Premier Foods plc

Good morning everybody and welcome to Premier Foods fall year results. That's for the year that ended on the 1st of April this year. I'm here with Duncan Leggett our CFO and Duncan obviously will take us through the numbers but before that I'll give us a quick overview of where we finished the year and then I'll come back and give a bit of a strategy update afterwards. So I'm pleased to say that the business had another really strong year. We crossed £1 billion worth of sales. That's for the first time for the business in its current format, of course, with sales up 11.8%. I mean, our grocery brands continued to increase their market share, so up 64 basis points in the year. And that actually strengthened as we went through the year. And in fact, we're up over 90 basis points in quarter four. Trading profit at £158 million was up 11.5%, and that 15.7% trading profit margin was bang in line with last year. So, therefore, we recovered all the input cost inflation through combinations of efficiencies, cost savings within the business, and also, obviously, some pricing. Adjusted PBT, therefore, 137 million up 13%. And I think importantly, net debt to EBITDA, actually, we'd reduce further by 0.2 times down to 1.5 times EBITDA. So that is now in line with our medium-term target. And of course, remember, that's after buying the SpiceTailor within the year. So essentially, we funded the SpiceTailor from actually less than one year's free cash generation. The Board's recommending a dividend that's up 20% versus a year ago, so that's ahead of earnings growth. But I think importantly is this box on the right-hand side at the bottom here, which is pensions. So you remember the new pensions arrangement we put in place a couple of years ago. We're really starting to see the benefit of that flowing through now. In the latest triennial valuation, we've seen a 50% reduction in the MPV of pension deficit contributions going forward. So I'll let Duncan talk about that in a little bit more detail, but we see that as pretty significant. We've also made good strategic progress as well as the financial progress. So against the five pillars of the growth strategy, we've continued to grow the UK core. Our three year average growth rate is now at plus 5.3. and we've continued to invest back into our manufacturing infrastructure both in terms of new product development capabilities so the ability to manufacture the new products that we're launching but also in terms of efficiency improvements and automation and we've continued to grow our new categories with 33 growth from those new category experiments i'll talk a little bit more about those shortly And our international business continued to make good progress, 10% growth in turnover, but actually a lot more strategic progress, I think, under the bonnet there. And then the fifth pillar with the inorganic opportunities, so acquisitions, of course, we bought the Spice Tailor in the year. We've started to apply the branded growth model to the Spice Tailor, and I'm pleased to say that we're seeing an acceleration from an already high base, actually, in the growth rate of the Spice Tailor, so up 25%. in the year. And at the same time, we've also made good progress on the ESG strategy, which I'll come back to shortly. But before I do that, I'll hand over to Duncan, and Duncan can take us through the numbers in a bit more detail.

Brilliant. Thanks, Alex. Good morning, everyone. Delighted to be here to present the full year results. I'll spend the next few minutes just talking through the numbers for the full year and also a bit of an update following our pension scheme triennial evaluation. So starting with the group positions, I mean, as Alex mentioned, it's been a pretty good year for us. So total revenue is up 11.8%. You can see that's pretty well spread between branded and non-branded. For the branded businesses up 9.1%, pretty good growth across all our major brands. And you can see that stepped up a bit in the second half. So the equivalent number for H1 was about 4%. So you can see a bit of acceleration through H2. Non-branded revenue, I mean, that really reflects a bit of a trend we've been seeing during the year. So that's up strongly at 28%. That's pretty evenly across grocery and sweet treats. And that's a combination of new contract wins, particularly in our sweet treats business, as well as the impact of pricing. So gross margin is back a little bit at 70 basis points. I mean, this is very much just the way the year has played out in terms of how the branded business has grown and how the non-branded business has grown. It's not something we're expecting to see going forward. It's just a function of the way this year has played out. But you can see further down the P&L, by the time it gets divisional contribution, you know, really good control of costs. We have spent more marketing year on year, but we've got margins back in line. So that's up 11.7% to 216 million. Group and corporate costs are up, as you'd probably expect. So we've got some wage and salary inflation in there. We've also recognised the cost of a bonus to our non-management Greg colleagues to recognise their contribution towards this financial year. So that's up 12%. So where does that leave trading profit? So that's trading profit up 157.5 million. And you can see trading profit margins in line with the prior year. Going a bit further down the P&L, clearly seeing quite high movements in interest rates this year. I'll comment too shortly, but we've been pretty well protected by that. So slightly higher net regular interest, which leaves adjusted profit before tax and adjusted earnings per share up around 13%. So looking at the divisions in a bit more detail, starting with grocery, which includes our international business. You know, this has really been the key driver of our performance this year. So total revenue up 15% and particularly good performance from our branded business, which is up 13%. All our major brands are in growth. We've called out particularly Bachelors and Nisshin. I mean, Bachelors has been up more than, grown by more than 20% this year. And also Nisshin continues to perform really strongly. I think what we're seeing here is these are resonating with the consumer trends that we're seeing, which Alex will talk about in a bit. Non-banded revenue again, and we've got a bit of a continued recovery from our out-of-home sector. We've also got the impact of pricing in there. And again, at divisional contribution, good cost control, particularly good cost saving and efficiency programmes from the supply chain within grocery. And you can see that flowing through divisional contribution and helping to take margin forward year on year as well. So sweet treats, that's another year of growth for the business. So that's up 2.7%. Slight different picture, actually. So you can see mainly the growth's been driven by non-branded. And as we've seen through the year, a combination of new contract wins, so driving volume into the sites, as well as the impact of price. Branded revenues, that's a story of two parts really. So we've got Mr Kipling that's in growth for the year, so that continues to be the group's largest brand. That has been offset by lower Cadbury's cake performance. You might remember as part of our quarter three announcement we referenced some unscheduled maintenance at one of our Cadbury's cake factories. That obviously had an impact in our ability to supply an impacted branded growth for Q3 and also the beginning of quarter four as well. So an improving trend through quarter four, but obviously it had an impact for the full year. And then down at divisional contribution, I mean, very much similar story. You know, when you have an unable to produce a factory, there's some fixed costs associated with that. So that's obviously flows through divisional contributions. That's down 19% to 27 million. And although margins are back year on year, they are actually up 110 basis points versus two years ago. Really pleased to be able to share that we've hit our 1.5 times leverage target this year, and that's even having made this acquisition of the Spicetailer. How have we done that? So, I mean, EBITDA is clearly a big contributor, as you can see. CapEx is a bit lower than we guided, so that's 20 million. That's purely our ability to get hold of bits of kit and components that go within kit to be able to spend the cash. Pensions I'll come back to shortly. And then net debt before M&A, you can see, is actually as low as 1.3 times, and when you factor in the acquisition of the Spice Taylor back in August, we would get to the one and a half times target. So as I leverage our target of one and a half times, the business continues to generate a lot of good operating cash flow. Our credit facility was unused or undrawn at the year end, and we still have significant headroom still. And you combine that with pretty much fixed interest costs, so obviously the refinancing a couple of years ago, fixed our interest for quite a while at 3.5%. So we have been pretty insulated to the increase in rates during this year. We've still got three and a bit years to go on the bond there. So please, we've got a bit of a runway. Commodities and currency, clearly it's been a tropic couple of years, particularly for commodities. I guess just a reminder, we have a broad base spend when we come to commodities. We're not overly exposed to any particular one input. We do manage it in the ways you'd expect through forward contracts and hedging. Currency, it's been pretty volatile, particularly the US dollar, I guess particularly during the middle part of this year. I guess just a reminder, we don't have any sort of direct exposure to the US dollar. We continue to have about 50 million net exposure to the euro, which again, we manage in a normal way. Right, pensions. So really happy to share the results of our triennial valuation here with pensions. Following the merger three years ago, we've made some good progress. And I think this valuation confirms the continuation of this progress. So what does it say? So if you think about the net present value of our pension cash contributions, so how we view our pensions debt, that's reduced from $250 million down to $125 million. And that does include what is now a small surplus on the RHM scheme on a buyout basis. So that's very much progressing in line with plan. So 50% lower versus the last valuation and actually about 60% lower than it was pre-merger. And if you remember the projections we set out at the time of the merger, Our upside case in terms of MPV was forecasting about 45% reduction. So you can see at 60% we are already higher than that, which is great news. And it's really this performance that's allowed us to agree lower cash contributions with the pension trustees. So we're guiding to about 6 million reduction from this year, and that's 5 million of deficit contribution reduction, plus a small reduction in scheme expenses as well. And again, if we go back to where we were at the time of the merger, we were forecasting a lower ongoing level of contributions to the pension scheme. I think what we're saying today, I think with the increased momentum and the way the schemes, the trustees have been managing the schemes, we're now targeting resolution, i.e. reducing contributions to zero. This is quite difficult in terms of exactly how and when these will play out because there's a lot of things that impact the performance of a pension scheme. But we're targeting this in around three years. Thought we were spending a couple minutes reflecting on our difficult decision we took to close our site at Knighton. I mean, just a reminder, this is a site that produces mainly business-to-business products and also non-branded, so pretty low margin. Actually, we're slightly loss-making. And we tried for some years to try and make it viable. Unfortunately, we weren't able to, hence having to take a difficult decision to close it. We're going to be exiting about 30 million of non-branded revenue. There are some costs associated with the closure that we've previously disclosed. And we will be reporting this year, excluding Knighton, and we've set out some comparatives in the deck to help you with that. So it will take the best part of the year to cycle through the closure, to exit the contracts. But I think from FY25 onwards, you can expect to see our branded mix increase. And also from an absolute and percentage profit basis, they should also nudge forward as well. So moving on to guidance. I mean, working capital, we continue to see the impact of inflation, particularly on our value of stock. So you expect that to be an outflow. I mean, CapEx, I talked about it being lower than we'd frankly want this year because we do have the cash to spend and the projects to spend it on. Very much expecting that to step up back to, I guess, our view of where we see things on a medium term basis. about £35 million for this year and then great to see the pension contributions you can see the cash reductions that I've mentioned today flowing through and then the cost of the proposed dividend about £16 million. So capital allocation, I mean, we've got our leverage down to target. Pension contributions have actually started to reduce now following the merger, which we're really pleased about. We expect those to get a lot lower or eliminate over time. And again, very much as we've talked, I mean, Alex will talk about this in a bit, but capital expenditure, we continue to see masses of opportunity to invest within our business to generate high returns. And we still think that's a really good home for our cash. M&A, you obviously know we've bought and integrated the Spice Taylor business this year. We've increased its growth from 20% when we bought it to 25% this year. We've unlocked more distribution. Again, Alex will talk about that in a bit. But we continue to look at M&A and continue to look at brands that we think we can take, apply our model to and create value. And then dividends, we've always said that we'll progress on a full year basis. Hopefully evidence of that today with the dividends up 20%. That's the second consecutive year of 20% growth. So we'll continue to progress that as we've set out. And from a leverage target perspective, I mean, clearly it's one and a half times now. If we do make a transaction, it will obviously go up, but we'll still be targeting getting it back down to one and a half times in the medium term. Right, that's it for me. I'll pass back to Alex.

Thanks, Duncan. So what I want to do is kick off by just reminding us what that five pillar growth strategy is. So if we start on the left hand side here, you've got continuing to grow the UK core. Obviously, that's still the majority of our business by a long way. And so continuing to apply our branded growth model to drive the brands in the core UK key categories is obviously mission critical. And that creates the basis as well, the foundations on which we can do the rest. The second one, as Duncan has just been talking about, is investing back into the supply chain, both in terms of the ability to make those new products, but also in terms of efficiencies. And those efficiencies ultimately lead to gross margin improvement, and that's what we use as fuel to invest back into the brands in order to drive further growth. The third pillar is expanding into new categories. So we're the leader in our five core categories. So this is actually all about then how we generate white space revenue from new categories by taking the strength of our brands and extending them into places where currently we've historically not derived any revenue. And the fourth pillar is about building our international businesses to critical mass. We've got our focused geographies overseas. And more and more, this is actually turning into how we build global brands, so how we turn Mr. Kipling into a global brand, Sharwoods into a global brand, and now, of course, the Spice tailor as well. And then the fifth pillar is those inorganic opportunities. So we continue to look for brands where we believe if we could apply our branded growth model, then we will generate significant value just as is playing out with the spice tailor. And so really, if you look at this and stand back, what's actually happening here is we're taking what we believe our core skill set, which is building brands and driving profitable growth from brands, and then applying that not just to our existing home market and core categories, but looking at how we can use that skill set to build the business much bigger through new categories and new markets overseas, and ultimately new brands that we don't even own yet. So as I've said before, the ambition here is to make the business a lot bigger than it is today over time. through those brand building techniques. And that's all obviously guided by our purpose, enriching life through food together with our ESG strategy. And so I'll walk through where we've got to on each of these pillars. But before I do that, I just want to give you a brief update on where we are with our enriching life plan. We've made lots of progress against a lot of the KPIs, so I can only put a handful of them on here. The rest will be in the annual report, of course. But the plan has three pillars to it, you might remember, product, planet, and people. Some of the things I've just pulled out here on product is one of the commitments we made was to help people who want to have plant-based diets, and we've increased our sales of plant-based products in the year by 34%, and that's helped by a number of launches under our Plantastic brand, so that's our plant-based brand. including the millionaire flapjacks, which you can see at the top there, which I thoroughly recommend, by the way, if you get the chance to try those, protein pots and creamy pasta sauces. And anyone who knows about these things is it's actually really difficult to make a good creamy sauce without using dairy. So I think that was actually a really big win by our chefs and food technologists. In terms of packaging, our goal obviously is to get to 100% of our packaging being recyclable by 2025. We're now at 96%, so 4% left to go. I suspect that's going to be the most difficult 4%, but nevertheless, really good progress to get to where we've got to. Under the planet pillar, actually in the last week or so, we've actually now had validation back from the science-based target initiative on our goals in terms of greenhouse gas emissions to do our bit to try and limit to 1.5 degrees. And we've got a series of comprehensive plans, therefore, to get ourselves down to net zero on our scope one and twos by 2040. And then down the bottom there in the middle is focusing on food waste. So we've been reducing food waste. You may be aware for a number of years now we made a further 11% reduction in the year. But we also started to shift to working with our consumers to help them reduce their food waste as well. So we've got a thing called Take a Fresh Taste take on food waste. which is a website and features on a lot of our packs and gives consumers tips and hints on how they can reduce food waste. And if you think about it, a lot of our products, particularly cooking sauces, are actually really helpful if you're trying to reduce the food waste that you generate and the things in your fridge before they go off. You can grab those, put them in some pasta and put a sauce on it, and you've transformed a random set of ingredients into something which is actually quite tasty. And then the third pillar there is people. And one of the big things this year is that we entered into a five-year partnership with the Fair Share charity, so working towards fighting hunger and tackling food waste. And then one of the things that came out of that was a big promotional activity we did called... or win a dinner, give a dinner. And the idea there, it worked with FairShare and Tesco with a big piece of promotional activity. And you could win on pack. There was a code. You put it into a website. And you could win a voucher for buying things for a meal you could cook at home. But the important thing is if you won, you also were donating a meal to someone in food poverty to do the same. So that was really successful for everybody. And actually, so much so, we've repeated it again. So it's happened twice. Lots of progress on the inclusion and diversity agenda as well. The one statistic we've pulled out there that if you look across all our management colleagues, we've now reached a point where 47% of them are female. So really good progress against that as well. And it's also really nice to see a lot of this stuff getting recognised by the ratings agency. We're really pleased with the reduction in our Sustainalytics rating. By the way, if you don't know Sustainalytics, a low score is a good score, by the way, just for the avoidance of doubt. So overall, really pleased with the progress there and something we continue to drive really passionately within the business. So if we now go through those five pillars of the growth strategy, that first pillar on building the brands in the UK is all underpinned by this, which hopefully most people are now familiar with, which is our branded growth model. But as a reminder, we start from a really fortuitous place where we've got a portfolio of brands which are in the UK really well known. They're market leaders in their core categories. They've got high household penetration. And there's a lot of emotional affinity between consumers and our brands. Now, that on its own is not going to give you growth. So it's a question of then what do you do with them? And this second bucket is one of the key drivers of our growth. And it's really how we work with consumers to understand what's happening in their lives, understand how they're shopping, understand how they're cooking at home, and understand how they're eating. Because it's understanding that that allows us to develop new products which really resonate with them in terms of lifestyle. And it's one of the reasons we believe why we've got a significantly more successful rate of our innovation and our new products than the average of our categories. So it's a significant growth driver for the business. But then the third box there is we also work really hard to keep the brands top of mind, to keep them relevant and contemporary for our consumers through a series of marketing and advertising campaigns. And we work really hard on reinforcing that emotional engagement that consumers have got with the brands. And then the fourth box is our retail partnership. So really important is that we look to build strategic relationships with our retailers where we work together to drive category growth. And that tends to translate itself into something that's very beneficial for us, of course, because we tend to be the leader in our in our categories, so it tends to be a big win-win. So some examples of that through the year. Of course, you would be very surprised if we hadn't had a whole series of new products that we brought to market. There's really only a handful of the examples on this chart. Starting with health and nutrition remains a key consumer trend as people try to eat just that little bit more healthily. And we continue to bring new products to market that are really designed to help people with that journey. We've also continued to work on convenience and remember convenience isn't just about speed anymore it's also about ease because one of the things that we see is we see a long-term decline in people's core cooking skills so people not as able to cook from scratch as previous generations were and so we're helping people with that journey. And then what is sometimes slightly counterintuitive given the strong health trend is there is still an indulgence trend as well. And we put this down to the fact that you're trying to eat healthily through most of the week and it gets to Friday and you feel like you deserve a bit of a treat. But what we realize is that when you do break out of that and you want that treat, People will describe it as it's got to be worth it. So having some really indulgent products that fit with that is also really part of the plan. We continue to support the key brands with TV campaigns, digital campaigns, and also now some poster sites as well. But the real new thing has been the campaign we've called the best restaurant in town. So this came about because what consumers were telling us is that they were looking for ways to make tasty, nutritious, but at the moment particularly low-cost meals at home. And if you think about it, the cheapest way to eat is to cook for yourself at home. But we're lacking ideas and inspiration. So we put together a series of short videos, which obviously featured our brands, and helped you. to make something which was kind of quite healthy and quite low cost. And they were so popular, we got 30 million views of the full video end to end on the website, which quite surprised us actually. So we've actually extended the campaign. In quarter four, we put it on mainstream TV. And we're now extending it with more recipe ideas featuring more of our brands. And I think that's going to be ongoing part of our overall marketing campaign. In-store execution is really important. And this goes back to those strategic partnerships with retailers. And one of the things we've been doing actually over the last year is also then linking up with major gaming franchises. So you might remember we did some bachelor's work with Call of Duty. And this is actually movie franchises are featured here. So we had Ambrosia and Angel Delight linking with the Minions franchise. So there's an on-pack promotion there. You can win cinema tickets. We linked up with one retailer on this. So it was exclusive. And in exchange in that retailer, we've got these really big, dramatic displays, very similar thing on the right-hand side there with Bachelors linking up with the new Shazam movie. And when we have these big dramatic displays in-store theatre, as some people call it, we see really significant incremental volumes. This is actually really beneficial to the brands. Now, how's all that working in terms of the branded growth model delivering in the UK? On the left-hand side there, that's our UK branded sales over the last five years. And you can see there's good, strong progress year after year. There's a peak there in the middle. Of course, that was COVID when we were all cooking all our meals at home and desperately running out of ideas of things to cook. And you can see then, of course, in the last year, we've now surpassed that peak. And the three-year average growth rate is now at 5.3%. So working really well for us. Now, of course, that's all happening in quite a difficult macro environment, as everybody's very aware. Quite incredible levels of food inflation, as we've seen, and some changes in consumer spending patterns, because obviously consumers haven't just got food inflation to deal with. They've also got their energy bills and a whole bunch of other challenges. And we're seeing this now start to translate in some changes in consumer purchase dynamics. So one of the things we're seeing is we're definitely seeing more people eating at home. As I go back to, it's the cheapest way to eat is to cook for yourself at home. But we're also seeing some changes in what people are buying. So we're seeing people buying more noodles, for example. And we think that's because noodles are a really low-cost way of creating a base for a meal that you can add vegetables or whatever to and turn into something quite tasty. How does that leave us and our brand portfolio in this environment? I think the evidence is that we're in a good place here. We start with those strong brands that everyone's got a strong affection for. That's always a good start point. But ultimately, if you think about it, our products are really still quite affordable. They might be more expensive than they were, but they're actually quite low priced in absolute terms. A pack of super noodles there, it's still only a pound. even after it's increased in price. So we've got a number of products that really help people to put those low-cost meals together, and I think that's why we've seen such a strong performance from our grocery business. I think it's also underpinning those strong market share gains that we've seen as well. And then, of course, you've got the Breast Restaurant in Town campaign, which is really designed to help people put those low-cost meals together. So a difficult environment, but one I think that we've navigated well and one in which our brand portfolio is probably well-placed to deal with. I'll move on to the second pillar. And obviously, this is investing back into our infrastructure. We've still got a lot of projects, as Duncan says, with quite short payback periods of three to four years. And that's one of the reasons why we're going to be diverting more cash into investment in some of those automation projects. A few examples here, in our Stoke bakery, We put a new depositor on the cake slicers line. If you don't know what that means, I don't blame you. Really, all we're saying is it's something that actually increases the speed and the efficiency of the line. It means that there's more consistency in the product delivery for the consumer, and ultimately it generates less waste. So it's actually quite a big efficiency improvement as well as improving quality. I've mentioned these other two at the half years, but the middle one is an automatic case packing machine. So it's taking the boxes of cakes and it's pulling them in the case and sealing it automatically. And on the right hand side, that big yellow robotic arm is an automatic palletiser. So it's taking finished boxes of French fancies and it's stacking them into a pallet configuration ready to be taken away on a truck to the warehouse. So really quite modular payback technology. you know, periods on some of these efficiency improvements. I move on to the third pillar. So this is driving sales from those new categories. And you might remember that we had a handful of experiments over on the left hand side. So things like Ambrosia ready to eat porridge, the OXO rubs and marinades. And OXO rubs and marinades is quite interesting because, of course, OXO is largely a seasonal brand towards the winter. And actually having a present in barbecue actually helps balance that out a little bit over the summer. We've got a number of our brands that we're experimenting with ice cream. So there's Angel Delight ice cream there. And then we've got the Cape. spices and rubs. All of those are performing pretty well and we're continuing to drive all of them. But the one standout I want to pull out is the ambrosia porridge pots because this has really just taken us by surprise on how successful it's been. And I think what we've hit on here is something which is unique. There's no other product like it out there and which is consumer preferred, which is exactly where you want to be, isn't it? You've got a product that no one else is making and consumers prefer it. What's preferred about it and what's different? Well, it's ready to eat. It's not like all the other products in the category are dried powders in a pot and you have to add water or milk and then mix them and microwave them. This is ready to eat and it uses our skills in making ambient stable dairy products for custard and for rice pudding. It's not just a convenience benefit though for the consumers, what people are telling us is that actually it tastes better, it's smoother and creamier because it's already made and hasn't just been made out of a powder. And we're seeing really positive consumer results on that, so really high online Ratings, four and a half out of five stars. Tracking the stars is really important these days. And very high levels for the early stages of this of repeat rates. And repeat rate, of course, is someone who buys the product and then goes on to buy it again because they liked it so much. And what's quite different about this compared to most of the products in our range where people might come back and buy most of our products a handful of times during the year, the people who like this, we're hearing people are buying five a week because they're taking one to work with them every day. So that's quite different for most of our customers. most of our brands. And this chart on the right-hand side shows actually what happened to our market share so far. So when we started the experiment, just in a few stores, we had a 1% market share. We're now up to almost a 6% market share. And we're not in all the customers yet. We're still in rollout mode. The first customer where we launched, we're now up to a 12% market share. So significant increases and ongoing increases in market share in a category that's going by 19%. So we're really quite excited about this, so much so that we're looking to put more capacity in for it because we think this is a real winner. It's no longer considered as a test within the business. This is now a full-on product range that we're rolling out. I'll move on to our international businesses. So sales up again, double-digit, 10%. I think standout performance was Australia, where we delivered, again, record market shares from our cake business and Mr. Kipling in particular. And I'm going to come back to that in a moment. We're now also, of course, the market leader in Indian cooking sources in Australia because we've got the Sharwoods brand and we've also acquired the Spice Tailor. Ireland had a really good year with broad-based growth across the brands, but it was Sober that stood out. So, since we launched Sober a year or so ago in Ireland and sales have more than doubled. So, that's very much following in the footsteps of the success that we've had with Sober in the UK. In the US, I'm sure you'll remember, we were experimenting. We had a test of Mr. Kipling in the Target brand of stores. We were in 221 of their stores. That test has concluded. We were super happy with the results. All the cakes that we had in Target performed in the top 50% of all the cakes that they sell. So we are now happy to go ahead and we're talking to other retailers about expanding distribution into the US, which is quite an exciting prospect. Canada, low base, but we doubled the size of the Canadian business in the year. That was due to a couple of things. So a significant amount of new distribution in Walmart Canada for Sharwoods, and also continued strong growth of Mr. Kipling as we roll the brand out more in Canada. So if you look overall at what's happened to the international business since we put this strategy in place, we've seen a 46% growth in our revenues from overseas. And as you know, our ambition is actually make that international business several times the size it is now. So that is all going in the right direction. Now, I said I'd come back and talk about Australian Mr Kipling. So on the left-hand side there, that's the market share of Mr Kipling in Australia from just after it launched. So increases in share every year, a big step up in financial year 2020. That's when we put the strategy in place and a new high this year as well. And I think the interesting thing here is we've now reached a certain critical mass in Australia that we're able to fully apply the UK branded growth model to the market. So we're bringing new products to market. We launched lemon Bakewell tarts in Australia this last year. We're starting to get the same quality of display and in-store visibility in Australia that we also expect to get in the retailers in the UK. And this year, the year we're in now, we will turn on TV advertising for Mr Kipling in Australia. So now it's the full UK branded growth model being implemented. And then also quite interesting is when you then start to look at this not just as Australia, but actually as a proof point for the global rollout of Mr. Kipling. So I've said this before, the research we've got says that in most developed cake markets, there's a good chance Mr. Kipling is going to work. And this for me is the proof of the pudding of this actually starting to play out. But the interesting thing is the Australian cake market is worth about $300 million Australian dollars, of which we've got about 10% with Mr. Kipling. The US cake market is worth 5 billion US dollars. So you can imagine if we get even remotely close to the success that we've had in Australia, in the US, it's quite transformational for us. Now, the one thing you do need to bear in mind, of course, that the retail environment is very, very different. In Australia, the majority of the market is by two customers. So, actually getting distribution is two conversations. The U.S. retail market is highly fragmented. So, that same sort of level of distribution is hundreds and hundreds of conversations. So, it's clearly going to be a bit of a journey and take a bit of time. But nevertheless, I take this as an interesting proof point of what might be possible as we start to roll the brand out globally. And I'll move on to the final pillar. The final pillar, of course, is acquisitions. We bought Spice Taylor in the year. We liked it because it was a brand of business. It had got already a high growth level. But what we saw in it was a real opportunity to drive the business harder through the application of our branded growth model. So through an innovation pipeline, because we could see in our mind's eye what we would be able to do with the brand from an innovation point of view, but also leveraging our commercial relationships and the other brands that we've we've got. And I think the really exciting thing for us is that that's starting to play out already. Even though we've only owned the brand for a few months, we've seen the growth step up from 20% to 25%. And there's some examples of here of some of the things we've been doing. We've been getting more in-store promotional space and more shelf space. Particularly there, that example is where we've linked up the Spice Tailor with Charwoods and Lloyd Grossman to do a full cooking source type promotion. We're starting to see more distribution coming online. We've gained distribution in Tesco, in Morrisons. We've now got agreements to go into Ireland with Duns and Musgraves, so they'll come on stream during the summer. And we've got into Walmart in Canada. And there'll be more of this to come as we talk to more retailers in the UK and also overseas. And then also just coming to market are some new flavours of the traditional heartland of the Spicetailer as we start to expand the brand further. I would be very surprised if I didn't see a strong innovation pipeline for the year, increased market sites, And as Duncan says, an accelerated level of capital in particular things like ice cream, where we were in Iceland as part of an experiment, maybe porridge, because that's, as I say, no longer a test. That's actually United States following that successful test in Target. And in Target, actually, we're already starting to put more flavors in. So that's a strawberries and cream market and that TV advertising as we fully adopt the branded growth model in England. And then Sharwoods is still just about building the pillars. So where does that leave us? Look, I think we go into this year with a lot of positive momentum, plans in place on all of those strategic pillars. And as Duncan said, we're starting to see, and we expect to make further good progress this year. So thank you very much. I think with that...

Can we just talk a little bit about pricing and volumes and just discuss a little bit about how volumes performed when you were putting through price increases, what that did to promotional activity? And now looking forward, you've obviously put through prices earlier this year. Are you now largely done on pricing and it's about driving volume growth?

No, thanks, Charles. So, yes, I think – I'll do the second part first. So, I think we're pretty much done on pricing. We think what we're seeing is that the commodity prices and things have peaked, and the pricing that we put in place in our – back end of our quarter four is designed to cover us for the rest of the year, at least until we review it again in quarter four. So, I think, you know, hopefully all things – being equal we should be done on price. Yes, so price volume elasticity is a really interesting topic and I think we talked about this before that when we put our prices up in the summer obviously we saw an immediate price elasticity impact and volumes negatively impacted by that. And then as each week went past, we started to see the volumes improve, improve, improve, until we were getting pretty close back to where they were. And then, of course, we put our prices up again, and the whole cycle starts again. So we're now, obviously, after the quarter four pricing, we're working through that same journey again. And that's helped by, frankly, that recovery is helped by a lot of those activities that were put in place, particularly that focus on those enormous displays in store and those link-ups with films and with gaming franchises and things, because they really do help volume recovery.

And secondly, on the sweet treats, obviously, the branded sales went backwards a bit. You had the issues with Cadbridge. How much impact did that have on the sales and what's your outlook for Sweet Treats branded sales this year?

Yeah, sure. So Mr. Kipling grew in the year and it actually grew faster in the second half than in the first half. So really what you're seeing there is that decline was cabri and driven by that sort of manufacturing maintenance that we had to do. So, yeah, and Keepley actually had a really good Christmas, and it's also just had a really good coronation as well, because we did a load of special cake packs around the coronation. It seems to have done really well from that as well. So, look, we'll keep driving the model, and we'll keep working on those big displays and new products, and we expect the brands to do well.

And last question, the grocery market share obviously moved forward really nicely. Was that because you're taking shelf space or is that greater sell-through on the existing shelf space or a combination of the two?

It's all of the thing. Yes, that's true, but it's all the elements of the model. It's the innovation. It's the brand support. There's clearly some consumer trend towards some of our categories because of people trying to cook low-cost meals at home. But I can't pull the elements out because it's just continuing to drive our branded growth model, delivers market share growth. I think Martin was out, and then we'll go to you, Clive. Yeah?

Alex, thanks. The first question is a lot of talk in the media about greedflation and profiteering, the two words that have suddenly come from nowhere. Thank you. Oh, sorry. Thank you. Sorry, the question was around greedflation and profiteering, to use the media parlance. So it's good to hear you've got your pricing. But what is the risk of a sort of change in the retail climate? We've seen Morrison's taking the first sort of price cuts on bread and things recently. And what's the risk that if the commodity environment changes, you're pushed into a lot of increased promotion? We get a sort of promotional zoo. I'm just trying to tease out sort of where the climate is going in retail. And then just to follow up on Charles' question on market share, just a very simple one. Does the 64 bps include the benefit of the price tailor, or is it pure despite the price tailor? What an interesting concept that would be. It is, yeah. I haven't been current climate. The spice tailor, or is it purely like for like?

Yeah, so let's take the first one first. So, I mean, look, we've been really clear that the amount of pricing that we've passed on to our retailers is less than the amount of general commodity and energy inflation and things. And we've managed that through our normal hedging strategies and long-term volume commitments with our supply base, so working with them to keep our costs low. and then the internal efficiencies and cost-saving measures that we put in place. So we've worked really hard to limit the amount of costs that we've passed through. And I think maintaining margin, whilst that's really important to us, has been really helped by those cost savings. In terms of how we see things playing out, I don't think we're going to be looking for any more price this year. If we've got it right in the pricing that we've put through in Q4, then we should be done now, to be honest. I think what we're probably going to see is we're going to see some commodities come off and start to decrease in price. But I don't think we're going to ultimately see absolute deflation, given when I look at the ingredients that we put into our products. We don't really have any single ingredient products, do we? We have multiple ingredients and multiple packaging components. And a lot of that is still, I think, going to stay higher than it was before. So I don't think we're going to be in a deflationary position at all. But if we did have the opportunity to sharpen some of our promotional prices, we would look at that as we always do. We analyse these things to death and make sure that every activity that we do has got a good return on investment associated with it. The second question was about the market share growth.

Is it light for light with that?

I think this includes the Spice Taylor, Richard. Is that correct? But to be honest, its overall impact on our total market share is not particularly significant. Clive.

Yeah, thank you. Clive Black from Shore Capital. As Charles says, good effort. Two questions. First one around marketing. I know you may not want to give numbers, but Year on year, what sort of change was there in 23 versus 22? You said there was more marketing. Where do you see that going in terms of direction of travel or proportionality? And then secondly, in terms of capex, this year it looks like you're going to be spending on the UK plant. When you talk about the American opportunity in cake or indeed Ambrosia's porridge, What sort of capacity do you have? Are we looking at something much more significant in CapEx in the medium term to meet those market potentials, if that makes sense?

Yeah, sure. So let me take the capex question first. So as I say, a lot of that is all sitting behind our efficiency improvements and MPD capabilities, as we talked about. If I look specifically at US cake, if we were to be really successful on the top end of our expectations, we would need more capacity. It's probably some years down the line But I think you'd be at a point there, well, certainly, because we've done the maths, you'd be at a point where you would have created a US business that was so big, the cost of putting an extra production line in place would really not be a worry at that point. And we would probably look to site that in North America somewhere. But this is all very hypothetical. At the moment, we're in 200 stores. So let's not get too carried away. But yeah, it's all manageable. Porridge, I think we're OK from a capacity point of view for the UK market. but we think we've got aspirations to roll that out into other countries and so we're starting to think about what that would mean in terms of capacity requirements and how we'd go about putting that capacity in place but not particularly significant in the grand in the grand scheme of things don't you want to add anything to that don't go yeah sorry and just to follow on then in terms of your m&a will that remain like the uk focus from what you've just said or could you look at bolt-on acquisitions that actually involve a

a brand that's not UK-based?

Yeah, it's not impossible. It's not impossible. So I think, you know, the first and most important thing is, if we apply our brand and growth model, will this brand deliver better performance? The obvious place to look is categories in the UK where we don't have presence, because then that's all white space. But another opportunity would be what we might call filling acquisitions, i.e. buying our way into the categories where we've got expertise in the UK in another market. So that would definitely be on the horizon scan, I would suggest.

And I think, just building on that, I think it'll be, you know, if it's a market outside the UK, it's more than likely to be a market that we are already in outside the UK, or clearly anything else would be a bit too much risk. Yeah.

Damian McNeill from Numis. That's a question for Duncan. You mentioned that your aspiration is to neutralise the pension in around three years. What are the moving parts that could make that quicker or longer, please?

Yeah, sure. I mean, look, I guess when we set out at the time of the merger three years ago in terms of how we want to play it out, in terms of recapping why we did what we did, it was all about harnessing the strength of the RHM scheme, which has always been in a pretty good position. The Premier Food Scheme has always struggled a bit in terms of pretty high deficits, and obviously that's where our cash goes. So the dream and the ambition is that the RHM went from a deficit on a buyout basis to neutral and then into surplus. And then clearly, that creates the sort of firepower to be able to fund within this trust that we've set up to fund the Premier Food Scheme. So that was a vision when we set it out three years ago. I think what's really pleasing now is the RHM scheme is now starting in a surplus on a buyout basis. Now it's about 100 million, which is brilliant. But we need that to grow, but we now have a surplus where we used to have a deficit, so we need the RHM scheme to continue to do what it's doing. I think what's been particularly pleasing, Damien, is the performance of the Premier Food Scheme under its own steam and under the new stewardship of the trustee group who have been running it since the merger. through investment strategy, through benefiting from some of the assets that used to be in the RHM scheme that's been working well. And that's been doing probably better under its own steam than we expect. And that's, you know, I think from an MPV, from a valuation perspective, that's best part of 200 million lower than it was at the beginning of the merger. So we certainly need both of those things to combine. We need continued improvement in the Premier Food Scheme. We need the RHM scheme from an asset return perspective, to continue to build the surplus. And then we'll get to a point where the surplus is big enough to plug the complete hole in the Premier Foods section, which will be when the scheme will start to be less or not reliant on the company at all. And that's the point at which we'll be able to turn off contributions.

Matthew Webb from Investec. I wonder if you could just offer a bit of guidance on the margin on sweet treats. We'll see down 280 pips in this period, which, if I understand it correctly, was primarily a mix effect with the very strong growth of non-branded. I see that you exited, well, Q4 non-branded growth up over 60%. So presumably there'll be further mix shift towards the non-branded in the year to come. I also note that you commented that although the margin was down year on year, it was still up versus two years ago. I mean, are you effectively trying to sort of guide us that there's potentially a little bit further margin attrition to come there?

Well, I think what's happened this year, it's probably more about the manufacturing interruption that we had during our quarter three. And clearly, if we're unable to produce, we've got a lot of factory costs that we're still incurring without the benefit of the volume. So I think that's really the driver behind the margin reduction year on year. Clearly, there's probably a bit of a mix in there just the way it's grown. But a lot of that is... is new contract winds, which will start to cycle as we go into this year. So I wouldn't say that the mix and sweet cheats has been a particular drag factor. And clearly we will be cycling the manufacturing interruption that we had during the second half of the year. So I think I'd probably, you know, probably clearly we are always looking to move these things on. I think, as we said, you know, we're looking to build volumes

in the sweet treats business hard to build them back now following the you know following the pricing that we've put through and i'd expect to probably see a steadily improving trend through the year particularly in the second half and also just to follow on from that i mean the the obviously the us is has gone very well which is which is great news but in terms of the the investment that will be required to move that on to the next level is that something that you'd expect to be a little bit of a drag on the margin for the next for the next 12 months

No, it's a really good question. But I guess starting off, the international business is profitable and it's always been profitable. So that's probably point number one. So it isn't a drag. And from a margin perspective, you've got slightly different dynamics because in the UK you get highly promoted. We're in a highly promotional environment and our customers are sort of next door. In the US and overseas, you get less promotional activity, but it costs us a bit more to sort of get it there. So from a margin perspective... even higher up the P&L international is in line with our grocery business pretty much. So, no, I think – and so it is making profit. I mean, it's mainly – and the investment at the moment is mainly in, you know, people to sort of drive the growth. I think to Alex's point earlier, you know, if we get to a position where we're talking about investment from a capacity perspective, we'll be absolutely delighted because that would be a great decision to have.

Yeah. And sorry, just final one from me. Are there circumstances in which you might subcontracts your manufacturing into the US, rather than going straight from export to having your own local capacity?

Highly unlikely, because we believe we've got some proprietary capability in the way in which we manufacture our cake. That's why they're quite different, and I would say better than what you might buy elsewhere. That's part of the uniqueness of the brand. So we'll not want to give that expertise away. So we would put our own kit in place and have our own people run it. Thank you very much.

Sorry, a couple of follow-ups. Just given the debate we've had on pensions, what's the likely future of the dividend match payment? Anything you can say on that? And secondly, I forgot what I was going to ask. Never mind.

Why don't I start answering the first question, Martin, and if you remember, feel free to add at the end. Yeah, look, I think dividend match contribution, I mean, it's been in place for quite some time now. And, you know, it's in place, you know, all the contributions and dividend match by sort of definition are in place until the next valuation. So, you know, there's a next valuation at March 25. So that will be the point at which we discuss everything again.

Thank you. And the second one was any, as we think about the trading profit line for 24 obviously the big issue is pricing versus your input cost position, which I won't ask you, but any obvious moving parts you should be cognizant of. I think Knighton is profit accretive, isn't it, on the trading profit line? But just anything else you want to call out in terms of thinking about trading profit in 24?

No, I mean, I think, you know, we see the slight beat that we've announced today as probably being our new base for growth into next year. So you probably want to think about that. I mean, night and once it's fully cycled through, might add a small amount to profit, but I wouldn't expect anything during this year. This year will be mainly, you know, it will take the best part of the year to fully close it and to fully realise the benefits. So that's probably it. And, you know, we're clearly focused continuing on growing the top line and continuing to invest behind our brands.

Good. Any more? Or are we done? Going once? Oh, yeah, hang on. We have a taker.

Just quickly, Alex, sorry, Andrew Ford from Peel Hunt, just quickly on M&A, you mentioned there's some category gaps potentially in the UK. Has the success of some of your new products changed the way which you're looking at those category gaps? And can you bridge that more yourself? And now you're focusing a bit more on those regional targets or is it, has it not really changed at all? Those some things are just unbridgeable with your current brand?

Yeah, I think the last thing you said is actually the key here. So when we look at any category, we ask ourselves a couple of things. One, is this something we can do organically ourselves? Because we've got a great brand that's going to translate really well into that category and is likely to be really successful. Or is there a brand out there which we could acquire which will do a much better job? So there are some categories where it's obvious we do it organically. There are some categories where you could do either if the right brand was out there and it was available. And there are some categories where, being honest, our brands just would not stretch and therefore you'd be entirely reliant on on buying in a brand. But that would be based on a brand being available that was suitable. So yeah, it's a good question. And that's exactly how the lens we look at new category expansion through is, what can we do? What can't we do? And therefore, where are we better off looking at acquisition? Thanks. Good. That probably is it this time. So thanks very much, everybody. Thank you. Thanks.