for 52 weeks ended 1 April 2017 16 May 2017 A SUMMARY OF FY16/17 A - PowerPoint PPT Presentation

Preliminary results for 52 weeks ended 1 April 2017 16 May 2017

A SUMMARY OF FY16/17 A challenging year with a number of rapidly changing external factors Headlines External environment £117m Inflation (1.4%) Deflation (9.3%) Full year sales Trading profit £300- Low growth £523m environment £320m Net debt Pensions NPV 2

Alastair Murray Chief Financial Officer 3

GROUP HEADLINE RESULTS Second and third quarter results impacted by external factors £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 659 683 (3.5%) (2.9%) Non-branded sales 131 118 +11.1% 12.3% Total sales 790 801 (1.4%) (1.0%) Divisional contribution 150 165 (9.4%) Group & corporate costs (33) (36) 9.6% Trading profit 117 129 (9.3%) Trading profit % 14.8% 16.1% (1.3ppt) EBITDA 133 147 (9.1%) EBITDA % 16.9% 18.3% (1.4ppt)  Branded sales and margins lower due to time lag in input cost inflation recovery and lower Grocery category volumes in H2  Non-branded sales ahead in both Grocery and Sweet Treats businesses due to recovery in Knighton Foods B2B volumes and new cake contracts  Group & corporate costs lower due to reduction in management incentive payments  Overall performance consistent with Quarter 3 update in January 2017 4

GROCERY External environment impacted FY16/17 performance £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 482 505 (4.5%) (2.9%) Non-branded sales 81 73 10.7% 11.8% Total sales 563 578 (2.6%) (1.0%) Divisional contribution 130 140 (7.3%) Divisional contribution % 23.1% 24.2% (1.1ppt)  Lower sales in H2 due to changing retailer promotional strategies  Quarter two branded sales volumes impacted by warmer weather  Non-branded sales higher due to increased B2B Knighton Foods volumes  Divisional contribution £10m lower International sales increased 18% and grew for 10 th successive quarter in Quarter 4  5

SWEET TREATS Good Cadbury & Non-branded performance £m FY16/17 FY15/16 Change (%) Q4 Change (%) Branded sales 177 178 (0.5%) (2.8%) Non-branded sales 50 45 11.6% 14.6% Total sales 227 223 1.9% (0.7%) Divisional contribution 20 25 (20.8%) Divisional contribution % 8.7% 11.2% (2.5ppt)  Strong Cadbury cake performance with volumes, sales and market share all ahead  Mr Kipling weaker due to lower levels of promotional activity; strong NPD plan for FY17/18  Non-branded increased sales due to a number of contract wins across range of customers in seasonal and core product ranges 6

GROUP TRADING PROFIT BRIDGE Trading performance impacted by external factors £m 140 129 117 120 100 80 Trading profit Cost inflation time H2 Retailer promo Q2 Grocery Mix Marketing SG&A & Trading profit FY15/16 lag strategies category declines Efficiencies FY16/17  Increased input cost inflation and time lag in concluding mitigating actions  Changing retailer promotional strategies expected to stabilise in FY17/18 H2  Grocery categories experienced volume declines in Q2 due to warmer weather  Manufacturing efficiencies from enhanced labour flexibility plus SG&A benefits 7

OPERATING PROFIT Increased £7m to £62m £m FY16/17 FY15/16 Continuing operations Trading profit 117 129 Amortisation of intangible assets (38) (38) Foreign exchange fair value movements (1) 3 Restructuring costs (16) (11) Net interest on pension and administration costs (0) (15) Impairment - (13) Operating profit 62 55  Amortisation of intangibles in line with prior year and expectations  Restructuring costs associated with corporate activity costs in H1 and Logistics and SG&A change programmes  Net interest on pensions lower in FY16/17 due to opening balance combined surplus  Prior year impairment due to write down of associate investments 8

ADJUSTED EARNINGS PER SHARE Adjusted eps 7.2p £m FY16/17 FY15/16 Change (%) Trading profit 117 129 (9.3%) Net regular interest (43) (45) 4.7% Adjusted PBT 74 84 (11.8%) Notional tax @ 20.0% (15) (17) (11.8%) Adjusted earnings 59 67 (11.8%) Weighted average shares in issue (million) 830.1 826.0 0.5% Adjusted earnings per share (pence) 7.2p 8.1p (12.2%)  Net regular interest lower due to lower average debt levels  Tax rate unchanged at 20.0% 9

NET DEBT £11m LOWER AT £523m Strong cash flow conversion before servicing obligations £m 600 550 534 117 523 14 5 40 500 21 52 450 16 400 350 Net debt Trading profit Depreciation Pensions Capex Interest Working capital / Restructuring Net debt FY15/16 Other FY16/17  Pension cash costs to be £11-£13m lower in FY17/18  Capex expected to be similar in FY17/18  Restructuring due to SG&A overhead cost reductions and corporate activity costs the majority of which were in H1 10

PENSION DEFICIT CONTRIBUTION SCHEDULE CHANGES Cash payments to schemes reduced by £32m over next three years £m 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 New plan 35 35 37 38 38 38 Deficit contributions 4-6 4-6 4-6 6-8 6-8 6-8 Administration costs 39-41 39-41 41-43 44-46 44-46 44-46 Total Previous plan 49 44 40 33 33 35 Deficit contributions 6-8 6-8 6-8 6-8 6-8 6-8 Administration costs 55-57 50-52 46-48 39-41 39-41 41-43 Total Reduction/(Increase) 1 16 11 5 (5) (5) (3)  Net present value of pension deficit recovery schedule reduced by £100m to £300-£320m over last 12 months  No contributions to RHM schemes in current schedule reflecting fully funded status  Subject to mechanism of limited further cash contributions if the Group outperforms certain targets 1 – Assumes mid-point of reduction in payments when comparing new and previous plan (per November 2016) 11

TRIENNIAL PENSIONS VALUATION £641m reduction in funding deficit confirmed Surplus/(Deficit) £m April 2016 April 2013 Change Change (%) RHM 135 (504) 639 - Premier Foods (551) (538) (13) (2.4%) Ireland (5) (20) 15 75.0% Total schemes (421) (1,062) 641 60.4%  Strong performance in RHM portfolio benefitting from a successful hedging strategy and investment performance 12

COMBINED PENSION SCHEMES – ACCOUNTING BASIS Accounting surplus £105m; NPV of recovery schedule now £300-£320m 1 April 2017 2 April 2016 IAS19 Accounting valuation Premier Premier (£m) RHM Combined RHM Combined Foods Foods Assets 4,191 674 4,865 3,759 584 4,343 Liabilities (3,597) (1,163) (4,760) (3,208) (1,004) (4,212) Surplus/(Deficit) 594 (489) 105 551 (420) 131 Surplus/(Deficit) net of deferred tax 493 (406) 87 452 (344) 107 (Tax @ 17.0%/18.0%) Discount rate 2.65% 2.65% 2.65% 3.55% 3.55% 3.55% Inflation rate (RPI) 3.30% 3.30% 3.30% 3.00% 3.00% 3.00%  Net present value of pension deficit recovery schedule reduced by £100m to £300-£320m over last 12 months  RHM scheme remains in surplus reflecting hedging instruments in place  Revised pension scheme cash contributions agreed in March 2017 13

PENSION SCHEMES VALUATION EVOLUTION RHM scheme displays progression over last two years £m 800 594 600 RHM Premier Foods 400  RHM scheme now in 200 surplus for over 2 years  Premier Foods deficit 0 remains in £400-£500m (200) range (400) (489) (600) (800) Dec 2013 Apr 2017 14

FY17/18 CASH GUIDANCE FY17/18 guidance £m Working capital Slightly negative Depreciation £16-£18m Capital expenditure £20-£22m Interest – cash £40-£43m Interest – P&L £45-£48m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £35m Pension administrative & PPF levy cash costs £4-£6m Restructuring costs £8-£10m  Pension cash costs reflect revised payment schedule  Cash tax expected to be nil in medium term 15

PROPOSED CAPITAL STRUCTURE UPDATE £210m Floating rate notes issuance and RCF extended to December 2020 Current debt maturity profile Pro forma debt maturity profile 325 350 350 325 300 300 272 250 250 210 184 200 175 200 150 150 100 100 50 50 33 0 0 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 RCF committed Floating Notes Fixed Notes RCF committed Floating Notes Fixed Notes  Premier Foods expects to have appropriate liquidity and a comfortable maturity profile post the refinancing with the first maturity in 2019  Total committed facilities of £217m pro forma for the refinancing 16

Gavin Darby Chief Executive Officer Strategy update 17

AN INDUSTRY UNDERGOING RAPID CHANGES A return to inflation and changing retailer promotional strategies Retailer promotional strategies Deflation → Inflation Over 2 years of food deflation Move away from multi-buy deals drives has rapidly reversed higher price investment +2.3% 1 Inflation/Deflation £27m 24% Lower category Reduction in sales from multi-buys 2 multi-buys 2 Jan 2014 Mar 2017 1 - Kantar Worldpanel 12 weeks ended 26 March 2017, UK Grocery inflation; 2 – In Premier Foods’ categories 18