TIDMPFD TIDMIRSH
RNS Number : 0767Z
Premier Foods plc
19 May 2021
19 May 2021
Premier Foods plc (the "Group" or the "Company")
Preliminary year results for the 53 weeks ended 3 April 2021
Adjusted PBT growth of 23.5%, Net debt/EBITDA(3) reduced to 1.9x
and dividend reinstated after 13 years
Financial results FY20/21 Exclude: FY20/21 FY19/20 Change
53 week Week 53 52 week 52 week
basis basis basis
Headline measures
Revenue (GBPm) 947.0 (12.8) 934.2 847.1 +10.3%
Trading profit(1) (GBPm) 151.3 (3.0) 148.3 132.6 +11.9%
Adjusted profit before
taxation (GBPm) 117.9 (2.6) 115.3 93.3 +23.5%
Adjusted earnings per
share(7) (pence) 11.2 (0.2) 11.0 8.9 +22.8%
Net debt/EBITDA(3,11,13)
(pre-IFRS 16) 1.9 0.0 1.9 2.7
Statutory measures
Operating profit (GBPm) 152.6 N/A N/A 95.3 +60.1%
Profit before taxation
(GBPm) 122.8 N/A N/A 53.6 +129.1%
Basic earnings per share
(pence) 12.5 N/A N/A 5.5 +127.3%
Net debt(9) (pre-IFRS
16, GBPm) (314.1) N/A N/A (408.1) +23.0%
Net debt (GBPm) (332.7) N/A N/A (429.6) +22.6%
Note: Only headline measures are provided on a 52 week basis, to
aid comparability of results
Financial headlines
====================
-- Branded revenue* up +13.6% in full year and ahead +7.0% in Q4
-- Trading profit* increased +11.9% to GBP148.3m after increased
marketing investment and incremental Covid costs
-- Net debt/EBITDA,3,11 (pre-IFRS 16) reduced to 1.9x, the Group's lowest ever leverage14
-- Repaid GBP190m Floating rate notes in FY20/21 reducing
interest costs by c.GBP10m p.a.; plus ratings agency upgrades
-- Combined pensions surplus of GBP539.9m
-- New RCF facility to 2024 and launching offer of new GBP300m 5
year Senior Secured Fixed Rate Notes
-- Proposed final dividend of 1.0 pence per share; reinstated for first time in thirteen years
Strategic & operational headlines
==================================
-- Remained fully operational throughout pandemic
-- Continued to deploy branded growth model; new product
launches and six major brands received TV advertising
-- Growing faster than the market; gained +70bps market share
-- Online performance +104% and increased market share by 128bps
-- Expanded consumer base as households tried new meal ideas
-- International revenue growth +23%(8) , demonstrating strong
progress against revised strategy
-- Strong ESG progress; reduced CO(2) emissions by 43% since
2008 and recyclable plastics increased from 63% to 70%
-- Hovis disposal completed in H2, raising gross proceeds of GBP37.3m
Non-GAAP measures above are defined and reconciled to statutory
measures throughout
*Branded revenue and Trading profit on a 52 week basis
A reconciliation between 53 week and 52 week measure is provided
in the appendices; EBITDA is EBITDA on an adjusted basis and as
defined in the appendices
Alex Whitehouse, Chief Executive Officer
"This has been an outstanding year for the business with very
strong financial metrics across the board. We have reduced our
leverage to 1.9x EBITDA(3) , repaid GBP190m of our Floating Rate
Bonds saving approximately GBP10m in interest costs and entered
into a transformational new pensions agreement. As a result, we are
pleased to be reinstating dividend payments for the first time in
13 years. We have also just completed the refinancing of a new
Revolving Credit facility with a refreshed bank group, extending
maturity to at least 2024, and are today announcing the launch of a
new Fixed Rate Bond."
"Throughout the year, we continued to drive our branded growth
model, launching a series of new product ranges, including many
healthy options such as Sharwood's low sugar stir fry sauces and
increasing marketing investment with six of our major brands
benefitting from TV advertising. This, along with a robust
performance from our supply chain, ensured we delivered growth
ahead of the market. Sales of our brands online more than doubled
and our continued focus on this channel led to further market share
gains. In overseas markets we are now clearly seeing the benefits
of last year's change in strategy with double digit growth in each
quarter and 23% in the full year."
"We enter this year in a strong position, with the benefit of an
expanded consumer base, further TV advertising for our brands and a
substantial pipeline of new products planned. We are confident in
our Trading profit expectations for the full year and we expect
adjusted PBT to benefit from lower financing costs. As we look to
the future, with a transformed business in a demonstrably much
stronger financial position, we will continue to move forward at
pace and with rigour, applying our brand building skills to expand
the business. We will do this through entering new categories in
the UK, scaling up our overseas businesses and exploring the
opportunity for appropriate bolt on acquisitions ."
" Finally, and most importantly, I would like to thank our
colleagues who have shown incredible resilience and commitment,
keeping our operations running, ensuring we were able to keep food
supplies flowing to our customers and taking all the necessary
actions to keep each other safe."
This announcement contains inside information.
Further information
====================
A presentation to investors and analysts will be webcast today
at 9:00am BST.
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 factsheet with highlights of the Preliminary 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 +44 (0) 1727 815
850
Media enquiries:
Hannah Collyer, Director of Corporate Affairs & ESG +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. Any securities
referred to herein have not been and will not be registered under
the U.S. Securities Act of 1933 and may not be offered or sold
within the United States absent registration or an applicable
exemption from registration requirements. There will be no offering
of the Securities in the United States.
Environmental, Social and Governance (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. The Group
delivered strong progress in all its ESG pillars during the year
which includes:
-- Healthier choices: 17 new better for you ranges were introduced in the year
-- Realise people's potential: Featured in the Top 100
apprenticeship employers for 4(th) year in succession
-- Ethical sourcing: 100% of its direct sourced soya now meets
Round Table Resourced Soy (RTRS) requirements
-- Supporting communities: Donated over 550,000 meals via
Fareshare and 238,000 products to the NHS
-- Reducing the Group's environmental footprint: CO(2) emissions
reduced by 5.8% since last year and are now 42.7% lower than the
2008 baseline. Percentage of recyclable plastics increased from 63%
to 70%.
On 5 May 2021, the Group appointed Hannah Collyer as Director of
Corporate Affairs and ESG, to the executive leadership team of the
Group, reporting to CEO Alex Whitehouse. This newly created role
reflects the increased strategic importance of ESG issues to the
business and the growing significance of sustainability in its
fullest sense across the Group.
Response to Covid-19 pandemic
==============================
In the face of this pandemic, the business has proven to be
robust and resilient, with colleagues demonstrating great resolve
at home and at work, meeting unprecedented levels of consumer
demand for the Group's brands, whilst adopting new Covid-safe ways
of working. The Group's response to this crisis can be summarised
as follows:
-- Health and wellbeing of colleagues has been paramount
-- Early implementation of enhanced hygiene protocols and social
distancing measures in February 2020
-- Manufacturing and logistics operations remained fully
operational, ensuring continuity of food supply
-- Donated 550,000 meals through charitable food redistributor,
Fareshare and 238,000 products to NHS
-- Continued to focus on the core business model, increasing
brand investment and further innovation plans
Outlook
========
The Group goes into FY21/22 in a strong position, having gained
a significantly larger consumer base during the past year. The
business will continue to employ its successful branded growth
model, with further new product launches planned and six of its
largest brands due to benefit from TV advertising in FY21/22. It
expects to deliver further progress overseas as it applies these
strategies in its key international markets.
Initial trading this year is in line with the Group's
expectations, reflecting the ongoing strength of its growth
strategy, set against a period of strong comparatives. The Board is
confident in the delivery of its full year profit expectations, and
is set to benefit from substantially lower financing costs. As the
Group transitions to the next phase of its evolution, it will look
to expand through accessing new categories in the UK and also in
selected overseas markets, while exploring bolt-on acquisition
opportunities. It continues to target 1.5x Net debt/EBITDA(3) in
the medium term.
Financial results
==================
Revenue
GBPm FY20/21 Exclude: FY20/21 FY19/20 FY20/21 vs
FY19/20
Week 53 (52 week %
change)
53 week 52 week
basis basis
Grocery 702.6 (9.2) 693.4 611.6 +13.4%
* Branded 609.3 (7.6) 601.7 514.7 +16.9%
* Non-branded 93.3 (1.6) 91.7 96.9 (5.3%)
Sweet Treats 244.4 (3.6) 240.8 235.5 +2.2%
* Branded 203.2 (3.3) 199.9 190.9 +4.7%
- Non-branded 41.2 (0.3) 40.9 44.6 (8.4%)
Group 947.0 (12.8) 934.2 847.1 +10.3%
* Branded 812.5 (10.9) 801.6 705.6 +13.6%
- Non- branded 134.5 (1.9) 132.6 141.5 (6.3%)
Group revenue for the 53 weeks to 3 April 2021 was GBP947.0m, an
increase of GBP99.9m compared to the 52 weeks ended 28 March
2020.
On a 52 week basis, Group revenue increased by +10.3% to
GBP934.2m; Branded revenue grew by +13.6% while Non-branded revenue
was (6.3%) lower. In the fourth quarter, on a 13 week comparative
basis, Group revenue increase by +4.0% to GBP226.9m and branded
revenues increased by +7.0%. In the year, the Group's branded mix
advanced by 250 basis points to 85.8% on a 52 week basis.
The Group saw a prolonged period of elevated demand for its
product ranges, as consumers were restricted to eating all meals at
home due to the closure of hospitality outlets for long periods.
The supply chain demonstrated its robustness through meeting these
volumes and in doing so, kept product availability high. This,
together with continued new product launches and brand investment,
resulted in 70 basis points of market share gain in the year.
Overall, the Group's consumer base expanded this year, as a result
of more people cooking from home, experimenting with new recipes
and expanding their repertoire of meals.
Grocery
Grocery revenue for the 53 week financial year was GBP702.6m, of
which GBP609.3m was branded revenue and GBP93.3m Non-branded. On a
52 week basis, Grocery revenue increased by 13.4% to GBP693.4m, led
by its branded portfolio which grew by 16.9% to GBP601.7m. The
fourth quarter saw revenues grow by 3.6% to GBP172.4m with brands
up by 6.8%. The grocery portfolio gained 32 basis points of value
share in the year, growing faster than a market which increased by
12.3%.
In FY20/21, the Group's Grocery brands benefitted from the
Group's innovation strategy and increasing consumer marketing
investment behind emotionally engaging advertising. A significant
driver of increased volumes in the year was due to consumers eating
more meals at home due to pandemic related restrictions on eating
out of home; consequently many of the major Grocery brands grew in
strong double-digit terms, with Bisto, Oxo, Ambrosia, Sharwood's,
Homepride, Paxo and Nissin all stand out performers. Additionally,
the increase in cooking at home, with consumers expanding their
repertoire of meals has resulted in a significant increase in
household penetration of brands such as Bisto, Oxo, Sharwood's and
Paxo, which all attracted approximately a million or more new
households buying their product ranges.
New product development in the year was led by better for your
options such as Sharwood's 30% less sugar cooking sauce pouches,
30% less fat Butter Chicken sauces and low-fat Naan breads. Oxo
launched meat free Beef flavoured stock cubes, suitable for a vegan
diet. The Group became the UK's sole distributor for the high
quality Cape Herb and Spice range, which highlights the extension
of the Group into a new sub-category. Other new products brought to
market this year include Bisto Southern style gravy, which provides
consumers with the opportunity to replicate takeaways at home
following the fakeaway trend.
The Group's five largest Grocery brands; Ambrosia, Batchelors,
Bisto , Sharwood's and Oxo received an aggregate 58 weeks of
advertising on television during the year. Ambrosia and Sharwood's
both benefitted from advertising for the first time in four and
five years respectively, each with new production copy designed to
build an emotional engagement with consumers.
The online market grew rapidly in H1 and broadly maintained this
elevated level through the second half of the year. The Group's
categories have grown ahead of this, with sales increasing by
+104%, equating to a market share gain of 128 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. This includes
ensuring the Group's brands are promoted and displayed using
pertinent techniques for the online channel.
Looking ahead to FY21/22, the Grocery business will continue to
launch a number of new product ranges as part of its healthier
choices strategy. For example, it will be launching a Deliciously
Vegan range of Sharwood's Indian cooking sauces and 30% less fat
Loyd Grossman lasagne sauces. Other new product ranges include Oxo
marinades and rubs, Bisto Creamy pepper sauce and Bird's convenient
custard pots. The new Cape Herb and Spice range of rubs, chilli
tins and seasonings, as described above, will expand to further
distribution.
Additionally, the Group is planning to advertise all five of its
largest Grocery brands during the course of the next financial
year.
Sweet Treats
Sweet Treats revenue was GBP244.4m in the 53 weeks to 3 April
2021; branded revenue was GBP203.2m and Non-branded revenues
GBP41.2m. On a 52 week basis, Sweet Treats revenue increased by
2.2% to GBP240.8m. Branded revenue saw growth of 4.7% in a
declining cake market, which reflected fewer celebration occasions,
while Non-branded revenue was 8.4% lower. The fourth quarter saw an
acceleration in revenue growth, as total revenue in Sweet Treats
increased by 5.4% on a 13 week comparable basis. Branded revenue
was the driver of this growth, as revenue grew by 7.7%; well ahead
of the wider cake market.
Market share of the Group's cake brands grew by 113 basis points
in a market which declined by 2.3%, while Household penetration
increased by a very strong 193 basis points.
After a muted start to the year, when consumers and customers
focused heavily on staple items, both Mr Kipling and Cadbury cake
enjoyed a strong year of revenue growth. Mr Kipling, the Group's
largest brand, reached revenue of GBP150m for the first time in its
history, benefitting from 25 weeks of TV advertising in the year,
increased sales of its reduced sugar slices ranges and expansion of
its premium Signature collection. Cadbury cake sales were supported
by the launch of Crunchie and Fudge cake bars, while the core Mini
Rolls delivered robust volumes through the year. 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.
In the coming months, the Group will be investing in further TV
advertising for Mr Kipling, while FY21/22 sees the launch of Mr
Kipling Choc Tarts. Sweet Treats will also benefit from the full
year effect of new products launched in the prior year, such as the
new Cadbury Crunchie and Fudge cake bars and expanded Mr Kipling
Signature collection.
International
The International business enjoyed a strong year, as it began to
reap the benefits of its revised strategy, with revenue at constant
currency up 23%(8) compared to the prior year on a 52 week basis.
This revamped approach is designed to deliver sustainable
profitable growth as evidenced in the UK and is led by a new Head
of International. 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.
Revenue in FY20/21 grew in double digit percentage terms
compared to the prior year in each four quarters of the year. In
Ireland, all major brands displayed growth, some of which reflected
increased at home consumption during the pandemic, in a similar way
to the UK. In the second half of the year, Ireland saw the launch
of new products such as the Mr Kipling Signature range and Soba
Noodle pots and TV advertising for Bisto and Mr Kipling. These
activities are the first examples of how the International business
is applying the established and proven branded growth model from
the UK to its overseas markets. Australia saw a similar approach;
Mr Kipling aired on Australian TV in the fourth quarter and new
product launches included Sharwood's low fat cooking sauces and Mr
Kipling Chocolate & Cherry slices. A new head of market for
Australia, now country and not UK based, was appointed in the year
alongside a new team with strong local market consumer sector
backgrounds.
The USA saw very strong revenue growth in the year which
reflected significantly improved in market execution for
Sharwood's, achieving 3,000 new distribution points. In the fourth
quarter, the Group signed a new agreement with Weston Foods to sell
and market Mr Kipling cakes in the USA. The first shipments of cake
are expected to commence in the first half of FY21/22, which will
follow the confirmation of a preferred lead customer.
Non-branded
On a 52 week basis, Grocery Non-branded revenue declined (5.3%)
in the year while Sweet Treats revenue fell by (8.4%). Grocery saw
an increase in volume and 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 throughout the year. In Sweet Treats,
the sales decline reflected contract exits for retailer brand cake
and lower volumes in the discounter channel; these effects are
expected to unwind in the second half of FY21/22.
Trading profit
GBPm FY20/21 Exclude: FY20/21 FY19/20 FY20/21 vs
FY19/20
Week 53 (52 week %
change)
53 week 52 week
basis basis
Divisional contribution 197.9 (3.0) 194.9 171.9 +13.4%
* Grocery 174.7 (2.2) 172.5 148.2 +16.4%
* Sweet Treats 23.2 (0.8) 22.4 23.7 (5.5%)
Group & corporate
costs (46.6) - (46.6) (39.3) (18.6%)
Trading profit 151.3 (3.0) 148.3 132.6 +11.9%
The Group delivered Trading profit of GBP151.3m in FY20/21. This
comprised Divisional contribution of GBP197.9m less costs of Group
& corporate related activity of GBP46.6m. On a 52 week basis,
Trading profit in FY20/21 was GBP148.3m, an 11.9% increase on the
prior year. Divisional contribution grew by +13.4% on the same
basis, reflecting strong growth in the Grocery business of +16.4%,
partly offset by a reduction in Sweet Treats Divisional
contribution of GBP22.4m which was 5.5% lower.
Grocery benefitted from strong performances across its branded
portfolio, as the substantial increase in volumes saw benefits of
operational leverage feed through to Divisional contribution. This
effect more than offset incremental supply chain costs incurred
during 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 with Ambrosia, Batchelors, Bisto, Sharwood's
and Oxo all recipients of television advertising in the year. This
reflects one of the key pillars of the Group's branded growth model
strategy of delivering emotionally engaging advertising. 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 than expected, however
these lower market rates dissipated in the second half.
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 increased temporary labour due to higher absence was more
evident in Sweet Treats than Grocery. Additionally, with less
pronounced volume uplifts in Sweet Treats compared to Grocery,
limited operational leverage benefits were offset by these
incremental pandemic related costs. Marketing investment for Mr
Kipling was higher in the year, as the Group's largest brands
benefitted from 25 weeks on air of the popular 'Little Thief'
television advert.
Group & corporate costs increased by GBP7.3m in the period
to GBP46.6m. This was largely as a result of higher Group wider
management incentive schemes costs, covering a large section of the
Group's workforce.
The Group will continue to invest strongly behind its brands in
FY21/22 as it did in FY20/21, with six of the Group's largest
brands in line to benefit from media advertising. Mr Kipling and
Bisto are planned to benefit from new advertising creative.
As the Group enters this year, it has been closely monitoring
movements in commodity markets. The recent increase in some input
costs are not unexpected and follow a period of relatively benign
input cost inflation. The business has planned for these changes,
and will use a range of measures to ensure any impacts are
offset.
Operating profit
GBPm FY20/21 FY19/20 Change
53 week basis
EBITDA(3) 170.4 152.5 17.9
Depreciation (19.1) (19.9) 0.8
Trading profit 151.3 132.6 18.7
Amortisation of intangible assets (30.4) (29.4) (1.0)
Net interest on pensions and administrative
expenses 9.7 (4.6) 14.3
Fair value movements on foreign
exchange & derivatives (2.3) 1.7 (4.0)
Non-trading items:
Restructuring costs (4.9) (4.1) (0.8)
GMP equalisation (2.9) - (2.9)
Other non-trading (0.5) (0.9) 0.4
Operating profit before gain on
sale of Hovis 120.0 95.3 24.7
Reversal of impairment loss on financial
assets 15.7 - 15.7
Profit on disposal of investment
in associate 16.9 - 16.9
------- ------- ------
Operating profit 152.6 95.3 57.3
------- ------- ------
Operating profit increased by GBP57.3m, to GBP152.6m in the
year. This growth reflected the Trading profit performance as
described above, a positive movement in the net interest on
pensions and administrative expenses and the sale of the Group's
Hovis investment in the second half of the year.
Amortisation of intangible assets was GBP30.4m in the year
compared to GBP29.4m in FY19/20. Fair valuation of foreign exchange
and derivatives resulted in an adverse movement of GBP2.3m.
Non-trading restructuring costs increased by GBP0.8m to GBP4.9m in
FY20/21. This increase was due to costs associated with advisory
work on the segregated merger pensions agreement announced on 20
April 2020, integration of the Knighton Foods business. The
November 2020 Guaranteed Minimum Pensions (GMP) high court
judgement ruled that pension scheme trustees are also legally
responsible for equalising the GMP for the employees who
transferred out of UK defined benefit pension schemes. Accordingly,
there is a requirement to revisit historic cash equivalent transfer
values that were previously not equalised and make adjustments
where necessary and a non-cash charge of GBP2.9m in the year
reflects past service costs associated with this equalisation.
Net interest on pensions and administrative expenses was
GBP9.7m, which includes expenses for operating the Group's pension
schemes of GBP10.7m, offset by a net interest credit of GBP14.4m.
Also included is a credit of GBP9.3m related to a Wind Up Lumpsum
exercise as part of the scheme merger and a charge of GBP3.3m which
reflects settlement costs associated with enhanced transfer value
payments made to certain RHM scheme deferred members.
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. A
profit on disposal of GBP16.9m was recognised as result of the sale
of the Hovis investment.
Finance costs
GBPm FY20/21 Exclude: FY20/21 FY19/20
53 week
53 week 52 week
basis basis
Senior secured notes interest 25.9 (0.4) 25.5 31.0
Bank debt interest - net 4.6 (0.0) 4.6 5.0
30.5 (0.4) 30.1 36.0
Amortisation of debt issuance
costs 2.9 - 2.9 3.3
------- -------- ------- -------
Net regular interest(5) 33.4 (0.4) 33.0 39.3
------- -------- ------- -------
Write-off of financing costs 1.3 -
Discount unwind (1.1) 1.3
Other finance cost 0.9 1.1
Other finance income (4.7) -
------- -------- ------- -------
Net finance cost 29.8 41.7
------- -------- ------- -------
Note: 52 week basis not applied for Write off of financing
costs, Discount unwind, Other finance cost and Other finance
income
Net finance cost was GBP29.8m in the year to the 53 weeks ended
3 April 2021, a decrease of GBP11.9m compared to FY19/20. Net
regular interest was GBP33.4m in the year and GBP33.0m on a 52 week
basis. This compares to GBP39.3m in the comparative period. The
reduction in net regular interest in the year was primarily due to
lower Senior secured notes interest charges, principally due to
four partial redemptions of the Group's Floating Rate Notes (FRN)
which completed at different points during the year, and are
outlined in the table below.
GBPm GBPm
FRN outstanding at 28 March 2020 210.0
Part redemptions in FY20/21:
17 June 2020 (80.0)
1 December 2020 (40.0)
16 February 2021 (40.0)
31 March 2021 (30.0)
-------
FRN outstanding at 3 April 2021 20.0
-------
Bank debt interest decreased by GBP0.4m to GBP4.6m in the year
and amortisation of debt issuance costs were also GBP0.4m lower.
The Revolving Credit Facility (RCF) was undrawn at the year
end.
Following the partial redemptions of the FRN during the year,
write off of financing fees amounting to GBP1.3m were incurred in
the year. A credit of GBP1.1m in the year related to a discount
unwind associated with properties held by the Group. Other finance
income of GBP4.7m relates to the reversal of the impairment of the
interest on the Hovis loan note.
Taxation
GBPm FY20/21 FY19/20
Profit before taxation 122.8 53.6
* Tax charge at rate of 19.0% (23.3) (10.2)
Tax effect of:
* Changes in tax rate - 4.9
6.6 -
* Capital gain on disposal of business
* Other items (0.1) (1.8)
Income tax (charge) (16.8) (7.1)
---------- --------
Deferred tax asset 28.4 -
Deferred tax liability 85.8 184.9
A tax charge in the year of GBP16.8m compared to GBP7.1m in the
prior year. The current year reflects a charge of GBP23.3m on
profit before tax at the rate of 19% and a capital gain of GBP6.6m
relating to the disposal of the Hovis investment.
At 3 April 2021, deferred tax assets were GBP28.4m (28 March
2020: nil) while a deferred tax liability of GBP85.8m is a decrease
of GBP99.1m compared to the prior year position and reflects a
reduction in the combined pensions surplus.
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 expects to
recommence paying cash tax in low single digit GBPmillions in the
medium term.
Earnings per share
Statutory earnings per FY20/21 FY19/20 Change
share (GBPm)
53 week basis
Operating profit 152.6 95.3 +57.3
Net finance cost (29.8) (41.7) +11.9
Profit before taxation 122.8 53.6 +69.2
Taxation (16.8) (7.1) (9.7)
-------- -------- -------
Profit after taxation 106.0 46.5 +59.5
Average shares in issue
(millions) 851.4 846.6 +4.8
-------- -------- -------
Basic Earnings per share
(pence) 12.5 5.5 +7.0
The Group reported a profit before tax of GBP122.8m in the year,
an increase of GBP69.2m compared to FY19/20. Profit after tax in
the year grew by GBP59.5m from GBP46.5m to GBP106.0m. Basic
earnings per share in FY20/21 increased by 7.0p to 12.5p.
Adjusted earnings per share FY20/21 FY19/20 Change
(GBPm) (%)
52 week comparable basis
Trading profit 148.3 132.6 +11.9%
Less: Net regular interest (33.0) (39.3) +15.9%
-------- -------- --------
Adjusted profit before
tax 115.3 93.3 +23.5%
Less: Notional tax (19%) (21.9) (17.7) (23.5%)
-------- -------- --------
Adjusted profit after tax(6) 93.4 75.6 +23.5%
Average shares in issue
(millions) 851.3 846.6 0.6%
Adjusted earnings per share
(pence) 11.0 8.9 +22.8%
Adjusted profit before tax on a 52 week comparable basis
increased by 23.5% in the year to GBP115.3m, reflecting both
Trading profit growth in the period and lower net regular interest
costs as described above. Adjusted profit after tax also increased,
by 23.5%, to GBP93.4m in the year after deducting a notional 19.0%
tax charge of GBP21.9m. Based on average shares in issue of 851.3
million shares, adjusted earnings per share for the 52 week
comparable basis grew +22.8% to 11.0p.
Hovis
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 GBP16.9m was in respect of equity and
GBP20.4m reflected the settlement of the outstanding loan to
associate.
Dividend
The Company last paid a dividend to shareholders in 2008. Over
recent years, the Company has made significant progress in
delivering against its branded growth model strategy and so in
turn, reducing Net debt to a level that would enable the payment of
a dividend under the Group's financing arrangements. In February
2021, the Company completed a capital reduction which will provide
greater flexibility in how the Company manages its capital
resources going forward. Subject to shareholder approval, the
directors have proposed a final dividend of 1.0 pence for the 53
weeks ended 3 April 2021 (2019/20: nil), payable on 30 July 2021 to
shareholders on the register at the close of business on 2 July
2021. The shares will go ex-dividend on 1 July 2021. Under the
dividend matching agreement with the Company's pension schemes, for
up to GBP5 million paid to shareholders as a dividend, a payment of
50 pence for every GBP1 paid to shareholders is payable to the
pension schemes. For any dividend paid between GBP5m and GBP10m,
there is no matching payment made to the pensions schemes and for
any dividend paid above GBP10m, the 50 pence: GBP1 matching
arrangement, as described above, recommences.
Free cash flow
GBPm FY20/21 FY19/20
53 week basis
Statutory cash flow statement
Cash generated from operating activities 85.6 85.9
Cash generated from (used in) investing
activities 13.8 (18.0)
Cash (used in)/generated from financing
activities (276.2) 82.2
-------- --------
Net (decrease)/increase in cash & cash
equivalents (176.8) 150.1
Cash, cash equivalents and bank overdrafts
at beginning of period 177.9 27.8
-------- --------
Cash, cash equivalents and bank overdrafts
at end of period 1.1 177.9
-------- --------
On a statutory basis, cash generated from operations was
GBP118.2m compared to GBP121.5m in the comparative period. Cash
generated from operating activities was GBP85.6m after deducting
net interest paid of GBP32.6m. Cash generated from investing
activities was GBP13.8m compared to GBP18.0m used in the prior
year. This reflected proceeds received from the Group's Hovis
investment, partly offset by the purchase of tangible and
intangible assets of GBP23.6m. Cash used in financing activities
was (GBP276.2m) in the year versus GBP82.2m cash generated in the
prior year; the difference 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 repaid GBP190.0m part redemptions of its Senior
Secured Floating Rate Notes during the year. Cash and cash
equivalents of GBP1.1m at the year end comprised a bank overdraft
of GBP3.1m and cash and bank deposits of GBP4.2m.
GBPm FY20/21 FY19/20
53 week basis
Trading profit 151.3 132.6
Depreciation 19.1 19.9
Other non-cash items 3.4 1.7
Interest (32.6) (35.6)
Pension contributions (47.0) (44.7)
Capital expenditure (23.6) (18.0)
Working capital & other 0.6 14.6
Non-trading items (5.1) (6.6)
Proceeds from share issue 1.7 1.1
Sale of property, plant & equipment 0.1 0.1
Net proceeds from sale of Hovis 30.3 -
investment
Free cash flow(10) 98.2 65.1
-------- --------
The Group reported an inflow of Free cash in the year of
GBP98.2m compared to GBP65.1m in the previous year. Trading profit
of GBP151.3m on a 53 week basis was GBP18.7m ahead of the prior
year for the reasons outlined above, while depreciation was
slightly lower at GBP19.1m (FY19/20: GBP19.9m). Other non-cash
items of GBP3.4m was due primarily to share based payments.
Net interest paid of GBP32.6m was GBP3.0m lower than the prior
year, due to part redemptions of the Group's Senior Secured
Floating Rate Notes during the year which attract a coupon of 5.0%
above LIBOR. The Group expects interest paid to continue to reduce
in FY21/22 as the full year impact of these part redemptions take
effect. Additionally, and as announced today, the Group is planning
to issue new Senior Secured Fixed Rate Notes which are expected to
replace its existing Fixed Rate Notes which currently attract a
6.25% interest rate.
Total pension contributions in the period were GBP47.0m
(2019/20: GBP44.7m), due to previously agreed planned increases in
deficit contribution payments to the Premier Foods pension scheme.
Of this, pension deficit contribution payments were GBP39.1m and
administration costs including pension levy costs were GBP7.9m.
Capital expenditure in the year was GBP23.6m, in line with
expectations and higher than FY19/20. The Group expects to continue
investing at least GBP25m per annum in capital expenditure as it
funds growth projects supporting the Group's innovation strategy
and cost release projects to deliver efficiency savings. Both these
areas of capital investment offer attractive payback returns and
accordingly are a key factor in the Group's assessment of capital
allocation.
Following the completion of the sale of the Group's Hovis
investment to Endless LLP, as described above, cash proceeds of
GBP37.3m were received on 5 November 2020. This was partly offset
by a GBP7.0m share of proceeds made to the Group's pension
schemes.
A working capital inflow of GBP0.6m compared to an inflow of
GBP14.6m in the prior year. The prior year position was due to
unusually low stock holding levels as the Group experienced higher
than expected demand from its retail customers in the final three
weeks of the financial year due to impacts associated with
COVID-19. Non-trading items of GBP5.1m were paid in the year and
comprise the final tranche of advisory costs associated with the
Group's strategic review and costs relating to restructuring of
both the International and Knighton businesses.
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 (98.2) (98.2)
Movement in debt issuance
costs 4.2 4.2
Movement in lease creditor - (2.9)
------------ ----------
Net debt at 3 April 2021 314.1 332.7
------------ ----------
Net debt at 3 April 2021 was GBP332.7m, a reduction of GBP96.9m
compared to the prior year while on a pre-IFRS 16 basis, Net debt
was GBP314.1m, GBP94.0m lower than the comparative period. Free
cash inflow in the period was GBP98.2m and the movement in debt
issuance costs was GBP4.2m. On a pre-IFRS 16 Leases basis, Net debt
/ EBITDA(3) was 1.9x; while on a reported basis, Net debt /
EBITDA(3) was 2.0x.
There were no changes to the Group's committed bank lending
facilities in the year. As at 3 April 2021, the Group held net cash
and bank deposits of GBP1.1m. At the start of the financial year
the Group held in issue GBP300m Senior Secured Fixed Rate Notes
maturing October 2023 and GBP210m Senior Secured Floating Rate
Notes ("FRN") maturing July 2022. With the Group's strong progress
in cash generation and debt reduction during the last two years, it
redeemed GBP190m of the original GBP210m outstanding FRN during
FY20/21 at par.
The Group has today announced the proposed issue of new five
year GBP300m Senior Secured fixed rate notes due 2026, to refinance
its GBP300m existing Senior Secured fixed rate notes, due to mature
October 2023. Pricing of the new GBP300m Senior Secured fixed rate
notes is to be confirmed and the notes are expected to be callable
after two years.
The Group has also entered into a new revolving credit facility
(RCF) with an updated lending group for a period of three years
from May 2021 with the option of extending for up to two additional
years. This new senior secured RCF is a committed facility of
GBP175m with an interest margin grid broadly in line with the
previous RCF. The prevailing coupon on the RCF at the year end was
2.75% plus three month LIBOR, although the facility was undrawn.
Undrawn elements of the RCF will continue to attract interest
equivalent to 35% of the applicable margin. It is expected that the
Group's outstanding GBP20m Senior Secured Floating Rate Notes due
July 2022 will be repaid as part of this refinancing.
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 agreed and signed legal
documentation with the scheme trustees for the merger, which was
implemented as planned on 30 June 2020. A winding up lump sum
(WULS) exercise was completed in February 2021. Following the
segregated merger, the Group chose to effect a winding up of the
Premier Foods Pension Scheme Trustees Limited and the Premier
Grocery Products Pension Schemes Trustee Limited which will be
completed in 2021. A winding up lump sum (WULS) exercise was
completed in February 2021.
IAS 19 results and commentary
IAS 19 Accounting 3 April 2021 28 March 2020
Valuation (GBPm)
RHM Premier Combined RHM Premier Combined
Foods Foods
Assets 4,459.4 792.5 5,251.9 4,745.3 774.7 5,520.0
Liabilities (3,536.9) (1,175.1) (4,712.0) (3,240.0) (1,049.6) (4,289.6)
---------- ---------- ---------- ----------
Surplus/(Deficit) 922.5 (382.6) 539.9 1,505.3 (274.9) 1,230.4
Net of deferred
tax (19.0%) 747.2 (309.9) 437.3 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 3 April 2021 of
GBP539.9m, GBP690.5m lower than 28 March 2020. Net of deferred tax,
the combined surplus at 3 April 2021 was GBP437.3m. 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.
Assets in the combined schemes at 3 April 2021 were GBP268.1m
lower at GBP5,251.9m. RHM scheme assets decreased by GBP285.9m to
GBP4,459.4m while the Premier Foods' schemes assets increased by
GBP17.8m to GBP792.5m. The reduction in the RHM scheme assets was
largely due to a drop in the value of government bonds held by the
schemes. At the previous year end, UK 30 year Government gilts were
at c.0.6%, however during the year, UK government Gilt yields
increased. The pension schemes use hedges to reduce the impact of
movements in Gilts on the actuarial valuation, so when gilt yields
rise, the asset values of these hedges fall.
Liabilities in the combined schemes increased by GBP422.4m to
GBP4,712.0m as at 3 April 2021 compared to 28 March 2020. The RHM
scheme liabilities increased by GBP296.9m to GBP3,536.9m in the
year and the Premier Foods scheme liabilities increased by
GBP125.5m to GBP1,175.1m The main driver of the movement in
liabilities was due to a decrease in the discount rate used at 28
March 2020 of 2.5%.
Combined pensions schemes 3 April 2021 28 March 2020
(GBPm)
Assets
Equities 14.9 11.5
Government bonds 1,625.4 1,802.6
Corporate bonds 1.0 25.3
Property 467.9 445.2
Absolute return products 1,112.1 1,198.2
Cash 79.8 32.4
Infrastructure funds 321.5 309.8
Swaps 485.4 487.1
Private equity 240.6 510.1
LDI 191.2 268.3
Other 712.1 429.5
------------- --------------
Total Assets 5,251.9 5,520.0
Liabilities
Discount rate 2.00% 2.50%
Inflation rate (RPI/CPI) 3.25%/2.80% 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.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
===========
The Company's preliminary results are presented for the 53 weeks
ended 3 April 2021 and the comparative period, 52 weeks ended 28
March 2020. All references to the 'quarter', unless otherwise
stated, are for the 13 weeks ended 27 March 2021 and the
comparative period, 13 weeks ended 28 March 20209.
To aid comparability of results, headline results are provided
on a 52 week basis and reconciliations provided to a 53 week
basis.
Headline group results for 53 weeks ended 3 April 2021
=======================================================
GBPm FY20/21 Exclude: FY20/21 FY19/20 FY20/21
vs FY19/20
53 week (52 week
% change)
53 week 52 week
Revenue basis basis
-------
Grocery 702.6 (9.2) 693.4 611.6 +13.4%
* Branded 609.3 (7.6) 601.7 514.7 +16.9%
* Non-branded 93.3 (1.6) 91.7 96.9 (5.3%)
Sweet Treats 244.4 (3.6) 240.8 235.5 +2.2%
* Branded 203.2 (3.3) 199.9 190.9 +4.7%
* Non-branded 41.2 (0.3) 40.9 44.6 (8.4%)
Group 947.0 (12.8) 934.2 847.1 +10.3%
- Branded 812.5 (10.9) 801.6 705.6 +13.6%
- Non-branded 134.5 (1.9) 132.6 141.5 (6.3%)
Divisional contribution
Grocery 174.7 (2.2) 172.5 148.2 +16.4%
Sweet Treats 23.2 (0.8) 22.4 23.7 (5.5%)
Total 197.9 (3.0) 194.9 171.9 +13.4%
Trading profit 151.3 (3.0) 148.3 132.6 +11.9%
EBITDA(3) 170.4 (3.3) 167.1 152.5 +9.6%
EBITDA(3) (excl
IFRS 16) 168.2 (3.3) 164.9 149.9 +10.0%
Net regular interest (33.4) 0.4 (33.0) (39.3) +15.9%
Adjusted profit
before tax 117.9 (2.6) 115.3 93.3 +23.5%
Adjusted eps 11.2 (0.2) 11.0 8.9 +22.8%
-------
Net debt 332.7 N/A N/A 429.6 +22.6%
Net debt (excl
IFRS 16) 314.1 N/A N/A 408.1 +23.1%
Net debt/EBITDA(3) 2.0x N/A N/A 2.8x N/A
Net debt/EBITDA(3)
(excl IFRS 16) 1.9x N/A N/A 2.7x N/A
Quarter 4 Sales - 52 week comparable basis
===========================================
Q4 Sales (GBPm) Grocery Sweet Treats Group
Branded 152.1 50.7 202.8
Non-branded 20.3 3.8 24.1
-------- ------------- --------
Total 172.4 54.5 226.9
% change
Branded +6.8% +7.7% +7.0%
Non-branded (15.3%) (18.4%) (15.8%)
-------- ------------- --------
Total +3.6% +5.4% +4.0%
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,
reversal of impairment loss on financial assets, profit on disposal
of investment in associate, 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 and net interest
on pensions and administration expenses (defined as the net
interest on the pension scheme assets and liabilities, the
administrative costs of running the schemes and settlement costs or
credits related to the pensions schemes).
2. Divisional contribution refers to Gross Profit less selling,
distribution and marketing expenses directly attributable to the
relevant business unit.
3. EBITDA means EBITDA on an adjusted basis and 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% (2019/20:
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 851.4 million (52 weeks ended 28 March 2020: 846.6
million). On a 52 week basis for the 52 weeks to 27 March 2021,
weighted average number of shares was 851.3 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
14. Historical Net debt/EBITDA leverage since public listing in July 2004.
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 business
unit, the results of which are aggregated within the Grocery
business unit, are not required to be separately disclosed for
reporting purposes.
-- Net debt is presented pre-IFRS 16 as targets the Group have
previously communicated are on a pre-IFRS 16 basis and this allows
for comparability to these targets.
Consolidated statement of profit or loss
52 weeks
53 weeks ended ended
3 April 2021 28 Mar 2020
Note GBPm GBPm
-------------------------------------------- ----- ------------------------ ------------
Revenue 3 947.0 847.1
Cost of sales (611.7) (549.6)
-------------------------------------------- ----- ------------------------ ------------
Gross profit 335.3 297.5
Selling, marketing and distribution
costs (137.4) (125.6)
Administrative costs (77.9) (76.6)
Reversal of impairment losses on financial
assets 15.7 -
Profit on disposal of investment in
associate 16.9 -
Operating profit 3 152.6 95.3
Finance cost 4 (36.2) (44.1)
Finance income 4 6.4 2.4
-------------------------------------------- ----- ------------------------ ------------
Profit before taxation 122.8 53.6
Taxation charge 5 (16.8) (7.1)
Profit for the period attributable
to owners of the parent 106.0 46.5
-------------------------------------------- ----- ------------------------ ------------
Basic earnings per share
From profit for the period (pence) 6 12.5 5.5
-------------------------------------------- ----- ------------------------ ------------
Diluted earnings per share
From profit for the period (pence) 6 12.2 5.4
-------------------------------------------- ----- ------------------------ ------------
Adjusted earnings per share(1)
From adjusted profit for the period
(pence) 6 11.2 8.9
-------------------------------------------- ----- ------------------------ ------------
(1) Adjusted earnings per share is defined as trading profit less
net regular interest, less a notional tax charge at 19.0% (2019/20:
19.0%) divided by the weighted average number of ordinary shares
of the Company.
Consolidated statement of comprehensive income
53 weeks
ended 52 weeks ended
3 April 2021 28 Mar 2020
Note GBPm GBPm
------------------------------------------- ----- ------------- ------------------
Profit for the period 106.0 46.5
Other comprehensive income, net of
tax
Items that will never be reclassified
to profit or loss
Remeasurements of defined benefit schemes 9 (750.3) 816.7
Deferred tax credit / (charge) 5 132.9 (167.0)
Current tax credit 5 9.2 5.2
Items that are or may be reclassified
subsequently to profit or loss
Exchange differences on translation (1.0) 0.3
-------------
Other comprehensive income, net of
tax (609.2) 655.2
------------------------------------------- ----- ------------- ------------------
Total comprehensive income attributable
to owners of the parent (503.2) 701.7
------------------------------------------- ----- ------------- ------------------
Consolidated balance sheet
As at As at
3 Apr 2021 28 Mar 2020
Note GBPm GBPm
----------------------------------------- ----- ------------------- -------------------
ASSETS:
Non-current assets
Property, plant and equipment 7 192.1 194.0
Goodwill 646.0 646.0
Other intangible assets 8 317.2 341.3
Deferred tax assets 5 28.4 -
Net retirement benefit assets 9 934.7 1,512.6
2,118.4 2,693.9
Current assets
Stocks 68.8 68.0
Trade and other receivables 83.4 89.1
Cash and cash equivalents 10 4.2 177.9
Derivative financial instruments 0.1 0.9
156.5 335.9
----------------------------------------- ----- ------------------- -------------------
Total assets 2,274.9 3,029.8
----------------------------------------- ----- ------------------- -------------------
LIABILITIES:
Current liabilities
Trade and other payables (249.8) (249.7)
Financial liabilities
- short term borrowings 11 (3.1) (85.0)
- derivative financial instruments (2.3) (0.8)
Lease liabilities 11 (2.3) (2.5)
Provisions for liabilities and charges 12 (6.2) (6.4)
(263.7) (344.4)
Non-current liabilities
Long term borrowings 11 (315.2) (501.0)
Lease liabilities 11 (16.3) (19.0)
Net retirement benefit obligations 9 (394.8) (282.2)
Provisions for liabilities and charges 12 (8.4) (9.6)
Deferred tax liabilities 5 (85.8) (184.9)
Other liabilities 13 (7.1) (8.7)
(827.6) (1,005.4)
----------------------------------------- ----- ------------------- -------------------
Total liabilities (1,091.3) (1,349.8)
----------------------------------------- ----- ------------------- -------------------
Net assets 1,183.6 1,680.0
----------------------------------------- ----- ------------------- -------------------
EQUITY:
Capital and reserves
Share capital 85.5 84.8
Share premium 0.6 1,409.4
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Profit and loss reserve 755.1 (156.6)
----------------------------------------- -------------------
Total equity 1,183.6 1,680.0
----------------------------------------- ----- ------------------- -------------------
Consolidated statement of cash flows
53 weeks ended 52 weeks
ended
3 Apr 2021 28 Mar 2020
Note GBPm GBPm
-------------------------------------------- ----- ------------------------ -------------------
Cash generated from operations 10 118.2 121.5
Interest paid (34.1) (38.0)
Interest received 1.5 2.4
-------------------------------------------- ----- ------------------------ -------------------
Cash generated from operating activities 85.6 85.9
Proceeds from repayment of loan notes 15.7 -
to associate
Net proceeds from sale of investment 16.9 -
in associate
Interest received on loan notes to 4.7 -
associate
Purchases of property, plant and equipment (18.0) (12.8)
Purchases of intangible assets (5.6) (5.3)
Sale of property, plant and equipment 0.1 0.1
-------------------------------------------- ----- ------------------------ -------------------
Cash generated from / (used in) investing
activities 13.8 (18.0)
Repayment of borrowings (275.0) -
Proceeds from borrowings - 85.0
Payment of lease liabilities (2.7) (3.9)
Purchase of shares to satisfy share (0.2) -
awards
Proceeds from share issue 1.7 1.1
-------------------------------------------- ----- ------------------------ -------------------
Cash (used in) / generated from financing
activities (276.2) 82.2
Net (decrease) / increase in cash and
cash equivalents (176.8) 150.1
Cash, cash equivalents and bank overdrafts
at beginning of period 177.9 27.8
-------------------------------------------- ----- ------------------------ -------------------
Cash and cash equivalents at end of
period(1) 10 1.1 177.9
-------------------------------------------- ----- ------------------------ -------------------
(1) Cash and cash equivalents of GBP1.1m includes bank overdraft
of GBP3.1m and cash and bank deposits of GBP4.2m. See note 10 for
more details
Consolidated statement of changes in equity
Note Share Share Merger Other Profit Total
capital premium reserve reserves and equity
loss
reserve
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
Profit for the period - - - - 46.5 46.5
Remeasurements of defined
benefit schemes 9 - - - - 816.7 816.7
Deferred tax charge 5 - - - - (167.0) (167.0)
Current tax credit 5 5.2 5.2
Exchange differences
on translation - - - - 0.3 0.3
Other comprehensive income - - - - 655.2 655.2
------------------------------ ----- --------- ---------- --------- ---------- --------- --------
Total comprehensive income - - - - 701.7 701.7
Shares issued 0.3 0.8 - - - 1.1
Share-based payments - - - - 1.3 1.3
Deferred tax movements
on share-based payments 5 - - - - 0.5 0.5
Other deferred tax movements 5 - - - - (0.1) (0.1)
At 28 March 2020 84.8 1,409.4 351.7 (9.3) (156.6) 1,680.0
------------------------------ ----- --------- ---------- --------- ---------- --------- --------
At 29 March 2020 84.8 1,409.4 351.7 (9.3) (156.6) 1,680.0
Profit for the period - - - - 106.0 106.0
Remeasurements of defined
benefit schemes 9 - - - - (750.3) (750.3)
Deferred tax credit 5 - - - - 132.9 132.9
Current tax credit 5 9.2 9.2
Exchange differences
on translation - - - - (1.0) (1.0)
Other comprehensive income - - - - (609.2) (609.2)
------------------------------ ----- --------- ---------- --------- ---------- --------- --------
Total comprehensive income - - - - (503.2) (503.2)
Shares issued 0.7 1.0 - - - 1.7
Capital reduction(1) (1,409.8) 1,409.8 -
Share-based payments - - - - 3.1 3.1
Purchase of shares to
satisfy share awards - - - - (0.2) (0.2)
Deferred tax movements
on share-based payments 5 - - - - 2.2 2.2
At 3 April 2021 85.5 0.6 351.7 (9.3) 755.1 1,183.6
------------------------------ ----- --------- ---------- --------- ---------- --------- --------
(1) Following shareholder approval at a General Meeting held on
11 January 2021 and a hearing in the High Court of Justice, Business
and Property Courts of England and Wales on 9 February 2021, an
order was given confirming the cancellation of the entire amount
standing to the credit of the Company's share premium account, which
amounted GBP1,409.8m ("Capital Reduction"). The order was produced
to the Registrar of Companies and was registered on 10 February
2021, making the Reduction of Capital effective.
1. General information
The financial information included in this preliminary
announcement does not constitute the Company's
statutory accounts for the 53 weeks ended 03 April 2021 and for
the 52 weeks ended 28 March 2020, but is derived from those
accounts. Statutory accounts for the 52 weeks ended 28 March 2020
have been delivered to the registrar of companies, and those for 53
weeks ended 03 April 2021 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention to by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements of the Company have been
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and in
accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the
European Union.
Basis for preparation of financial statements on a going concern
basis
The Group's revolving credit facility includes net debt/EBITDA
and EBITDA/interest covenants, as detailed in note 15. 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 26 September
2020 and 03 April 2021.
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, the Directors have a reasonable
expectation that the Group is able to operate within the level of
its current facilities, meet the required covenant tests and has
adequate resources to continue in operational existence for at
least 12 months from the date of approval of these financial
statements. The Group and Company therefore continues to adopt the
going concern basis in preparing its financial information for the
reasons set out below:
At 03 April 2021, the Group had total assets less current
liabilities of GBP2,011.2m and net assets of GBP1,183.6m. Liquidity
as at that date was GBP177m, made up of cash and cash equivalents,
and undrawn committed credit facilities of GBP173m expiring in
December 2022. At the time of the approval of these financial
statements, the cash and liquidity position of the group has not
changed significantly. The revolving credit facility was refinanced
in May 2021, the new facility is for GBP175m and expires in May
2024 with the option of extending for up to two additional years.
Further details of the refinancing are included in note 15.
The Group operates in the Food Manufacturing industry,
considered as essential during the current pandemic, and whilst
uncertainty exists in respect of the potential future impact of
COVID-19, HM Government restrictions when necessary to be put in
place, mean more meals are eaten at home and hence increased demand
for the Group's product ranges. The Group's first priority remains
the health and wellbeing of its colleagues, customers and other
stakeholders and to date the Group has experienced no net financial
adverse impact of the COVID-19 pandemic with elevated levels of
demand seen.
The Directors have rigorously reviewed the situation relating to
COVID-19 and have modelled a series of 'downside case' scenarios
impacting future financial performance, cash flows and covenant
compliance, that cover a period of at least 12 months from the date
of approval of the financial statements. These downside cases
represent severe but plausible scenarios and include assumptions
relating to estimation of the impact of the closure of all
manufacturing sites due to colleague absence as opposed to
Government imposed guidelines. 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, to date there have been no manufacturing
site closures. The Directors have also considered upcoming UK
regulations impacting the food industry and consumer preferences
that may have an adverse impact on the demand for certain product
groups.
Whilst these downside scenarios are severe but plausible, each
is considered by the Directors to be prudent, having an adverse
impact on Revenue, margin and cash flow. The Directors, in
response, also have identified mitigating actions within their
control, 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 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 and Company has adequate
resources to continue to meet its liabilities as they fall due for
at least 12 months from the date of approval the financial
statements. Accordingly, the Directors are satisfied that it is
appropriate to adopt the going concern basis in preparing its
financial statements.
2. Significant accounting policies, estimates and judgements
The following are areas of particular significance to the
Group's financial statements and may include the use of estimates,
which is fundamental to the compilation of a set of financial
statements. Results may differ from actual amounts.
Significant accounting policies
The following are considered to be the significant accounting
policies within the financial statements:
2.1 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
statements.
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
Further disclosures are contained within note 5.
Estimates
The following are considered to be the key estimates within the
financial statements:
2.2 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 9.
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.
2.3 Goodwill
Impairment reviews in respect of goodwill are performed at least
annually and more regularly if there is an indicator of impairment.
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 has conducted sensitivity analysis on the
value in use calculations of the CGUs carrying values for the
purposes of testing goodwill.
2.4 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.
A material adjustment is not expected in the 12 months of the
estimate.
Judgements
The following are considered to be the key judgements within the
financial statements:
2.5 Non-trading items
Non-trading items have been presented separately throughout the
financial statements. These are items that management believes
require separate disclosure by virtue of their nature in order that
the users of the financial statements 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.
3. 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", and "International". During the year, following the
announcement at the end of FY2020 to re-integrate Knighton Foods
("Knighton") subsidiary into the rest of the Group, Knighton ceases
to be an operating segment. 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 and
administrative expenses.
The segment results for the period ended 3 April 2021 and for
the period ended 28 March 2020 and the reconciliation of the
segment measures to the respective statutory items included in the
consolidated financial statements are as follows:
53 weeks ended 3 April 52 weeks ended 28 March
2021 2020
---------------------------------- ---------------------------------------- ---------------------------------------
Grocery Sweet Total Grocery Sweet Total
Treats Treats
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
Revenue 702.6 244.4 947.0 611.6 235.5 847.1
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
Divisional contribution 174.7 23.2 197.9 148.2 23.7 171.9
Group and corporate costs (46.6) (39.3)
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
Trading profit 151.3 132.6
Amortisation of intangible
assets (30.4) (29.4)
Fair value movements on foreign
exchange and other derivative
contracts (2.3) 1.7
Reversal of impairment losses 15.7 -
on financial assets(1)
Profit on disposal of investment 16.9 -
in associate(1)
Net interest on pensions and
administrative expenses and
past service costs 9.7 (4.6)
Non-trading items:(2)
- GMP equalisation charge (2.9) -
- Restructuring costs (4.9) (4.1)
- Other non-trading items (0.5) (0.9)
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
Operating profit 152.6 95.3
Finance cost (36.2) (44.1)
Finance income(1) 6.4 2.4
-------------
Profit before taxation 122.8 53.6
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
Depreciation(3) (11.5) (7.6) (19.1) (11.1) (8.8) (19.9)
---------------------------------- ------------ ----------- ------------- ---------- ------------- ------------
(1) 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 GBP16.9m was in respect
of equity and GBP20.4m reflected the settlement of the outstanding loan
to associate including interest of GBP4.7m
(2) Non-trading items include restructuring costs of GBP4.9m (2019/20:
GBP4.1m) relating primarily to costs associated with the Strategic review
and integration of the Knighton business. For further detail of GMP equalisation
please refer to note 9.
(3) Depreciation in the period ended 03 April 2021 includes GBP2.2m (2019/20:
GBP2.6m) of depreciation of IFRS 16 right of use assets.
Revenues in the period ended 3 April 2021, from the Group's four
principal customers, which individually represent over 10% of total
Group revenue, are GBP240.2m, GBP138.8m, GBP112.0m and GBP98.5m
(2019/20: GBP190.6m, GBP125.9m, GBP95.2m and GBP84.8m). These
revenues relate to both the Grocery and Sweet Treats reportable
segments.
The Group primarily supplies the UK market, although it also
supplies certain products to other countries in Europe and the rest
of the world. The following table provides an analysis of the
Group's revenue, which is allocated on the basis of geographical
market destination, and an analysis of the Group's non-current
assets by geographical location.
Revenue
53 weeks 52 weeks
ended ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
----------------- ----------- ------------
United Kingdom 892.9 803.8
Other Europe 28.5 22.0
Rest of world 25.6 21.3
------------------ ----------- ------------
Total 947.0 847.1
-------------------- ----------- ------------
Non-current assets
As at As at
3 Apr 28 Mar 2020
2021
GBPm GBPm
-------------------- -------- ------------
United Kingdom 1,155.3 1,181.3
--------------------- -------- ------------
Non-current assets exclude deferred tax assets and net
retirement benefit assets.
4. Finance income and costs
53 weeks ended 52 weeks ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
---------------------------------------- ------------------------- -----------------------
Interest payable on bank loans
and overdrafts (5.7) (7.2)
Interest payable on senior secured
notes (25.9) (31.0)
Interest payable on revolving facility (0.6) (0.2)
Other interest receivable / (payable)
(1) 0.2 (2.4)
Amortisation of debt issuance costs (2.9) (3.3)
(34.9) (44.1)
Write off of financing costs(2) (1.3) -
Total finance cost (36.2) (44.1)
---------------------------------------- ------------------------- -----------------------
Interest receivable on bank deposits 1.7 2.4
Other finance income(3) 4.7 -
Total finance income 6.4 2.4
---------------------------------------- ------------------------- -----------------------
Net finance cost (29.8) (41.7)
---------------------------------------- ------------------------- -----------------------
(1) Included in other interest receivable/(payable) is GBP0.9m
charge (2019/20: GBP1.1m) relating to non-cash interest costs
arising following the adoption of IFRS 16 and GBP1.1m credit (2019/20:
GBP1.3m charge) relating to the unwind of the discount on certain
of the Group's long term provisions
(2) Relates to write off of the financing costs for the GBP190m
floating rate note redeemed during the 53 weeks ended 3 April
2021
(3) Other finance income of GBP4.7m (2019/20: GBPnil) relates
to the reversal of the impairment of the interest on the Hovis
loan note settled as part of the sale consideration. For further
detail please refer to note 3
5. Taxation
53 weeks ended 52 weeks ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
------------------------- ------------------------- ---------------------------
Current tax
- Current period (9.2) (5.2)
Deferred tax
- Current period (9.2) (6.3)
- Prior periods 1.6 (0.5)
- Changes in tax rate - 4.9
Income tax charge (16.8) (7.1)
------------------------- ------------------------- ---------------------------
The applicable rate of corporation tax for the period is
19%.
Tax relating to items recorded in other comprehensive income
included:
53 weeks ended 52 weeks ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
----------------------------------------- ------------------------ ----------------------
Corporation tax credit on pension
movements 9.2 5.2
Deferred tax charge on reduction
of corporate tax rate - (6.4)
Deferred tax credit/(charge) on pension
movements 132.9 (160.6)
142.1 (161.8)
----------------------------------------- ------------------------ ----------------------
The tax charge for the period differs from the standard rate of
corporation tax in the United Kingdom of 19.0% (2019/20: 19.0%).
The reasons for this are explained below:
53 weeks ended 52 weeks ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
-------------------------------------------- ------------------------- ----------------------
Profit before taxation 122.8 53.6
Tax charge at the domestic income tax rate
of 19.0% (2019/20: 19.0%) (23.3) (10.2)
Tax effect of:
Non-deductible items (1.4) (0.6)
Other disallowable items (0.3) (0.4)
Capital gain on disposal of business 6.6 -
Overseas losses not recognised - (0.3)
Changes in tax rate - 4.9
Adjustments to prior periods 1.6 (0.5)
Income tax charge (16.8) (7.1)
--------------------------------------------- ------------------------- ----------------------
The movements in losses recognised for the 53 weeks ended 3
April 2021 is GBPnil (2019/20: GBPnil). Corporation tax losses are
not recognised where future recoverability is uncertain.
The adjustments to prior periods of GBP1.6m (2019/20: GBP(0.5)m)
relates mainly to the adjustment of prior period losses and capital
allowances following verifications in submitted returns.
Deferred tax
Deferred tax is calculated in full on temporary differences
using the tax rate appropriate to the jurisdiction in which the
asset/(liability) arises and the tax rates that are expected to
apply in the periods in which the asset or liability is settled. In
all cases this is 19.0% (2019/20: 19.0%).
2020/21 2019/20
GBPm GBPm
-------------------------------------------------- -------------------------- ------------------
At 03 April 2021 / 29 March 2020 (184.9) (13.5)
Implementation of IFRS 16 - (2.9)
Adjusted balance at 03 April 2021 / 29 March
2020 (184.9) (16.4)
Charged to the statement of profit or loss (7.6) (1.9)
Charged/(credited) to other comprehensive income 132.9 (167.0)
Credited to equity 2.2 0.4
At 03 April 2021 / 29 March 2020 (57.4) (184.9)
-------------------------------------------------- -------------------------- ------------------
The Group has not recognised GBP1.7m of deferred tax assets
(2019/20: GBP1.9m not recognised) relating to UK corporation tax
losses. In addition, the Group has not recognised a tax asset of
GBP83.9m (2019/20: GBP83.9m) relating to Advanced Corporation Tax
(ACT) and GBP58.1m (2019/20: GBP56.5m) relating to capital losses.
Under current legislation these can generally be carried forward
indefinitely.
In the Spring Budget of 2021, it was proposed that the
corporation tax rate starting April 2023 will increase from the
current 19% to 25%. The tax rate increase will be followed by
legislation in the 2021 Finance Bill. Since the change in tax rate
is yet to be substantively enacted by law, the current tax rate of
19% is used to calculate deferred tax above. The increase in tax
rate is expected to increase the deferred tax asset by GBP8.4m and
deferred tax liability by GBP28.2m giving a net P&L charge of
GBP19.8m.
Deferred tax liabilities Intangibles Retirement IFRS 16 Other Total
benefit
obligation
GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ ------------ -------- ------ --------
At 31 March 2019 (47.6) (62.5) - (1.0) (111.1)
- implementation of IFRS 16 - - (2.9) - (2.9)
Adjusted balance at 31 March
2019 (47.6) (62.5) (2.9) (1.0) (114.0)
Prior period (charge)/credit
- To statement of profit or
loss (5.6) 0.6 - 1.0 (4.0)
- To other comprehensive income - (8.0) - - (8.0)
Current period credit/(charge) 1.2 (2.3) - - (1.1)
Charged to other comprehensive
income - (160.6) - - (160.6)
Prior period credit
- To other comprehensive income - 0.1 - - 0.1
At 28 March 2020 (52.0) (232.7) (2.9) - (287.6)
--------------------------------- ------------ ------------ -------- ------ --------
At 29 March 2020 (52.0) (232.7) (2.9) - (287.6)
Current period credit/(charge) 1.9 (2.1) - - (0.2)
Reclassified from deferred
tax assets - - - (1.0) (1.0)
Credited to other comprehensive
income - 132.9 - - 132.9
At 3 April 2021 (50.1) (101.9) (2.9) (1.0) (155.9)
--------------------------------- ------------ ------------ -------- ------ --------
Deferred tax assets Accelerated Share based Losses Other Total
tax depreciation payments
GBPm GBPm GBPm GBPm GBPm
------------------------------ --------------------- ------------------- ------------- ------------- ------------
At 31 March 2019 52.7 0.9 41.0 3.0 97.6
Prior period credit/(charge)
- To statement of profit or
loss 6.2 0.2 3.2 (0.7) 8.9
- To other comprehensive
income - - 1.6 - 1.6
- To equity - - - (0.1) (0.1)
Current period
(charge)/credit (2.2) (0.2) (0.9) (1.9) (5.2)
Credited to equity - 0.7 - - 0.7
Charge to other comprehensive
income - - - (0.1) (0.1)
Prior period (charge)/credit:
- To statement of profit or
loss - (1.3) 1.0 (0.2) (0.5)
- To equity - (0.2) - - (0.2)
--------------------- ------------------- ------------- ------------- ------------
At 28 March 2020 56.7 0.1 45.9 - 102.7
------------------------------ --------------------- ------------------- ------------- ------------- ------------
At 29 March 2020 56.7 0.1 45.9 - 102.7
Current period
(charge)/credit (8.6) 0.4 (0.9) 0.1 (9.0)
Reclassified to deferred tax
liabilities - - - 1.0 1.0
Credited to equity - 2.2 - - 2.2
Prior period credit:
- To statement of profit or
loss 1.4 - - 0.2 1.6
At 3 April 2021 49.5 2.7 45.0 1.3 98.5
------------------------------ --------------------- ------------------- ------------- ------------- ------------
Deferred tax asset on losses and accelerated tax GBPm
depreciation
-------------------------------------------------------------------------- ------------- ------------- ------------
As at 3 April 2021 28.4
----------------------------------------------------- ------------------- ------------- ------------- ------------
Net deferred tax liability GBPm
----------------------------------------------------- ------------------- ------------- ------------- ------------
As at 3 April 2021 (85.8)
As at 28 March 2020 (184.9)
----------------------------------------------------- ------------------- ------------- ------------- ------------
Where there is a legal right of offset and an intention to
settle as such, deferred tax assets and liabilities may be
presented on a net basis. This is the case for most of the Group's
deferred tax balances except non-trading losses of GBP18.7m and
accelerated tax depreciation of GBP9.7m. The remainder of deferred
tax assets have therefore been offset in the tables above.
Substantial elements of the Group's deferred tax assets and
liabilities, primarily relating to the defined benefit pension
obligation, are greater than one year in nature.
6. Earnings per share
Basic earnings per share has been calculated by dividing the
profit attributable to owners of the parent of GBP106.0m (2019/20:
GBP46.5m profit) by the weighted average number of ordinary shares
of the Company.
2020/21 2019/20
Number Number
(m) (m)
------------------------------------------------ ------------------ -----------------
Weighted average number of ordinary shares
for the purpose of basic earnings per share 851.4 846.6
Effect of dilutive potential ordinary shares:
- Share options 17.1 7.9
Weighted average number of ordinary shares
for the purpose of diluted earnings per share 868.5 854.5
------------------------------------------------ ------------------ -----------------
Earnings per share calculation
53 weeks ended 3 April 52 weeks ended 28 March
2021 2020
Basic Dilutive Diluted Basic Dilutive Diluted
effect effect
of share of share
options options
------------------------------ ------ ---------- -------- ------ ---------- --------
Profit after tax (GBPm) 106.0 106.0 46.5 46.5
Weighted average number
of shares (m) 851.4 17.1 868.5 846.6 7.9 854.5
------------------------------
Earnings per share (pence) 12.5 (0.3) 12.2 5.5 (0.1) 5.4
------------------------------ ------ ---------- -------- ------ ---------- --------
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 annual 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, 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
receivable/payable and other finance income.
Trading profit and Adjusted EPS have been reported as the
directors believe these assists in providing additional useful
information on the underlying trends, performance and position of
the Group.
52 weeks
53 weeks ended ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
--------------------------------------------- ------------------------- ------------------------
Trading profit 151.3 132.6
Less net regular interest (33.4) (39.3)
------------------------- ------------------------
Adjusted profit before tax 117.9 93.3
Notional tax at 19.0% (2019/20: 19%) (22.4) (17.7)
Adjusted profit after tax 95.5 75.6
--------------------------------------------- ------------------------- ------------------------
Average shares in issue (m) 851.4 846.6
Adjusted EPS (pence) 11.2 8.9
--------------------------------------------- ------------------------- ------------------------
Dilutive effect of share options (0.2) (0.1)
Diluted adjusted EPS (pence) 11.0 8.8
--------------------------------------------- ------------------------- ------------------------
Net regular interest
Net finance cost (29.8) (41.7)
Exclude other finance income (4.7) -
Exclude write-off of financing costs 1.3 -
Exclude other interest receivable / payable (0.2) 2.4
Net regular interest (33.4) (39.3)
--------------------------------------------- ------------------------- ------------------------
7. Property, plant and equipment
Land and buildings Vehicles, Assets under Right of Total
plant and construction use Assets
equipment
GBPm GBPm GBPm GBPm GBPm
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Cost
At 30 March 2019 104.9 309.7 10.5 - 425.1
Adjustment on
transition
to IFRS 16 - - - 14.0 14.0
Additions 0.1 7.5 5.9 0.6 14.1
Disposals (0.6) (3.7) - (0.4) (4.7)
Reclassification
of cost (2.4) 2.4 - - -
Transferred into
use - 7.1 (7.1) - -
At 28 March 2020 102.0 323.0 9.3 14.2 448.5
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Balance at 29
March 2020 102.0 323.0 9.3 14.2 448.5
Additions 0.3 7.2 11.3 1.0 19.8
Disposals (2.2) (1.5) - (0.9) (4.6)
Remeasurement - - - (1.4) (1.4)
Reclassified to
intangibles - 0.1 (0.5) - (0.4)
Transferred into
use 0.2 5.6 (5.8) - -
At 3 April 2021 100.3 334.4 14.3 12.9 461.9
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Aggregate depreciation and impairment
At 30 March 2019 (43.8) (195.3) - - (239.1)
Depreciation
charge (2.1) (15.2) - (2.6) (19.9)
Disposals 0.5 3.4 - 0.4 4.3
Reclassification
of depreciation 1.0 (0.6) - - 0.4
Impairment charge - - - (0.2) (0.2)
At 28 March 2020 (44.4) (207.7) - (2.4) (254.5)
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Depreciation
charge (2.1) (14.8) - (2.2) (19.1)
Disposals 2.1 1.2 - 0.8 4.1
Impairment charge - (0.2) - (0.1) (0.3)
At 3 April 2021 (44.4) (221.5) 0.0 (3.9) (269.8)
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Net book value
At 28 March 2020 57.6 115.3 9.3 11.8 194.0
------------------- --------------------- ---------------- --------------------- ------------------- ----------
At 3 April 2021 55.9 112.9 14.3 9.0 192.1
------------------- --------------------- ---------------- --------------------- ------------------- ----------
Included in the right of use assets are the following:
Land and Vehicles, Total
buildings plant and
equipment
GBPm GBPm GBPm
--------------------------------------- --------------------- ---------------- ---------------------
Cost
At 30 March 2019 - - -
Adjustment on transition to IFRS
16 10.1 3.9 14.0
Additions 0.3 0.3 0.6
Disposals (0.1) (0.3) (0.4)
At 28 March 2020 10.3 3.9 14.2
--------------------------------------- --------------------- ---------------- ---------------------
Balance at 29 March 2020 10.3 3.9 14.2
Additions 0.5 0.5 1.0
Disposals (0.1) (0.8) (0.9)
Remeasurement (1.4) - (1.4)
--------------------------------------- --------------------- ----------------
At 3 April 2021 9.3 3.6 12.9
--------------------------------------- --------------------- ---------------- ---------------------
Aggregate depreciation and impairment
At 30 March 2019 - - -
Depreciation charge (1.2) (1.4) (2.6)
Disposals 0.1 0.3 0.4
Impairment charge (0.2) - (0.2)
At 28 March 2020 (1.3) (1.1) (2.4)
--------------------------------------- --------------------- ---------------- ---------------------
Depreciation charge (1.2) (1.0) (2.2)
Disposals 0.1 0.7 0.8
Impairment charge (0.1) - (0.1)
At 3 April 2021 (2.5) (1.4) (3.9)
--------------------------------------- --------------------- ---------------- ---------------------
Net book value
At 28 March 2020 9.0 2.8 11.8
--------------------------------------- --------------------- ---------------- ---------------------
At 3 April 2021 6.8 2.2 9.0
--------------------------------------- --------------------- ---------------- ---------------------
The Group's borrowings are secured on the assets of the Group
including property, plant and equipment.
8. Other intangible assets
Software Brands/ Customer Assets under Total
trademarks/ relationships construction
licences
GBPm GBPm GBPm GBPm GBPm
---------------------------- ---------------- ---------------- ----------------- ------------------ -------------
Cost
At 30 March 2019 141.0 693.2 134.8 1.9 970.9
Additions 1.6 - - 3.1 4.7
Disposals (0.2) - - - (0.2)
Transferred into use 1.7 - - (1.7) -
At 28 March 2020 144.1 693.2 134.8 3.3 975.4
Additions 2.9 - - 3.1 6.0
Disposals (0.5) - - - (0.5)
Reclassified from property,
plant & equipment (0.1) - - 0.5 0.4
Transferred into use 2.9 - - (2.9) -
At 3 April 2021 149.3 693.2 134.8 4.0 981.3
---------------------------- ---------------- ---------------- ----------------- ------------------ -------------
Accumulated amortisation
and impairment
At 30 March 2019 (120.0) (349.7) (134.8) - (604.5)
Disposals 0.2 - - - 0.2
Amortisation charge (8.6) (20.8) - - (29.4)
Reclassification of
amortisation (0.4) - - - (0.4)
At 28 March 2020 (128.8) (370.5) (134.8) - (634.1)
Disposals 0.5 - - - 0.5
Amortisation charge (6.7) (23.7) - - (30.4)
Impairment charge (0.1) - - - (0.1)
At 3 April 2021 (135.1) (394.2) (134.8) - (664.1)
---------------------------- ---------------- ---------------- ----------------- ------------------ -------------
Net book value
---------------- ---------------- ----------------- ------------------ -------------
At 28 March 2020 15.3 322.7 - 3.3 341.3
---------------------------- ---------------- ---------------- ----------------- ------------------ -------------
At 3 April 2021 14.2 299.0 - 4.0 317.2
---------------------------- ---------------- ---------------- ----------------- ------------------ -------------
All amortisation is recognised within administrative costs.
Included in the assets under construction additions for the
period are GBP1.1m (2019/20: GBP1.1m) in respect of internal
costs.
The Group's borrowings are secured on the assets of the Group
including other intangible assets.
The material brands held on the balance sheet are as
follows:
Carrying value Estimated
at useful
3 April 2021 life remaining
GBPm Years
------------
Bisto 95.5 16
Oxo 69.9 25
Batchelors 49.8 16
Mr Kipling 37.1 16
Sharwoods 20.8 16
--------------
9. 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") (transfer of assets and
liabilities to the Premier Foods Section of the RHM Pension Scheme
completed 26 February 2021)
Premier Grocery Products Pension Scheme ("PGPPS") (transfer of
assets and liabilities to the Premier Grocery Products Section of
the RHM Pension Scheme completed 29 January 2021)
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
With effect from 30th June 2020, the Premier Foods Pension
Scheme (PFPS) and Premier Grocery Products Pension Scheme (PGPPS)
were merged on a segregated basis with the RHM Pension Scheme. The
transfer of assets and liabilities to new sections of the RHM
Pension Scheme for both the PFPS and PGPPS has been completed. The
RHM Pension Scheme now operates as three sections, the RHM Section,
Premier Foods Section and Premier Grocery Products Section.
A winding up lump sum (WULS) exercise was completed in February
2021. 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.
Actuarial valuations are being conducted for the Premier Foods
and Premier Grocery Products Sections as at 31 March 2021. The
triennial valuation cycle will then continue with effect from 31
March 2022 for all three sections of the RHM Pension Scheme.
The exchange rates used to translate the overseas euro based
schemes are GBP1.00 = EUR1.1215 for the average rate during the
period, and GBP1.00 = EUR1.1740 for the closing position at 3 April
2021.
All defined benefit schemes are held separately from the Company
under Trusts. Trustees are appointed to operate the schemes in
accordance with their respective governing documents and pensions
law. The schemes meet the legal requirement for member nominated
trustees' representation on the trustee boards. Trustee directors
undertake regular training and development to ensure that they are
equipped appropriately to carry out the role. In addition, each
trustee board has appointed professional advisers to give them the
specialist expertise they need to support them in the areas of
investment, funding, legal, covenant and administration.
The trustee boards of the UK schemes generally meet at least
four times a year to conduct their business. To support these
meetings the Trustees have delegated certain aspects of the
schemes' operation to give specialist focus (e.g. investment,
administration and compliance) to committees for which further
meetings are held as appropriate throughout the year. These
committees regularly report to the full trustee boards.
The schemes invest through investment managers appointed by the
Trustees in a broad range of assets to support the security and
funding of their pension obligations. Asset classes used include
government bonds, private equity, absolute return products, swaps
and infrastructure.
The scheme assets do not include any of the Group's own
financial instruments, nor any property occupied by, or other
assets used by, the Group. The RHM Pension Scheme holds a security
over the assets of the Group which ranks pari passu with the banks
and bondholders in the event of insolvency, up to a cap.
The schemes incorporate a Liability Driven Investment (LDI)
strategy to more closely match the assets with changes in value of
liabilities. The RHM Pension Scheme uses assets including interest
rate and inflation swaps, index linked bonds and infrastructure in
its LDI strategy.
The main risks to which the Group is exposed in relation to the
funded pension schemes are as follows:
-- Liquidity risk - the PFPS and PGPPS have significant
technical funding deficits which could increase. The RHM Pension
Scheme is currently in surplus, but subsequent valuations could
reveal a deficit. As such this could have an adverse impact on the
financial condition of the Group. The Group continues to monitor
the pension risks closely working with the trustees to ensure a
collaborative approach.
-- Mortality risk - the assumptions adopted make allowance for
future improvements in life expectancy. However, if life expectancy
improves at a faster rate than assumed, this would result in
greater payments from the schemes and consequently increases in the
schemes liabilities. The trustees review the mortality assumption
on a regular basis to minimise the risk of using an inappropriate
assumption.
-- Yield risk - a fall in government bond yields will increase
the schemes liabilities and certain of the assets. However, the
liabilities may grow by more in monetary terms, thus increasing the
deficit in the scheme.
-- Inflation risk - the majority of the schemes liabilities
increase in line with inflation and so if inflation is greater than
expected, the liabilities will increase.
-- Investment risk - the risk that investments do not perform in line with expectations
The exposure to the yield and inflation risks described above
can be hedged by investing in assets that move in the same
direction as the liabilities in the event of a fall in yields, or a
rise in inflation. The RHM Pension Scheme has largely hedged its
inflation and interest rate exposure to the extent of its funding
level. The new Premier Foods Section is currently hedged to 60% for
interest rates and 55% to inflation. The Premier Grocery Products
Sections is hedged to 75% for interest rates and 100% to
inflation.
The liabilities of the schemes are approximately 45% in respect
of former active members who have yet to retire and approximately
55% in respect of pensioner members already in receipt of benefits.
All pension schemes are closed to future accrual.
The disclosures in note 9 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 accounting
valuation assumptions were as follows:
At 3 Apr 2021 At 28 Mar 2020
Premier RHM schemes Premier RHM schemes
schemes schemes
Discount rate 2.00% 2.00% 2.50% 2.50%
Inflation - RPI 3.25% 3.25% 2.65% 2.65%
Inflation - CPI 2.80% 2.80% 1.65% 1.65%
Expected salary increases n/a n/a n/a n/a
Future pension increases 2.10% 2.10% 1.90% 1.90%
For the smaller overseas schemes, the discount rate used was
1.10% (2019/20: 1.00%) and future pension increases were 1.60%
(2019/20: 0.80%).
At 3 April 2021 and 28 March 2020, the discount rate was derived
based on a bond yield curve expanded to also include bonds rated AA
by one credit agency (and which might for example be rated A or AAA
by other agencies).
At 3 Apr 2021 At 28 Mar 2020
Premier schemes RHM schemes Premier RHM schemes
schemes
Male pensioner, currently aged
65 87.2 85.4 87.0 85.4
Female pensioner, currently
aged 65 89.4 87.8 89.2 87.8
Male non-pensioner, currently
aged 45 87.8 86.6 87.6 86.6
Female non-pensioner, currently
aged 45 90.4 89.4 90.2 89.3
The mortality assumptions are based on standard mortality tables
and allow for future mortality improvements. The life expectancy
assumptions are as follows:
A sensitivity analysis on the principal assumptions used to
measure the scheme liabilities at the period end is as follows:
Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease Decrease/increase by GBP77.4m/GBP79.2m
by 0.1%
Inflation Increase/decrease Increase/decrease by GBP39.4m/GBP24.4m
by 0.1%
Assumed life expectancy Increase/decrease Increase/decrease by GBP223.2m/GBP222.6m
at age 60 (rate of mortality) by 1 year
The sensitivity information has been derived using projected
cash flows for the Schemes valued using the relevant assumptions
and membership profile as at 3 April 2021. Extrapolation of these
results beyond the sensitivity figures shown may not be
appropriate.
The Group continued to set RPI inflation in line with the market
break-even expectations less an inflation risk premium. The
inflation risk premium has been increased from 0.2% at 28 March
2020 to 0.3% at 03 April 2021, reflecting an allowance for
additional market distortions caused by the RPI reform
proposals.
At 28 March 2020, the CPI inflation assumption was derived by
taking the value of the RPI inflation assumption and deducting
1.00% p.a. Following the 25 November 2020, joint HM Treasury and UK
Statistics Authority ("UKSA") response to the consultation on the
'Reform to RPI Methodology', and specifically the proposal to align
RPI with CPIH (CPI including owner occupiers' housing costs), the
Group's approach to deriving the CPI assumption has been refined at
3 April 2021:
-- Pre-2030 the CPI inflation assumption was derived by taking
the value of the RPI inflation assumption and deducting 1.00% p.a
following the UKSA stating no intention to make changes prior to
2030;
-- Post-2030 the CPI inflation assumption is that CPI and RPI
will be aligned
For CPI, the Group reduced the assumed difference between the
RPI and CPI by 0.55% to an average of 0.45% per annum. The
estimated impact of the change in RPI/CPI methodology is
approximately a GBP95m increase in the defined benefit obligation
in respect of the schemes.
The RHM scheme invests directly in interest rate and inflation
swaps to protect from fluctuations in interest rates and
inflation.
The directors have considered the impact of the current COVID-19
pandemic on the mortality assumptions and consider that use of the
updated Continuous Mortality Improvement (CMI) 2020 projections
released in March 2021 for the future improvement assumption a
reasonable approach. Whilst the CMI projections are the latest
available, it is too soon to quantify the impact COVID-19 may have
on the scheme liabilities and the directors will continue to
monitor any potential future impact upon the mortality assumptions
used.
The fair value 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 3 April 2021:
Government bonds 45.1 5.7 1,527.7 34.3 1,572.8 29.9
Cash 14.9 1.9 64.9 1.5 79.8 1.5
Assets without a quoted price in an active market at 3 April 2021:
UK equities 0.6 0.1 0.3 0.0 0.9 0.1
Global equities 8.1 1.0 5.9 0.1 14.0 0.3
Government bonds 34.3 4.3 18.3 0.4 52.6 1.0
Corporate bonds 1.0 0.1 - - 1.0 0.0
UK Property 84.6 10.7 278.8 6.2 363.4 6.9
European property 20.6 2.6 83.9 1.9 104.5 2.0
Absolute return products 228.2 28.8 883.9 19.8 1,112.1 21.1
Infrastructure funds 19.3 2.5 302.2 6.8 321.5 6.1
Interest rate swaps - - 464.2 10.4 464.2 8.8
Inflation swaps - - 21.2 0.5 21.2 0.4
Private equity 22.3 2.8 218.3 4.9 240.6 4.6
LDI 191.2 24.1 - - 191.2 3.6
Other(1) 122.3 15.4 589.8 13.2 712.1 13.7
Fair value of scheme assets
as at 3 April 2021 792.5 100 4,459.4 100 5,251.9 100
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
(1) Included in Other in the RHM schemes is GBP106.3m of assets
which have been sold during the 53 weeks ended 3 April 2021 and are
awaiting settlement at the year-end date.
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.
Where pensions asset valuations are not available as at the
balance sheet, the directors use the most recent valuation
available, reflect cash movements to the balance sheet date and
then assess and make adjustments based upon their review of
appropriate market movements which could impact upon the valuations
reported. Pension asset valuations are therefore subject to
estimation uncertainty due to market volatility, which could result
in a material movement in asset values over the next 12 months.
The amounts recognised in the balance sheet arising from the
Group's obligations in respect of its defined benefit schemes are
as follows:
At 3 April 2021 At 28 March 2020
Premier RHM schemes Total Premier RHM schemes Total
schemes schemes
GBPm GBPm GBPm GBPm GBPm GBPm
Present value of
funded obligations (1,175.1) (3,536.9) (4,712.0) (1,049.6) (3,240.0) (4,289.6)
Fair value of scheme
assets 792.5 4,459.4 5,251.9 774.7 4,745.3 5,520.0
(Deficit)/surplus
in schemes (382.6) 922.5 539.9 (274.9) 1,505.3 1,230.4
The aggregate surplus of GBP1,230.4m has decreased to a surplus
of GBP539.9m in the current period. This decrease of GBP690.5m
(2019/20: GBP857.3m increase) is primarily due to changes in
financial assumptions, being the lower discount rate and higher
inflation versus 2019/20.
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 HHL 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 (22.8) (60.4) (83.2)
Past service cost (0.4) (2.5) (2.9)
Settlement 27.4 57.8 85.2
Remeasurement loss (171.6) (442.8) (614.4)
Exchange differences 2.6 1.5 4.1
Benefits paid 39.3 149.5 188.8
Defined benefit obligation at 3 April
2021 (1,175.1) (3,536.9) (4,712.0)
Changes in the fair value of scheme assets were as follows:
Premier RHM schemes Total
schemes
GBPm GBPm GBPm
Fair value of scheme assets at 30 March
2019 707.1 4,333.6 5,040.7
Recognition of HHL pension scheme 0.5 - 0.5
Interest income on scheme 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 scheme assets at 28 March
2020 774.7 4,745.3 5,520.0
Interest income on scheme assets 16.2 81.4 97.6
Remeasurement gains/(losses) 16.7 (152.6) (135.9)
Administrative costs (6.8) (3.9) (10.7)
Settlement (18.1) (61.1) (79.2)
Contributions by employer 45.5 1.5 47.0
One off contribution by employer(1) 7.0 - 7.0
Exchange differences (3.4) (1.7) (5.1)
Benefits paid (39.3) (149.5) (188.8)
Fair value of scheme assets at 3 April
2021 792.5 4,459.4 5,251.9
(1) One off contribution by employer is related to Hovis
disposal proceeds due to the Premier schemes
The reconciliation of the net defined benefit (deficit)/surplus
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 (4.5) 11.3 6.8
Remeasurements recognised in other comprehensive
income (154.9) (595.4) (750.3)
Contributions by employer 45.5 1.5 47.0
One off contribution by employer 7.0 - 7.0
Exchange differences recognised in other
comprehensive income (0.8) (0.2) (1.0)
(Deficit)/surplus in schemes at 3 April
2021 (382.6) 922.5 539.9
Remeasurements recognised in the consolidated statement of
comprehensive income are as follows:
2020/21 2019/20
Premier RHM Total Premier RHM Total
schemes schemes schemes schemes
GBPm GBPm GBPm GBPm GBPm GBPm
Remeasurement loss/(gain)
on scheme liabilities (171.6) (442.8) (614.4) 113.6 157.6 271.2
Remeasurement gain/(loss)
on scheme assets 16.7 (152.6) (135.9) 49.3 496.2 545.5
Net remeasurement gain/(loss)
for the period (154.9) (595.4) (750.3) 162.9 653.8 816.7
The actual return on scheme assets was a GBP38.3m loss (2019/20:
GBP665.9m gain), which is GBP135.9m less (2019/20: GBP545.5m more)
than the interest income on scheme assets of GBP97.6m (2019/20:
GBP120.4m).
The remeasurement loss on liabilities of GBP614.4m (2019/20:
GBP271.2 gain) comprises a loss due to changes in financial
assumptions of GBP575.1m (2019/20: GBP184.5m gain), a gain due to
member experience of GBP6.7m (2019/20: GBP76.5m gain) and a loss
due to demographic assumptions of GBP46.0m (2019/20: GBP10.2m
gain).
The net remeasurement loss taken to the consolidated statement
of comprehensive income was GBP750.3m (2019/20: GBP816.7m gain).
This loss was GBP607.7m (2019/20: GBP661.4m gain) net of taxation
(with tax at 19% for UK schemes, and 12.5% for Irish schemes).
The Group expects to contribute between GBP4m and GBP6m annually
to its defined benefit schemes in relation to expenses and
government levies and GBP35-38m of additional annual contributions
to fund the scheme deficits up to 2 April 2022
The Group has concluded that it has an unconditional right to a
refund of any surplus in the RHM Pension Scheme once the
liabilities have been discharged and, that the trustees of the RHM
pension scheme do not have the unilateral right to wind up the
scheme, so the asset has not been restricted and no additional
liability has been recognised.
The International Accounting Standards Board under IFRIC 14, are
currently reviewing the recognition of a pensions surplus in the
financial statements of an entity. Dependent upon the final
published standard, there is potential that any future defined
benefit surplus may not be recognised in the financial statements
of the Group and additionally, the deficit valuation methodology
may also change.
The total amounts recognised in the consolidated statement of
profit or loss are as follows:
2020/21 2019/20
Premier schemes RHM schemes Total Premier RHM schemes Total
schemes
GBPm GBPm GBPm GBPm GBPm GBPm
Operating profit
Past service cost (0.4) (2.5) (2.9) - - -
Settlement credit/(costs) 9.3 (3.3) 6.0 (0.1) (3.6) (3.7)
Administrative costs (6.8) (3.9) (10.7) (5.6) (4.6) (10.2)
Net interest (cost)/credit (6.6) 21.0 14.4 (11.1) 20.4 9.3
Total (cost)/credit (4.5) 11.3 6.8 (16.8) 12.2 (4.6)
In November 2020 the high court ruled that pension scheme
trustees are also legally responsible for equalising the Guaranteed
Minimum Pensions (GMP) for the employees who transferred out of UK
defined benefit pension schemes. Accordingly, the directors have
revisited historic cash equivalent transfer values that were
previously not equalised and made adjustments where necessary. A
non-cash charge of GBP2.9m in the year, which represents the
Directors' best estimate of the cost based on actuarial advice,
reflects the past service costs associated with this
equalisation.
Defined contribution schemes
A number of companies in the Group operate defined contribution
schemes, including provisions to comply with auto enrolment
requirements laid down by law. In addition, a number of schemes
providing life assurance benefits only are operated. The total
expense recognised in the statement of profit or loss of GBP7.8m
(2019/20: GBP7.3m) represents contributions payable to the schemes
by the Group at rates specified in the rules of the schemes.
10. Notes to the cash flow statement
Reconciliation of profit before tax to
cash flows from operations
53 weeks ended 52 weeks
ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
Profit before taxation 122.8 53.6
Net finance cost 29.8 41.7
Operating profit 152.6 95.3
Depreciation of property, plant and equipment 19.1 19.9
Amortisation of intangible assets 30.4 29.4
Loss on disposal of non-current assets 0.4 0.4
Impairment of tangible assets 0.3 -
Impairment of intangible assets 0.1 -
Fair value movements on foreign exchange
and other derivative contracts 2.3 (1.7)
Reversal of impairment losses on financial (15.7) -
assets(1)
Profit on disposal of investment in associate(1) (16.9) -
Equity settled employee incentive schemes 3.1 1.3
GMP equalisation and past service cost
related to defined benefit pension schemes(2) 2.9 -
(Increase)/decrease in inventories (0.8) 9.8
Decrease in trade and other receivables 5.7 0.1
(Decrease)/increase in trade and other
payables and provisions (1.6) 9.5
Movement in retirement benefit obligations (63.7) (42.5)
Cash generated from operations 118.2 121.5
(1) 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 GBP16.9m was in respect
of equity and GBP20.4m reflected the settlement of the outstanding
loan to associate including interest of GBP4.7m
(2) For further detail of GMP equalisation please refer to note
9
Reconciliation of cash and cash equivalents
to net borrowings
53 weeks ended 52 weeks
ended
3 Apr 2021 28 Mar 2020
GBPm GBPm
Net (outflow) / inflow of cash and cash
equivalents (176.8) 150.1
Movement in lease liabilities 2.9 (21.5)
Decrease / (Increase) in borrowings 275.0 (85.0)
Other non-cash movements (4.2) (3.3)
Decrease in borrowings net of cash 96.9 40.3
Total net borrowings at beginning of period (429.6) (469.9)
Total net borrowings at end of period (332.7) (429.6)
Analysis of
movement in
borrowings
As at Cash Non-cash Other As at
28 Mar 2020 flows interest non-cash 3 Apr
expense movements 2021
GBPm GBPm GBPm GBPm GBPm
Bank overdrafts - (3.1) - - (3.1)
Cash and bank
deposits 177.9 (173.7) - - 4.2
Net cash and
cash
equivalents 177.9 (176.8) - - 1.1
Borrowings -
revolving
credit
facilities (85.0) 85.0 - - -
Borrowings -
senior secured
notes (510.0) 190.0 - - (320.0)
Lease
liabilities (21.5) 2.7 (0.9) 1.1 (18.6)
Gross
borrowings net
of
cash(1) (438.6) 100.9 (0.9) 1.1 (337.5)
Debt issuance
costs(2) 9.0 - - (4.2) 4.8
Total net
borrowings(1) (429.6) 100.9 (0.9) (3.1) (332.7)
Total net
borrowings
excluding
lease
liabilities(1) (408.1) 98.2 - (4.2) (314.1)
(1) Borrowings exclude derivative financial instruments.
(2) The non-cash movement in debt issuance costs relates to the amortisation
of capitalised borrowing costs only.
The Group has the following cash pooling arrangements in sterling, euros
and US dollars, where both the Group and the bank have a legal right
of offset.
As at 3 Apr 2021 As at 28 Mar 2020
Offset Offset Net offset Offset Offset Net offset
asset liability liability asset liability asset
Cash, cash
equivalents
and bank
overdrafts 138.2 (141.3) (3.1) 312.8 (134.9) 177.9
11. Bank and other borrowing
As at As at
3 Apr 2021 28 Mar
2020
GBPm GBPm
Current:
Bank overdrafts (3.1) -
Lease liabilities (2.3) (2.5)
Secured senior credit facility - revolving - (85.0)
Total borrowings due within one year (5.4) (87.5)
Non-current:
Lease liabilities (16.3) (19.0)
(16.3) (19.0)
Transaction costs 4.8 9.0
4.8 9.0
Senior secured notes (320.0) (510.0)
(320.0) (510.0)
Total borrowings due after more than one year (331.5) (520.0)
Total bank and other borrowings (336.9) (607.5)
(1) Included in transaction costs is GBP2.6m (2019/20:
GBP4.2m) relating to the revolving credit facility.
Secured senior credit facility - revolving
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.
The covenant package attached to the revolving credit facility
is:
Net debt Net debt
/ EBITDA(1) / Interest(1)
2021/22 FY 4.00x 2.90x
2023/24 HY 4.25x 2.90x
(1) Net debt, EBITDA and Interest are
as defined under the revolving credit
facility.
On 19 May 2021 the Group announced that it signed a new current
revolving credit facility agreement. Please refer to note 15 for
more details.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock
Exchange. The notes totalling GBP320m 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
GBP20m matures in July 2022 and attracts an interest rate of 5.00%
above LIBOR.
Lease liabilities
The following table analyses the Group's lease liabilities into
relevant maturity groupings based on the contractual undiscounted
cash flows.
Within 1 and 2 and 3 and 4 and Over
1 year 2 years 3 years 4 years 5 years 5 years Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 3 April 2021
Lease liabilities (2.3) (2.2) (2.1) (2.0) (1.7) (8.3) (18.6)
At 28 March 2020
Lease liabilities (2.5) (2.2) (2.0) (1.9) (1.9) (11.0) (21.5)
12. Provisions for liabilities and charges
Property provisions primarily relate to provisions for
dilapidations against leasehold properties and environmental
liabilities. Other provisions primarily relate to insurance and
legal matters and provisions for restructuring costs. These
provisions have been discounted at rates between 0.07% and 1.34%
(2019/20: 0.12% and 0.77%). The unwinding of the discount is
charged or credited to the statement of profit or loss under
finance cost.
Property Other Total
GBPm GBPm GBPm
At 30 March 2019 (31.8) (10.3) (42.1)
Utilised during the period 0.2 2.9 3.1
Additional charge in the period (0.2) (1.5) (1.7)
Unwind of discount (1.4) (0.0) (1.4)
Released during the period 0.7 0.9 1.6
Release under IFRS 16 24.5 - 24.5
At 28 March 2020 (8.0) (8.0) (16.0)
Utilised during the period - 0.9 0.9
Additional charge in the period (1.3) (0.6) (1.9)
Reclassification - (0.3) (0.3)
Unwind of discount 1.1 - 1.1
Released during the period - 1.6 1.6
At 3 April 2021 (8.2) (6.4) (14.6)
Ageing of total provisions: As at As at
3 Apr 2021 28 Mar 2020
GBPm GBPm
Within one year (6.2) (6.4)
Between 2 and 5 years (3.3) (1.8)
After 5 years (5.1) (7.8)
Total (14.6) (16.0)
13. Other liabilities
As at As at
3 Apr 2021 28 Mar 2020
GBPm GBPm
Deferred income (6.4) (7.4)
Other accruals (0.7) (1.3)
Other liabilities (7.1) (8.7)
Deferred income relates to amounts received in relation to a
previously disposed business.
14. Contingencies
There were no material contingent liabilities at 3 April 2021
(2019/20: none).
15. Subsequent events
On 19 May the directors have proposed a final dividend of 1.0
pence per share for the period ended 3 April 2021 subject to the
ratification at the AGM by the shareholders.
On 19 May 2021 the Group announced the proposed issue of new
five year GBP300m Senior Secured fixed rate notes due 2026, to
refinance its GBP300m existing Senior Secured fixed rate notes, due
to mature October 2023. Pricing of the new GBP300m Senior Secured
fixed rate notes is to be confirmed and the notes are expected to
be callable after two years.
The Group has also announced that it has signed a new revolving
credit facility (RCF) agreement with an updated lending group for a
period of three years from May 2021 with the option of extending
for up to two additional years. This new senior secured RCF is a
committed facility of GBP175m with an interest margin grid broadly
in line with the previous RCF, undrawn elements of the RCF will
continue to attract interest equivalent to 35% of the applicable
margin. The covenant package attached to the revolving credit
facility tested bi-annually is:
Net debt Net debt
/ EBITDA(1) / Interest(1)
2021/22 HY 3.75x 3.00x
Subsequent test dates 3.50x 3.00x
(1) Net debt, EBITDA and Interest are
as defined under the revolving credit facility.
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END
FR APMJTMTABTMB
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