Premier Foods plc

Hello, everyone, and thank you for joining the Premier Foods Q3 Trading Update Analyst Call. My name is Marie, and I will be coordinating your call today. During the presentation, you can register a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Alex Whitehouse, CEO, to begin. Please go ahead.

Thank you and good morning everyone. Thank you for joining this, our quarter three trading update call. That covers the 13 weeks through the 28th of December last year. I'm also joined on the call this morning by Duncan Leggett, our Chief Finance Officer. So I'll give an overview of our third quarter trading before we open the call up to your questions as usual. As you all know, quarter three is our most important quarter of the year. And so I'm pleased to say that we continue to deliver and that takes our year-to-date position to plus 5.9%. This branded revenue growth has been very much volume-led across our brand portfolio, and so, as you might remember, continues the trend we saw in the first half of the year. With this volume-led branded growth in our key third quarter behind us, we're now very pleased to be able to raise our expectations for trading profit for this financial year. Looking at a couple of other headlines, Group sales increased by 3.1% on a constant currency basis, which means that after the first three quarters, group sales are now ahead by 4%. You may recall that that's against a fairly strong comparative. At this point last year, our Q3 year-to-date sales were up 17.1%. So we relaxed this strong comparative. This further strong growth demonstrates the strength and continued relevance of our portfolio of brands. Of course, that strong brand performance continues to be underpinned by our branded growth strategy, leveraging our great market-leading brands and driving growth by bringing highly relevant new products innovation to market. And that's based on our in-depth understanding of consumer needs and trends. And we also support our major brands in engaging in meaningful advertising and marketing campaigns. And that keeps the brands relevant and top of mind for consumers. And then we deliver excellent input execution for our strong retail partnerships. And whilst this is always important, it's especially so in quarter three, which as we know is our key quarter in terms of sales. Now, as I've said before, our brand building model is actually very similar to some large-cap multinational branded food businesses. In fact, we see ourselves as just a much smaller version of one of these multinationals. The main difference, of course, is that we're still in the early stages of our international expansions. And I'd argue that our size and culture make us more agile and so quicker to respond to consumer needs. As I've said many times, brand investment is really important to our brand growth model. And we invest strongly behind our brands in our first quarter. And this year was no exception. So, Ambravia, Bisto, Bachelors, Oxay, Charlotte and Mr. Kisling, they all benefited from advertising support in the run-up to Christmas, demonstrating continued commitment to building strong brands for the long term. In terms of product innovation, we again introduced a number of new products, and that's based on our in-depth consumer understanding. And again, these have helped deliver incremental sales, and they include things like the Spice Bailer, expanding into a broader range of East Asian cooking sauce kits, and Fuel 10K, expanding into the broader cereal market with multigrain flakes, and Louis Graceman with both toaster and mascarpone sauce, and expanding into Pepto, to name just a few of the things we do. Now, one of the key trends we've been seeing during this third quarter is consumers trading up and treating themselves over Christmas, and therefore our premium ranges, including Ambrosia Deluxe Desserts, Bisto Best Gravy, and Mr Kittle's signature Brownie Bites, have grown strongly in quarter three. In fact, this continues the trend that we've seen from the first half of the year, and has been an important driver of our growth in the quarter. At the start of this year, we said that we expected to see a return to volume growth this year, and that's following the price-less sales growth last year, when, of course, we were recovering import cost inflation. Well, you'll remember that we delivered significant volume growth in half-month of this year, and this has continued into quarter three, with branded volumes of 7% in the quarter. Once again, we also grew our overall market share, and our volume share gains have been ahead of value share gains which again is a continuation of the shape that we delivered in half one. So if we now turn to look at our grocery business, our sales increased by 2.2%, very much led by our brands, which were up 3.5%. Now I've already mentioned that Ambrosia Deluxe and Bistro Best Gravy had a good quarter, and we also had a number of very good performances across the rest of the grocery portfolio. Low grossman sales grew very well, supported by those new products, so tomato and mascarpone sauce and pesto, both of which we launched in the first half of the year. This in soba and cup noodles again grew strongly, double digits, and in fact in the first three quarters of the year it's now surpassed OXO in terms of revenue as a result of its phenomenal consistent growth in recent years. And this can continue to play both volume and value share, demonstrating its very strong appeal to the UK consumer. It's also been bolstered this year by the addition of the authentic Demi Ramen noodle range, As you know, one of our strategic pillars is to extend our brand into new categories. And sales in those new categories took another step up, increasing 38% and against a very strong quarter this time last year. Now, yet again, Ambrosia porridge pots led the way, and we're very pleased to achieve more distribution this quarter. And we again advertise them on TV. And such has been the success of these porridge pots. We're now just launching to market our fifth flavour, which is sweet cinnamon, which has just gone into stores. Again, all the variants are ready to eat, deliciously creamy and yet low in fat. Also driving the new category's performance was cake, herb and spice, which is going from trend to trend, with sales more than tripling versus last year. The brand now has got very wide distribution, it's available in all the major multiple retailers, and the best-selling stew is Texan Steakhouse, but also the new fruit, lemon and herb, which is actually the third bestseller in the course. Now moving to the brands that we've acquired over the last couple of years, we're really pleased with the progress that these have made with both the Spice Tailor and Fuel 10K growing sales in double digits in the quarter. The Spice Tailor continues to perform very well both at home and overseas and we continue to leverage our innovation capabilities applying them to a lot of the potential of this great authentic brand. This course has benefited from the extension into Chinese and into East Asian source kits with flavours like Spicy Kung Pao and Japanese Teriyaki, both of which helped deliver that double-digit growth. Moving to Fuel 10K. The more time we spend in this ground, the more we're encouraged about its potential, both in the UK and stretching the brand beyond its breakfast heartland, but also the potential opportunity for expansion into overseas markets. This quarter, Fuel 10K's core granola range again grew very strongly. and while the recently launched 25 gram ultimate protein drink also continues for the growth. We've also recently moved into the mainstream big box breakfast cereal part of the category, where we launched multigrain flakes in the course, and we've just introduced multigrain hoops as well. And they've got 50% less sugar than others in the market, and they're high in protein and fibre, so perfect for those looking for a healthy breakfast option. Turning to Street 3, sales increased by 5.5% in the quarter, and within this, the brandless side of the business delivered very strong volume-led growth, with revenue up 8.9% and volumes up 10%, which we're obviously very pleased with. Both Mr Kipling and Cadbury Cake were fairly equal contributors to the shape of the growth in the quarter, and they basically were ahead of the market. Non-branded sales were in line with last year. Mr Kipling had a strong Christmas. We sold 20% more Mr Kipling branded mince pies. And within this, we more than doubled sales of our premium signature mince pies. As I mentioned earlier, we've definitely seen consumers trading up over the last couple of quarters. And this includes into our signature brownie bites. We've had another strong quarter following the excellent roast delivered in half one. Cadbury Cake also had a very good period of growth and you may have seen in our statement this morning that we've recently extended the licence we hold with Mongole for manufacture, sell and distribute Cadbury Cake through to 2028. A brief word on the non-branded side of the business then. I mentioned that three three non-branded sales were in line with last year and over the medium term that would be our expectations, although the nature of this part of the business is such that it might be a bit lumpy from year to year, but over the medium to long term it should be broadly flat. In grocery, non-branded sales were 9.3% lower, largely due to some contract exits, but we're also seeing some evidence of consumers continuing to trade up into our brands from private labels. Now looking at our international businesses, these made and some further very good progress in the quarter, with overall sales up 29% and double-digit growth in all our target regions. And as a reminder, our three key brands, which are a strategic focus for us overseas, are Mr Kipling, Charlotte, and the Spice Tailor. And as I alluded to at the interim, we're also now seeing an increased opportunity for True 10K to expand overseas as well. So in Australia, Mr. Kipling was again a key provider of growth. This was down to the strength of our core case slices range and some new flavors of bakewell sauce. We also expanded our brand investment in Mr. Kipling to a third region in Australia with a five-month campaign using our little fee factors. But additionally, as we start to expand in Australia beyond cake and Indian cooking sources, we've now got an early presence in the gravy category where we've launched a number of Paxo brands which is also an encouraging start and performed pretty well in the quarter. As we've said before, sometimes the quarterly sales profiles are taking up very little fluctuate a little. As far as Q3 is concerned, some of the kipping gauges chipped a little earlier than we expected. They've landed in quarter three rather than quarter four. So quarter four sales growth in Australia may turn out to be a bit lighter than we saw in Q3. But the key thing is that we perform well in market and that absolutely continues to be the case. In North America, the Spice Tailor grew strongly due to increased distribution in Vestro and Sobeys in Canada, firmly establishing the brand in market and also supported this quarter by Duvalier seasonal activity. And in the US, we're now in market with our first customer with the Spice Tailor, where we're seeing some promising early results. And then finally in EMEA, Sharwoods was a standout performer as we delivered increased distribution in Germany, Belgium, Spain and in Portugal. So that's a run for some of the key highlights in Q3. As we look ahead to Q4, as you'd expect, we've got strong plans in place, including further new product launches, advertising support for our brands, and impactful execution lined up for in-store. And as we referred to in the statement this morning, we're expecting the level of volume growth to moderate during the fourth quarter as we lap more of those promotional price changes that we made last year. And certainly as we go into next year, we expect sales growth to be much more balanced between the blend of volume growth and the price. So to wrap up then, we've had a very good Christmas, characterised by strong volume-less branded sales growth in both grocery and three trees, with a clear trend of consumers trading up to premium ranges. And we've also paid some further market share, and we've continued to live on all the pillars of our five-colour growth strategy, with sales from new categories up 38%, our international business up 29%, and double-digit growth in all our target regions. And then Spice, Taylor & Fields NK continue to grow very strongly as we apply our growth model to those acquired brands. And as I mentioned right at the start, given that strong brand of performance in our key quarter, we're now diving to the upper end of expectations for this financial year. I can also tell you that quarter four started well, and I think we're in good shape for the rest of this financial year and, in fact, beyond. And so with that, I'd like to thank everyone for your time this morning. I'll stop there and pass it back to the operator, and Duncan and I will be more than happy to take your questions. Thank you.

Thank you, Alex. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your device is unmuted locally. We will allow for a momentary pause for you to register your questions. Our first question is from Charles Hall of Fuel Hunt. Please go ahead.