Premier Foods plc

Hello, everyone, and thank you for joining the Premier Foods Q3 Trading Update. My name is Lucy, and I'll 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. It is now my pleasure to hand over to CEO Alex Whitehouse to begin. Please go ahead.

Thank you very much, and good morning, everyone. Thanks for joining this, which is our Q3 Trading Update call. And that covers the 13 weeks up to the 27th of December last year. I'm also joined on the call this morning by Duncan Leggett, who's our Chief Finance Officer. I'll give a quick overview of our Q3 trading, and then we'll open the call for questions. So as always, the third quarter of our financial year is our biggest and therefore our most important quarter of the year. And I'm very pleased to say that we've had a really strong Christmas as the momentum from our brands accelerated into the third quarter, so building quickly. on the numbers we delivered in quarter two. In fact, our branded revenue grew by 5.2% in the quarter compared to last year, and we also made further good progress against all five of our strategic pillars. So given that strong performance in our key quarter, today we're raising our profit expectations for this financial year. If we now look at a few of the other headlines, total group sales increased by 4.1%, which as I mentioned just now represents and acceleration on the sales reported in quarter one and quarter two. Also very pleasing is that we have a grain-grown market share, both in grocery and sweet treats in the UK, where overall share went up by 22 basis points, and where we also gained share in Australia as well. And this demonstrates that we continue to drive branded growth ahead of our markets, and this builds on the strong track record that we've delivered over a number of years now. And of course, that strong brand performance continues to be underpinned by what we call our branded growth model, leveraging our great market-leading brands and driving growth by bringing highly relevant new product innovation to market based on our in-depth understanding of consumer needs and trends. We also support our brands with engaging and meaningful advertising and marketing campaigns that keep the brands relevant, and top of mind for consumers. And that's something that we're actively evolving right now, targeting younger consumers as they start to cook for themselves. And then we deliver excellent in-store 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. And if you were out in stores on the run up to Christmas, I've no doubt you would have seen several of those impactful product displays that we had out in store across our customers. And as I've said before, our brand building model is actually very similar to many of the large-cap multinational branded food or FMCG businesses. In fact, we see ourselves as just a much smaller version of those multinationals. The main difference, of course, is that whilst we've got significant scale here in the UK, we're still in the early stages of our international expansion. And I'd also argue that our spies and culture make us more agile and so quicker to respond to consumer needs. at the heart of this model is our strong portfolio of brands which offer our consumers both quality and value for money one thing we know is that when consumers are feeling financial pressure many of them turn to our brands to make tasty affordable family meals and if you think about it this makes perfect sense as obviously we all need to eat and the most cost effective way to do that is to cook for yourself at home rather than eating out or getting a takeaway so which arguably means that we're insulated from the fluctuations of the economic cycle. As we've said many times before, brand investment is very important to our branded growth model. We said back in November at the interims that we were planning to spend more on brand investment in the second half of this year than we did last year, and that's certainly been the case in quarter three, and we've got plans in place to do the same for the fourth quarter as well. For example, in quarter three, in addition to our usual strong support for the larger brands like Bisto and Mr. Kipling, this year Paxo benefited from some advertising, and actually it was the first time in around 20 years supporting the brand, and it's the most important time of year in the run-up to Christmas. And this financial year, we've had a particularly strong product innovation program, and that's across all our categories, and quarter three really benefited from the addition of these new ranges delivering significant incremental sales growth. And as always, as I've said before, these are all based on our in-depth consumer understanding. And I'll come back to some specific examples shortly. But overall, this is really one of the most comprehensive programs we've put together in recent years, and the benefits will continue into this quarter and, in fact, beyond. Now, one of the increasingly consistent trends we've seen over the last year or so is consumers trading up into our premium ranges. So the premium indulgence consumer trend is the one that we've been working on for some time with ranges such as Ambrosia Deluxe, the Spice Taylor brand, and Mr. Kipling's signature mince pies. And all of these ranges outperformed their respective categories in the quarter. And actually, when it comes to those signature mince pies, I think I've probably got to confess that I contributed to a fair amount of the growth personally. So let's take a look at how our grocery business did in the quarter. Grocery branded sales increased by 5.8% and with total sales of 4.6%. Now, I've already mentioned that we had a wide range of really good products which we've launched into market over the last quarter or so. And so, for example, OXO enjoyed a particularly good period of training as it benefited from new product launches including Bone Broth, which has proven to be very successful. And also a ready-to-use stock, which as the name suggests, comes ready to use in a liquid form so you don't have to make it up. And additionally, Bisto sales also grew, helped by a new premium ready-to-use gravy product. And while from Paxo, we launched stuffing kits, which were shaped like a Christmas wreath. Our desserts range has also enjoyed a strong quarter. Ambrosia fails increased partially due to continued growth of its premium deluxe range. And Angel Delight benefited from recently launched pots of bubble jelly, which are based on the bubble tea idea. Sales of the Nissin brand, the grain grew in double digits, and that was led by Demo Ramen noodles. And we also launched a new Soba protein pots in the quarter. So these are pots of instant high protein noodles aligned to the trend for consumers seeking increased protein in their diets. And Bassel has also increased sales, helped by the addition of a range of pasta and sauce in convenient microwavable pouches. In grocery non-branded sales, were down 7.5%, and that's as we made conscious decisions to exit a couple of contracts on stuffing and custard. So turning to sweet treats then, branded sales increased by 3.1% in the quarter, and with the strong performance that it's delivered so far this year, sales to date are up 6.9%, which we're obviously very pleased with. And within this, both Mr Kipling and Cadbury Cake have reported sales growth, And like the first half of the year, we again grew faster than the market. So taking further market share as we continue to drive our branded growth model. And Mr. Kipling had a very good Christmas. We sold 19% more of those premium Mr. Kipling signature mince pies as we further increased retailer distribution. And we also introduced a two-pack version. And as I mentioned earlier, we've definitely seen consumers trading up and spending just a little bit extra to treat themselves. Also driving the Mr. Kipling growth is its extensive innovation program and very much a continuation from half one. So the breakfast breaks range continued to contribute to the sales growth. However, the star performer here is now the cake bites pubs range, which I mentioned back in November. So this is a range of bite-sized pieces of cake that come in tubs, which are handy for sharing with family and friends. Capri Cake also had a very good period of growth. and was supported by a good performance from its core Mini Rolls range, boosted by new Cadbury Caramel Mini Rolls, which we launched in the first half of the year. And then just a brief word on the non-branded side of the business. So non-branded sweet treats increased sales by 2% compared to last year, following contract wins on parts and also some seasonal lines. And so now moving on to our strategic pillar of extending our brands into new categories. So we've had some really notable successes here since we embarked on this strategy. And this quarter was no exception as we increased sales by another 29%. And you might recall this is on top of an increase of 38% last year. So some really strong compounding progress taking place here. And the growth was led by the emerging success of Fuel 10K yogurt and granola range, which, as you may recall, is our first real foray into the chilled part of the store. And the range comes in three flavor variants. And we're looking now to build further retailer distribution during 2026. Also driving new category performance was Cape Herbs and Spice, which has gained further distribution this year and continues to go from strength to strength with wide distribution now across all the major retailers. Now, moving to the brands we've acquired over the last couple of years, and we continue to be really pleased with the progress that these have all made. With all three brands, the Spice Tailor, Fuel 10K, and our most recent acquisition, Merchant Gourmet, all growing sales in double digits in the quarter. So this year, the Spice Tailor has launched another set of new product ranges as we continue to leverage the strength of the brand. And this year, that's included a larger size pack that's suitable for families and an expansion of the Thai range with Pad Thai noodles and sauce. Moving over to Fuel 10K, the momentum of the core granola range continued through the quarter and was a strong contributor to the overall growth. And we also recently launched a convenient ready-to-eat porridge pot. And this is essentially the same format as our successful Ambrosia porridge pots. But, of course, the Fuel 10K version is high in protein. And both are made at our Lyft and Ambrosia cream room. And, of course, as I just mentioned, there's the new Fuel 10K yogurt and granola, which is also proving very popular with consumers, having been in market for a couple of quarters now. Merchant Gourmet's had a really strong start in its first full quarter of our ownership. The brand delivered very strong results. It benefited from increased in-store displays for its chestnut range in the run-up to Christmas, leveraging the strength, actually, of the Premier Foods merchandising team. And additionally, the new product range is launched this year, such as the Meals in Minutes range, which includes things like super grain bowls and bean and lentil chilli, performed very strongly. And then finally, looking at our international business, We resumed double-digit sales growth in the quarter, with revenue up 10% compared to the same period last year. And as a reminder, the main brands that are our strategic focus for us overseas are Mr Kipling, Sharwoods, the Spice Tailor, and increasingly, actually, Fuel 10K. And in time, this may well also include Merchant Gourmet. That's something that we're currently looking at. In Australia, our cake business yet again reported very good in-market performance, building on the performance in half one. So in the quarter, this delivered strong turnover growth now that the level of stock in market is stable. Mr Kipling was again a key driver of growth, and that was due to the strength of our core cake slicers range. And yet again, we delivered further market share gains. And as we look forward into the fourth quarter, we also have some new listings landing in New Zealand across both the core Mr Kipling and Cadbury cake ranges. Remaining in Australasia, the Spice Tailor benefited from the introduction of that large size pack. And as in the UK, this is in addition to the standard size pack, it's aimed at families looking to create that restaurant quality meal at home. And of course, Sharwood's product range also grew sales in the quarter. Moving briefly on to North America. In the U.S., it's early days, but the launch of Mr. Kipling apple pies has been going very well in Kroger, which is obviously encouraging, and while the core slicers range also made some further distribution gains. You might also recall that we've recently accentuated the Britishness of Mr. Kipling cakes on the packs for the U.S. market, which seems to be resonating well with the U.S. consumer. So with all that, Mr. Kipling was up quite strongly in the quarter. In Canada, Mr. Kipling slicers continued to perform well, And that's in Walmart and now with a confirmed listing of apple pies as well. And then finally on to EMEA. We've just landed some significant new distribution of Fuel 10K in Europe. And by the end of quarter four, our best selling granolas will be also available in Germany, the Netherlands, Portugal and Italy. So that's a run through of some of the key highlights in quarter three. As we look ahead to quarter four, and as you would expect, we've got strong plans in place, including further new product launches, increased advertising support for our brands year on year, and continued impactful execution lined up for in-store. So to wrap up then, look, we've had a really good Christmas with strong growth for both our grocery and treats businesses, driven by that lineup of new products and some great execution of our brands in-store. We've taken further market share in both our grocery and sweet treats businesses in the UK and also in Australia. Premium ranges have continued to go well and are growing ahead of our core ranges as consumers trade up and treat themselves. And importantly, we've continued to deliver against all the pillars in our five pillar growth strategy, with sales from new categories up 29% on international business resuming double digit growth, and the spice dealer, Fuel 10K, and our most recent acquired brand, The Merchant Gourmet, all increasing sales in double digits with actually much more to come. Now, one point that I'd like to leave you with today, and it's a really fundamental one. So we've got a broad portfolio of market-leading brands with high household penetration, and these brands offer great options for consumers to prepare and eat affordable, delicious meals at home, which means that we're pretty insulated from fluctuations through the economic cycle. Because in good times, consumers trade up from label into our brands, while in tougher times, consumers might trade down from eating out or eating takeaways to cooking at home. So with this great portfolio of brands and our strong track record, we're therefore very confident of delivering on our medium term aspirations. And so as I mentioned right at the start, given that strong brand of performance in our key quarter, we're now guiding trading profits for this financial year to the upper end of expectations. So I'd say we're in good shape for the rest of this financial year and, in fact, beyond. And with that, I'd like to thank everyone for your time. I'll stop there and pass back to the operator, and Duncan and I will be very happy to take the questions. Thank you.

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