REG - Premier Foods plc Premier Foods Fin - Preliminary Results
18/05/2022 07:00
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RNS Number : 8577L Premier Foods plc 18 May 2022
18 May 2022
Premier Foods plc (the "Group" or the "Company")
Preliminary results for the 52 weeks ended 2 April 2022
Trading profit and adjusted PBT ahead of expectations; further market share
gains;
£60m reduction in pension contributions NPV to £240-£260m
Headlines
· Trading profit, Adjusted PBT and earnings per share ahead of
previously raised expectations(11), dividend up +20%
· Strong branded growth driving volume and value market share
gains in both Grocery and Sweet Treats
· Successfully navigating macro and industry wide supply chain
challenges and continued inflationary environment
· Trading profit margin increased 60 basis points to 16.5%,
leveraging operational efficiencies
· International revenue up +25%(8) vs two years ago; strong
growth on Sharwood's and Mr Kipling
· Interest costs(5) halved in last two years, reflecting
strength of strategic progress and debt refinancing
· Pensions merger now delivering through c.£60m reduction in
NPV of cash contributions
· New ESG strategy, the 'Enriching Life Plan', announced with a
series of major sustainability commitments
· Expectations for further good progress in FY22/23 unchanged
Headline results FY21/22 FY20/21* Change vs 1yr ago Change vs 2yrs ago
(52 weeks) (52 weeks)
Revenue (£m) 900.5 934.2 (3.6%) +6.3%
Trading profit(1) (£m) 148.3 148.3 +0.0% +11.9%
Adjusted profit before taxation(4) (£m) 128.5 115.3 +11.4% +37.6%
Adjusted earnings per share(7) (pence) 12.1 11.0 +10.5% +35.7%
Net debt(9)/adjusted EBITDA(3) 1.7 2.0
Statutory measures FY21/22 FY20/21* Change vs 1yr ago Change vs 2yrs ago
(52 weeks) (53 weeks)
Revenue (£m) 900.5 947.0 (4.9%) +6.3%
Operating profit (£m) 131.1 152.6 (14.1%) +37.6%
Profit before taxation (£m) 102.6 122.8 (16.4%) +91.4%
Basic earnings per share (pence) 9.0 12.5 (28.0%) +63.6%
Net debt(9) (£m) (285.0) (332.7) 14.3% lower 33.7% lower
Dividend per share (pence) 1.2 1.0 20.0% N/A
Non-GAAP measures above are defined and reconciled to statutory measures
throughout
* FY21/22 and FY19/20 were 52 week years, FY20/21 was a 53 week year, a
reconciliation between 53 week and 52 week measure for FY20/21 and the
financials for FY19/20 are provided in the appendices
Financial headlines
Compared to 2 years ago
· Group revenue up +6.3%, Branded revenue(12) up +9.7% reflecting strength of
branded growth model
· Trading profit increased +11.9%
· Adjusted profit before tax £128.5m, up +37.6% due to trading performance and
significant interest cost savings
· Adjusted earnings per share increased by +35.7% to 12.1p
Compared to 1 year ago
· Group revenue on 53 week basis (4.9%) decline due to lapping effect of
exceptional pandemic related volumes
· Statutory profit before tax £20.2m lower reflecting £33.6m Hovis disposal
gain in prior year
· Adjusted profit before tax on 52 week basis up +11.4% due to reduced interest
costs
· Dividend proposed of 1.2p, 20% increase on prior year
· Net debt reduced by £47.7m to £285.0m and Net debt/adjusted EBITDA(3)
leverage down to 1.7x
· Premier Foods' pension scheme IAS19 deficit nearly halved to £193.9m
Alex Whitehouse, Chief Executive Officer
"In January, we increased our full year profit guidance(11), and so it's
particularly pleasing that we have exceeded those increased expectations with
Trading profit up 11.9% and adjusted PBT up 37.6% compared to two years ago.
Yet again, our brands have grown faster than their categories, with revenues
increasing nearly 10% vs two years ago as they gained volume and value market
share in Grocery and Sweet Treats both instore and online. Mr Kipling enjoyed
its best year ever, benefitting from sustained levels of marketing investment
and a series of new product launches."
"As we look to expand beyond our core UK business, we have made great initial
progress leveraging the strength of our leading brands by entering a number of
adjacent new categories. Overseas, our International business grew by 25%(8)
compared to two years ago with particularly strong growth in Ireland and
Australia driven by our priority international brands Sharwood's and Mr
Kipling."
"Over the last two years, we have completely transformed our financial
position with our leverage now down to 1.7x, our interest costs halved, and
dividend payments recommenced after thirteen years. Today, we have announced a
£60m reduction in the NPV of future pension payments, representing the first
important deliverable from the pensions merger we announced two years ago."
"As we enter FY22/23, we have strong growth plans in place including several
new product launches such as the range of Mr Kipling Deliciously Good cakes.
We anticipate seeing further input cost inflation which we will continue
to address using a combination of measures, as we have successfully done
before, and including cost efficiency programmes and increased pricing. Our
initial trading so far this year has been encouraging, in line with our
plans, and we are seeing strong market share gains as consumers
increasingly look for good value meal solutions. With this positive momentum,
and the resilience of our brands, categories and supply chain, we are
confident of delivering another year of good progress."
Environmental, Social and Governance (ESG)
On 29 October 2021, the Group announced its new 'Enriching Life Plan' ESG
strategy building on the strong progress the business has made to date. The
Group recognises its responsibility and the opportunity, as a leading UK food
manufacturer, to forge a healthier future for people and the planet. This new
strategy will build a more resilient business for the long-term, ensuring it
can thrive in a changing world. During the process of developing this
strengthened ESG strategy, the Group also conducted a materiality review,
engaging with a range of stakeholders.
This new ESG strategy is articulated through the three key strategic pillars
of Product, Planet and People. The Group has set out a series of major
sustainability targets under each pillar which can be found on the Company's
website.
Dividend
Last year, the Group recommenced the payment of a dividend to shareholders for
the first time in thirteen years. Following another good year of progress, the
Board is proposing a dividend for the full year of 1.2 per share, a 20.0%
increase on the prior year. This reflects strong earnings per share growth in
FY21/22, commitment to a progressive dividend and confidence in the Group's
future plans.
Outlook
The Group enters FY22/23 in a strong position, following another year of
successful strategic and financial progress. It continues to execute against
its five point strategy; growing the core UK business; investing in its
infrastructure; expanding into new categories; building its overseas business
and exploring M&A opportunities.
Initial trading so far this financial year has been in line with the Board's
plans, and it is confident in the delivery of its full year expectations. The
Group expects to see further input cost inflation, which it will continue to
manage using a range of measures including cost efficiency programmes and
further pricing action. The resilience of the Group's brands, categories and
supply chain means it is well positioned to deliver further progress this
year, while it's target of approximately 1.5x Net debt/adjusted EBITDA(3)
remains unchanged.
Strategy overview
The Group delivers growth and creates value through its five point strategy,
outlined below.
1. Continue to grow the UK core business
We have a vibrant and growing UK business which provides the basis for further
expansion. The branded growth model which we employ in the UK is at the heart
of what we do and is core to our success. With our leading category positions,
we launch new products to market linked to key consumer trends, supported by
sustained levels of marketing investment and delivered through strong customer
and retailer partnerships.
2. Supply chain investment
We invest in operational infrastructure to increase efficiencies across our
manufacturing and logistics operations, providing a virtuous cycle for brand
investment. Capital investment in our sites also facilitates growth through
our innovation strategy and enhances the safety and working conditions of our
colleagues.
3. Expand UK business into new categories
We leverage the strength of our brands, using our proven branded growth model
to launch products in adjacent, new food categories.
4. Build international businesses with critical mass
We are building sustainable business units with critical mass overseas,
applying our brand building capabilities to deliver growth in our target
markets of Republic of Ireland, Australia, North America and Europe. Our
primary brands to drive this expansion are Mr Kipling and Sharwood's.
5. Inorganic opportunities
We will utilise our brand building and commercial expertise to expand across a
wider portfolio, accelerating value creation through modest and targeted
acquisition opportunities.
Further information
A presentation to investors and analysts will be webcast today at 9:00am BST.
To register for the webcast follow the link:
www.premierfoods.co.uk/investors/investor-centre
(http://www.premierfoods.co.uk/investors/investor-centre)
A recording of the webcast will be available on the Company's website later in
the day.
A conference call for bond investors and analysts will take place today, 18
May 2022, at 1:30pm BST. Dial in details are outlined below:
Telephone: +44 20 8585 2961 (standard
international access)
Conference ID: 3179028
A factsheet with highlights of the Preliminary results is available at:
www.premierfoods.co.uk/investors/results-centre
(http://www.premierfoods.co.uk/investors/results-centre)
A Premier Foods image gallery is available using the following link:
www.premierfoods.co.uk/media/image-gallery/
(http://www.premierfoods.co.uk/media/image-gallery/)
As one of the UK's largest food businesses, we're passionate about food and
believe each and every day we have the opportunity to enrich life for
everyone. Premier Foods employs over 4,000 people operating from 15 sites
across the country, supplying a range of retail,
wholesale, foodservice and other customers with our iconic brands which
feature in millions of homes every day.
Through some of the nation's best-loved brands, including Ambrosia,
Batchelors, Bisto, Loyd Grossman, Mr. Kipling, Oxo and Sharwood's, we're
creating great tasting products that contribute to healthy and balanced diets,
while committing to nurturing our people and our local communities, and going
further in the pursuit of a healthier planet, in line with our Purpose of
'Enriching Life Through Food'.
Contacts:
Institutional investors and analysts:
Duncan Leggett, Chief Financial Officer
Richard Godden, Director of Investor Relations
Investor.relations@premier (mailto:Investor.relations@premier) foods.co.uk
Media enquiries:
Lisa Kavanagh, Director of
Communications
Headland
Ed
Young
+44 (0) 7884 666830
Jack Gault
+44 (0) 7799 089357
- Ends -
This announcement may contain "forward-looking statements" that are based on
estimates and assumptions and are subject to risks and uncertainties.
Forward-looking statements are all statements other than statements of
historical fact or statements in the present tense, and can be identified by
words such as "targets", "aims", "aspires", "assumes", "believes",
"estimates", "anticipates", "expects", "intends", "hopes", "may", "would",
"should", "could", "will", "plans", "predicts" and "potential", as well as the
negatives of these terms and other words of similar meaning. Any
forward-looking statements in this announcement are made based upon Premier
Foods' estimates, expectations and beliefs concerning future events affecting
the Group and subject to a number of known and unknown risks and
uncertainties. Such forward-looking statements are based on numerous
assumptions regarding the Premier Foods Group's present and future business
strategies and the environment in which it will operate, which may prove not
to be accurate. Premier Foods cautions that these forward-looking statements
are not guarantees and that actual results could differ materially from those
expressed or implied in these forward-looking statements. Undue reliance
should, therefore, not be placed on such forward-looking statements. Any
forward-looking statements contained in this announcement apply only as at the
date of this announcement and are not intended to give any assurance as to
future results. Premier Foods will update this announcement as required by
applicable law, including the Prospectus Rules, the Listing Rules, the
Disclosure and Transparency Rules, London Stock Exchange and any other
applicable law or regulations, but otherwise expressly disclaims any
obligation or undertaking to update or revise any forward-looking statement,
whether as a result of new information, future developments or otherwise.
Financial results
Due to the unique nature of the prior year when the Group saw exceptional
patterns of demand for its products during the peak of the Covid pandemic, it
has managed and reviewed the performance of its business this year with
reference to the more normalised trading conditions of two years ago as well
as the prior year.
The statutory comparative period is for the 53 weeks ended 3 April 2021. To
aid comparability of results against equal timeframes, the following review
for headline measures is provided on a 52 week comparable basis and
reconciliations provided to a 53 week basis for FY20/21 can be found in the
appendix.
Revenue
Group revenue (£m) Grocery Sweet Treats Group
(52 week comparable basis)
Branded(12) 560.1 214.0 774.1
Non-branded(13) 87.6 38.8 126.4
Total 647.7 252.8 900.5
% change vs 1 year ago*
Branded (6.9%) +7.0% (3.4%)
Non-branded (4.5%) (5.0%) (4.7%)
Total (6.6%) +5.0% (3.6%)
% change vs 2 years ago*
Branded +8.8% +12.1% +9.7%
Non-branded (9.6%) (13.0%) (10.6%)
Total +5.9% +7.3% +6.3%
(53 week comparable basis)
% change vs 1 year ago*
Branded (8.1%) +5.3% (4.7%)
Non-branded (6.1%) (5.7%) (6.0%)
Total (7.8%) +3.4% (4.9%)
Commentary versus two years ago
Group revenue increased by 6.3% compared to two years ago. Branded(12) revenue
was particularly strong, up 9.7%, while lower margin Non-branded(13) revenue
declined (10.6%). In the fourth quarter, Group revenues increased by 3.5% to
£225.8m, with branded revenue up 5.1% and Non-branded revenue (7.0%) lower.
This quarter compares against the same period two years ago when consumers
began to accelerate their purchase of household staple grocery products at the
onset of the pandemic. The Group's branded mix accelerated to 86.0% of total
sales, up 270 basis points compared to two years ago.
The Group's branded growth model strategy leverages the strength of its market
leading brands, launching insightful new products, supporting them with
emotionally engaging advertising and building strategic retail partnerships.
Branded revenues on a two-year compound annual growth rate basis, have grown
by 4.7%, serving to illustrate the success of this strategy and model.
Additionally, volume and value market share(14) increased by 41 and 68 basis
points respectively compared to the same period two years ago. Outperformance
was delivered in both the Grocery and Sweet Treats markets, by 52 and 23 basis
points respectively. In e-commerce, many consumers who turned to shopping
online for grocery products during the pandemic have continued to use this
channel. The Group's sales through online have grown by a very significant 71%
compared to two years ago and additionally, market share has increased by 111
basis points.
Another key element of the Group's branded growth model is the strength of its
retailer/customer partnerships. Compared to the prior year, the Group's
weighted average distribution points have grown by 121 basis points; and one
of the key drivers of this has been the strength and delivery of its
innovation programme.
Grocery
Grocery revenue grew by 5.9% compared to two years ago. The branded portfolio
was the clear driver behind this growth as revenue increased by 8.8%, with
non-branded business (9.6%) lower. Grocery revenues in the fourth quarter were
marginally lower by (0.2%), with higher margin brands delivering growth of
0.9%, as volumes spiked two years ago at the onset of the pandemic. This was
offset by a (6.9%) decline in lower margin non-branded revenue due to lower
out of home volumes.
The majority of the Group's Grocery brands grew revenues in FY21/22 compared
to the same period two years ago. Brands such as Batchelors, Bisto,
Sharwood's, Paxo and Angel Delight all grew well above the category averages
and many of these have benefitted from sustained levels of consumer marketing
investment and new product development programmes.
A major success for the Group has been the Nissin noodle product ranges. The
Nissin brand has grown consistently strongly over the last four years;
revenues this year grew by nearly 130% compared to the same period two years
ago. During the year, Nissin noodles became the market leader in the authentic
snack pot market, having grown market share from 16% in 2017 to 48% today.
The Group continues to bring more healthy product ranges to market such as
Loyd Grossman 30% less sugar Lasagne sauces, no added sugar Homepride pasta
bakes, Oxo meat-free Chicken flavour stock cubes and Angel Delight ready to
eat, on the go, low calorie dessert pots. In FY22/23, the Group will be
launching a series of exciting new better for you products such as Bisto Best
meat-free gravy, Sharwood's lower fat Poppodoms and Popped Crackers and Paxo
low salt stuffing.
One of the Group's strategic pillars is expanding into adjacent categories,
leveraging the strength of the Group's branded equities' and significant
progress was delivered in the year. This year, major launches included Oxo
Rubs and Marinades, representing Oxo's first major move beyond its heartland
of stock; the extension of the Mr Kipling, Ambrosia and Angel Delight brands
into the Ice-cream category with initial sales over £1m while Cape Herb &
Spice, the product range of rubs, chilli and seasonings has achieved increased
distribution.
Sweet Treats
Sweet Treats delivered strong revenue growth of 7.3% in the year when compared
to two years ago, driven by particularly high branded growth, up 12.1% to
£214.0m. This was partly offset by non-branded revenue which declined by
(13.0%) following exit of lower margin contracts. During the fourth quarter,
Sweet Treats revenue increased by 15.4%, reflecting strong branded sales,
which grew 17.7%.
The branded performance was as a result of the particularly strong innovation
program. Consumer uptake from the new better for you Mr Kipling 30% less sugar
Viennese Whirls was strong, while the premium Mr Kipling Signature products
such as Deluxe Millionaire Whirls also performed very well. Cadbury cake
delivered strong growth through the year, well supported by innovation, and
investment in Mr Kipling continued in FY21/22 with further advertising to come
next year
As outlined above, one of the Group's strategies is to expand into new,
adjacent, categories, leveraging its brands' equities. Mr Kipling entered the
biscuit category for the first time in the second half of the year with a
range of new biscuits targeting the everyday treat occasion.
Looking ahead to the coming year, the Group has recently announced the launch
of Mr Kipling Deliciously Good cakes. This ground breaking new range is a
clear demonstration of delivering against the Group's 'Enriching Life Plan'
ESG strategy, offering consumers further healthier options to support
healthier lifestyles. These new cakes, which come in seven different variants,
are made with higher levels of fibre and fruit compared with the standard Mr
Kipling range and are classified as non-HFSS under UK government guidelines.
International
In the International business, revenue on a constant currency basis was 25%(8)
higher than the same period two years ago, with growth in all target markets.
In Ireland, application of the branded growth model strategy saw further new
product development and television advertising. The business entered the Quick
Meals Snack & Soups and Homebaking categories and launched the Mr Kipling
premium signature range of cakes. Revenues in Australia grew double digits,
reflecting higher sales of Mr Kipling and Cadbury cake, which between them,
hold a 14% share of the cake category and remain market leaders.
The Group continues to make strategic progress as it applies its brand
building capabilities and executional focus in its priority markets of
Ireland, North America, Australia and Europe. For example, Mr Kipling snack
pack cake slices in Canada are now in wider distribution, following a
successful trial and after refinement of the product proposition. A similar
approach is being taken in the USA, with a test trial to validate the approach
which commenced at the start of FY22/23. Also in the USA, Sharwood's continues
to increase distribution in a key retailer reflecting both increased store
presence and new product listings.
Europe is increasingly becoming a clear opportunity for the Group, with
Sharwood's in particular demonstrating strong growth in both Spain and Germany
during the year. In Spain, revenue of Sharwood's cooking sauces has increased
by nearly 100% compared to two years ago, reflecting strong growth in Indian
sauces such as Tikka Masala while sales in Germany have grown due to the
popularity of Sharwood's Rice pots.
Non-branded
Non-branded revenue was (10.6%) lower than the same period two years ago. In
Grocery, retailer non-branded revenue grew, while some out of home volumes
remain below pre-pandemic levels, some parts of this business have now
returned to growth on a one year basis. Sweet Treats non-branded revenue was
impacted by lower margin contract exits in pies and slices.
Commentary versus prior year
The commentary in the following section is made by comparison to the 52 weeks
ended 3 April 2021, unless otherwise stated
Group revenue for the 52 weeks to 2 April 2022 was £900.5m, a decrease of
(3.6%) on the same period a year ago when volumes were inflated by more meals
being eaten at home due to restrictions on out of home eating. Branded revenue
was (3.4%) lower at £774.1m while non-branded revenue declined (4.7%) to
£126.4m. In the fourth quarter, Group revenues were (0.5%) lower at £225.8m,
with branded revenue down (1.8%) and non-branded revenue up 10.5%. The fourth
quarter last year saw pandemic lockdown restrictions in place, with less out
of home hospitality open to consumers and therefore a greater prevalence of
eating in home.
When the year's results are compared to the statutory comparative of 53 weeks
ended 3 April 2021, revenue was (4.9%) lower than the prior year. Grocery
Revenue declined by (7.8%) while Sweet Treats grew by 3.4%. Branded revenue
declined by (4.7%) while non-branded revenue was (6.0%) lower.
Grocery
As expected, Grocery revenue was lower in FY21/22 compared to the prior year.
Branded and non-branded revenue declined by (6.9%) and (4.5%) respectively,
reflecting the exceptional volumes experienced in the prior year due to the
elevated consumer demand observed in the Group's grocery categories during the
peaks of the Covid pandemic. During the course of the year, the strongest
comparatives were seen in the first quarter when lockdown restrictions were at
their most stringent.
Sweet Treats
In Sweet Treats, revenue grew by 5.0% in the year to £252.8m. The Branded
part of the business grew strongly, as revenue grew by 7.0% to £214.0m, while
Non-branded revenue was (5.0%) lower at £38.8m. In FY20/21, the cake category
did not experience the same level of elevated volumes compared to that seen in
the Group's grocery categories, as consumers focused on purchasing key
household staple products as the UK entered lockdown restrictions.
The delivery of the Sweet Treats branded revenue profile is attributable to
the Group's proven branded growth model, including the strength of the new
product development programme and sustained marketing investment, as outlined
above.
International
The International business saw revenue grow by 2%(8) on a constant currency
basis. In a similar vein to the Grocery business in the UK, revenue in the
first half of the year compared to the prior period was impacted by the
effects of the global pandemic. In particular, grocery product ranges in the
majority of overseas markets saw lower sales due to more meals eaten at home
during lockdown restrictions in the prior year, as was the case in the UK.
Non-branded
Grocery Non-branded sales were (4.5%) lower in the year due to lower sales at
Knighton Foods partly offset by higher sales at the Group's frozen pizza base
business, Charnwood Foods. In Sweet Treats, revenue declined by (5.0%) which
was due to the impact of contract exits in fruit pies and slices ranges.
The Group's Non-branded business plays a secondary, supportive role which
includes assisting the recovery of manufacturing overheads; applying strict
financial hurdles on new contracts while deploying low levels of capital
investment and protecting branded intellectual property.
Trading profit
£m FY21/22 FY20/21* Change vs Change vs FY20/21*
(52 weeks) (52 weeks) 1 year ago* 2 years ago* (53 weeks)
Divisional contribution(2)
Grocery 160.2 172.5 (7.1%) +8.1% 174.7
Sweet Treats 33.4 22.4 +49.6% +41.0% 23.2
Total 193.6 194.9 (0.6%) +12.7% 197.9
Group & corporate costs (45.3) (46.6) +2.7% (15.4%) (46.6)
Trading profit 148.3 148.3 0.0% +11.9% 151.3
Commentary versus two years ago
The Group delivered a very strong performance at Divisional contribution and
Trading profit compared to two years ago. Trading profit rose by 11.9% to
£148.3m as Grocery and Sweet Treats Divisional contribution grew by 8.1% and
41.0% respectively.
The Group's proven branded growth model has been a key driver behind these
performances reflecting the benefits of its innovation strategy, consistent
brand investment and collaborative customer partnerships. Gross margins and
Trading profit margins increased by 120 and 80 basis points respectively
compared to two years ago, reflecting benefits from branded mix and cost
efficiency projects while the Group also increased investment behind its
brands through higher advertising and marketing spend.
One of the Group's strategies is to increase its investment in its supply
chain infrastructure. The elements of this strategy include capital investment
to (i) increase efficiencies across the manufacturing and logistics operations
and (ii) to facilitate growth through the Group's innovation strategy. Through
these strategies, the Group expects to deliver improvements in gross margin,
which then provides funds for additional brand investment, in line with the
branded growth model and so drive further branded revenue growth as part of a
virtuous cycle. An example of such investment includes a new pots line at the
Ashford site, which will deliver innovation growth for the Batchelors and
Sharwood's brands.
Commentary versus prior year
The commentary in the following section is made by comparison to the 52 weeks
ended 3 April 2021, unless otherwise stated
As outlined above, the Group reported Trading profit of £148.3m in FY21/22.
This matches the exceptional performance delivered in the prior year when
Trading profit benefitted from the operational leverage effects of elevated
volumes during the various lockdown phases of the pandemic. Divisional
contribution was slightly lower at £193.6m while Group & corporate costs
declined by 2.7% to £45.3m. The Grocery business reported Divisional
contribution of £160.2m which was (7.1%) lower than the last year while Sweet
Treats saw excellent Divisional contribution growth of 49.6% to £33.4m.
Last year, the Grocery business saw some exceptionally strong performances
across its branded portfolio, as the substantial increase in volumes seen
during the peaks of the Covid pandemic saw benefits to operational leverage,
which in turn fed through to Divisional contribution. With Grocery volumes
lower than FY20/21, this resulted in reduced levels of operational leverage
and hence lower Divisional contribution in the year.
In Sweet Treats, Divisional contribution increased by £11.0m to £33.4m in
the year. This strong progress reflects improved supply chain efficiencies,
lower Covid related costs in the year and branded mix benefits as higher
margin Mr Kipling and Cadbury cake sales increased while non-branded sales
declined. Unlike the Group's grocery categories, the cake market was less
impacted by exceptional consumer buying trends during the pandemic in 2020.
The Group continued to invest in its market leading brands during the year
with Ambrosia, Batchelors, Bisto, Mr Kipling, Oxo and Sharwood's all
benefitting from TV advertising. Additionally, some of these brands received
investment in shorter, YouTube activation media which focus on helping
consumers with ideas on recipes and cooking ideas. Looking ahead to FY22/23,
the Group has plans for increased levels of brand investment as the prior
year, as it continues to consistently apply its branded growth model strategy.
Group & corporate costs of £45.3m benefitted from lower management and
colleague bonuses in the year and the release of a provision no longer
required.
During the course of the year, global supply chains across a number of
industries faced a range of challenges including a shortage of heavy goods
vehicle (HGV) drivers; general labour shortages and an increasingly
inflationary environment. The Group successfully navigated through this
environment during FY21/22, demonstrating the strength of its supplier and
customer relationships and delivering in line with its plans.
Following the tragic events unfolding in Ukraine in early 2022, a number of
global commodity and energy markets are expected to rise further. While the
Group has no direct exposure through revenue from, or purchases to, Russia or
Ukraine, it expects to be impacted by rising global commodity markets over the
coming months. Consequently, the Group will take mitigating actions to recover
increased costs, both through cost efficiency measures and pricing actions.
Operating profit
£m FY21/22 FY20/21 Change vs Change vs
(52 weeks) (53 weeks) 1 year ago 2 years ago*
Adjusted EBITDA(3) 167.5 170.4 (2.9) 15.0
Depreciation (19.2) (19.1) (0.1) 0.7
Trading profit 148.3 151.3 (3.0) 15.7
Amortisation of intangible assets (27.0) (30.4) 3.4 2.4
Fair value movements on foreign exchange & derivatives 4.4 (2.3) 6.7 2.7
Net interest on pensions and administrative expenses 4.2 9.7 (5.5) 8.8
Non-trading items:
Restructuring costs - (4.9) 4.9 4.1
GMP equalisation (0.3) (2.9) 2.6 (0.3)
Other non-trading 1.5 (0.5) 2.0 2.4
Operating profit before gain on sale of Hovis 131.1 120.0 11.1 35.8
Reversal of impairment loss of Loan receivable - 15.7 (15.7) -
Profit on disposal of investment in associate - 16.9 (16.9) -
Operating profit 131.1 152.6 (21.5) 35.8
Operating profit in the year was £131.1m, a decrease of £21.5m compared to
the prior year. This was largely due to the reversal of the impairment loss on
the Hovis loan note principal and profit on disposal of the Hovis investment
in the comparative period of £32.6m. Operating profit before gain on sale of
the Hovis investment associate grew by £11.1m in the year to £131.1m.
Amortisation of intangible assets was £27.0m in the year, a £3.4m reduction
compared to FY20/21. Fair valuation of foreign exchange and derivatives
resulted in a positive movement of £4.4m compared to the comparative period.
An impairment reversal of £15.7m was recognised in the prior year in respect
of the Hovis loan note previously written off; this reflected a reassessment
of the loan note's recoverability. Hovis Holdings Limited was disposed by the
Company and The Gores Group to Endless LLP on 5 November 2020. Additionally, a
profit on disposal of £16.9m was recognised in the prior year following
completion of this transaction.
Net interest on pensions and administrative expenses was a credit of £4.2m in
the year. Expenses for operating the Group's pension schemes were £6.8m in
the FY21/22, offset by a net interest credit of £11.0m due to an opening
surplus of the Group's combined pension schemes. There were no restructuring
costs incurred in the year; charges in the prior year of £8.3m were largely
due to costs associated with advisory work on the segregated merger pensions
agreement announced on 20 April 2020. Other non-trading income of £1.5m
primarily related to the resolution of a legacy legal matter.
Finance costs
Net finance cost was £28.5m, a decrease of £1.3m compared to the comparative
period. Net regular interest was £19.8m, a £13.2m reduction compared to the
prior year and nearly half that of two years ago. This reduction was due to
lower Senior secured notes interest charges following redemptions of the
Group's now retired 2022 Floating Rate Notes ("FRN"). Additionally, the Group
issued new £330m Fixed Rate Notes due October 2026 in FY21/22, replacing the
previous £300m Fixed Rate Notes due July 2023 which were fully repaid in the
year. The October 2026 Notes attract a lower coupon (3.5%) compared to the
retired October 2023 Notes which attracted a coupon of 6.25%, therefore
representing a significant ongoing saving for the Group. Consequently, Senior
secured notes interest declined by £12.1m to £13.4m when compared to the
prior year on a 52 week basis.
£m FY21/22 FY20/21* Change vs Change vs FY20/21
(52 weeks) (52 weeks) 1 year ago* 2 years ago* (53 weeks)
Senior secured notes interest 13.4 25.5 12.1 17.6 25.9
Bank debt interest - net 4.3 4.6 0.3 0.7 4.6
17.7 30.1 12.4 18.3 30.5
Amortisation of debt issuance costs 2.1 2.9 0.8 1.2 2.9
Net regular interest(5) 19.8 33.0 13.2 19.5 33.4
Write-off of financing costs 4.3 N/A N/A (4.3) 1.3
Early redemption fee 4.7 N/A N/A (4.7) -
Discount unwind (0.9) N/A N/A 2.2 (1.1)
Other finance cost 0.8 N/A N/A (0.3) 0.9
Other finance income (0.2) N/A N/A 0.2 (4.7)
Net finance cost 28.5 N/A N/A 13.2 29.8
Bank debt interest of £4.3m was £0.3m lower than the prior year and the
Group's revolving credit facility was undrawn as at 2 April 2022. Amortisation
of debt issuance costs were £0.8m lower at £2.1m, reflecting a lower quantum
of borrowing facilities held by the Group.
Following the completion of the Group's refinancing in the year, the write-off
of financing costs associated with borrowings now retired and facilities which
have since been replaced, were £4.3m in the period. Additionally, and as
expected, a fee of £4.7m was incurred relating to the early redemption of the
Group's now retired £300m 2023 dated Fixed Rate Notes.
In the prior period, other finance income of £4.7m related to the reversal of
the impairment on interest on the Hovis loan note, reflecting the reassessment
of the loan note's recoverability.
Taxation
£m FY21/22 FY20/21 FY19/20
Profit before taxation 102.6 122.8 53.6
- Tax charge at rate of 19.0% (19.5) (23.3) (10.2)
Tax effect of:
- Changes in tax rate (7.2) - 4.9
- Capital gain on disposal of business - 6.6 -
- Other items 1.6 (0.1) (1.8)
Income tax (charge) (25.1) (16.8) (7.1)
Deferred tax asset 23.1 28.4 -
Deferred tax liability 212.9 85.8 184.9
The taxation charge for the year to 2 April 2022 was £25.1m (2020/21:
£16.8m). This charge comprised primarily a charge on operating activities of
£19.5m (2020/21: £23.3m) and £7.2m due to tax rate changes. In the
Government's 2021 spring budget, the rate of corporation tax effective from
April 2023 will increase from the current level of 19% to 25%. Therefore,
deferred tax balances have been restated depending on the rate which they are
expected to unwind.
The Group retains brought forward losses which it can utilise to offset
against future tax liabilities. Due to changes in tax legislation with respect
to the offset of tax losses, the Group expects to recommence paying cash tax
in low single digit £millions in the medium term.
Earnings per share
Earnings per share (£m) FY21/22 FY20/21 Change vs Change vs
(52 weeks) (53 weeks) 1 year ago 2 years ago*
Operating profit 131.1 152.6 (21.5) 35.8
Net finance cost (28.5) (29.8) 1.3 13.1
Profit before taxation 102.6 122.8 (20.2) 49.0
Taxation (25.1) (16.8) (8.3) (18.0)
Profit after taxation 77.5 106.0 (28.5) 31.0
Average shares in issue (million) 858.8 851.4 7.4 12.1
Basic Earnings per share (pence) 9.0 12.5 (3.5) 3.5
Profit before tax was £102.6m in the year, a decrease of £20.2m compared to
FY20/21 and Profit after tax was £77.5m, £28.5m lower than the comparative
period. On a two year comparator basis, profit before tax increased by £49.0m
and profit after tax was £31.0m higher. Basic earnings per share was 9.0
pence compared to 12.5 pence in the prior period.
Adjusted earnings per share (£m) FY21/22 FY20/21* Change vs Change vs
(52 weeks) (52 weeks) 1 year ago* 2 years ago*
Trading profit 148.3 148.3 0.0% 11.9%
Less: Net regular interest (19.8) (33.0) 40.0% 49.5%
Adjusted profit before tax 128.5 115.3 11.4% 37.6%
Less: Notional tax (19%) (24.4) (21.9) (11.4%) (37.6%)
Adjusted profit after tax(6) 104.1 93.4 11.4% 37.6%
Average shares in issue (millions) 858.8 851.3 7.5 12.2
Adjusted earnings per share (pence) 12.1 11.0 10.5% 35.7%
Adjusted profit before tax increased by 11.4% in the year to £128.5m, as
Trading profit was in line with the prior period and net regular interest
costs declined significantly, as described above. Adjusted profit after tax
also grew by 11.4%, to £104.1m after deducting a notional 19.0% tax charge of
£24.4m. Based on average shares in issue of 858.8 million shares, adjusted
earnings per share were 10.5% higher at 12.1p.
When compared to two years ago, adjusted profit before tax increased by 37.6%
due to both higher Trading profit and a significantly lower net regular
interest charge. Over this time frame, adjusted profit after tax and adjusted
earnings per share increased by 37.6% and 35.7% respectively.
Statutory cash flow statement
£m FY21/22 FY20/21
Cash generated from operating activities 90.1 85.6
Cash (used in)/generated from investing activities (23.2) 13.8
Cash used in financing activities (13.7) (276.2)
Net increase/(decrease) in cash and cash equivalents 53.2 (176.8)
Cash, and cash equivalents at beginning of period 1.1 177.9
Cash and cash equivalents at end of period 54.3 1.1
Free cash flow
£m FY21/22 FY20/21
Trading profit 148.3 151.3
Depreciation 19.2 19.1
Other non-cash items 4.1 3.4
Capital expenditure (23.2) (23.6)
Working capital (21.0) 0.6
Operating cash flow 127.4 150.8
Interest (20.8) (32.6)
Pension contributions (41.4) (47.0)
Free cash flow(10) 65.2 71.2
Non-trading items 0.9 (5.1)
Net proceeds from share issue 1.3 1.7
Re-financing fees (13.2) -
Sale of property, plant and equipment - 0.1
Dividend (including pensions match) (11.0) -
Disposal proceeds - 30.3
Movement in cash 43.2 98.2
Repayment of borrowings (320.0) (275.0)
Proceeds from borrowings 330.0 -
Net increase/(decrease) in cash and cash equivalents 53.2 (176.8)
On a statutory basis, cash generated from operations was £110.9m compared to
£118.2m in the comparative period. Cash generated from operating activities
was £90.1m after deducting net interest paid of £20.8m. Cash used in
financing activities was £13.7m in the year versus £276.2m in the prior year
and includes the proceeds from the issuance of the Group's £330m 2026 dated
3.5% Fixed Rate Notes in the period. These proceeds were largely offset by the
repayment in full of the Group's £300m 2023 dated 6.25% Fixed Rate Notes, the
last remaining £20.0m tranche of the Group's FRN, financing fees of £8.5m,
an early redemption fee of £4.7m relating to the retirement of the £300m
Fixed Rate Notes and dividends paid to shareholders of £8.5m. In FY20/21, the
Group repaid a drawdown of £85.0m on its committed revolving credit facility
in the first quarter of the year. This followed an earlier prudent decision by
the Group at the end of the previous financial year to draw this £85.0m sum,
reflecting early stage wider uncertainties associated with the COVID-19
pandemic. Secondly, the Group used cash generated during FY19/20 and FY20/21
to fund part redemptions of its FRN totalling £190.0m.
The Group reported an inflow in cash in the year of £43.2m. Trading profit of
£148.3m was £3.0m lower than the prior year for the reasons outlined above,
while depreciation of £19.2m was similar to the prior year. Other non-cash
items of £4.1m was £0.7m higher and was predominantly due to share based
payments.
Net interest paid of £20.8m was £11.8m lower than the prior year; this was
due to reduced interest payments following the redemption of the Group's FRN
and the issue of £330m Fixed Rate Notes due October 2026 which attract a
coupon of 3.5%. These Fixed Rate Notes replaced the previous £300m Fixed Rate
Notes due October 2023 which were repaid in the year and attracted a coupon of
6.25%. There was no taxation paid in FY21/22 due to the availability of
brought forward losses and capital allowances.
Total pension contributions in the year were £41.4m, a £5.6m reduction
compared to prior year, reflecting lower administration costs. Pension deficit
contribution payments were £37.6m and administration costs amounted to
£3.8m.
Capital expenditure was £23.2m and was broadly in line with the prior year.
In the medium term, the Group expects capital expenditure to be in the range
of £30-35m, as it looks to accelerate investment across the supply chain,
covering both growth projects supporting the Group's innovation strategy and
cost release projects to deliver efficiency savings. One of the key objectives
of this programme, is through improving operational efficiency, the resultant
accretion in gross margin will provide additional funds for brand investment.
This strategy of investing in supply chain infrastructure represents a
virtuous cycle to provide the fuel for the Group's branded growth model.
The year saw a working capital outflow of (£21.0m) compared to an inflow of
£0.6m in the prior year. This outflow was largely due to the higher value of
input costs on inventory and also higher level of trade receivables compared
to the prior year.
The Group paid re-financing fees during the year which amounted to £13.2m and
were largely due to advisory, legal and arrangement fees and included a
redemption fee of £4.7m as referred to above. Dividends paid in the year were
£11.0m; of this, £8.5m were payments made to shareholders and £2.5m was due
to a dividend match payment in favour of the Group's pension schemes.
Net debt and sources of finance
Net debt at 2 April 2022 was £285.0m, a reduction of £47.7m compared to the
prior year. The movement in cash in the year was £43.2m and the movement in
debt issuance costs was £2.0m. Lease creditor movements were £2.5m and as at
2 April 2022, the Group held cash and bank deposits of £54.3m. On a pre-IFRS
16 basis, Net debt at 2 April 2022 was £268.9m.
Net debt/adjusted EBITDA(3) was 1.7x on a Post-IFRS 16 basis.
£m Post-IFRS 16 Pre-IFRS 16
Net debt at 3 April 2021 332.7 314.1
Movement in cash (43.2) (43.2)
Movement in debt issuance costs (2.0) (2.0)
Movement in lease creditor (2.5) -
Net debt at 2 April 2022 285.0 268.9
Adjusted EBITDA(3) 167.5 165.5
Net debt / Adjusted EBITDA(3) 1.7x 1.6x
During the year, the Group entered into a new revolving credit facility (RCF)
with an updated lending group for a period of three years from May 2021 with
extension options for up to two additional years. This new senior secured RCF
is a committed facility of £175m and includes an interest margin grid broadly
in line with the previous RCF. The prevailing coupon on the RCF is currently
2.5% above GBP SONIA and undrawn elements of the RCF attract interest
equivalent to 35% of the applicable margin. Following the year end, the Group
completed the first extension of the RCF facility to 2025.
Additionally, the Group issued new October 2026 dated £330m Fixed Rate Notes
during the year. These notes attract an interest coupon of 3.5%; the first
call date in 15 June 2023. As referred to above, the Group redeemed in full
its £300m 2023 dated Fixed Rate Notes and the outstanding 2022 dated FRN
during the year.
Pensions
IAS 19 results and commentary
IAS 19 Accounting Valuation (£m) 2 April 2022 3 April 2021
RHM Premier Foods Combined RHM Premier Foods Combined
Assets 4,273.7 826.3 5,100.0 4,459.4 792.5 5,251.9
Liabilities (3,134.9) (1,020.2) (4,155.1) (3,536.9) (1,175.1) (4,712.0)
Surplus/(Deficit) 1,138.8 (193.9) 944.9 922.5 (382.6) 539.9
Net of deferred tax (25%/19.0%) 854.1 (145.4) 708.7 747.2 (309.9) 437.3
The IAS 19 pension schemes valuation reported a surplus for the combined RHM
and Premier Foods' pension schemes at 2 April 2022 of £944.9m, an increase of
£405.0m compared to the prior year. This is equivalent to a surplus of
£708.7m net of a deferred tax charge of 25.0%. The reduction in value of
liabilities of £556.9m is the main driver behind the movement in the surplus
and substantially reflects an increase in the applicable discount rate from
2.00% to 2.75% between the two respective periods. Asset values across the two
sets of schemes reduced by £151.9m, with the RHM scheme asset values reducing
by £185.7m and the Premier Foods scheme assets increasing by £33.8m. When
compared to the position at 3 April 2021, the RHM scheme surplus increased by
23.4% while the Premier Foods' scheme deficit reduced by 49.3%.
Deferred tax of 25.0% is deducted from the IAS19 retirement benefit valuation
of the Group's schemes to reflect the fact that pension deficit contributions
made to the Group's pension schemes are allowable for tax. The deferred tax
rate has been increased from the 19.0% rate used for the prior period to 25.0%
following the change in the UK's corporation tax rate, effective from April
2023.
Combined pensions schemes (£m) 2 April 2022 3 April 2021
Assets
Equities 10.4 14.9
Government bonds 1,213.7 1,625.4
Corporate bonds 6.3 1.0
Property 576.9 467.9
Absolute return products 934.7 1,112.1
Cash 113.8 79.8
Infrastructure funds 364.7 321.5
Swaps 490.9 485.4
Private equity 320.0 240.6
LDI 7.7 191.2
Illiquid credits 273.2 174.9
Global credits 628.6 318.6
Other 159.1 218.6
Total Assets 5,100.0 5,251.9
Liabilities
Discount rate 2.75% 2.00%
Inflation rate (RPI/CPI) 3.6%/3.2% 3.25%/2.80%
Actuarial valuation update and NPV of deficit contributions
Following the segregated merger of the Group's pension schemes, effective June
2020, an interim actuarial funding valuation of the Premier Foods and Premier
Grocery Products sections as at 31 March 2021 has been completed. The outcome
of this valuation has resulted in a £125m reduction in the deficit of these
schemes from £552m as at 31 March 2019 to £427m as at 31 March 2021.
Following the reduction in this deficit, the Company and Trustees of the
schemes have agreed to reduce the length of the current pension deficit
contribution schedule by two years. Consequently, the net present value of
future pension contributions to the end of the respective recovery periods has
reduced by approximately £60m, from £300-320m(15) to £240-260m.
Capital allocation
The Group is a highly cash generative business and has substantially reduced
its interest costs. Today, the allocation of capital is split across pension
contributions, capital investment and dividends, with a strategy to explore
bolt-on M&A. In the medium term, we expect pensions contributions to
reduce, freeing up increased cash to spend on capital investment, dividends
and M&A.
Principal risks and uncertainties
Strong risk management is key to delivery of the business' strategic
objectives. The Group has an established risk
management process, the Executive Leadership Team performing a formal robust
assessment of the principal
risks bi-annually which is reviewed by the Board and Audit Committee. Risks
are monitored at a segment and
functional level throughout the year considering both internal and external
factors. The principal risks that the Group is exposed to will be disclosed in
the Group's 2022 Annual Report. These are: macroeconomic & geopolitical
instability, impact of government legislation, market and retailer actions,
operational integrity, legal compliance, climate risk, technology, product
portfolio, HR and employee risk and strategy delivery.
Alex Whitehouse
Duncan Leggett
Chief Executive Officer
Chief Financial Officer
Appendices
The Company's Preliminary results are presented for the 52 weeks ended 2 April
2022 and the comparative period, 53 weeks ended 3 April 2021 and 52 weeks
ended 28 March 2020. References to the 'quarter', unless otherwise stated, are
for the 13 weeks ended 2 April 2022 and the comparative periods, 13 weeks
ended 3 April 2021 and 13 weeks ended 28 March 2020. To aid comparability of
results, headline results are provided on a 52 week basis and reconciliations
provided to a 53 week basis.
Headline group results for 52 weeks ended 2 April 2022 and comparative 53
weeks ended 3 April 2021 and 52 weeks ended 28 March 2020
£m FY21/22 FY20/21 Exclude: FY20/21 FY19/20
53 week 52 week basis
Revenue 52 week basis 53 week basis 52 week basis
Grocery 647.7 702.6 (9.2) 693.4 611.6
- Branded 560.1 609.3 (7.6) 601.7 514.7
- Non-branded 87.6 93.3 (1.6) 91.7 96.9
Sweet Treats 252.8 244.4 (3.6) 240.8 235.5
- Branded 214.0 203.2 (3.3) 199.9 190.9
- Non-branded 38.8 41.2 (0.3) 40.9 44.6
Group 900.5 947.0 (12.8) 934.2 847.1
- Branded 774.1 812.5 (10.9) 801.6 705.6
- Non-branded 126.4 134.5 (1.9) 132.6 141.5
Divisional contribution
Grocery 160.2 174.7 (2.2) 172.5 148.2
Sweet Treats 33.4 23.2 (0.8) 22.4 23.7
Total 193.6 197.9 (3.0) 194.9 171.9
Trading profit 148.3 151.3 (3.0) 148.3 132.6
Adjusted EBITDA(3) 167.5 170.4 (3.3) 167.1 152.5
Adjusted EBITDA(3) (excl IFRS 16) 165.5 168.2 (3.3) 164.9 149.9
Net regular interest (19.8) (33.4) 0.4 (33.0) (39.3)
Adjusted profit before tax 128.5 117.9 (2.6) 115.3 93.3
Adjusted eps 12.1 11.2 (0.2) 11.0 8.9
Net debt 285.0 332.7 N/A N/A 429.6
Net debt (excl IFRS 16) 268.9 314.1 N/A N/A 408.1
Net debt/adjusted EBITDA(3) 1.7x 2.0x N/A N/A 2.8x
Net debt/adjusted EBITDA(3) (excl IFRS 16) 1.6x 1.9x N/A N/A 2.7x
Quarter 4 Revenue
£m - 52 week basis Grocery Sweet Treats Group
FY21/22 Q4 Revenue
Branded 143.8 55.4 199.2
Non-branded 22.3 4.3 26.6
Total 166.1 59.7 225.8
FY20/21 Q4 Revenue
Branded 152.1 50.7 202.8
Non-branded 20.3 3.8 24.1
Total 172.4 54.5 226.9
% change vs 1 year ago
Branded (5.5%) 9.2% (1.8%)
Non-branded 10.0% 13.1% 10.5%
Total (3.6%) 9.5% (0.5%)
FY19/20 Q4 Revenue
Branded 142.5 47.1 189.6
Non-branded 24.0 4.6 28.6
Total 166.5 51.7 218.2
% change vs 2 years ago
Branded 0.9% 17.7% 5.1%
Non-branded (6.9%) (7.6%) (7.0%)
Total (0.2%) 15.4% 3.5%
Notes and definitions of non-GAAP measures
The Company uses a number of non-GAAP measures to measure and assess the
financial performance of the business. The Directors believe that these
non-GAAP measures assist in providing additional useful information on the
underlying trends, performance and position of the Group. These non-GAAP
measures are used by the Group for reporting and planning purposes and it
considers them to be helpful indicators for investors to assist them in
assessing the strategic progress of the Group.
1. The Group uses Trading profit to review overall Group profitability. Trading
profit is defined as profit/(loss) before tax, before net finance costs,
amortisation of intangible assets, fair value movements on foreign exchange
and other derivative contracts, net interest on pensions and administration
expenses and any material items that require separate disclosure by virtue of
their nature in order that users of the financial statements obtain a clear
and consistent view of the Group's underlying trading performance.
2. Divisional contribution refers to Gross Profit less selling, distribution and
marketing expenses directly attributable to the relevant business segment.
3. Adjusted EBITDA is Trading profit as defined in (1) above excluding
depreciation.
4. Adjusted profit before tax is Trading profit as defined in (1) above less net
regular interest.
5. Net regular interest is defined as net finance cost after excluding write-off
of financing costs, early redemption fees, other interest payable and other
finance income.
6. Adjusted profit after tax is Adjusted profit before tax as defined in (4)
above less a notional tax charge of 19.0% (2020/21: 19.0%).
7. Adjusted earnings per share is Adjusted profit after tax as defined in (6)
above divided by the weighted average of the number of shares of 858.8 million
(53 weeks ended 3 April 2021: 851.4 million).
8. International sales remove the impact of foreign currency fluctuations and
adjusts current year sales to ensure comparability in geographic market
destinations. The constant currency calculation is made by adjusting the
current year's sales to the same exchange rate as the prior year and two years
ago, as applicable. The constant currency adjustment is calculated by applying
a blended rate.
The following are stated on a 52 week basis for each respective year:
£m Reported Adjustment Constant currency
FY21/22 53.4 1.4 54.8
FY20/21 53.9 N/A 53.9
Growth/(decline) % (1.0%) 1.6%
£m Reported Adjustment Constant currency
FY21/22 53.4 0.6 54.0
FY19/20 43.3 N/A 43.3
Growth/(decline) % 23.3% 24.6%
9. Net debt is defined as total borrowings, less cash and cash equivalents and
less capitalised debt issuance costs.
10. Free cash flow is Net increase or decrease in cash and cash equivalents
excluding proceeds and repayment of borrowings, less dividend payments,
disposal proceeds, re-financing fees, proceeds from share issues and
non-trading items.
11. FY21/22 guidance provided at Q3 trading update, 19 January 2022: at least
£145m Trading profit; at least £125m Adjusted profit before tax.
12. Branded revenue is revenue generated from products sold by the Group under
owned brands, or licenced brands, such as Ambrosia, Batchelors, Bisto, Loyd
Grossman, Mr Kipling, Sharwood's, Oxo and others.
13. Non-branded revenue is revenue generated by products sold by the Group which
are not labelled as brands owned, or sold under licence, by the Group.
14. IRI, 52 weeks ended 26 March 2022.
15. The schedule of future contributions are as agreed per the 2021 interim
actuarial funding valuation for the Premier Foods Schemes, discounted using
the Company post tax WACC of 7.4%.
Additional notes:
· The Directors believe that users of the financial statements are most
interested in underlying trading performance and cash generation of the Group.
As such intangible asset amortisation and impairment are excluded from
Trading profit because they are non-cash items.
· Restructuring costs have been excluded from Trading profit because they are
incremental costs incurred as part of specific initiatives that may distort a
user's view of underlying trading performance.
· Net regular interest is used to present the interest charge related to the
Group's ongoing financial indebtedness, and therefore excludes non-cash items
and other credits/charges which are included in the Group's net finance cost.
· Group & corporate costs refer to group and corporate expenses which are
not directly attributable to a business unit and are reported at total Group
level.
· In line with accounting standards, the International and Knighton business
units, the results of which are aggregated within the Grocery business unit,
are not required to be separately disclosed for reporting purposes.
Consolidated statement of profit or loss
52 weeks ended 53 weeks ended
2 April 2022 3 April 2021
Note £m £m
Revenue 3 900.5 947.0
Cost of sales (573.4) (611.7)
Gross profit 327.1 335.3
Selling, marketing and distribution costs (133.4) (137.4)
Administrative costs (62.6) (77.9)
Reversal of impairment losses on financial assets - 15.7
Profit on disposal of investment in associate - 16.9
Operating profit 3 131.1 152.6
Finance cost 4 (29.0) (36.2)
Finance income 4 0.5 6.4
Profit before taxation 102.6 122.8
Taxation charge 5 (25.1) (16.8)
Profit for the period attributable to owners of the parent 77.5 106.0
Basic earnings per share
From profit for the period (pence) 6 9.0 12.5
Diluted earnings per share
From profit for the period (pence) 6 8.8 12.2
Consolidated statement of comprehensive income
52 weeks ended 53 weeks ended
2 April 2022 3 April 2021
Note £m £m
Profit for the period 77.5 106.0
Other comprehensive income, net of tax
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit schemes 7 357.3 (750.3)
Deferred tax (charge) / credit 5 (114.2) 132.9
Current tax credit 5 6.4 9.2
Items that are or may be reclassified subsequently to profit or loss
Exchange differences on translation (0.4) (1.0)
Other comprehensive income, net of tax 249.1 (609.2)
Total comprehensive income attributable to owners of the parent 326.6 (503.2)
Consolidated balance sheet
As at As at
2 Apr 2022 3 Apr 2021
Note £m £m
ASSETS:
Non-current assets
Property, plant and equipment 190.9 192.1
Goodwill 646.0 646.0
Other intangible assets 293.5 317.2
Deferred tax assets 5 23.1 28.4
Net retirement benefit assets 7 1,148.7 934.7
2,302.2 2,118.4
Current assets
Stocks 78.1 68.8
Trade and other receivables 96.5 83.4
Cash and cash equivalents 8 54.3 4.2
Derivative financial instruments 10 2.4 0.1
231.3 156.5
Total assets 2,533.5 2,274.9
LIABILITIES:
Current liabilities
Trade and other payables (254.0) (249.8)
Financial liabilities
- short-term borrowings - (3.1)
- derivative financial instruments 10 (0.3) (2.3)
Lease liabilities 9 (2.1) (2.3)
Provisions for liabilities and charges (2.3) (6.2)
(258.7) (263.7)
Non-current liabilities
Long-term borrowings 9 (323.2) (315.2)
Lease liabilities 9 (14.0) (16.3)
Net retirement benefit obligations 7 (203.8) (394.8)
Provisions for liabilities and charges (8.3) (8.4)
Deferred tax liabilities 5 (212.9) (85.8)
Other liabilities (5.7) (7.1)
(767.9) (827.6)
Total liabilities (1,026.6) (1,091.3)
Net assets 1,506.9 1,183.6
EQUITY:
Capital and reserves
Share capital 86.3 85.5
Share premium 1.5 0.6
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Profit and loss reserve 1,076.7 755.1
Total equity 1,506.9 1,183.6
Consolidated statement of cash flows
52 weeks ended 53 weeks ended
2 April 2022 3 Apr 2021
Note £m £m
Cash generated from operations 8 110.9 118.2
Interest paid (21.2) (34.1)
Interest received 0.4 1.5
Cash generated from operating activities 90.1 85.6
Proceeds from repayment of loan notes to associate - 15.7
Net proceeds from sale of investment in associate - 16.9
Interest received on loan notes to associate - 4.7
Purchases of property, plant and equipment (19.5) (18.0)
Purchases of intangible assets (3.7) (5.6)
Sale of property, plant and equipment - 0.1
Cash (used in) / generated from investing activities (23.2) 13.8
Repayment of borrowings (320.0) (275.0)
Proceeds from borrowings 330.0 -
Repayment of lease liabilities (3.3) (2.7)
Financing fees(1) (8.5) -
Early redemption fee(1) (4.7) -
Dividends paid (8.5) -
Purchase of shares to satisfy share awards (0.4) (0.2)
Proceeds from share issue 1.7 1.7
Cash used in financing activities (13.7) (276.2)
Net increase / (decrease) in cash and cash equivalents 53.2 (176.8)
Cash, cash equivalents and bank overdrafts at beginning of period 1.1 177.9
Cash and cash equivalents at end of period(2) 8 54.3 1.1
(1)Relates to payments made as part of the refinancing of the Group's debt in
June 2021. See note 11 for further details.
(2)Cash and cash equivalents of £54.3m (2020/21: £1.1m) includes bank
overdraft of £nil (2020/21: £3.1m) and cash and bank deposits of £54.3m
(2020/21: £4.2m). See note 10 for more details.
Consolidated statement of changes in equity
Share capital Share premium Merger reserve Other reserves Profit and loss reserve(1) Total equity
Note
£m £m £m £m £m £m
At 29 March 2020 84.8 1,409.4 351.7 (9.3) (156.6) 1,680.0
Profit for the period - - - - 106.0 106.0
Remeasurements of defined benefit schemes 7 - - - - (750.3) (750.3)
Deferred tax credit 5 - - - - 132.9 132.9
Current tax credit 5 9.2 9.2
Exchange differences on translation - - - - (1.0) (1.0)
Other comprehensive income - - - - (609.2) (609.2)
Total comprehensive income - - - - (503.2) (503.2)
Shares issued 0.7 1.0 - - - 1.7
Capital reduction(2) (1,409.8) 1,409.8 -
Share-based payments - - - - 3.1 3.1
Purchase of shares to satisfy share awards - - - - (0.2) (0.2)
Deferred tax movements on share-based payments 5 - - - - 2.2 2.2
At 3 April 2021 85.5 0.6 351.7 (9.3) 755.1 1,183.6
At 4 April 2021 85.5 0.6 351.7 (9.3) 755.1 1,183.6
Profit for the period - - - - 77.5 77.5
Remeasurements of defined benefit schemes 7 - - - - 357.3 357.3
Deferred tax charge 5 - - - - (114.2) (114.2)
Current tax credit 5 6.4 6.4
Exchange differences on translation - - - - (0.4) (0.4)
Other comprehensive income - - - - 249.1 249.1
Total comprehensive income - - - - 326.6 326.6
Shares issued 0.8 0.9 - - - 1.7
Share-based payments - - - - 3.4 3.4
Purchase of shares to satisfy share awards - - - - (0.4) (0.4)
Deferred tax movements on share-based payments 5 - - - - 0.5 0.5
Dividends 11 - - - - (8.5) (8.5)
At 2 April 2022 86.3 1.5 351.7 (9.3) 1,076.7 1,506.9
(1)Included in Profit and loss reserve at 2 April 2022 is £3.7m in relation
to cumulative translation losses (2019/20: £2.3m loss, 2020/21: £3.3m loss)
(2)Following shareholder approval at a General Meeting held on 11 January 2021
and a hearing in the High Court of Justice, Business and Property Courts of
England and Wales on 9 February 2021, an order was given confirming the
cancellation of the entire amount standing to the credit of the Company's
share premium account, which amounted to £1,409.8m ('Capital Reduction'). The
order was produced to the Registrar of Companies and was registered on 10
February 2021, making the Reduction of Capital effective.
1. General information
The financial information included in this preliminary announcement does not
constitute the Company's statutory accounts for the 52 weeks ended 02 April
2022 and for the 53 weeks ended 03 April 2021, but is derived from those
accounts. Statutory accounts for the 53 weeks ended 03 April 2021 have been
delivered to the registrar of companies, and those for 52 weeks ended 02 April
2022 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention to by way of emphasis
without qualifying their report, and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements of the Company have been prepared in
accordance with UK-adopted international accounting standards.
Basis for preparation of financial statements on a going concern basis
The Group's revolving credit facility includes net debt/EBITDA and
EBITDA/interest covenants as detailed in note 11. In the event these covenants
are not met then the Group would be in breach of its financing agreement and,
as would be the case in any covenant breach, the banking syndicate could
withdraw funding to the Group. The Group was compliant with its covenant tests
as at 2 October 2021 and 2 April 2022.
Having undertaken a robust assessment of the Group's forecasts with specific
consideration to the trading performance of the Group, cashflows and covenant
compliance, the Directors have a reasonable expectation that the Group is able
to operate within the level of its current facilities, meet the required
covenant tests and has adequate resources to continue in operational existence
for at least 12 months from the date of approval of these financial
statements. The Group therefore continues to adopt the going concern basis in
preparing its financial information for the reasons set out below.
At 2 April 2022 the Group had total assets less current liabilities of
£2,274.8m and net assets of £1,506.9m. Liquidity as at that date was
£229.3m made up of cash and cash equivalents, and undrawn committed credit
facilities of £175m expiring in May 2025. The covenants linked to the
facilities are shown in note 11. At the time of the approval of these
financial statements, the cash and liquidity position of the group has not
changed significantly.
The Group operates in the Food Manufacturing industry, considered as essential
during the pandemic, and whilst HM Government restrictions have now been
lifted, there still exists uncertainty in respect of the potential future
impact of Covid-19. HM Government restrictions when necessary to be put in
place and the increase in hybrid working, means more meals are expected to be
eaten at home and hence increased demand for the Group's product ranges. The
Group's first priority remains the health and wellbeing of its colleagues,
customers and other stakeholders and to date the Group has experienced no net
financial adverse impact of the Covid-19 pandemic with elevated levels of
demand seen.
The Directors have rigorously reviewed the situation relating to inflationary
pressures across the industry driven by global supply chain disruption as a
result of Covid-19 and the current global political uncertainty driven by the
conflict in Ukraine and have modelled a series of 'downside case' scenarios
impacting future financial performance, cash flows and covenant compliance,
that cover a period of at least 12 months from the date of approval of the
financial statements. These downside cases represent severe but plausible
scenarios and include assumptions relating to an estimate of the impact of
inflation during the period, net of estimated recovery and the closure of a
proportion of manufacturing sites due to colleague absence as opposed to
Government imposed guidelines. The Directors continue to believe that the risk
of enforced site closures is low supported by there having been no
manufacturing site closures and a large proportion of colleagues have received
a vaccination. The Directors have also considered driver shortages and climate
change that may have an adverse impact on supply of, or the demand for certain
product groups and actions that retailers could take impacting financial
performance.
Whilst the downside scenarios are severe but plausible, it is considered by
the Directors to be prudent, having an adverse impact on revenue, margin and
cash flow. The Directors, in response, identified mitigating actions within
their control, that would reduce costs, optimising cashflow and liquidity.
Amongst these are the following actions reducing capital expenditure, reducing
marketing spend and delaying or cancelling discretionary spend. The Directors
have assumed no significant structural changes to the business will be needed
in any of the scenarios modelled.
The Directors, after reviewing financial forecasts and financing arrangements,
consider that the Group has adequate resources to continue to meet its
liabilities as they fall due for at least 12 months from the date of approval
of this report. Accordingly, the Directors are satisfied that it is
appropriate to adopt the going concern basis in preparing its consolidated
financial information.
Impact of the war in Ukraine
The Group primarily supplies the UK market but also supplies to other
countries in Europe and rest of the world. The Group does not trade in Ukraine
or Russia and is therefore not directly affected by trading restrictions or
sanctions. However, the Group could be affected in future due to inflationary
pressures such as increase in commodity prices (e.g. wheat, dairy), energy
prices, changes in long term UK GDP growth rate, and discount rates. The Group
has reviewed the impact of these changes and have modelled sensitivities as
part of the viability and going concern analysis and sensitivities of changes
in key inputs to impairment testing of goodwill. The Group will continue to
monitor the situation as it develops.
Climate change
The Group has considered the impact of both physical and transitional climate
change risks on the financial statements of the Group. The Group does not
consider there to be a material impact on the valuation of the Group's assets
or liabilities, including useful economic life of property, plant and
equipment, or on any significant accounting estimates or judgements. The Group
will continue to monitor the impact on valuations of assets and liabilities as
government policy evolves.
The impact of climate change has been considered in the projected cash flows
used for impairment testing.
2. Significant estimates and judgements
The following are areas of particular significance to the Group's financial
statements and may include the use of estimates, which is fundamental to the
compilation of a set of financial statements. Results may differ from actual
amounts.
Significant accounting estimates
The following are considered to be the key estimates within the financial
statements:
2.1 Deferred tax
All balances giving rise to deferred tax liabilities are recognised in full,
whereas deferred tax assets are only recognised to the extent at which they
are recoverable. Management performs an assessment on an annual basis to
assess the extent of future taxable profits that will be available against
which the tax losses can be utilised. The key assumptions underlying the
assessment is availability of future taxable profits and the underlying
revenue growth and divisional contribution margin growth. Revenue growth is
forecast based on known or forecast customer sales initiatives, including, to
the extent agreed, customer business plans or agreements for the next period,
current and forecast new product development, promotional and marketing
strategy, and specific category or geographical growth. External factors,
including the consumer environment, are also taken into account in the more
short-term forecasts.
The taxable profits for Year 1 to 3 are based on the latest Board approved
Budget and strategic plans. For recoverability purposes taxable profits are
assumed to remain flat from year 3 onward based on which, the tax losses will
be fully utilised within 20 years. A reasonable change in the key assumptions
will not lead to a material change in the deferred tax balance recognised and
a material adjustment in the carrying value of the deferred tax asset is not
expected in the next 12 months.
Further disclosures are contained within note 5.
2.2 Employee benefits
The present value of the Group's defined benefit pension obligations depends
on a number of actuarial assumptions. The primary assumptions used include the
discount rate applicable to scheme liabilities, the long-term rate of
inflation and estimates of the mortality applicable to scheme members. Each of
the underlying assumptions is set out in more detail in note 9.
At each reporting date, and on a continuous basis, the Group reviews the
macro-economic, Company and scheme specific factors influencing each of these
assumptions, using professional advice, in order to record the Group's ongoing
commitment and obligation to defined benefit schemes in accordance with IAS 19
(Revised).
Plan assets of the defined benefit schemes include a number of assets for
which quoted prices are not available. At each reporting date, the Group
determines the fair value of these assets with reference to most recently
available asset statements from fund managers.
Where pensions asset valuations were not available at the reporting date, as
is usual practice, valuations at 31 December 2021 are rolled forward for cash
movements to end of March 2022 to estimate the valuations for these assets.
This approach is principally relevant for Infrastructure Funds, Private
Equity, Absolute Return Products, Property Assets, Illiquid Credits and Global
Credits. Management have reviewed the individual investments to establish
where valuations are not expected to be available for inclusion in these
financial statements, movements in the most comparable indexes have then been
applied to these investments at a category level to establish any potential
estimation uncertainty within the results
2.3 Goodwill
Impairment reviews in respect of goodwill are performed at least annually and
more regularly if there is an indicator of impairment. Impairment reviews in
respect of intangible assets are performed when an event indicates that an
impairment review is necessary. Examples of such triggering events include a
significant planned restructuring, a major change in market conditions or
technology, expectations of future operating losses, or a significant
reduction in cash flows. In performing its impairment analysis, the Group
takes into consideration these indicators including the difference between its
market capitalisation and net assets.
The Group has considered the impact of the assumptions used on the
calculations and has conducted sensitivity analysis on the value in use
calculations of the CGUs carrying values for the purposes of testing goodwill.
2.4 Commercial arrangements
Sales rebates and discounts are accrued on each relevant promotion or customer
agreement and are charged to the statement of profit or loss at the time of
the relevant promotional buy-in as a deduction from revenue. Accruals for each
individual promotion or rebate arrangement are based on the type and length of
promotion and nature of customer agreement. At the time an accrual is made the
nature, funding level and timing of the promotion is typically known. Areas of
estimation are sales volume/activity, phasing and the amount of product sold
on promotion.
For short-term promotions, the Group performs a true up of estimates where
necessary on a monthly basis, using real time customer sales information where
possible and finally on receipt of a customer claim which typically follows
1-2 months after the end of a promotion. For longer-term discounts and rebates
the Group uses actual and forecast sales to estimate the level of rebate.
These accruals are updated monthly based on latest actual and forecast sales.
A reasonable change in the key assumption will not lead to a material change
in the balance recognised and a material adjustment is not expected in the 12
months of the estimate.
Judgements
The following are considered to be the key judgements within the financial
statements:
2.5 Non-trading items
Non-trading items have been presented separately throughout the financial
statements. These are items that management believes require separate
disclosure by virtue of their nature in order that the users of the financial
statements obtain a clear and consistent view of the Group's underlying
trading performance. In identifying non-trading items, management have applied
judgement including whether i) the item is related to underlying trading of
the Group; and/or ii) how often the item is expected to occur.
3. Segmental analysis
IFRS 8 requires operating segments to be determined based on the Group's
internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM
has been determined to be the Executive Leadership Team as it is primarily
responsible for the allocation of resources to segments and the assessment of
performance of the segments.
The Group's operating segments are defined as 'Grocery', 'Sweet Treats', and
'International'. The CODM reviews the performance by operating segments. The
Grocery segment primarily sells savoury ambient food products and the Sweet
Treats segment sells primarily sweet ambient food products. The International
segment has been aggregated within the Grocery segment for reporting purposes
as revenue is below 10% of the Group's total revenue and the segment is
considered to have similar characteristics to that of Grocery as identified in
IFRS 8. There has been no change to the segments during the period.
The CODM uses Divisional contribution as the key measure of the segments'
results. Divisional contribution is defined as gross profit after selling,
marketing and distribution costs. Divisional contribution is a consistent
measure within the Group and reflects the segments' underlying trading
performance for the period under evaluation.
The Group uses trading profit to review overall Group profitability. Trading
profit is defined as profit/loss before tax before net finance costs,
amortisation of intangible assets, fair value movements on foreign exchange
and other derivative contracts, net interest on pensions and administrative
expenses, and any material items that require separate disclosure by virtue of
their nature in order that users of the financial statements obtain a clear
and consistent view of the Group's underlying trading performance.
The segment results for the period ended 2 April 2022 and for the period ended
3 April 2021 and the reconciliation of the segment measures to the respective
statutory items included in the consolidated financial statements are as
follows:
52 weeks ended 2 April 2022 53 weeks ended 3 April 2021
Grocery Sweet Total Grocery Sweet Total
Treats Treats
£m £m £m £m £m £m
External revenues 647.7 252.8 900.5 702.6 244.4 947.0
Divisional contribution 160.2 33.4 193.6 174.7 23.2 197.9
Group and corporate costs (45.3) (46.6)
Trading profit 148.3 151.3
Amortisation of intangible assets (27.0) (30.4)
Fair value movements on foreign exchange and other derivative contracts(1) 4.4 (2.3)
Reversal of impairment losses on financial assets(2) - 15.7
Profit on disposal of investment in associate(2) - 16.9
Net interest on pensions and administrative expenses 4.2 9.7
Non-trading items:(3)
- GMP equalisation charge (0.3) (2.9)
- Restructuring costs - (4.9)
- Other non-trading items(4) 1.5 (0.5)
Operating profit 131.1 152.6
Finance cost (29.0) (36.2)
Finance income(2) 0.5 6.4
Profit before taxation 102.6 122.8
Depreciation(5) (11.2) (8.0) (19.2) (11.5) (7.6) (19.1)
(1)The gain of £4.4m (2020/21: loss of £2.3m) reflects changes in fair value
rate during the 52-week period and movement in nominal value of the
instruments held at 2 April 2022 from the 3 April 2021 position.
(2)In April 2014, the Group entered into a partnership with The Gores Group
LLC in respect of Hovis Holdings Limited ('Hovis'). This partnership, of which
the Group held a 49% equity interest, was subsequently written off in FY
2015/16. On 5 November 2020, the Group completed the sale of its interest in
Hovis to Endless LLP. As part of the sale, the Group has received a total
consideration of £37.3m, of which £16.9m was in respect of equity and
£20.4m reflected the settlement of the outstanding loan to associate
including interest of £4.7m.
(3)Non-trading items in the prior period include restructuring costs of £4.9m
relating primarily to costs associated with the Strategic review and
integration of the Knighton business.
(4)Other in the current period relates primarily to the resolution of a legacy
legal matter.
(5)Depreciation in the period ended 2 April 2022 includes £2.0m (2020/21:
£2.2m) of depreciation of IFRS 16 right of use assets.
Revenues in the period ended 2 April 2022, from the Group's four principal
customers, which individually represent over 10% of total Group revenue, are
£224.8m, £129.0m, £97.6m and £91.7m (2020/21: £240.2m, £138.8m, £112.0m
and £98.5m). These revenues relate to both the Grocery and Sweet Treats
reportable segments.
The Group primarily supplies the UK market, although it also supplies certain
products to other countries in Europe and the rest of the world. The following
table provides an analysis of the Group's revenue, which is allocated on the
basis of geographical market destination, and an analysis of the Group's
non-current assets by geographical location.
Revenue
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
United Kingdom 847.1 892.9
Other Europe 26.2 28.5
Rest of world 27.2 25.6
Total 900.5 947.0
Non-current assets
As at As at
2 Apr 2022 3 Apr 2021
£m £m
United Kingdom 1,130.4 1,155.3
Non-current assets exclude deferred tax assets and net retirement benefit
assets.
4. Finance income and costs
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Interest payable on bank loans and overdrafts (4.3) (5.7)
Interest payable on senior secured notes (13.4) (25.9)
Interest payable on revolving facility (0.3) (0.6)
Other interest receivable(1) 0.1 0.2
Amortisation of debt issuance costs (2.1) (2.9)
(20.0) (34.9)
Write off of financing costs(2) (4.3) (1.3)
Early redemption fee(3) (4.7) -
Total finance cost (29.0) (36.2)
Interest receivable on bank deposits 0.3 1.7
Other finance income 0.2 4.7
Total finance income 0.5 6.4
Net finance cost (28.5) (29.8)
(1)Included in other interest receivable is £0.8m charge (2020/21: £0.9m
charge) relating to non-cash interest costs arising following the adoption of
IFRS 16 and £0.9m credit (2020/21: £1.1m credit) relating to the unwind of
the discount on certain of the Group's long-term provisions
(2) Relates to the refinancing of the senior secured fixed rate notes due 2023
and revolving credit facility in the current period and redemption of senior
secured floating rate notes due 2022 in the previous period. See note 11 for
further details.
(3) Relates to a non-recurring payment arising on the early redemption of the
£300m senior secured fixed rate notes due to mature in October 2023 as part
of the refinancing of the Group's debt in June 2021.
5. Taxation
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Current tax
- Current period (6.4) (9.2)
Deferred tax
- Current period (16.5) (9.2)
- Prior periods 1.9 1.6
- Changes in tax rate (4.1) -
Income tax charge (25.1) (16.8)
The applicable rate of corporation tax for the period is 19%.
Tax relating to items recorded in other comprehensive income included:
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Corporation tax credit on pension movements 6.4 9.2
Deferred tax charge on increase of corporate tax rate (17.9) -
Deferred tax credit on prior year 1.6 -
Deferred tax (charge)/credit on pension movements (97.9) 132.9
(107.8) 142.1
The applicable rate of corporation tax for the period is 19%. As set out in
the Finance Act of 2021, the corporation tax rate will increase from the
current 19% to 25% starting April 2023. Therefore, the deferred tax balances
have been restated between 22% to 25% depending on the rate at which they are
expected to unwind. As a result of the higher tax rate a tax charge of £4.1m
has been recorded in the consolidated statement of profit or loss and a tax
charge of £17.9m has been recorded in other comprehensive income.
The tax charge for the period differs from the standard rate of corporation
tax in the United Kingdom of 19.0% (2020/21: 19.0%). The reasons for this are
explained below:
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Profit before taxation 102.6 122.8
Tax charge at the domestic income tax rate of 19.0% (2020/21: 19.0%) (19.5) (23.3)
Tax effect of:
Non-deductible items (0.8) (1.4)
Other disallowable items - (0.3)
Capital gain on disposal of business - 6.6
Adjustment to restate opening deferred tax balances (4.1) -
Difference between current and deferred tax rate (3.1) -
Tax incentives 0.5 -
Adjustments to prior periods 1.9 1.6
Income tax charge (25.1) (16.8)
Corporation tax losses are not recognised where future recoverability is
uncertain.
The difference between current and deferred tax rate of £3.1m relates to the
impact of the current tax rate being 19% and the current year deferred tax
movements being measured at between 22% and 25%.
The adjustments to prior periods of £1.9m (2020/21: £1.6m) relates primarily
to the changes in prior period intangibles and capital allowances following
verifications in submitted returns.
Deferred tax
Deferred tax is calculated in full on temporary differences using the tax rate
appropriate to the jurisdiction in which the asset/(liability) arises and the
tax rates that are expected to apply in the periods in which the asset or
liability is settled.
2021/22 2020/21
£m £m
At 4 April 2021 / 29 March 2020 (57.4) (184.9)
Charged to the statement of profit or loss (18.7) (7.6)
(Charged)/credited to other comprehensive income (114.2) 132.9
Credited to equity 0.5 2.2
At 2 April 2022 / 3 April 2021 (189.8) (57.4)
The Group has not recognised £2.2m of deferred tax assets (2020/21: £1.7m
not recognised) relating to UK corporation tax losses. In addition, the Group
has not recognised a tax asset of £83.9m (2020/21: £83.9m) relating to
Advanced Corporation Tax (ACT) and £76.6m (2020/21: £58.1m) relating to
capital losses. Under current legislation these can generally be carried
forward indefinitely.
Deferred tax liabilities Intangibles Retirement benefit obligation Leases Other Total
£m £m £m £m £m
At 29 March 2020 (52.0) (232.7) (2.9) - (287.6)
Current period credit/(charge) 1.9 (2.1) - - (0.2)
Reclassified from deferred tax assets - - - (1.0) (1.0)
Credited to other comprehensive income - 132.9 - - 132.9
At 3 April 2021 (50.1) (101.9) (2.9) (1.0) (155.9)
At 4 April 2021 (50.1) (101.9) (2.9) (1.0) (155.9)
Charge due to change in corporate tax rate
- To statement of profit or loss (15.4) (9.5) (0.9) (0.3) (26.1)
- To other comprehensive income (22.7) (22.7)
Current period credit/(charge) 1.3 (3.5) - - (2.2)
Charged to other comprehensive income - (97.9) - - (97.9)
Prior period (charge)/credit
- To statement of profit or loss (0.3) - - - (0.3)
- To other comprehensive income 1.6 1.6
At 2 April 2022 (64.5) (233.9) (3.8) (1.3) (303.5)
Deferred tax assets Accelerated tax depreciation Share-based payments Losses Other Total
£m £m £m £m £m
At 29 March 2020 56.7 0.1 45.9 - 102.7
Current period (charge)/credit (8.6) 0.4 (0.9) 0.1 (9.0)
Reclassified to deferred tax liabilities - - - 1.0 1.0
Credited to equity - 2.2 - - 2.2
Prior period credit
- To statement of profit or loss 1.4 - - 0.2 1.6
At 3 April 2021 49.5 2.7 45.0 1.3 98.5
At 4 April 2021 49.5 2.7 45.0 1.3 98.5
Credit due to change in corporate tax rate
- To statement of profit or loss 12.7 - 9.1 0.2 22.0
- To other comprehensive income - - 4.8 - 4.8
- To equity - 0.1 - - 0.1
Current period (charge)/credit (13.1) 0.7 (1.2) (0.7) (14.3)
Credited to equity - 0.4 - - 0.4
Prior period credit
- To statement of profit or loss 2.2 - - - 2.2
At 2 April 2022 51.3 3.9 57.7 0.8 113.7
Deferred tax asset on losses and accelerated tax depreciation £m
As at 2 April 2022 23.1
As at 3 April 2021 28.4
Net deferred tax liability £m
As at 2 April 2022 (212.9)
As at 3 April 2021 (85.8)
Where there is a legal right of offset and an intention to settle as such,
deferred tax assets and liabilities may be presented on a net basis. This is
the case for most of the Group's deferred tax balances except non-trading
losses of £23.1m (2020/21: £18.7m) and £nil (2020/21: £9.7m) towards
accelerated tax depreciation. The remainder of deferred tax assets have
therefore been offset in the tables above. Substantial elements of the Group's
deferred tax assets and liabilities, primarily relating to the defined benefit
pension obligation, are greater than one year in nature.
6. Earnings per share
Basic earnings per share has been calculated by dividing the profit
attributable to owners of the parent of £77.5m (2020/21: £106.0m profit) by
the weighted average number of ordinary shares of the Company.
2021/22 2020/21
Number (m) Number (m)
Weighted average number of ordinary shares for the purpose of basic earnings 858.8 851.4
per share
Effect of dilutive potential ordinary shares:
- Share options 17.0 17.1
Weighted average number of ordinary shares for the purpose of diluted earnings 875.8 868.5
per share
52 weeks ended 2 April 2022 53 weeks ended 3 April 2021
Basic Dilutive effect of share options Diluted Basic Dilutive effect of share options Diluted
Profit after tax (£m) 77.5 77.5 106.0 106.0
Weighted average number of shares (m) 858.8 17.0 875.8 851.4 17.1 868.5
Earnings per share (pence) 9.0 (0.2) 8.8 12.5 (0.3) 12.2
Dilutive effect of share options
The dilutive effect of share options is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. The only dilutive potential ordinary
shares of the Company are share options and share awards. A calculation is
performed to determine the number of shares that could have been acquired at
fair value (determined as the average annual market share price of the
Company's shares) based on the monetary value of the share awards and the
subscription rights attached to the outstanding share options.
No adjustment is made to the profit or loss in calculating basic and diluted
earnings per share.
Adjusted earnings per share ('Adjusted EPS')
Adjusted earnings per share is defined as trading profit less net regular
interest, less a notional tax charge at 19.0% (2020/21: 19.0%) divided by the
weighted average number of ordinary shares of the Company.
Net regular interest is defined as net finance cost after excluding write-off
of financing costs, early redemption fees, other interest payable and other
interest receivable.
Trading profit and Adjusted EPS have been reported as the directors believe
these assists in providing additional useful information on the underlying
trends, performance and position of the Group.
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Trading profit 148.3 151.3
Less net regular interest (19.8) (33.4)
Adjusted profit before tax 128.5 117.9
Notional tax at 19.0% (2020/21: 19%) (24.4) (22.4)
Adjusted profit after tax 104.1 95.5
Average shares in issue (m) 858.8 851.4
Adjusted EPS (pence) 12.1 11.2
Dilutive effect of share options (0.2) (0.2)
Diluted adjusted EPS (pence) 11.9 11.0
Net regular interest
Net finance cost (28.5) (29.8)
Exclude other interest receivable (0.2) (4.7)
Exclude write-off of financing costs 4.3 1.3
Exclude early redemption fee 4.7 -
Exclude other interest receivable (0.1) (0.2)
Net regular interest (19.8) (33.4)
7. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of defined benefit schemes under which current and
former employees have built up an entitlement to pension benefits on their
retirement. Although the Premier Foods Section, Premier Grocery Products
Section and RHM Section identified below are no longer separate schemes
following the merger in 2020, historically, Premier Foods companies' pension
liabilities and ex-RHM companies' liabilities have been shown separately.
These are as follows:
(a) The "Premier" Schemes, which comprise:
Premier Foods Pension Section of RHM Pension Scheme
Premier Grocery Products Pension Section of RHM Pension Scheme
Premier Grocery Products Ireland Pension Scheme ('PGPIPS')
Chivers 1987 Pension Scheme
Hillsdown Holdings Limited Pension Scheme
(b) The "RHM" Pension Schemes, which comprise:
RHM Section of the RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The Premier Foods Pension Scheme (PFPS) and Premier Grocery Products Pension
Scheme (PGPPS) were wound up following the merger of assets and liabilities on
a segregated basis with the RHM Pension Scheme in June 2020. The RHM Pension
Scheme operates as three sections, the RHM Section, Premier Foods Section and
Premier Grocery Products Section.
The interim actuarial valuations for the new Premier Foods and Premier Grocery
Products Sections as at 31 March 2021 have been agreed and show a combined
reduction in their deficits of £125m since April 2019. This has allowed the
recovery plans for both Sections to be shortened by two years. There is no
change to the rate of deficit contributions paid in the short term.
The triennial valuation cycle continues with effect from 31 March 2022 for all
three Sections of the RHM Pension Scheme.
The exchange rates used to translate the overseas euro based schemes are
£1.00 = €1.1774 (2020/21: £1.00 = €1.1215) for the average rate during
the period, and £1.00 = €1.1881 (2020/21: £1.00 = €1.1740) for the
closing position at period end.
All defined benefit schemes are held separately from the Company under Trusts.
Trustees are appointed to operate the schemes in accordance with their
respective governing documents and pensions law. The schemes meet the legal
requirement for member nominated trustees' representation on the trustee
boards. Trustee directors undertake regular training and development to ensure
that they are equipped appropriately to carry out the role. In addition, each
trustee board has appointed professional advisers to give them the specialist
expertise they need to support them in the areas of investment, funding,
legal, covenant and administration.
The trustee boards generally meet at least four times a year to conduct their
business. To support these meetings certain aspects of the schemes' operation
are delegated to give specialist focus (e.g. investment, administration and
compliance) to committees for which further meetings are held as appropriate
throughout the year. These committees regularly report to the full trustee
boards.
The schemes invest through investment managers appointed by the trustees in a
broad range of assets to support the security and funding of their pension
obligations. Asset classes used include government bonds, private equity,
absolute return products, swaps, infrastructure, illiquid credits and global
credits.
The scheme assets do not include any of the Group's own financial instruments,
nor any property occupied by, or other assets used by, the Group. The RHM
Pension Scheme holds a security over the assets of the Group which ranks pari
passu with the banks and bondholders in the event of insolvency, up to a cap.
The schemes incorporate a Liability Driven Investment (LDI) strategy to more
closely match the assets with changes in value of liabilities. The RHM Pension
Scheme uses assets including interest rate and inflation swaps, index linked
bonds and infrastructure in its LDI strategy.
In setting the investment strategy, the primary concern for the trustee of the
RHM Pension Scheme is to act in the best financial interests of all
beneficiaries, seeking the best return that is consistent with a prudent and
appropriate level of risk. This includes the risk that environmental, social
and governance factors, including climate change, negatively impact the value
of investments held if not understood and evaluated properly. The trustee
considers this risk by taking advice from its investment advisors when
choosing asset classes, selecting managers, and monitoring performance.
From 1 October 2022, the trustee is required by regulation to:
· implement climate change governance measures and produce a Taskforce on
Climate-related Financial Disclosures (TCFD) report containing associated
disclosures; and
· publish its TCFD report on a publicly available website, accessible free of
charge.
The trustee is on track to draft and disclose the scheme's first TCFD report
as part of the 2023 year-end reporting cycle.
The main risks to which the Group is exposed in relation to the funded pension
schemes are as follows:
· Liquidity risk - the PF and PGP Sections of the RHM Pension Scheme have
significant technical funding deficits which could increase. The RHM Section
of the RHM Pension Scheme is currently in surplus, but subsequent valuations
could reveal a deficit. As such this could have an adverse impact on the
financial condition of the Group. The Group continues to monitor the pension
risks closely working with the trustees to ensure a collaborative approach.
· Mortality risk - the assumptions adopted make allowance for future
improvements in life expectancy. However, if life expectancy improves at a
faster rate than assumed, this would result in greater payments from the
schemes and consequently increases in the schemes liabilities. The trustees
review the mortality assumption on a regular basis to minimise the risk of
using an inappropriate assumption.
· Yield risk - a fall in government bond yields will increase the schemes
liabilities and certain of the assets. However, the liabilities may grow by
more in monetary terms, thus increasing the deficit in the scheme.
· Inflation risk - the majority of the schemes liabilities increase in line with
inflation and so if inflation is greater than expected, the liabilities will
increase.
· Investment risk - the risk that investments do not perform in line with
expectations
The exposure to the yield and inflation risks described above can be hedged by
investing in assets that move in the same direction as the liabilities in the
event of a fall in yields, or a rise in inflation. The RHM Pension Scheme has
largely hedged its inflation and interest rate exposure to the extent of its
funding level. Both the Premier Foods and Premier Grocery Products Sections
are currently hedged to 80% for interest rates and 80% to inflation.
The liabilities of the schemes are approximately 45% in respect of former
active members who have yet to retire and approximately 55% in respect of
pensioner members already in receipt of benefits.
The average duration of the pension liabilities for the three Sections of the
RHM Pension Scheme is 16.0 years (16.0 years for the RHM Section; 15.5 years
for the PF Section and 15.5 years for the PGP Section).
All pension schemes are closed to future accrual.
At the balance sheet date, the combined principal accounting valuation
assumptions were as follows:
At 2 Apr 2022 At 3 Apr 2021
Premier Schemes RHM Premier Schemes RHM Schemes
Schemes
Discount rate 2.75% 2.75% 2.00% 2.00%
Inflation - RPI 3.60% 3.60% 3.25% 3.25%
Inflation - CPI 3.20% 3.20% 2.80% 2.80%
Future pension increases
- RPI (min 0% and max 5%) 3.35% 3.35% 3.10% 3.10%
- CPI (min 3% and max 5%) 3.65% 3.65% 3.40% 3.40%
For the smaller overseas schemes, the discount rate used was 1.75% (2020/21:
1.1%) and future pension increases were 2.6% (2020/21: 1.6%).
At 2 April 2022 and 3 April 2021, the discount rate was derived based on a
bond yield curve expanded to also include bonds rated AA by one credit agency
(and which might for example be rated A or AAA by other agencies).
The Group continued to set RPI inflation in line with the market break-even
expectations less an inflation risk premium. The inflation risk premium of
0.3% (2020/21: 0.3%), reflects an allowance for additional market distortions
caused by the RPI reform proposals.
The Group has set the CPI assumption by assuming it is 1.0% p.a. lower than
RPI pre 2030 (reflecting UKSA's stated intention to make no changes before
2030) and 0.1% lower than RPI post 2030 (2020/21: 0.0% post 2030), this being
our expectation of the long-term average difference between CPI and CPI-H.
Using this approach, the assumed difference between the RPI and CPI is an
average of 0.40% (2020/21: 0.45%) per annum. The estimated impact of the
reduction in the difference between RPI and CPI is approximately £9.2m
increase in defined benefit obligation in respect of the schemes.
The assumptions take into account the timing of the expected future cashflows
from the pension schemes.
The RHM scheme invests directly in interest rate and inflation swaps to
protect from fluctuations in interest rates and inflation.
The mortality assumptions are based on standard mortality tables. The
directors have considered the impact of the current Covid-19 pandemic on the
mortality assumptions and consider that use of the updated Continuous
Mortality Improvement (CMI) 2021 projections released in March 2022 for the
future improvement assumption a reasonable approach. Management considers the
2020 and 2021 mortality experience to be outliers and therefore have applied a
0% weight to the 2020 and 2021 mortality experience data. However, an addition
to the mortality scaling factors of 2% has been applied, which reflects the
expected long term negative outlook from the impact of Covid-19 on future life
expectancy. The estimated impact of the addition to the mortality scaling
factors is approximately 0.5% decrease in defined benefit obligation in
respect of the schemes.
An adjustment to the base mortality tables has been made for the Premier Foods
schemes to reflect the latest scheme mortality studies which were commissioned
by the trustee in 2021. The life expectancy assumptions are as follows:
At 2 Apr 2022 At 3 Apr 2021
Premier Schemes RHM Schemes Premier Schemes RHM Schemes
Male pensioner, currently aged 65 86.6 85.2 87.2 85.4
Female pensioner, currently aged 65 88.3 87.7 89.4 87.8
Male non-pensioner, currently aged 45 87.5 86.5 87.8 86.6
Female non-pensioner, currently aged 45 89.8 89.3 90.4 89.4
A sensitivity analysis on the principal assumptions used to measure the scheme
liabilities at the period end is as follows:
Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease by 0.1% Decrease/increase by £65.9m/£66.9m
Inflation Increase/decrease by 0.1% Increase/decrease by £29.2m/£19.0m
Assumed life expectancy at age 60 (rate of mortality) Increase/decrease by 1 year Increase/decrease by £225.3m/£215.9m
The sensitivity information has been derived using projected cash flows for
the Schemes valued using the relevant assumptions and membership profile as at
2 April 2022. Extrapolation of these results beyond the sensitivity figures
shown may not be appropriate.
Premier % of total RHM % of total Total % of total
Schemes Schemes
£m % £m % £m
Assets with a quoted price in an active market at 2 April 2022:
Government bonds 337.1 40.8 842.3 19.7 1,179.4 23.1
Cash 27.9 3.4 76.0 1.8 103.9 2.0
Assets without a quoted price in an active market at 2 April 2022:
UK equities 0.1 0.0 0.3 0.0 0.4 0.0
Global equities 4.3 0.5 5.7 0.1 10.0 0.2
Government bonds 31.8 3.9 2.5 0.1 34.3 0.7
Corporate bonds 0.3 0.0 6.0 0.1 6.3 0.1
UK property 84.9 10.3 285.4 6.7 370.3 7.3
European property 38.3 4.6 168.3 3.9 206.6 4.0
Absolute return products 62.5 7.6 872.2 20.4 934.7 18.3
Infrastructure funds 26.7 3.2 338.0 7.9 364.7 7.2
Interest rate swaps 0.1 0.0 397.4 9.3 397.5 7.8
Inflation swaps - - 93.4 2.2 93.4 1.8
Private equity 39.9 4.8 280.1 6.5 320.0 6.3
LDI - - 7.7 0.2 7.7 0.2
Global credit 74.3 9.0 554.3 13.0 628.6 12.3
Illiquid credit 81.6 9.9 191.6 4.5 273.2 5.4
Cash 9.8 1.2 0.1 0.0 9.9 0.2
Other(1) 6.7 0.8 152.4 3.6 159.1 3.1
Fair value of scheme assets 826.3 100% 4,273.7 100% 5,100.0 100%
as at 2 April 2022
Assets with a quoted price in an active market at 3 April 2021:
Government bonds 45.1 5.7 1,527.7 34.3 1,572.8 29.9
Cash 14.8 1.9 64.9 1.5 79.7 1.5
Assets without a quoted price in an active market at 3 April 2021(2):
UK equities 0.6 0.1 0.3 0.0 0.9 0.1
Global equities 8.1 1.0 5.9 0.1 14.0 0.3
Government bonds 34.3 4.3 18.3 0.4 52.6 1.0
Corporate bonds 1.0 0.1 - - 1.0 0.0
UK Property 84.6 10.7 278.8 6.2 363.4 6.9
European property 20.6 2.6 83.9 1.9 104.5 2.0
Absolute return products 228.2 28.8 883.9 19.8 1,112.1 21.1
Infrastructure funds 19.3 2.5 302.2 6.8 321.5 6.1
Interest rate swaps - - 464.2 10.4 464.2 8.8
Inflation swaps - - 21.2 0.5 21.2 0.4
Private equity 22.3 2.8 218.3 4.9 240.6 4.6
LDI 191.2 24.1 - - 191.2 3.6
Global credit 16.9 2.1 301.7 6.8 318.6 6.1
Illiquid credit 47.1 5.9 127.8 2.9 174.9 3.4
Cash 0.1 0.0 - - 0.1 0.0
Other(1) 58.3 7.4 160.3 3.5 218.6 4.2
Fair value of scheme assets 792.5 100 4,459.4 100 5,251.9 100
as at 3 April 2021
(1) Included in Other in the RHM Schemes is £111.2m (2020/21: £106.3m) of
assets which were sold in the prior period and await settlement at the
year-end date.
(2) Updated to provide enhanced disclosure on the assets within the Other
category.
For assets without a quoted price in an active market fair value is determined
with reference to net asset value statements provided by third parties.
Where pensions asset valuations were not available at 31 March 2022, as is
usual practice, valuations at 31 December 2021 have been rolled forward for
cash movements to end of March 2022 to estimate the valuations for these
assets. This approach is principally relevant for Infrastructure Funds,
Private Equity, Absolute Return Products, Property Assets, Illiquid Credits
and Global Credits. Management have applied movements in the market indexes
most comparable between 31 December 2021 and 1 April 2022 to project a
valuation for assets where the lagged value approach is to be taken. Pension
asset valuations are therefore subject to estimation uncertainty due to market
volatility, which could result in a material movement in asset values over the
next 12 months.
The amounts recognised in the balance sheet arising from the Group's
obligations in respect of its defined benefit schemes are as follows:
At 2 April 2022 At 3 April 2021
Premier Schemes RHM Schemes Total Premier Schemes RHM Schemes Total
£m £m £m £m £m £m
Present value of funded obligations (1,020.2) (3,134.9) (4,155.1) (1,175.1) (3,536.9) (4,712.0)
Fair value of scheme assets 826.3 4,273.7 5,100.0 792.5 4,459.4 5,251.9
(Deficit)/surplus in schemes (193.9) 1,138.8 944.9 (382.6) 922.5 539.9
The aggregate surplus of £539.9m has increased to a surplus of £944.9m in
the current period. This increase of £405.0m (2020/21: £690.5m decrease) is
primarily due to changes in financial assumptions, being higher discount rate
offset to a lesser extent by higher inflation assumptions. Further details are
provided later in this note.
The disclosures in note 9 represent those schemes that are associated with
Premier ('Premier schemes') and those that are associated with ex-RHM
companies ('RHM Schemes'). These differ to that disclosed on the balance
sheet, in which the schemes have been split between those in an asset position
and those in a liability position. The disclosures in note 9 reconcile to
those disclosed on the balance sheet as shown below:
At 2 April 2022 At 3 April 2021
Premier Schemes RHM Schemes Total Premier Schemes RHM Schemes Total
£m £m £m £m £m £m
Schemes in net asset position 9.9 1,138.8 1,148.7 12.2 922.5 934.7
Schemes in net liability position (203.8) - (203.8) (394.8) - (394.8)
Net (Deficit)/surplus in schemes (193.9) 1,138.8 944.9 (382.6) 922.5 539.9
Changes in the present value of the defined benefit obligation were as
follows:
Premier Schemes RHM Schemes Total
£m £m £m
Defined benefit obligation at 28 March 2020 (1,049.6) (3,240.0) (4,289.6)
Interest cost (22.8) (60.4) (83.2)
Past service cost (0.4) (2.5) (2.9)
Settlement 27.4 57.8 85.2
Remeasurement loss (171.6) (442.8) (614.4)
Exchange differences 2.6 1.5 4.1
Benefits paid 39.3 149.5 188.8
Defined benefit obligation at 3 April 2021 (1,175.1) (3,536.9) (4,712.0)
Interest cost (22.7) (68.9) (91.6)
Past service cost (0.1) (0.2) (0.3)
Settlement 0.2 - 0.2
Remeasurement gain 139.7 333.5 473.2
Exchange differences 0.5 0.2 0.7
Benefits paid 37.3 137.4 174.7
Defined benefit obligation at 2 April 2022 (1,020.2) (3,134.9) (4,155.1)
Changes in the fair value of scheme assets were as follows:
Premier RHM Schemes Total
Schemes
£m £m £m
Fair value of scheme assets at 28 March 2020 774.7 4,745.3 5,520.0
Interest income on scheme assets 16.2 81.4 97.6
Remeasurement gains/(losses) 16.7 (152.6) (135.9)
Administrative costs (6.8) (3.9) (10.7)
Settlement (18.1) (61.1) (79.2)
Contributions by employer 45.5 1.5 47.0
One-off contribution by employer(1) 7.0 - 7.0
Exchange differences (3.4) (1.7) (5.1)
Benefits paid (39.3) (149.5) (188.8)
Fair value of scheme assets at 3 April 2021 792.5 4,459.4 5,251.9
Interest income on scheme assets 15.3 87.3 102.6
Remeasurement gains/(losses) 17.5 (133.4) (115.9)
Administrative costs (4.2) (2.5) (6.7)
Settlement (0.3) - (0.3)
Contributions by employer 40.9 0.5 41.4
Additional employer contribution(2) 2.5 - 2.5
Exchange differences (0.6) (0.2) (0.8)
Benefits paid (37.3) (137.4) (174.7)
Fair value of scheme assets at 2 April 2022 826.3 4,273.7 5,100.0
(1) One-off contribution by employer is related to Hovis disposal proceeds due
to the Premier Schemes
(2)Contribution by the Group to the Premier Schemes due to the payment of
dividends during the year.
The reconciliation of the net defined benefit (deficit)/surplus over the
period is as follows:
Premier RHM Schemes Total
Schemes
£m £m £m
(Deficit)/surplus in schemes at 28 March 2020 (274.9) 1,505.3 1,230.4
Amount recognised in profit or loss (4.5) 11.3 6.8
Remeasurements recognised in other comprehensive income (154.9) (595.4) (750.3)
Contributions by employer 45.5 1.5 47.0
One-off contribution by employer 7.0 - 7.0
Exchange differences recognised in other comprehensive income (0.8) (0.2) (1.0)
(Deficit)/surplus in schemes at 3 April 2021 (382.6) 922.5 539.9
Amount recognised in profit or loss (11.8) 15.7 3.9
Remeasurements recognised in other comprehensive income 157.2 200.1 357.3
Contributions by employer 40.9 0.5 41.4
Additional employer contribution(1) 2.5 - 2.5
Exchange differences recognised in other comprehensive income (0.1) - (0.1)
(Deficit)/surplus in schemes at 2 April 2022 (193.9) 1,138.8 944.9
(1)Contribution by the Group to the Premier Schemes due to the payment of
dividends during the year.
Remeasurements recognised in the consolidated statement of comprehensive
income are as follows:
2021/22 2020/21
Premier RHM Total Premier RHM Total
Schemes Schemes Schemes Schemes
£m £m £m £m £m £m
Remeasurement gain/(loss) on scheme liabilities 139.7 333.5 473.2 (171.6) (442.8) (614.4)
Remeasurement gain/(loss) on scheme assets 17.5 (133.4) (115.9) 16.7 (152.6) (135.9)
Net remeasurement gain/(loss) for the period 157.2 200.1 357.3 (154.9) (595.4) (750.3)
The actual return on scheme assets was a £13.3m loss (2020/21: £38.3m loss),
which is £115.9m less (2020/21: £135.9m less) than the interest income on
scheme assets of £102.6m (2020/21: £97.6m).
The remeasurement gain on liabilities of £473.2m (2020/21: £614.4m loss)
comprises a gain due to changes in financial assumptions of £413.3m (2020/21:
£575.1m loss), a loss due to member experience of £3.2m (2020/21: £6.7m
gain) and a gain due to demographic assumptions of £63.1m (2020/21: £46.0m
loss).
The Group expects to contribute between £4m and £6m annually to its defined
benefit schemes in relation to expenses and government levies and £37-39m of
additional annual contributions to fund the scheme deficits up to 2 April
2023.
The Group has concluded that it has an unconditional right to a refund of any
surplus in the RHM Pension Scheme once the liabilities have been discharged
and, that the trustees of the RHM Pension Scheme do not have the unilateral
right to wind up the scheme, so the asset has not been restricted and no
additional liability has been recognised.
The total amounts recognised in the consolidated statement of profit or loss
are as follows:
2021/22 2020/21
Premier Schemes RHM Schemes Total Premier Schemes RHM Schemes Total
£m £m £m £m £m £m
Operating profit
Past service cost (0.1) (0.2) (0.3) (0.4) (2.5) (2.9)
Settlement (costs)/credits (0.1) - (0.1) 9.3 (3.3) 6.0
Administrative costs (4.2) (2.5) (6.7) (6.8) (3.9) (10.7)
Net interest (cost)/credit (7.4) 18.4 11.0 (6.6) 21.0 14.4
Total (cost)/credit (11.8) 15.7 3.9 (4.5) 11.3 6.8
Defined contribution schemes
A number of companies in the Group operate defined contribution schemes,
including provisions to comply with auto enrolment requirements laid down by
law. In addition, a number of schemes providing life assurance benefits only
are operated. The total expense recognised in the statement of profit or loss
of £8.0m (2020/21: £7.8m) represents contributions payable to the schemes by
the Group at rates specified in the rules of the schemes.
8. Notes to the cash flow statement
Reconciliation of profit before tax to cash flows from operations
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Profit before taxation 102.6 122.8
Net finance cost 28.5 29.8
Operating profit 131.1 152.6
Depreciation of property, plant and equipment 19.2 19.1
Amortisation of intangible assets 27.0 30.4
Loss on disposal of non-current assets 0.7 0.4
Impairment of tangible assets - 0.3
Impairment of intangible assets - 0.1
Fair value movements on foreign exchange and other derivative contracts (4.4) 2.3
Reversal of impairment losses on financial assets(1) - (15.7)
Profit on disposal of investment in associate(1) - (16.9)
Equity settled employee incentive schemes 3.4 3.1
GMP equalisation and past service cost related to defined benefit pension 0.3 2.9
schemes
Increase in inventories (9.3) (0.8)
(Increase) / Decrease in trade and other receivables (13.1) 5.7
Increase / (Decrease) in trade and other payables and provisions 4.1 (1.6)
Additional employer contribution(2) (2.5) -
Movement in retirement benefit obligations (45.6) (63.7)
Cash generated from operations 110.9 118.2
(1)On 5 November 2020, the Group completed the sale of its interest in Hovis
to Endless LLP. As part of the sale, the group received a total consideration
of £37.3m, of which £16.9m was in respect of equity and £20.4m reflected
the settlement of the outstanding loan to associate including interest of
£4.7m
(2)Contribution by the Group to the Premier schemes due to the payment of
dividends during the year.
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Net inflow / (outflow) of cash and cash equivalents 53.2 (176.8)
Movement in lease liabilities 2.5 2.9
(Increase) / decrease in borrowings (10.0) 275.0
Debt issuance costs in the period 8.5
Other non-cash movements (6.5) (4.2)
Decrease in borrowings net of cash 47.7 96.9
Total net borrowings at beginning of period (332.7) (429.6)
Total net borrowings at end of period (285.0) (332.7)
Analysis of movement in borrowings
As at Cash flows Non-cash interest expense Other As at
3 Apr 2021 non-cash movements 2 Apr 2022
£m £m £m £m £m
Bank overdrafts (3.1) 3.1 - - -
Cash and bank deposits 4.2 50.1 - - 54.3
Net cash and cash equivalents 1.1 53.2 - - 54.3
Borrowings - revolving credit facilities - - - - -
Borrowings - Senior Secured Fixed Rate Notes maturing October 2023 (300.0) 300.0 - - -
Borrowings - Senior Secured Fixed Rate Notes maturing October 2026 - (330.0) - - (330.0)
Borrowings - Senior Secured Floating Rate Notes maturing July 2022 (20.0) 20.0 - - -
Lease liabilities (18.6) 3.3 (0.7) (0.1) (16.1)
Gross borrowings net of cash(1) (337.5) 46.5 (0.7) (0.1) (291.8)
Debt issuance costs(2) 4.8 8.5 - (6.5) 6.8
Total net borrowings(1) (332.7) 55.0 (0.7) (6.6) (285.0)
Total net borrowings excluding lease liabilities(1) (314.1) 51.7 - (6.5) (268.9)
(1) Borrowings exclude derivative financial instruments.
(2) The non-cash movement in debt issuance costs relates to the amortisation
of capitalised borrowing costs only.
The Group has the following cash pooling arrangements in sterling, euros and
US dollars, where both the Group and the bank have a legal right of offset.
As at 2 Apr 2022 As at 3 Apr 2021
Offset asset Offset liability Net offset asset Offset asset Offset liability Net offset asset
Cash, cash equivalents and bank overdrafts 8.1 0.0 8.1 138.2 (141.3) (3.1)
9. Bank and other borrowing
As at As at
2 Apr 2022 3 Apr 2021
£m £m
Current:
Bank overdrafts - (3.1)
Lease liabilities (2.1) (2.3)
Total borrowings due within one year (2.1) (5.4)
Non-current:
Lease liabilities (14.0) (16.3)
(14.0) (16.3)
Transaction costs(1) 6.8 4.8
6.8 4.8
Senior secured notes (330.0) (320.0)
(330.0) (320.0)
Total borrowings due after more than one year (337.2) (331.5)
Total bank and other borrowings (339.3) (336.9)
(1)Included in transaction costs is £1.9m (2020/21: £2.6m) relating to the
revolving credit facility.
Secured senior credit facility - revolving
During the period, the Group entered into a new revolving credit facility
(RCF) with an updated lending group for a period of three years from May 2021
with the option of extending for up to two additional years, which led to a
write off of previously capitalised transaction fees of £2.3m. The RCF of
£175m attracts a leverage-based margin of between 2.0% and 4.0% above SONIA.
Banking covenants of net debt / EBITDA and EBITDA / interest are in place and
are tested biannually.
The covenant package attached to the revolving credit facility is:
Net debt / EBITDA(1) Net debt / Interest(1)
2021/22 FY 3.50x 3.00x
2022/23 FY 3.50x 3.00x
(1)Net debt, EBITDA and Interest are as defined under the revolving credit
facility.
On 18 May 2022, the Group announced that it had extended the period of its
revolving credit facility (RCF) by one year to May 2025 with the same lending
group. See note 15 for further details.
Senior secured notes
During the period, the Group issued new Senior Secured Fixed Rate Notes
maturing October 2026. The senior secured notes are listed on the Irish GEM
Stock Exchange. The notes totalling £330m mature in October 2026 and attract
an interest rate of 3.5%. The gross proceeds were used to redeem £300m Senior
Secured Fixed Rate Notes maturing October 2023, which led to the write off of
previously capitalised transaction fees of £1.9m and an early redemption fee
of £4.7m.
During the period, the Group also redeemed the remaining £20m Senior Secured
Floating Rate Notes maturing July 2022. This redemption led to the write off
of previously capitalised transaction fees of £0.1m.
Lease liabilities
The following table analyses the Group's lease liabilities into relevant
maturity groupings based on the contractual undiscounted cash flows.
Within 1 year 1 and 2 years 2 and 3 years 3 and 4 years 4 and 5 years Over 5 years Total
£m £m £m £m £m £m £m
At 2 April 2022
Lease liabilities (2.9) (2.6) (2.5) (2.2) (1.5) (19.1) (30.8)
At 3 April 2021
Lease liabilities (3.2) (2.8) (2.5) (2.4) (2.2) (20.6) (33.7)
Cash outflows of £3.3m (2020/21: £2.7m) in relation to repayments of lease
liabilities have been included in the consolidated statement of cash flows.
10. Financial instruments
The following table shows the carrying amounts (which approximate to fair
value except as noted below) of the Group's financial assets and financial
liabilities. Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Set out below is a summary of methods
and assumptions used to value each category of financial instrument.
As at 2 April 2022 As at 3 April 2021
Carrying amount Fair Carrying amount Fair
value
value
£m £m £m £m
Financial assets not measured at fair value:
Cash and cash equivalents 54.3 54.3 4.2 4.2
Financial assets at amortised cost:
Trade and other receivables 65.7 65.7 49.4 49.4
Financial assets at fair value through profit or loss:
Trade and other receivables 3.3 3.3 2.5 2.5
Derivative financial instruments
- Forward foreign currency exchange contracts 0.1 0.1 - -
- Commodity and energy derivatives 2.3 2.3 0.1 0.1
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts (0.3) (0.3) (2.3) (2.3)
Financial liabilities at amortised cost:
Trade and other payables (247.4) (247.4) (243.8) (243.8)
Senior secured notes (330.0) (305.8) (320.0) (326.6)
Bank overdraft - - (3.1) (3.1)
The following table presents the Group's assets and liabilities that are
measured at fair value using the following fair value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1).
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2).
· Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3).
As at 2 April 2022 As at 3 April 2021
Level 1 Level 2 Level 1 Level 2
£m £m £m £m
Financial assets at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - 0.1 - -
- Commodity and energy derivatives - 2.3 - 0.1
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - (0.3) - (2.3)
Financial liabilities at amortised cost:
Senior secured notes (305.8) - (326.6) -
11. Dividends
The following dividends were declared and paid during the period:
52 weeks ended 53 weeks ended
2 Apr 2022 3 Apr 2021
£m £m
Ordinary final of 1.0 pence per ordinary share (2020/21: nil) paid 30 July 8.5 -
2021
After the balance sheet date, a final dividend for 2021/22 of 1.2 pence per
qualifying ordinary share
(2020/21: 1.0 pence) was proposed for approval at the Annual General Meeting
on 20 July 2022 and will be payable on 29 July 2022. Dividend distributions
are recognised as a liability in the period in which the dividends are
approved by Group's shareholders.
12. Related party transactions
There has been no material change to transactions with related parties during
the period.
13. Subsequent events
On 18 May 2022 the Group announced that it had extended the period of its
revolving credit facility (RCF) by one year to May 2025 with the same lending
group. The covenant package attached to the RCF and tested bi-annually is
unchanged (see note 11 for details).
On 18 May 2022, the directors have proposed a final dividend for the period
ended 2 April 2022 for approval at the Annual General Meeting.
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