 3.0
-------------------------------------- -------------------------- -----------------------
Net regular interest
Net finance cost (14.7) (20.9)
Exclude write off of financing costs 0.6 -
Exclude other interest payable 0.6 1.5
Exclude other finance income (4.6) -
Net regular interest (18.1) (19.4)
-------------------------------------- -------------------------- -----------------------
8. 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
Hillsdown Holdings Limited Pension Scheme
(b) The RHM schemes, which comprise:
RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The triennial actuarial valuations of the PFPS, the PGPPS and
the RHM pension scheme for 31 March 2019 / 5 April 2019 were
concluded in June 2020. Deficit recovery plans were agreed with the
Trustees of each of the PFPS and PGPPS. The RHM Pension Scheme was
in surplus and no deficit contributions are payable. Actuarial
valuations for the schemes based in Ireland were completed during
the course of 2017 and 2019.
With effect from 30 June 2020, the assets and liabilities of the
Premier Foods and Premier Grocery Products schemes have been merged
with the RHM Pension Scheme on a segregated basis managed as three
separate sections. The winding up of the Premier Foods Pension
Scheme Trustees Limited and the Premier Grocery Products Pension
Schemes Trustee Limited will be completed in 2021.
The exchange rates used to translate the overseas euro based
schemes are GBP1.00 = EUR1.1120 for the average rate during the
period, and GBP1.00 = EUR1.0914 for the closing position at 26
September 2020.
The disclosures in note 8 represent those schemes that are
associated with Premier ("Premier schemes") and those that are
associated with ex-RHM companies ("RHM schemes"). These differs to
that disclosed on the balance sheet, in which the schemes have been
split between those in an asset position and those in a liability
position.
At the balance sheet date, the combined principal actuarial
assumptions were as follows:
Premier RHM schemes
schemes
At 26 September 2020
Discount rate 1.55% 1.55%
Inflation - RPI 2.85% 2.85%
Inflation - CPI 1.85% 1.85%
Expected salary increases n/a n/a
Future pension increases 2.00% 2.00%
---------------------------- --------- ------------
At 28 March 2020
Discount rate 2.50% 2.50%
Inflation - RPI 2.65% 2.65%
Inflation - CPI 1.65% 1.65%
Expected salary increases n/a n/a
Future pension increases 1.90% 1.90%
---------------------------- --------- ------------
For the smaller overseas schemes, the discount rate used was
1.00% (2019/20: 1.00%), CPI inflation was 1.20% (2019/20: 0.8%) and
future pension increases were 1.15% (2019/20: 0.8%).
The mortality assumptions are based on standard mortality tables
and allow for future mortality improvements. The assumptions are as
follows:
Premier RHM schemes
schemes
--------------------------------------- --------- ------------
Life expectancy at 26 September 2020
Male pensioner, currently aged 65 87.0 85.4
Female pensioner, currently aged 65 89.2 87.8
Male non-pensioner, currently aged 45 87.6 86.6
Female non-pensioner, currently aged
45 90.2 89.3
Life expectancy at 28 March 2020
Male pensioner, currently aged 65 87.0 85.4
Female pensioner, currently aged 65 89.2 87.8
Male non-pensioner, currently aged 45 87.6 86.6
Female non-pensioner, currently aged
45 90.2 89.3
---------------------------------------- --------- ------------
The fair values of plan assets split by type of asset are as
follows:
Premier schemes % of total RHM schemes % of total Total % of total
GBPm % GBPm % GBPm
------------------------------ ----------------- ----------- ------------ ----------- -------- -----------
Assets with a quoted price in an active market at 26 September 2020:
Government bonds - - 1,617.9 34.9 1,617.9 29.5
Cash 17.8 2.1 153.3 3.3 171.1 3.1
Assets without a quoted price in an active market at 26 September 2020:
UK equities 0.4 0.0 0.2 0.0 0.6 0.0
Global equities 7.2 0.9 5.8 0.1 13.0 0.2
Government bonds 38.2 4.6 19.8 0.4 58.0 1.1
Corporate bonds 8.3 1.0 - - 8.3 0.2
UK Property 31.8 3.8 330.8 7.1 362.6 6.6
European property 0.2 0.0 70.9 1.5 71.1 1.3
Absolute return products 347.7 41.4 860.4 18.6 1,208.1 22.1
Infrastructure funds - - 315.5 6.8 315.5 5.8
Interest rate swaps - - 537.6 11.6 537.6 9.8
Inflation swaps - - (37.9) (0.8) (37.9) (0.7)
Private equity - - 460.7 10.0 460.7 8.4
LDI 346.9 41.3 - - 346.9 6.3
Cash 0.7 0.1 - - 0.7 0.0
Other 40.2 4.8 302.3 6.5 342.5 6.3
Fair value of scheme assets
as at 26 September 2020 839.4 100 4,637.3 100 5,476.7 100
------------------------------ ----------------- ----------- ------------ ----------- -------- -----------
Assets with a quoted price in an active market at 28 March 2020:
Government bonds - - 1,758.5 37.1 1,758.5 31.8
Cash 6.9 0.9 25.5 0.5 32.4 0.6
Assets without a quoted price in an active market at 28 March 2020:
UK equities 0.1 0.0 0.2 0.0 0.3 0.0
Global equities 6.7 0.9 4.5 0.1 11.2 0.2
Government bonds 24.3 3.1 19.8 0.4 44.1 0.8
Corporate bonds 25.3 3.3 - - 25.3 0.5
UK Property 42.4 5.5 331.9 7.0 374.3 6.8
European property 0.8 0.1 70.1 1.5 70.9 1.3
Absolute return products 364.0 46.9 834.2 17.7 1,198.2 21.6
Infrastructure funds - - 309.8 6.5 309.8 5.6
Interest rate swaps - - 533.1 11.2 533.1 9.7
Inflation swaps - - (46.0) (1.0) (46.0) (0.8)
Private equity 0.6 0.1 509.5 10.7 510.1 9.2
LDI 268.3 34.6 - - 268.3 4.9
Other 35.3 4.6 394.2 8.3 429.5 7.8
Fair value of scheme assets
as at 28 March 2020 774.7 100 4,745.3 100 5,520.0 100
------------------------------ ----------------- ----------- ------------ ----------- -------- -----------
For assets without a quoted price in an active market fair value is determined with reference
to net asset value statements provided by third parties.
The RHM scheme invests directly in interest rate and inflation swaps to protect from fluctuations
in interest rates and inflation.
The amounts recognised on the balance sheet arising from the Group's obligations in respect
of its defined benefit schemes are as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
--------------------------------------------- ---------- ------------ ----------
At 26 September 2020
Present value of defined benefit obligation (1,244.4) (3,715.8) (4,960.2)
Fair value of plan assets 839.4 4,637.3 5,476.7
--------------------------------------------- ---------- ------------ ----------
(Deficit)/surplus in schemes (405.0) 921.5 516.5
--------------------------------------------- ---------- ------------ ----------
At 28 March 2020
Present value of defined benefit obligation (1,049.6) (3,240.0) (4,289.6)
Fair value of plan assets 774.7 4,745.3 5,520.0
--------------------------------------------- ---------- ------------ ----------
(Deficit)/surplus in schemes (274.9) 1,505.3 1,230.4
--------------------------------------------- ---------- ------------ ----------
The aggregate surplus of GBP1,230.4m has decreased to a surplus
of GBP516.5m during the period ended 26 September 2020. The
decrease of GBP713.9m (52 weeks ended 28 March 2020: GBP857.3 m
increase) is primarily due to the change in financial assumptions
driving an actuarial loss which increased liabilities.
Changes in the present value of the defined benefit obligation
were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
-------------------------------------------- ---------- ------------ ----------
Defined benefit obligation at 30 March
2019 (1,171.8) (3,495.8) (4,667.6)
Recognition of Hillsdown Holdings Limited
Pension Scheme (0.5) - (0.5)
Interest cost (27.8) (83.3) (111.1)
Settlement 0.9 36.1 37.0
Remeasurement gain 113.6 157.6 271.2
Exchange differences (2.0) (1.3) (3.3)
Benefits paid 38.0 146.7 184.7
Defined benefit obligation at 28 March
2020 (1,049.6) (3,240.0) (4,289.6)
Interest cost (12.7) (32.1) (44.8)
Settlement - 57.8 57.8
Remeasurement losses (200.0) (572.5) (772.5)
Exchange differences (1.1) (0.6) (1.7)
Benefits paid 19.0 71.6 90.6
-------------------------------------------- ---------- ------------ ----------
Defined benefit obligation at 26 September
2020 (1,244.4) (3,715.8) (4,960.2)
-------------------------------------------- ---------- ------------ ----------
Changes in the fair value of plan assets were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
-------------------------------------------- ------- ------------ --------
Fair value of plan assets at 30 March
2019 707.1 4,333.6 5,040.7
Recognition of Hillsdown Holdings Limited
Pension Scheme 0.5 - 0.5
Interest income on plan assets 16.7 103.7 120.4
Remeasurement gains 49.3 496.2 545.5
Administrative costs (5.6) (4.6) (10.2)
Settlement (1.0) (39.7) (40.7)
Contributions by employer 43.3 1.4 44.7
Exchange differences 2.4 1.4 3.8
Benefits paid (38.0) (146.7) (184.7)
-------------------------------------------- ------- ------------ --------
Fair value of plan assets at 28 March
2020 774.7 4,745.3 5,520.0
Interest income on plan assets 9.3 44.8 54.1
Settlement - (61.1) (61.1)
Remeasurement gains / (losses) 51.5 (19.4) 32.1
Administrative costs (3.5) (2.4) (5.9)
Contributions by employer 25.2 1.1 26.3
Exchange differences 1.2 0.6 1.8
Benefits paid (19.0) (71.6) (90.6)
-------------------------------------------- ------- ------------ --------
Fair value of plan assets at 26 September
2020 839.4 4,637.3 5,476.7
-------------------------------------------- ------- ------------ --------
The reconciliation of the net defined benefit liability over the
period is as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
-------------------------------------------------- --------- ------------ --------
(Deficit)/surplus in schemes at 30 March
2019 (464.7) 837.8 373.1
Amount recognised in profit or loss (16.8) 12.2 (4.6)
Remeasurements recognised in other comprehensive
income 162.9 653.8 816.7
Contributions by employer 43.3 1.4 44.7
Exchange differences recognised in other
comprehensive income 0.4 0.1 0.5
(Deficit)/surplus in schemes at 28 March
2020 (274.9) 1,505.3 1,230.4
Amount recognised in profit or loss (6.9) 7.0 0.1
Remeasurements recognised in other comprehensive
income (148.5) (591.9) (740.4)
Contributions by employer 25.2 1.1 26.3
Exchange differences recognised in other
comprehensive income 0.1 - 0.1
-------------------------------------------------- --------- ------------ --------
(Deficit)/surplus in schemes at 26 September
2020 (405.0) 921.5 516.5
-------------------------------------------------- --------- ------------ --------
The total amounts recognised in the consolidated statement of
profit or loss are as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
---------------------------------- --------- ------------ -------
26 weeks ended 26 September 2020
Operating profit
Settlement cost - (3.3) (3.3)
Administrative costs (3.5) (2.4) (5.9)
Net interest (cost)/credit (3.4) 12.7 9.3
---------------------------------- --------- ------------ -------
Total (cost)/credit (6.9) 7.0 0.1
---------------------------------- --------- ------------ -------
26 weeks ended 28 September 2019
Operating profit
Settlement cost (0.1) - (0.1)
Administrative costs (2.7) (2.1) (4.8)
Net interest (cost)/credit (5.4) 10.2 4.8
Total (cost)/credit (8.2) 8.1 (0.1)
---------------------------------- --------- ------------ -------
52 weeks ended 28 March 2020
Operating profit
Settlement cost (0.1) (3.6) (3.7)
Administrative costs (5.6) (4.6) (10.2)
Net interest (cost)/credit (11.1) 20.4 9.3
---------------------------------- --------- ------------ -------
Total (cost)/credit (16.8) 12.2 (4.6)
---------------------------------- --------- ------------ -------
9. Bank and other borrowings
As at As at
26 Sept 2020 28 Mar 2020
GBPm GBPm
----------------------------------------------- ------------------- --------------------
Current:
Secured senior credit facility - revolving - (85.0)
Lease liabilities (2.4) (2.5)
----------------------------------------------- --------------------
Total borrowings due within one year (2.4) (87.5)
----------------------------------------------- ------------------- --------------------
Non-current:
Lease liabilities (17.9) (19.0)
----------------------------------------------- ------------------- --------------------
(17.9) (19.0)
Transaction costs(1) 6.8 9.0
--------------------
6.8 9.0
Senior secured notes (430.0) (510.0)
(423.2) (501.0)
Total borrowings due after more than one year (441.1) (520.0)
Total bank and other borrowings (443.5) (607.5)
----------------------------------------------- ------------------- --------------------
(1) Included in transaction costs is GBP3.5m (2019/20: GBP4.2m) relating
to the revolving credit facility.
Revolving credit facility
The revolving credit facility of GBP177m is due to mature in
December 2022 and attracts a leverage based margin of between 2.25%
and 3.75% above LIBOR. Banking covenants of net debt / EBITDA and
EBITDA / interest are in place and are tested biannually.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock
Exchange. The notes totalling GBP430m are split between fixed and
floating tranches. The fixed note of GBP300m matures in October
2023 and attracts an interest rate of 6.25%. The floating note of
GBP130m matures in July 2022 and attracts an interest rate of 5.00%
above LIBOR.
The covenant package attached to the revolving credit facility
is:
Net debt Net debt
/ EBITDA(1) / Interest(1)
----------------- ------------- ---------------------
2020/21 FY 4.25x 2.85x
2021/22 FY 4.00x 2.90x
----------------- ------------- ---------------------
(1) Net debt, EBITDA and Interest are as
defined under the revolving credit facility.
10. Financial instruments
The following table shows the carrying amounts (which
approximate to fair value except as noted below) of the Group's
financial assets and financial liabilities. Fair value is the price
that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date. Set out below is a summary of methods and
assumptions used to value each category of financial
instrument.
As at 26 Sept As at 28 Mar 2020
2020
Carrying Fair Carrying Fair
amount value amount value
GBPm GBPm GBPm GBPm
-------------------------------------------- --------------- --------------- --------------- ---------------
Loans and receivables:
Cash and cash equivalents 40.4 40.4 177.9 177.9
Financial assets at amortised cost:
Trade and other receivables 58.0 58.0 61.4 61.4
Loans to associate(1) 20.3 20.3 - -
Financial assets at fair value through
profit or loss:
Trade and other receivables 3.0 2.9 2.9 2.8
Derivative financial instruments
- Forward foreign currency exchange
contracts 0.7 0.7 0.9 0.9
Financial liabilities at fair value
through profit or loss:
Derivative financial instruments
- Commodity and energy derivatives (0.9) (0.9) (0.8) (0.8)
Financial liabilities at amortised
cost:
Trade and other payables (275.2) (275.2) (244.8) (244.8)
Senior secured notes (430.0) (436.5) (510.0) (459.4)
Senior secured credit facility - revolving - - (85.0) (85.0)
-------------------------------------------- --------------- --------------- --------------- ---------------
(1) Remeasurement of the loss allowance
against a Loan to Associates.
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 26 Sept As at 28 Mar 2020
2020
Level Level Level Level
1 2 1 2
----------------------------------------- --------- --------------- ---------- ---------------
GBPm GBPm GBPm GBPm
Financial assets at amortised cost:
Loans to associate(1) - 20.3 - -
Financial assets at fair value through
profit or loss:
Derivative financial instruments
- Forward foreign currency exchange
contracts - 0.7 - 0.9
Financial liabilities at fair value
through profit or loss:
Derivative financial instruments
- Commodity and energy derivatives - (0.9) - (0.8)
Financial liabilities at amortised
cost:
Senior secured notes (436.5) - (459.4) -
----------------------------------------- --------- --------------- ---------- ---------------
(1) Remeasurement of the loss allowance
against a Loan to Associates.
The fair value of trade and other receivables and trade and
other payables is considered to be equal to the carrying amount of
these items due to their short-term nature.
Calculation of fair values
The fair values of the financial assets and liabilities are
defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. Methods and
assumptions used to estimate the fair values are consistent with
those used in the 52 weeks ended 28 March 2020.
11. Provisions for liabilities and charges
As at As at
26 Sept 2020 28 Mar 2020
GBPm GBPm
---------------------------- ------------- ------------
Within one year (6.8) (6.4)
Between two and five years (2.5) (1.8)
After 5 years (6.7) (7.8)
---------------------------- ------------- ------------
Total (16.0) (16.0)
---------------------------- ------------- ------------
Total provisions for liabilities and charges of GBP16.0m at 26
September 2020 (28 March 2020: GBP16.0m) comprise primarily
provisions for site costs, dilapidations and environmental
liabilities related to lease hold properties and provisions for
insurance and legal matters.
12. Notes to the cash flow statement
Reconciliation of profit before taxation to cash flows from operating
activities
26 weeks ended 26 weeks ended
26 Sept 2020 28 Sept 2019
GBPm GBPm
---------------------------------------------------- --------------- ------------------------
Profit before taxation 50.5 15.0
Net finance cost 14.7 20.9
Operating profit 65.2 35.9
Depreciation of property, plant and equipment 9.1 9.4
Amortisation of intangible assets 13.5 14.9
Loss on disposal of property, plant and
equipment 0.3 0.2
Reversal of impairment losses on financial (15.7) -
assets
Fair value movements on financial instruments 0.3 (1.3)
Equity settled employee incentive schemes 1.0 1.0
Increase in inventories (27.3) (13.2)
Decrease/(increase) in trade and other receivables 2.4 (1.5)
Increase in trade and other payables and
provisions 30.2 4.8
Movement in retirement benefit obligations (26.4) (24.3)
---------------
Cash generated from operations 52.6 25.9
---------------------------------------------------- --------------- ------------------------
Analysis of movement in
borrowings
As at Non-cash Other As at
28 Mar interest non-cash 26 Sept
2020 Cash flows expense movements 2020
GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------- ----------- ---------- ----------- ---------
Cash and bank deposits 177.9 (137.5) - - 40.4
-------------------------------- --------- ----------- ---------- ----------- ---------
Net cash and cash equivalents 177.9 (137.5) - - 40.4
Borrowings - revolving credit
facilities (85.0) 85.0 - - -
Borrowings - senior secured
notes (510.0) 80.0 - - (430.0)
Lease liabilities (21.5) 1.1 (0.5) 0.6 (20.3)
--------- ----------- ---------- -----------
Gross borrowings net of
cash (1) (438.6) 28.6 (0.5) 0.6 (409.9)
Debt issuance costs 9.0 - - (2.2) 6.8
-------------------------------- ---------
Total net borrowings (1) (429.6) 28.6 (0.5) (1.6) (403.1)
-------------------------------- --------- ----------- ---------- ----------- ---------
Total net borrowings excluding
lease liabilities (1) (408.1) 27.5 - (2.2) (382.8)
-------------------------------- --------- ----------- ---------- ----------- ---------
(1) Borrowings excludes derivative financial instruments.
13. Capital commitments
The Group has capital expenditure on property, plant and
equipment contracted for at the end of the reporting period but not
yet incurred at 26 September 2020 of GBP9.3m (2019/20:
GBP6.7m).
14. Contingencies
There were no material contingent liabilities as at 26 September
2020 and 28 March 2020.
15. Related party transactions
The Group's related party transactions and relationships for the
52 weeks ended 28 March 2020 were disclosed on page 133-134 of the
annual report and accounts for the financial period ended 28 March
2020.
Transactions with associates and major shareholders during the
period are set out below.
26 weeks 26 weeks
ended ended
26 Sept 2020 28 Sept 2019
GBPm GBPm
-------------------- ----------------------- ------------------
Sale of services:
- Hovis 0.4 0.4
Total sales 0.4 0.4
-------------------- ----------------------- ------------------
Purchase of goods:
- Nissin 8.4 4.9
Total purchases 8.4 4.9
-------------------- ----------------------- ------------------
As at 26 September 2020 the following are also considered to be
related parties under the Listing Rules due to their shareholdings
exceeding 10% of the Group's total issued share capital:
- Nissin Foods Holding Co., Ltd. ('Nissin') is considered to be
a related party by virtue of its 19.30% (2019/20: 19.39%) equity
shareholding in Premier Foods plc and its power to appoint a member
to the Board of directors. There have been recharges of GBP0.1m
(2019/20: GBP0.1m) in the period.
- Oasis Management Company Ltd ("Oasis") is considered to be a
related party to the Group by virtue of its 10.03% (2019/20:
11.94%) equity shareholding in Premier Foods plc, its 0.40%
interest through a total return swap, and its power to appoint a
member to the Board of directors.
- Paulson Investment Company LLC, ("Paulson") is considered to
be a related party to the Group by virtue of its 6.25% (2019/20:
11.93%) equity shareholding in Premier Foods plc, its 3.98%
interest through a total return swap and its power to appoint a
member to the Board of directors.
16. Subsequent events
On 6 October 2020 the Group notified of its intention to redeem
GBP40 million of the GBP130 million outstanding floating rate
senior secured note, which is listed on the Irish GEM Stock
Exchange. The intended redemption date is 1 December 2020.
On 5 November 2020, the Group completed the sale of its 49%
equity interest in Hovis Holdings Limited to Endless LLP. As part
of the sale, the group has received a total consideration of
GBP37.3m, of which GBP17.0m was in respect of equity and GBP20.3m
reflected the settlement of the outstanding loan to associate.
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END
IR FSMEFUESSELF
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