Premier Foods plc

Hello and welcome everyone to the Premier Foods quarter one trading update analyst conference call. My name is Becky and I will be your operator today. All lines will be muted throughout the presentation portion of the call with the chance for Q&A at the end. If you wish to ask a question in this time, please press start followed by one on your telephone keypad. I will now hand over to our host Alex Whitehouse to begin. Please go ahead.

Thank you very much and good morning everyone. Thank you for joining this, which is our quarter one training update call and that comes 13 weeks to the 27th of June this year. As usual, I'm joined on the call this morning by Duncan Leggett, our CFO. I'll start by giving a few headlines on our training in the quarter and then we'll go into a few key areas to provide a bit more detail before as usual passing to you for questions, taking that one practice. and also as a reminder we're holding our AGM at 11 o'clock this morning which as usual we're hosting in our offices here in St Holden's so if any shareholders would like to attend and don't yet have the details please do contact Richard Cullen in Investor Relations for details of how to attend. So on to the quarter one results then. Firstly I am pleased to say that once again we've grown our branded sales ahead of the market that's up 4% and so further increased our market shares and this was led by a particularly strong performance by our branded fruit treats and with our biggest brand, Mr Kippering, delivering especially strong growth. Now overall our group sales increased by 2.7% and our UK branded sales increased by 3.8% and that was led by our strong innovation programme. So the strong branded growth is partly offset there by further right-sizing of our less profitable non-branded business. I'm pleased to say that we're on track at this early stage in the year and with our trading profit expectations for the year unchanged. I'll take you through some of the progress we've made in the first quarter but before I do that I just wanted to remind you of the branded growth model which is the core of what we do and is the reason why we've been able to deliver such consistent long performance over an extended period of time there. now firstly we're lucky to have a portfolio of really strong brands which are leaders in their categories and have got very high household penetration but then we spend a lot of time and effort talking to and listening very carefully to our consumers so that we can create and bring to market insightful new products which are based on common consumer needs and trends and which include things like premiumization and better for you options we don't support many of our brands with emotionally engaging advertising and impactful marketing campaigns to maintain that strong awareness of our brand and keeping contemporary and relevant. And then we also use digital channels to enhance our connection with younger audiences. And finally, but very importantly, we work closely with our key retail partners to deliver category growth and deliver excellent institutional execution for our brand. And it's this plan of growth model that underpins our five pillar growth strategy where we continue to make strong progress in all of the pillars and I'll come back to that shortly. So if we kick off with sweet treats first then well we've had another really great quarter here with branded sales up by 6.6% and that was led by Mr Kipling which has grown by another 9% this period and this trend means that our branded sweet treats have now grown on average by 8% for the last 11 quarters which is clearly a very consistent strong performance and a significant part of this growth has been driven by the quality of the innovation program which As I said, there's a major part of our brand of growth model and overall strategy. However, I can also point out that the underlying core product ranges also continue to perform very strongly as well. And we talked back in May about those sweet treats and product ranges which we launched relatively recently. And this quarter we've introduced further new products including birthday cake slices. which builds on the already successful birthday cake tarts and you might remember these birthday cake tarts were inspired by a trend that we've seen in the US for birthday templates of flavour and these are selling really very well indeed and so we've extended the idea into our cake slicers which is of course our best-selling cake formats and we've also launched a new range of Mr Kipling world including some modern flavours like custom cream which will appeal to younger consumers Now these new ranges add to the policy innovation we launched last year, particularly Mr Kipling's ton of cake lights, which are perfect for sharing or for those wishing to control portion size, and also the Mr Kipling breakfast banks. Now if we move on to the grocery business then, our grocery branded sales increased by 3% compared to last year, and similarly to the free treats business we launched a series of new products based on current consumer trends, and this includes an ambrosia of customers. in pouches and which are a convenient option the perfect for lunch boxes they contain just 100 calories a pouch and we also introduced Lloyd Grossman premium cooking source kits which is the same format as the five-step to a three-step kit to bring Italian restaurant quality meals into the home and we've also brought to market knitting tans and meals in a pot and these are a complete nutrition product range which are nutrient dense they contain over 20 grams of protein per pot and 26 essential vitamins and minerals and they can be particularly helpful for those using GLP-1s. In addition to those waters I've just outlined we also deliver very good growth from some ranges that we introduced last year and in particular I call out off-road bone broth and angel delight bubble jelly which were significant contributors to both sales and growth and Cher Games for those brands. Moving to the non-branded part of the business, in sweet treats non-branded sales increased by 5.3% due to some stronger volumes on ties and paths and a contract win for Case Grocers. At the moment we expect our non-branded sweet treats to now deliver modest growth across the year. Non-branded grocery sales were 2.5 million lower in the course and I've said before we continue to right side this part of the business and so have access to some further contracts which impact the shape of the numbers in the quarter. We do actually expect the trend in growth to improve as we go through the year. Now as I've said before, whilst these non-branded contracts can be a bit lumpy, our target over the museum term is for these parts of the business to be flat or possibly deliver some modest low single digit growth and timing wise I'd expect it to take place in sweet trees before grocery which is what we're now starting to see. As we look more widely at the other strategic pillars we've continued to make some encouraging progress and the next pillar is investment in our infrastructure and we haven't provided an update on this today as this is just a training update however we do remain on track to invest somewhere between 55 and 60 million in capex this year and by way of a reminder this part of our strategy enables us to drive improved efficiency and automation for our supply chain and enhancing our great margins which means we can reinvest back into brand new investments. Now moving into new categories, I'm pleased to say we've continued the momentum here with sales increasing 16% compared to last year, so further good progress, especially when set against last year's comparative when sales in those new categories grew by 38%. This course I'd call out Kate Herb and Spice as a particularly strong performer, which as I've mentioned before, has become an established presence in the market. It's great for bringing flavour to liven up a wide range of dishes, so poultry, fish, salads and ribs. and also across mid-week evening meals but also the barbecue season. This helps to reduce the seasonality and sensitivity of our grocery business. Growth from new categories also included full 10k yoghurt and granola which we launched last year and is in the chill wrap and this is a pot of protein enriched yoghurt with a lid containing some of our market leading full 10k granola which you sprinkle on top or which you can mix in. If now we move on to international, as I've said before our focus markets are Australasia, North America and EMEA and within these target markets we're commonly focused on Mr Kipling, Charles and the Spice Tailor but now also Shilpan K. And in the first quarter overseas sales at constant currency grew by 6% and then actually 7% on a reported basis. Now in the 15th rule at first then where we increased sales in double digits in the quarter It's been very pleasing to see the encouraging staff for the launch of Fuel 10K, where we're in Italy, the Netherlands, Germany and France. And the Netherlands is where we've achieved the most significant distribution, with both Vanilla and Povish parts ranges listed in Albert High, and we've supported the launch with some social media, and as I say, it's got to be an encouraging start. In North America, sales also grew in double digits. Canada saw increased sales of the Spice Tailor while in the US we saw very strong growth compared to last year due to the new distribution from Mr Kipling's Spices and Pies which took place in the second half last year as well as some more recent listings In Australia sales of the Spice Tailor grew over 20% as it benefited from a multi-channel marketing campaign which actually included TV advertising in addition to an immersive retail experience in one of Australia's largest shopping centres. And we do this because we know that once people try the Spice Tailor, they do really like it and they tend to come back and make it a regular purchase. So our focus is on increasing consumer awareness. And then in case, in Australia we saw sales stabilise as retailer stockholding levels began to normalise. and then just as a reminder our final strategic growth goal is to look for inorganic opportunities where we can deliver further growth by leveraging the strength of our branded growth model and then you know we're looking at acquiring future focused brands which have significant further future potential to scale up and deliver high growth for many years ahead and following that trend all three of the brands we've acquired since we stepped out on this strategy that's the Spice Tailor, True 10k and Merchant Lawrate they've all again grown sales in double digits this quarter which we're really very pleased with and Merkin Gourmet enjoys widespread growth across all its range especially from some of its new launches including the new gourmet baked beans and Shulton K also continues to progress very strongly as well and we've mentioned before that we have the number one granola products in the UK market with our flagship chocolate granola but that continues to be the case and in fact we've strengthened that further and take a more market share in the granola category. So another very strong performance from the brand. And then in terms of the spice tailor, the core Indian kit range performed particularly strongly and the brand also then growing failed in the tea percentages in quarter one. 2024 will continue to explore further inorganic opportunities and where we believe we can add value by applying our brand of growth model. and we're looking for high growth future focused brands and of course we do now have some greater flexibility in terms of the size of opportunities we can consider given the size of our balance sheet however and also as we've said before we are quite picky and we'll update you once we've got anything more we can share on that. So in summary we're on track and our trading profit expectations for the financial year are unchanged. and it's particularly pleasing to see the good progress across the pillars of the growth strategy and in particular the roles that our recently acquired brands are playing in accelerating overall group growth. As we look forward to the rest of the year we'll continue to drive performance across all of those five pillars of our strategy and to leverage the strength of our brand and growth model. As usual of course we'll be continuing to support our brands as well as bringing a number of new products to market in the UK. and also building our brands overseas. And over the medium term, we expect to continue to build the business by making strong progress against that five pillar strategic growth strategy. So look, thank you very much again for your time today. I'll now pass back to the operator and we'd be very happy to take any questions.

Thank you. If you wish to ask a question, please press start followed by one on your telephone keypad now. If your question has been answered, or for any reason you would like to remove yourself from the queue, please press Start followed by T. When preparing to ask your question, please ensure your device is unmuted locally. Our first question comes from Charles Hall from Pill Hunt. Your line is now open. Please go ahead.