Premier Foods plc

Good day and thank you for standing by. Welcome to the premier first quarter one trading update analyst conference call. At this time, all participants are in listening only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, we want you to press star and one on your telephone keypad. Please be advised that today's conference is being recorded. And I would now like to open the conference over to your first speaker today, Mr. Alex Whitehouse. Thank you. Please go ahead.

Thank you and good morning everybody and thanks for joining this our quarter one trading update call that covers the 13 weeks to the 3rd of July 2021. So I'll give a brief introduction to our first quarter trading before opening up the call to questions and I'm joined of course this morning as always by Jonathan Leggett our CFO. So I'll start by giving a few headlines on our trading in the quarter. I'll then dive into a few key areas to provide a little bit more detail. And then I hope that some countries can give you a brief reminder of the refinancing that we completed in the quarter as well. And then as usual, Lester will pass the question. So as a reminder, by the way, today we're also holding our AGM. And that is at 11am. And we'll be holding that virtually again this year. So if any shareholders on the call who'd like to attend and don't yet have details to do contact with Scotland in relation to the details of how to attend this year's meeting. So on then to the quarter one results and overall I'm really pleased to say that we've had an encouraging start to the year and we've carried on the slaving remittance from last year into the third quarter and that this combines with the significantly reduced interest costs that means that we're now seeing lower adjusted PDT to be at the top end of our expectations for this financial year. Now, when we switch back in May, we test out a couple of things in terms of how we'll be measuring our progress this year. And I think, first of all, given the exceptional circumstances this time last year when the UK was in that first quite strict national lockdown during the quarter, our volumes were equally exceptional, particularly in our grocery business. So we said it would be sensible and appropriate to review our sales performance this year compared to two years ago, as well as compared to one year ago. So for this quarter, that means we're comparing events quarter to the end of June 2019. And also if you remember we provided then a range of where we expected our Q1 sales were likely to land and that range was between 5% and 6% growth compared to a couple of years ago. And so we're very pleased therefore that we've come in at the top end of that range with growth of 6.3% compared to the same quarter two years ago for the total growth. And when we look at our retail grocery sales, and by that I mean if we exclude the out-of-home channels, then things were up 13% during the same period, which compares quite favourably, I think, to how our retail partners have performed over a similar timeframe. But for me, most importantly, it's our branded sales. Our branded sales have performed really strongly, up 9.5%. business, branded sales were up 12% versus two years ago. So essentially the equivalent of two years of 6% back-to-back growth, which is clearly well ahead of the historical growth rates of our category. Now obviously that strong branded sales performance is a direct result. of us continuing to deploy our brand as growth model and that remains at the heart of what we're doing. And so as a reminder, of course, we start with a portfolio of brands which are our leaders in their categories and with very high household penetration. And we then bring to market insightful new products which are based on current consumer needs and trends. And we support our major brands with emotionally engaging and meaningful marketing and TV advertising campaigns. And finally, and very importantly, and we work closely in partnership with our key retail partners delivering excellent install execution for the brand. So during the quarter therefore we continue to execute the growth model with pace and with energy and three of our major brands, Starwood, Mr Kipling and Bachelors receive advertising during the quarter. And again, we brought a number of new products to market. In fact, you might remember that due to the challenges of COVID last year, there were delays for many of the retailers, range reviews, and the range reviews, obviously, those are the windows where we get our new products. And that resulted in some delays in the introduction of some of our new products from last year. So I'm pleased to say, ladies and gentlemen, those reviews are now taking place and we've seen some really very positive outcomes for our brand and for the distribution of our brand with much of the delayed new products from last year now coming through into store. And in fact, we've seen a rapid step up in the potential of sales that we derived from new products which for the quarter was well ahead of how we ended last year and we've been how we ended the year before so that's all very positive and as a result of all that we've continued therefore to perform ahead of the market in the quarter increasing our volume share versus last year If you look at the brands that saw the strongest two-year growth in the quarter, and there were quite a large number of them actually, but in particular, I'd call out Sharwood, Ambrosia, Bisto, OXO and PASO. All these brands grew in double-digit percentages compared to two years ago. And when you think again about the average invested growth rates over a longer period of time, that's really very strong performances. And additionally, all these five brands and a higher household penetration during the same period in 2019, which demonstrates clearly that some of those new consumers who tried our brand last year during lockdown are continuing to buy them again this year. In terms of sub-individual performance, I'll pull out Sharwood. You know, Sharwood is again a standout performer for us in the quarter. Sales were up 25% compared to the same period in 2019. Sharwood received sort of CD support in Q1 and that was a continuation of the new CD campaign we started at the end of last year. And we also launched, of course, a review product, but that included vegan versions of our Korma and Tikka Masala cooking sources. And that's as we extend our plant-based heating options across the business. Another brand that had an excellent product along was Mrs. Noodles. And when we took on the distribution of this product over three years ago, sales were pretty modest. But since then, he's taken the premium, authentic knitting round, and with the strength of our retail customer partnerships, we've built it into the clear leader in premium cotton noodles in the UK, with now almost £20 million annual retail sales buried. Sales over the last two years were up a very significant 168%, and grew 30% compared to last year. If we move on to sweet treats, now sweet treats we're experiencing very different trends over the last year, so consumer patterns in buying text were not as heavily impacted during the lockdown restrictions. And so, accordingly, you do not see the exceptional volumes in text at this time last year, like we did in our grocery factories. So, in the first quarter of this year, branded sweet treats were actually topped by 3.2% versus a year ago, and that being driven by Mr. Kiffling, which And that's coming from things like the low sugar options, such as the sugar angel and lemon slices, and further success on the new premium range and the significant signature range. In terms of peak consumer trends we're seeing, obviously we're seeing people transitioning fast towards eating at home more than they were earlier in the year. And we're also seeing people trying to maintain some of the good habits that they picked up last year, and I'm particularly talking about eating more healthily. And most consumers are also telling us they still want to try and hold on to the enjoyment they get from cooking at home and eating around the table together with the family. And as we move on to the online channel, and by that, again, I mean sales that we make via our retail partners' online platforms, I know we're all aware that this channel saw people moved to shopping for their groceries online during the pandemic. And you might remember that following the greater effort we've been putting into developing our business in this channel for a few years now, we remember last year, you know, when the channel went through that incredible growth phase, we were able to grow even faster than the channel and increase our online market share. So now, as expected as we start to anniversary that period from last year, what we're seeing is that most of the people who moved to buying their groceries online last year are sticking with it and so our business through the online channels is nearly double than the level it was two years ago and that's in line with the market. is very much core to our strategy and healthy nutrition is incredibly important to it and we've been doing a lot of work over a number of years now to be more healthy arrangers to market for our consumers and I'm particularly pleased to see that our healthy options ranges in the course of nearby twice the rate of our branded portfolio versus two years ago so that includes product common madras sources and things like Lloyd Grossman who added sugar following maize sources. If we move now on to our international business and remember that this is a key strategic growth pillar for the group looking forward and that enjoyed a very strong year last year with growth of 23% and I'm pleased to say it's carried that momentum forward into the current year and with sales on a two-year basis up 17%. I've talked before about our strategy for our overseas businesses, which is focused on doing sustainable, profitable businesses of scale in selected markets. And we're doing this by applying the same for the local market conditions and environment. So, for example, in Ireland, where we've always got an established business, we're launching a series of new products that have already been successful in the UK, so things like the Bisco Southern Sour Gravy, or the OXO Meat Free Stock Foods, and the Mr. Kipling Signature Age of Premium Cakes. And we'll also be supporting our brand in Ireland with advertising again later this year, so that's for the second year right now. And this approach in Ireland has led to our biggest brands in Ireland, Visto, Sharwoods and Mr Kipling, all increasing their market share over the last 12 weeks. And Visto sales, in fact, were up by a very strong 11% year-on-year and also took 180 basic points of share. So it's really clear to us that adopting that same brand-building strategy in Ireland is now starting to work really well for us. We've also expanded our category presence in Ireland from entering both the quick meals, snacks and soup category and also home baking and these are categories where we have not historically been present in Ireland so they represent wide space for us. And then in Australia Mr Kiffin and the Academy Cakes which are the market leaders of the Now one of the key markets we're looking to expand the business in is North America and we've previously mentioned that we've been running a trial for Mr Kipling in Canada and that's given us some really promising results. We're making some tweaks to the model based on what we've learnt and then we'll move to a full national rollout in the second half of this financial year. And then looking to the USA, it's clearly a much bigger market than Canada, we're continuing to work with our partner Western Booth and preparing a similar launch of Mr Kipling into the US market and we'll have the benefit of course of taking some of the learnings from that Canadian trial forward into our US model. Now another of our strategic growth pillars is taking the brand building capabilities that we've demonstrated in our core categories in the UK and expanding into new categories and so we already have four live initiatives in the market that take us out of our traditional And in fact, these have already delivered over £6 million of sales in the last 12 months in what I have to say are the early stages of this strategy. And in most cases, this involves utilising the strong brand equities that we've got available to us in our portfolios and expanding their presence into those adjacent capacities. So, for example, we've launched Mr Kittering and Cadbury into baking mixes, which has been a very logical extension to have. We've also introduced a range of rubs and mayonnaise under the Oxo brand and we've brought cake, fudge and spice to market that again is a white space capacity for us in the UK. And there are further initiatives in the pipeline for the second half of the year and that also includes a significant expansion in our plant-based offering. Now I'd just like to touch quickly on non-branded sales. So overall revenues were 10.9% lower than two years ago, but there were a few moving parts going on in here. So in the grocery business, sales were down 10.1% compared to two years ago, and that was due to declines in our business volumes of the supply as of home eating. So, you know, unsurprisingly, that's down versus two years ago, but, you know, promisingly now starting to recover versus a year ago. I should also point out that this was partially offset by stronger demand for the non-branded grocery products that we sell into our retail customers, which in fact were up just over 10% over the same time period. And then increasingly, non-branded sales were down 14.9%. So, with that being the review of the first quarter's training, I will pass over now to Duncan to cover the refinancing that we completed in the quarter. Thanks Alex and good morning everyone. So, just a reminder, when we announced our four-year results back in May, we announced the new revolving credit facility. We also announced the issuance of a new bond. The process was really strong and we actually chose to off-size the size of the bond to £330 million and following what ended up being two upgrades from credit rating agencies in nine months which is really strong recognition of our progress and our strong financial result. We priced them at 3.5% which we think was a great result and one frankly that we really pleased with. The difference is the £300 million of fixed rate notes, which were priced at 6.25%, so a significant improvement on interest. And this bond refinancing together with the retiring of the final £20 million of the £210 million floating rate notes will reduce our interest costs by nearly half compared to two years ago. And this forms a key part of our expectations for adjusted PD2 this year. So that's the final review. I'll hand that back to Alex to wrap up. So to wrap up really, we've made a very encouraging start to the year, particularly in our brand of business and I can also say now that quarter two is also off to a good start. So looking forward to the rest of the year and year, supporting in total six of our key brands with advertising in the UK, along with Mr. Kittingham Bisto in Ireland. And we'll also continue to focus on building our overseas businesses and expanding our UK presence into new categories. So I think given the encouraging start to the year, the strong plans that we know we've got in place, and has done contention of significantly lower interest costs compared to last year. That means that we're now seeing the PBT at the top end of our expectations for this financial year. So thank you for your time. I'll now pass back to the operator, and we've been very happy to stay with you.

Thank you. We will now begin the question and answer session. And as a reminder, if you wish to ask a question, please post a star and one on your telephone keypad. Once again, that is star N1 to ask a question. And your first question comes from the line of Charles Hall from Cloughan. Your line is now open.