Premier Foods plc

Morning, everybody. So, morning, and thank you for joining this, which is our quarter one trading update call that covers the 13 weeks to the 1st of July this year. I'm joined on the call this morning, as always, by Duncan Reget, our CFO. And I'll start by giving a few headlines on our trading in the quarter, and then I'll dive into a few key areas that provide a bit more detail, and before, as usual, passing to you for your questions. Now, also as a reminder, we're today holding our HLM. That's at 11 o'clock. And that's to tell us here that our office is in St Albans and we're an option of attending virtually just like we did last year. So if there are any shareholders who'd like to attend and don't yet have the details, please do contact Richard Godden in Investor Relations for details of how to attend. So on to the course one results then and overall I'm very pleased to say that we've had a strong start to the year and reported sales growth of 21.1% and branded growth of 17.5% this morning for our first quarter. And that's a result we're clearly very pleased with. In addition to this, we've also grown our market share and integrated business by another 94 basis points. and given the current environment, the results today are partly due to the strength of our brands, of course, and their relevance in the current economic environment, but also very importantly down to continuing to drive our brand and growth model and delivering against our five pillar growth strategy, but more of that shortly. In terms of strategic progress in our new category, we've more than doubled our sales of Ambrosia Porridge, and also actually of Kate Perkins and Spice. And our overseas business has made great progress, in particular with Mr. Kippering, both in the US and in Australia. So with a very positive start and with strong plans for the rest of the year, we're now saying we expect to deliver trading profit at the top end of market expectations. So we'll go through a brief review of progress in the quarter, but before I do, I just want to remind you of our brand's growth model, which is at the core of what we do and is the reason why we've been able to deliver such consistent, strong performance over the last five years or so. So we start with a portfolio of brands which are leaders in their categories and have got very high household penetration. This, of course, is a great starting point, but on its own doesn't give you growth. So we then rip and re-impair so we can work closely with our consumers so that we can bring to market insightful new products and which are based on what we've understood on consumer needs and trends. And then we support our brands with a mostly engaging and meaningful marketing and TV campaign. And then finally, but also very importantly, we work closely with our key retail partners, delivering excellent info execution and visibility for our brands. So to finish the grocery business, then a very broad-based and strong performance all round, and a similar pattern to that actually that we reported in quarter for last year. So total grocery sales were up by 26.7% and all our major brands delivered double-digit growth, so contributing to the 25.1% branded sales growth in the quarter. And really there aren't any brands which I would really call out as notably stronger than the others or in fact delay part within that. There was of course fair amount of price included in that very strong revenue growth. Separately and importantly, I'd point out that our portfolio is generally well positioned and highly relevant during the sort of challenging economic environment which we're facing at the moment, and I'll come back to that thought a little later. One important and very encouraging trend I'm pleased to highlight is that we saw an improving volume shape towards the end of the quarter across our brands, which, as I say, we're very encouraged by, and we'll be tracking this very closely in the coming weeks. As is always the case, the way we build volume sustainably over the medium term is through our branded growth model, and especially our new product development program. And the cause and benefit is from product ranges such as new improved versions of, let's say, stock pots, a big size version of our very popular, say, the noodle pots, a premium take on our bachelor's fashion sauce, which we call Chef's Specials, And then from Fantastic, expanding into two new categories with three new cancer sources and also something we call Protein Pops, all of which has been launched over the last year actually. Now I mentioned this briefly earlier, I'm pleased to say that as we've done over recent years, we've continued to take market share in our grocery business. And you may recall that we gained share during the last financial year for 64 basis points over the year. And this increased by the 90 basis points in the fourth quarter. Well, we've continued this momentum into the first quarter of this year, taking up to the 94 basis points per share. And I think it demonstrates that our brands continue to be very relevant and important for our consumers and also demonstrates their strong competitive positioning. Now, the topic of inflation has been very much debated over the last 12 months or so, and as I've previously outlined, we've obviously not been alone in experiencing significant import cost inflation across a range of commodities, energy, and also labour costs. And we monitor our commodity costs very closely, and as I've mentioned before, we've looked to offset this unusually high level of import cost inflation by using a range of measures, and these include how we manage our supply contracts, to minimise the impact of value input costs in the first place, along with our heading strategy, and then a significant focus on cost staging and efficiency programmes before finally price increases where we need to. You may recall that when we last spoke in May that we recovered all the input cost inflation that we've seen to date and that very much continues to be the case and we will of course continue to monitor the situation very closely but we now believe the significant levels of inflation which we've experienced over the last 12 to 18 months have now passed this peak and therefore we have no further price increases planned for the remainder of the calendar year. That In the current climate, there are clearly some consumers who are unfortunately needing to make tough choices when it comes to their grocery shopping. And one thing we continue to see is that more people are cooking for themselves and their families at home. And this, of course, makes a lot of sense. We all agree. And without doubt, the cheapest way to do this is to cook for yourself at home. And as you know, we have a broad portfolio of brands which resonates strongly with consumers and many of our product ranges. are therefore well-positioned to help consumers create those tasty and affordable meals in a convenient way. And actually one thing people tell us is they struggle for ideas for meals that they can create at home. So a great example of how we're helping provide families with the inspiration to prepare affordable, nutritious meals at home is through our Best Restaurant in Town campaign, with delicious meal ideas demonstrated in short videos. And we started this last year as a digital campaign with YouTube videos, but it proved to be so successful that we've now significantly upweighted the campaign, and with many of our recipe ideas also now being added on mainstream TV, so building on the successful YouTube campaign that we ran in the last five years. And then with three treats, Mr. Kipling has served the growth in the quarter with sales up by 3.6%, and this is really down to us continuing to work our brand and growth model Mr Kipling benefited from the impact of new product development, and examples of this include our indulgent signature brownie bites, which I have to say are particularly delicious, and the non-HFFS, the non-high-fat salt and sugar, deliciously good range of cake slices and fruit pies. And additionally, the King's Coronation in early May was celebrated on the packs of some of our most popular Mr. Kipling products with associated impactful displays in store, and that boosted sales in the quarter. Just for completeness, happy sales were a little lower following the slightly earlier timing of Easter this year compared to last year. Now, of course, another important element of the brandless growth model is investing behind our brands, including in marketing and advertising campaigns. And in the first quarter, we again advertised Mr. Kipling, our largest brand on TV, with the popular piano advert, as we call it, which captured the nostalgic moment between the father and daughter. And this is important because I think it's a great example of the kind of emotionally engaging approach that we're employing to build long-term emotional connections between our brands and our consumers. And this year, again, we planned to land the site six of our major brands using a variety of media, which we did in all posters and TV. And we will again increase our overall brand investment compared to last year. Our non-branded sales were also well up on previous years in groceries. Sales were up by 38% to £22 million, which was largely down to higher pricing compared to the same quarter last year. And the three tweets on branded sales were also much higher. quarter one this year and this is down to some further contract wins in pies and parts and then of course as you would expect there's some pricing benefit in there as well. Again as we've mentioned previously over the last few quarters we're not seeing a huge effect of consumers trading down from our branded product ranges to private label and I think one way you can see the evidence of that is in the continued increases in market share. So if we move on to our other strategic growth pillars, I'm sure you'll recall that one of these pillars is to deliver growth in overseas markets. And as I've said before, this will be in the key target markets of Ireland, Australia, New Zealand, North America, and Europe. And within these target markets, we're focused on Mr. Kissing, on Sharwood, and of course now also on the Spice Taylor. And that's other than Ireland, which is a more established business that carries a broader portfolio of our brands. Our international business has performed very well again for us over the first quarter, sales increasing by 14% on a constant currency basis, including the Spice Taylor. And as I just mentioned, Mr. Kipling is one of our brands which we see as having some true global potential. And as we said back in May, we've completed a successful trial in the US in 220 stores at the retailer Target. and we achieved some really encouraging results there with strong rates of sale. And so off the back of this, we've started to roll out for further customers. And so far, we've agreed distribution in 1,400 stores across a number of retailers in the U.S., including in Albertson Safeway, which is, of course, a major player in the space. Additionally, we're expanding the product range so it includes strawberries and cream slices for the summer, and they're in target right now, and then some seasonal limes planned for Halloween and the autumn. In Australia, another one of our key target markets, our in-market performance of cake has continued the positive momentum that we achieved last year, with market share now at 17.6%, that's another market share record. We've also reached 20% household penetration, which is two percentage points higher than the same period a year ago. The share of Mr. Kipling in Australia is now of sufficient size to support mainstream advertising, including TV, as we start to focus now on building brand equity, just as we do in the UK and Ireland. And together with new product launches, such as the same Mr. Kipling signature brownie bar, the rollout of our proven branded growth model from the UK is now in full swing in Australia. And in Europe, another one of our target markets, we've expanded distribution of Charlotte in both Germany and the Netherlands in the course, which has helped drive total European sales up by over 30%. And that's all part of the European expansion plan that we've got for Charlotte. Another of our strategic growth pillars is taking the brand building capabilities that we've demonstrated in our core categories, where we've got strong leadership positions, and expanding into new categories in the UK. One of the early successes is Ambrosia porridge pots, which, as a reminder, is a convenient and ready-to-eat range of breakfast porridge. And these are, as I say, ready-to-eat, so they're not the dry product. They're made with creamy West Country milk, which, of course, you'd expect from Ambrosia. We're very pleased, indeed, with the progress we're making with this range. We've built critical mass now in breakfast, with Q1 sales more than doubling versus last year, and our market share continuing to build. Additionally, Cape Heron Spice, the southern style spices range, also increased sales by over 100% in the quarter, benefiting from increased raising and distribution, and also a strong barbecue season in June, given the hot weather. And then just as a reminder, our final strategic growth pillar is to look for inorganic opportunities, which we can bring into Premier and then deliver further growth by leveraging the strength of our branded growth model. And that was one of the key principles we applied when we assessed the fit of the Spice Tailor. And I'm pleased to say that the Spice Tailor is on track and is actually expected to be slightly ahead of our original acquisition model this year. We're securing expanded distribution both in the UK and overseas and also working on a number of major new product initiatives which will start to come to market over the next couple of years. Now, we continue to explore further in organic opportunities. However, we are quite picky, and we'll update you when we have anything more that we can share on that. So, if we now look ahead to the rest of the year, a couple of things to note. So, firstly, we expect to see our grocery revenue growth moderate as we progress through the next course of the year, and that's the effect of year-long year price increases that we see. And then for retreats, this will have a slightly different dynamic, which we expect to see a strengthening trend in the second half of the year. So I think that's how to think broadly about the revenue trend for the remainder of the year. So to summarise where we are, we had a really good start to the year. The sponsor, of course, continued that very positive momentum from the end of last year, and we continue to drive our proven brand of growth model, and our portfolio continues to demonstrate its relevance in this challenging environment. And another result And, of course, we continue to take market share. As we look forward to the rest of the year, we will, of course, bring further new products to market. We'll be increasing our brand investment as well as expanding our UK presence in new categories and continuing to build our overseas businesses. And so with this strong first quarter behind us and some great plans for our brands for the rest of the year, we now expect to deliver plenty of profit at the top end of market expectations. So thank you for your time. I'll now pass back to the operator and we'd be very happy to take any questions. Thank you.

Thank you. We will now enter our Q&A session. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind and would like to revoke your question, please press star followed by two on your telephone keypad. When getting ready to ask your question, please make sure that your device is unmuted locally. We'll now take our first question from Charles Hall from Hill Hunt. Charles, your line is now open. Please go ahead.

Well done on an excellent quarter. Could you just talk a little bit about the impact of the weather during the quarter? Because obviously it was pretty hot during the period. What did you see in terms of trends in volumes and the mention that they were picking up towards the end of the quarter? Is that just because the weather started to normalise? Or is that because with pricing now embedded, there's more promotional activity or potentially just use of the pricing levels?