TIDMPFD TIDMIRSH
RNS Number : 8594Z
Premier Foods plc
18 May 2023
18 May 2023
Premier Foods plc (the "Group" or the "Company")
Preliminary results for the 52 weeks ended 1 April 2023
Another strong year; Adjusted PBT up 13.0%, and further pensions
progress
Headline results (GBPm) FY22/23 FY21/22 % change
Revenue 1,006.4 900.5 11.8%
Trading profit(1) 157.5 141.2 11.5%
Adjusted profit before taxation(4) 137.2 121.4 13.0%
Adjusted earnings per share(7) (pence) 12.9 11.5 12.7%
Net debt(11) /Adjusted EBITDA(3) 1.5x 1.7x
Statutory measures (GBPm) FY22/23 FY21/22 % change
Profit before taxation 112.4 102.6 9.6%
Profit after taxation 91.6 77.5 18.2%
Basic earnings per share (pence) 10.6 9.0 17.8%
Dividend per share (pence) 1.44 1.2 20.0%
Net debt(11) 274.3 285.0 3.8% lower
Alternative performance measures above are defined and
reconciled to statutory measures throughout.
Headline results presented for FY22/23 include ownership of 'The
Spice Tailor'.
Trading profit is stated including software amortisation;
FY21/22 comparative is re-stated accordingly.
Reconciliations for Revenue and Trading profit showing impact of
the financial performance of The Spice Tailor during period of
ownership and the Trading profit definition update are provided in
the appendices.
Headlines
-- Full year Branded revenue up +9.1%; Q4 branded revenue up
+15.9%
-- Grocery market share(13) increased +64bps compared to prior
year
-- Trading profit +11.5%, ahead of upgraded guidance
-- Trading profit margins in line with last year as input cost
inflation offset by cost savings and increased pricing
-- International revenue growth up +10%(8) with record market
share for Mr Kipling in Australia
-- New categories revenue increased +33% led by early success
with Ambrosia porridge pots
-- Accelerated revenue growth of The Spice Tailor post acquisition;
12 month revenue +25%
-- Pensions cash contributions NPV reduced by c.50% to c.GBP125m
and cash costs reduced by GBP6m from FY23/24
-- FY23/24 expectations for another good year unchanged
Alex Whitehouse, Chief Executive Officer
"Once again, the business has delivered a year of strong
performance in a challenging environment with Group Revenue
increasing by 11.8%. Our brands grew strongly, up 9.1%, underpinned
by our branded growth model and supported by higher pricing.
Trading profit increased by 11.5%, maintaining margins versus a
year ago, as we successfully offset exceptionally high input cost
inflation through a combination of cost efficiencies and
pricing."
"Additionally, we continued to make very good progress against
all our strategic objectives; our brands in the UK grew by 7.5%(14)
, with the Grocery brands further increasing market share; revenues
from new categories this year increased by 33% and we achieved a
record market share for Mr Kipling in Australia. We made our first
acquisition in 15 years, The Spice Tailor brand, which is already
delivering accelerated sales growth as we apply our proven branded
growth model. Even after this transaction, we reduced Net debt by
over GBP10m, lowering Net debt/adjusted EBITDA to 1.5x, in line
with our medium-term target. With a much stronger balance sheet, we
are pleased to propose an increase in the dividend of 20% again
this year. Additionally, we have today announced a further 50%
reduction in the net present value of our pension contributions and
a reduction in annual cash contributions of GBP6m. "
" We know that consumer budgets remain under pressure in the
current environment and our broad portfolio of brands continue to
provide great options to prepare and eat good value, delicious
meals at home. We are continuing to see consumers looking for
convenient, affordable and tasty meal solutions and Batchelors and
Nissin were two of our best branded performers in the year which
benefitted from this trend. Batchelors, well known for its tasty
Super Noodles, has now become our largest Grocery brand, increasing
revenues by over 20% this year. "
"We will continue to pursue vigorously our five pillar growth
strategy and with our positive momentum, including a good start to
Q1, we are well placed to make further progress this year, and our
expectations remain unchanged."
Environmental, Social and Governance (ESG)
===========================================
The Group continues to make strong progress against its
'Enriching Life Plan' which 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.
Under the product pillar, sales of plant-based products such as
Plantastic cooking sauces, protein pots and Millionaire Flapjacks
increased by 34% in the year. In terms of packaging, the percentage
of finished goods which are recyclable across the Group have now
reached 96%. Progress in the planet workstreams includes receipt of
validation of emissions targets from the SBTi(18) coalition, while
the Group has also reduced food waste (as measured by Champions
12.3(19) ) by 11% in the year. In the people pillar, the Company
agreed a new corporate charity partnership with FareShare in the
year and launched a colleague volunteering scheme. Additionally,
47% of management roles are now held by female colleagues.
Dividend
=========
Subject to shareholder approval, the directors have proposed a
final dividend of 1.44 pence in respect of the 52 weeks ended 1
April 2023 (FY21/22: 1.2p), payable on 28 July 2023 to shareholders
on the register at the close of business on 30 June 2023. The
shares will go ex-dividend on 29 June 2023. This represents a 20%
increase in the dividend paid per share compared to FY21/22, is
ahead of adjusted earnings per share growth and is consistent with
Board's approach of proposing a progressive dividend to
shareholders.
Outlook
========
The Group delivered a strong financial performance in FY22/23,
demonstrated by clear progress across all the elements of its five
pillar strategy. Looking ahead to the coming year, the Group has
strong plans in place for product innovation, further consumer
marketing and increased capital investment. Additionally, it
expects to build on the initial success in new categories, deliver
further progress Internationally and continue to explore M&A
opportunities. With continued positive momentum and a good start to
Quarter one, the Group is well placed to make further progress this
year, with expectations unchanged.
Strategy overview
==================
The Group's five pillar strategy drives growth and creates
value, as outlined below.
1. Continue to grow the UK core business
We have a well established and growing UK business which provides
the basis for further expansion. The UK's branded growth model
is at the heart of what we do and is core to our success. Leveraging
our leading category positions, we launch new products to market
driven by consumer trends, support our brands with sustained
levels of marketing investment and foster strong customer and
retailer partnerships.
Proof point: Three-year average growth rate for UK branded revenue
of 5.3%(14) .
2. Supply chain investment
We invest in operational infrastructure to increase efficiency
and productivity 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.
Proof point: New case packer and auto-palletiser in Stoke and
Carlton sites.
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.
Proof point: Revenue growth of products in new categories increased
by 33% compared to the prior year.
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
& New Zealand, North America and Europe. Our primary brands to
drive this expansion are Mr Kipling, Sharwood's and The Spice
Tailor.
Proof point: Revenue growth of 10%(8) in the year.
5. Inorganic opportunities
We will utilise our brand building and commercial expertise to
expand across a wider portfolio, accelerating value creation
through targeted acquisition opportunities and applying our branded
growth model.
Proof point: Completed The Spice Tailor acquisition in the year,
accelerating 12 month revenue growth to 25%.
Further information
====================
A presentation to investors and analysts will be webcast live
today at 9:00am BST.
To register for the webcast follow the link:
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 2023, at 1:30pm BST. Dial in details are
outlined below:
Telephone: 0800 358 1035 (UK toll free)
+44 20 3936 2999 (standard international access)
Access code: 795867
A factsheet providing an overview of the Preliminary results is
available at:
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/
Further information on the 'Best Restaurant in Town' can be found
at:
www.bestrestaurantintown.co.uk/
As one of Britain's largest food producers, 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, Ox o 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 foods.co.uk
Media enquiries:
Sarah Henderson, 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
==================
Overview
GBPm FY22/23 FY21/22 % change
Branded revenue 844.2 774.1 9.1%
Non-branded revenue 162.2 126.4 28.3%
-------- -------- ---------
Group revenue 1,006.4 900.5 11.8%
Divisional contribution(2) 216.2 193.6 11.7%
Divisional contribution margin 21.5% 21.5% 0.0ppts
Trading profit (1) 157.5 141.2 11.5%
Trading profit margin 15.7% 15.7% 0.0ppt
Adjusted EBITDA(3) 182.3 160.4 13.7%
Adjusted profit before tax(4) 137.2 121.4 13.0%
Adjusted earnings per share(7)
(pence) 12.9 11.5 12.7%
Basic earnings per share (pence) 10.6 9.0 16.7%
The table above is presented including the impact of The Spice
Tailor acquisition. A reconciliation excluding The Spice Tailor is
included in the appendices.
Group revenue increased by 11.8% in the year, with branded
revenue up 9.1% and non-branded revenue 28.3% higher. Revenue
growth of 6.6% in the first half of the year accelerated to 15.8%
in H2. Divisional contribution grew by 11.7% to GBP216.2m, with
margins in line with the prior year and Trading profit increased by
11.5% to GBP157.5m. Group and corporate costs rose in the year,
reflecting wage and salary inflation, additional strategic roles
and a provision release in the prior year. The Company also paid
one-off cost of living payments to colleagues and awarded a bonus
to all colleagues in the year. Trading profit also included other
income of GBP3.8m reflecting a receipt following a temporary
interruption at a manufacturing site, in compensation for
equivalent revenue and cost of sales impact presented within Gross
profit. Adjusted profit before tax and adjusted earnings per share
increased by 13.0% and 12.7% respectively. Basic earnings per share
for FY22/23 increased by 17.8% to 10.6p. The results above include
seven month's ownership of The Spice Tailor.
Trading performance
Grocery
GBPm FY22/23 FY21/22 % change
Branded revenue 635.3 560.1 13.4%
Non-branded revenue 111.5 87.6 27.3%
-------- -------- ---------
Total revenue 746.8 647.7 15.3%
Divisional contribution(2) 189.2 160.2 18.1%
Divisional contribution margin 25.3% 24.7% +0.6ppts
The table above is presented including the impact of The Spice
Tailor acquisition. A reconciliation excluding The Spice Tailor is
included in the appendices.
Grocery revenue increased by 15.3% in the year to GBP746.8m and
Branded revenue grew by 13.4% to GBP635.3m. Non-branded revenue
increased by GBP23.9m to GBP111.5m. Divisional contribution was
18.1% higher at GBP189.2m and consequently, divisional contribution
margins increased by 60 basis points.
In the fourth quarter, Grocery revenue increased by 24.7%, with
very strong growth in both branded and non-branded revenue,
reflecting pricing and benefits of the branded growth model across
the portfolio. Market share(13) grew by 64 basis points across the
year, illustrating the strength and resilience of the Group's
portfolio as consumers budgets came under pressure. Non-branded
revenue grew due to pricing benefits in retailer branded product
categories and recovery in out of home sales compared to the prior
year.
The Group's branded growth model leverages the strength of its
market leading brands, launching insightful new products,
supporting the brands with emotionally engaging advertising and
building strategic retail partnerships. During the year, the Group
expanded investment in its 'Best Restaurant in Town' campaign,
which highlights great value meal ideas across the Grocery
portfolio. This strategy has driven 5.3% compound annual branded
revenue growth for the combined UK Grocery and Sweet Treats
businesses over the last three years (this excludes revenue related
to The Spice Tailor).
Revenue growth of Batchelors and Nissin noodles ranges were
particularly strong in the year, as consumers sought convenient,
tasty and affordable meal solutions across the respective product
ranges. Consequently, Batchelors is now the Group's largest Grocery
brand by revenue. New product development, driven by key consumer
trends included Sharwood's East Asian cooking sauces, Batchelors
pasta 'n' sauce chef specials, Ambrosia Deluxe custard pots and
Plantastic cooking sauces and protein pots.
Strong, collaborative partnerships with customers is another key
element of the Group's branded growth model. Ambrosia and Angel
Delight teamed up with the Minions to deliver great instore
activity in conjunction with on pack offers to win cinema tickets.
Additionally, Batchelors continued to partner with the DC Warner
Brothers Superhero franchise to offer consumers the opportunity to
win prizes. These are both pertinent examples of driving volume
uplifts with retail customers leveraging the strength of the
Group's brands and the respective franchise partners.
Another of the Group's growth strategies is to leverage its
strong brand equities to expand into adjacent categories. Revenues
from products launched in new categories increased by 33% in the
year and was led by a particularly good performance from Ambrosia
porridge pots. This product benefits from being ready to eat with
the distinctive creamy texture characteristic of Ambrosia. The 'on
the go' porridge pot market is a high growth category, and Ambrosia
porridge succeeded in gaining over 10% value share in certain major
retailers.
The Group acquired The Spice Tailor brand in the year.
Complementing the Sharwood's and Loyd Grossman brands in the
cooking sauces and accompaniments category, The Spice Tailor grew
revenue by 25% on a 12 month pro forma basis, to GBP17m in FY22/23,
in line with expectations and ahead of its historical growth
rate.
New product development for FY23/24 include Loyd Grossman stir
in sauces, Sharwood's lower fat curry pastes and Batchelors cook
with noodles.
Sweet Treats
GBPm FY22/23 FY21/22 % change
Branded revenue 208.9 214.0 (2.4%)
Non-branded revenue 50.7 38.8 30.5%
-------- -------- ---------
Total revenue 259.6 252.8 2.7%
Divisional contribution(2) 27.0 33.4 (19.2%)
Divisional contribution margin 10.4% 13.2% (2.8ppt)
Revenue in the Sweet Treats business grew by 2.7% in the year.
Branded revenue was GBP208.9m, (2.4%) lower than the prior year,
while non-branded revenue increased by 30.5% to GBP50.7m. The
particularly strong growth in non-branded revenue of 30.5% was due
to pricing benefits of existing ranges and contract wins in pies
and tarts and seasonal ranges.
In the fourth quarter, overall revenue growth was similar to the
full year, with revenue growing by 2.9%. Branded revenue showed an
improving trend compared to the third quarter and Non-branded grew
by over 60% versus the prior year.
Divisional contribution was GBP27.0m in the year, GBP6.4m lower
than FY21/22. While divisional contribution margins of 10.4% were
2.8 percentage points lower than the prior year, they were 1.1
percentage points higher than two years ago. Revenue growth
reflected pricing to help recover input cost inflation, partly
offset by lower volumes due to lower promotional activity,
especially in the first half of the year and some price elasticity
effects which we expect to recover over the coming months. In the
second half, Sweet Treats was also affected by some unscheduled
maintenance of a Cadbury cake plant line which impacted Divisional
contribution in the year.
The Mr Kipling brand launched a new, non-HFSS (non-high fat,
salt & sugar) cake range called 'Deliciously Good' in the year,
which received a good response from consumers. This new range is a
clear demonstration of how the Group is delivering against the
Group's 'Enriching Life Plan' ESG strategy and offers consumers
further options to support healthier lifestyles. The product range
is made with 30% less sugar and lower fat and benefits from a
higher content of fibre and fruit compared with the standard Mr
Kipling range. These cakes are the only full range which can be
promoted on end of aisles and at front of store in large
supermarkets, under new legislation. Other new product development
launched in the year included Mr Kipling Signature brownie bites
and Plantastic Millionaire Flapjacks.
Mr Kipling also benefitted from a fresh new TV campaign for Mr
Kipling , the 'Piano' advert, continuing the strategy under the
brand growth model of building emotional connections with
consumers. Looking ahead to next year, product innovation to be
launched to market includes Mr Kipling Deliciously Good loaf cakes
and Cadbury Mini rolls in mint and orange flavours.
International
Revenue overseas (on a constant currency basis and excluding The
Spice Tailor) increased by 10%(8) compared to the prior year. On a
reported basis and including The Spice Tailor, revenue growth was
19%. This progress was broad based across the Group's target
markets of Australia, Canada, Europe, Ireland and the USA. The key
focus brands which the Group considers possess the greatest
potential for long-term international growth, are Sharwood's, Mr
Kipling and The Spice Tailor. In FY22/23, Sharwood's and Mr Kipling
grew by 30% and 11% respectively.
The Group's strategy of building sustainable businesses in its
target markets is progressing well. In Australia, the Mr Kipling
and Cadbury cake brands have collectively delivered the Group's
highest ever share of the cake market in the year and reached 15.6%
on a full year basis, extending leadership of the cake category.
Additionally, and following the acquisition of The Spice Tailor,
the reach in the Australian ethnic cooking sauces market is
significantly enhanced, and presents further opportunity for
growth.
The Mr Kipling test in the USA concluded successfully with
encouraging rate of sale KPIs; wider rollout to additional
retailers has now commenced and is expected to build during
FY23/24. Sharwood's also grew sales strongly in the US throughout
the year. In Canada, revenue more than doubled in the year
following the listing of 30 new product lines of Sharwood's in a
leading North American retailer. This was followed up by listings
of The Spice Tailor in the same retailer shortly after acquisition,
while Mr Kipling cake also delivered good sales growth in the
year.
Sales in Ireland were, like the UK, broad based and Nissin
noodles sales more than doubled. Europe continues to deliver
distribution gains for Sharwood's, entering the Netherlands for the
first time and expanding presence in Spain and Germany.
Operating profit
Operating profit grew by GBP1.1m to GBP132.2m in the year.
Trading profit increased to GBP157.5m, as described above. Brand
amortisation was GBP20.7m in the year and movement in the fair
valuation of foreign exchange and derivative contracts was a charge
of GBP1.8m. Net interest on pensions and administrative expenses
was a credit of GBP17.7m (FY21/22: GBP4.2m), reflecting c.GBP26m
due to an interest credit on the opening combined surplus of the
pension scheme, partly offset by approximately GBP8m of
administrative expenses. Following the decision to close the
Group's Knighton manufacturing site, restructuring costs of GBP7.6m
were incurred in addition to an impairment charge of GBP3.6m. Total
restructuring costs taken in the year were GBP11.1m which included
some additional supply chain restructuring. Other n on-trading
items were GBP5.8m, predominantly reflecting M&A advisory costs
and other one-off supply chain charges. Other non-trading income of
GBP1.5m in the prior period primarily related to the successful
resolution of a legacy legal matter.
Finance costs
Net finance cost was GBP19.8m in the year, a reduction of
GBP8.7m compared to the prior year. This was primarily due to the
accelerated amortisation of debt issuance costs (GBP4.3m) and the
early redemption of the Group's now retired GBP300m 2023 dated
Fixed Rate Notes (GBP4.7m) in FY21/22. Net regular interest(5) was
GBP20.3m, GBP0.5m higher than last year. This increase was due to a
higher SONIA rate applicable to the Group's revolving credit and
debtors securitisation facilities, partly offset by the full year
effect of lower Senior secured notes interest charges following
issuance of the Group's 3.5% 2026 Fixed Rate Notes.
Taxation
The taxation charge for the year of GBP20.8m (2021/22: GBP25.1m)
comprised a charge on operating activities of GBP21.4m (2021/22:
GBP19.5m) and adjustments to remeasure the opening deferred tax
balances, the latter due to the change in UK corporation tax from
19% to 25%, effective 1 April 2023. The Group currently retains
brought forward losses which it can utilise to offset against
future tax liabilities and has now recommenced paying cash tax.
Earnings per share
GBPm FY22/23 FY21/22 % change
Operating profit 132.2 131.1 0.8%
Net finance cost (19.8) (28.5) 30.5%
Profit before taxation 112.4 102.6 9.6%
Taxation (20.8) (25.1) 17.1%
-------- -------- ---------
Profit after taxation 91.6 77.5 18.2%
Average shares in issue (million) 861.2 858.8 0.3%
-------- -------- ---------
Basic Earnings per share (pence) 10.6 9.0 17.8%
The Group reported profit before tax of GBP112.4m in the year, a
9.6% increase on FY21/22. Profit after tax increased by GBP14.1m to
GBP91.6m and basic earnings per share increased by 17.8% to 10.6
pence.
Cash flow
Net debt as at 1 April 2023 was GBP274.3m, a reduction of
GBP10.7m compared to the prior year. An inflow of cash and cash
equivalents was GBP9.1m and movement in lease liabilities of
GBP2.8m was partly offset by a GBP1.2m movement in debt issuance
costs. The reduction in Net debt was after paying consideration of
GBP43.8m to acquire The Spice Tailor.
Trading profit was GBP157.5m, as described above, while
depreciation and software amortisation was GBP24.8m. A GBP24.8m
outflow of working capital was due to higher stock reflecting
inflation of both raw materials and finished goods, with an
associated impact on debtors. Pension deficit contribution payments
of GBP37.5m and administration cash were GBP7.6m, totalling
GBP45.1m cash outflow to the schemes.
On a statutory basis, cash generated from operating activities
was GBP87.2m (2021/22: GBP90.1m) after deducting net interest paid
of GBP19.6m (FY21/22: GBP20.8m) reflecting a lower coupon on the
Group's Fixed Rate Notes, partly offset by higher SONIA rates on
the Group's unutilised RCF and debtors securitisation facilities.
The Group paid Tax of GBP1.5m (2021/22: Nil).
Cash used in investing activities was GBP63.8m (FY21/22:
GBP23.2m) and included acquisition consideration of The Spice
Tailor as described above and capital expenditure of GBP20.0m
(FY21/22: GBP23.2m). In FY23/24, the Group expects to increase its
capital investment, as it looks to accelerate investment across the
supply chain and transfer some manufacturing capability from the
Knighton site to Ashford, Kent and Carlton, South Yorkshire. Such
investment includes both growth projects supporting the Group's
innovation strategy and cost release projects to deliver efficiency
savings. The strategy of investing in supply chain infrastructure
represents a virtuous cycle to provide the fuel for the Group's
branded growth model. Projects completed in the year include
automation solutions at some of the Group's cake manufacturing
sites; at the Stoke site an end of line auto case packer and triple
head depositor were installed and Carlton invested in an end of
line auto case packer.
Cash used in financing activities was GBP14.3m in the year
(FY21/22: GBP13.7m) which included a GBP10.3m dividend payment to
shareholders. A dividend match payment to the Group's pension
schemes of GBP2.7m was also made in the year.
The Group's Net debt/adjusted EBITDA ratio at 1 April 2023 was
1.5x, a reduction of 0.2x compared to the prior year position and
in line with the medium-term target. As at 1 April 2023, the Group
held cash and bank deposits of GBP63.4m and its GBP175m revolving
credit facility was undrawn.
Pensions
IAS 19 Accounting 1 April 2023 2 April 2022
Valuation (GBPm)
RHM Premier Combined RHM Premier Combined
Foods Foods
Assets 3,240.2 552.6 3,792.8 4,273.7 826.3 5,100.0
Liabilities (2,291.9) (735.4) (3,027.3) (3,134.9) (1,020.2) (4,155.1)
-------- ---------- ---------- ----------
Surplus/(Deficit) 948.3 (182.8) 765.5 1,138.8 (193.9) 944.9
Net of deferred
tax (25%) 711.2 (137.1) 574.1 854.1 (145.4) 708.7
The Group's pension scheme had a combined surplus of GBP765.5m
at 1 April 2023, a reduction of GBP179.4m compared to the prior
year. This is equivalent to a surplus of GBP574.1m net of a
deferred tax charge of 25.0%. Asset values and liabilities fell in
both sections of the schemes due to the hedging in place. The
movement in liabilities was impacted by the increase in discount
rate, from 2.75% to 4.80%, reflecting recent rises in UK corporate
bond yields. Asset values were lower across a number of asset
classes, notably in absolute return products and credit funds.
A deferred tax rate 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.
Assets in the combined schemes decreased by GBP1,307.2m, or by
25.6%, to GBP3,792.8m in the period. RHM scheme assets reduced by
GBP1,033.5m to GBP3,240.2m while the Premier Foods' schemes assets
decreased by GBP273.7m to GBP552.6m. In the combined schemes,
liabilities decreased by GBP1,127.8m, or 27.1%, to GBP3,027.3m. The
RPI inflation rate assumption used decreased by thirty basis points
to 3.3%, compared to 3.6% as at 2 April 2022.
The pension Trustee manages impacts from market volatility
efficiently and there were no issues encountered by the scheme as a
result of LDI asset collateral calls due to volatility in financial
markets during FY22/23.
Pensions - Triennial actuarial valuation
As at 31 March 2022, the Group's pension scheme was valued at a
combined surplus of GBP297m on a technical provisions basis. Within
this, was an RHM section surplus of GBP665m and a Premier Foods
section deficit of GBP368m. This represents an improvement of
approximately GBP511m compared to the previous technical provisions
basis at 31 March 2019, when the combined valuation was a deficit
of GBP214m.
Following this valuation, the Company and Trustees of the
schemes have agreed to reduce the annual deficit contribution
payments by GBP5m per annum to GBP33m until FY25/26. Additionally,
administrative expenses (including the UK Government PPF levy) have
reduced from the Group's guidance of GBP6-8m per annum to GBP6m.
Consequently, and in addition to an increase in the Group's
post-tax weighted average cost of capital to 9.1% (FY21/22: 7.4%),
the net present value of future pension contributions to the end of
the respective recovery periods has reduced by approximately 50%,
from GBP240-260m(15) to approximately GBP125m(15) . This includes
the benefit of a c.GBP100m surplus from the RHM section on a buyout
valuation basis.
Capital allocation
===================
The Group is a highly cash generative business and has
substantially reduced its interest costs in recent years. Today,
the allocation of capital is split across pension contributions,
capital investment and dividends. Additionally, the Group continues
to explore M&A opportunities. In the medium term, pensions
contributions are expected to reduce further, freeing up more cash
to spend on capital investment, M&A and dividends.
Principal risks and uncertainties
==================================
Strong risk management is key to delivery of the Group's
strategic objectives. It 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 Group's principal risks and uncertainties
will be disclosed in the annual report and accounts for the
financial period ended 1 April 2023. The major strategic and
operational risks are summarised under the headings of
Macroeconomic and geopolitical instability, Impact of Government
legislation, Market and retailer actions, Operational integrity,
Legal compliance, Climate risk, Technology, Product portfolio, HR
and employee risk, Strategy delivery. The Group notes the increase
since last year of the widely reported macro-economic and industry
wide supply chain environment issues which it continues to navigate
successfully through. In particular, the Group acknowledges risks
around increased input cost inflation and potential changes in
consumer behaviour.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
===========
The Company's Preliminary results are presented for the 52 weeks
ended 1 April 2023 and the comparative period, 52 weeks ended 2
April 2022. All references to the 'quarter', unless otherwise
stated, are for the 13 weeks ended 1 April 2023 and the comparative
periods, 13 weeks ended 2 April 2022 .
Full year and Quarter 4 Sales
==============================
FY Sales (GBPm) FY22/23
Excluding The The Spice Including The
Spice Tailor Tailor Spice Tailor
Grocery
Branded 625.3 10.0 635.3
Non-branded 111.5 0.0 111.5
-------------- ---------- --------------
Total 736.8 10.0 746.8
Sweet Treats
Branded 208.9 0.0 208.9
Non-branded 50.7 0.0 50.7
-------------- ---------- --------------
Total 259.6 0.0 259.6
Group
Branded 834.2 10.0 844.2
Non-branded 162.2 0.0 162.2
-------------- ---------- --------------
Total 996.4 10.0 1,006.4
% change vs prior year
Grocery
Branded 11.6% N/A 13.4%
Non-branded 27.3% N/A 27.3%
-------------- --------------
Total 13.8% N/A 15.3%
Sweet Treats
Branded (2.4%) N/A (2.4%)
Non-branded 30.5% N/A 30.5%
-------------- --------------
Total 2.7% N/A 2.7%
Group
Branded 7.8% N/A 9.1%
Non-branded 28.3% N/A 28.3%
-------------- --------------
Total 10.6% N/A 11.8%
-------------- --------------
Q4 Sales (GBPm) FY22/23
Excluding The The Spice Including The
Spice Tailor Tailor Spice Tailor
Grocery
Branded 171.5 5.0 176.5
Non-branded 30.7 0.0 30.7
-------------- ---------- --------------
Total 202.2 5.0 207.2
Sweet Treats
Branded 54.4 0.0 54.4
Non-branded 7.0 0.0 7.0
-------------- ---------- --------------
Total 61.4 0.0 61.4
Group
Branded 225.9 5.0 230.9
Non-branded 37.7 0.0 37.7
-------------- ---------- --------------
Total 263.6 5.0 268.6
% change vs prior year
Grocery
Branded 19.2% N/A 22.7%
Non-branded 37.6% N/A 37.6%
-------------- --------------
Total 21.7% N/A 24.7%
Sweet Treats
Branded (1.8%) N/A (1.8%)
Non-branded 63.9% N/A 63.9%
-------------- --------------
Total 2.9% N/A 2.9%
Group
Branded 13.4% N/A 15.9%
Non-branded 41.8% N/A 41.6%
-------------- --------------
Total 16.7% N/A 18.9%
-------------- --------------
Divisional contribution Excluding The Spice Including The
& Trading profit (GBPm) The Spice Tailor Spice Tailor
Tailor
FY22/23
Divisional contribution(2)
Grocery 188.7 0.5 189.2
Sweet Treats 27.0 - 27.0
---------- --------- -------------
Total 215.7 0.5 216.2
Group & corporate costs (62.5) - (62.5)
Other income 3.8 - 3.8
---------- --------- -------------
Trading profit (1) -
New definition 157.0 0.5 157.5
FY21/22
Divisional contribution(2)
Grocery 160.2 N/A 160.2
Sweet Treats 33.4 N/A 33.4
---------- --------- -------------
Total 193.6 N/A 193.6
Group & corporate costs (45.3) N/A (45.3)
---------- --------- -------------
Trading profit (1) -
Old definition 148.3 N/A 148.3
----------
Less: software amortisation (7.1) N/A (7.1)
---------- --------- -------------
Trading profit (1) -
New definition 141.2 N/A 141.2
---------- --------- -------------
EBITDA to Operating profit reconciliation FY22/23 FY21/22
(GBPm)
Adjusted EBITDA(3) 182.3 167.5
Depreciation (19.9) (19.2)
Trading profit - Old definition 162.4 148.3
Software amortisation (4.9) (7.1)
Trading profit - New definition 157.5 141.2
Amortisation of brand assets (20.7) (19.9)
Fair value movements on foreign exchange
& derivative contracts (1.8) 4.4
Net interest on pensions and administrative
expenses 17.7 4.2
Non-trading items - GMP equalisation - (0.3)
Non-trading items - restructuring costs (11.1) -
Non-trading items - other non-trading items (5.8) 1.5
Impairment of fixed assets (3.6) -
------- -------
Operating profit 132.2 131.1
------- -------
Finance costs (GBPm) FY22/23 FY21/22 Change
Senior secured notes interest 11.5 13.4 1.9
Bank debt interest - net 6.9 4.3 (2.6)
18.4 17.7 (0.7)
Amortisation of debt issuance
costs 1.9 2.1 0.2
------- ------- ------
Net regular interest(5) 20.3 19.8 (0.5)
------- ------- ------
Write-off of financing costs - 4.3 4.3
Early redemption fee - 4.7 4.7
Re-measurement due to discount
rate change (1.1) (0.9) 0.2
Other finance cost 0.6 0.8 0.2
Other finance income - (0.2) (0.2)
------- ------- ------
Net finance cost 19.8 28.5 8.7
------- ------- ------
Adjusted earnings per share FY22/23 FY21/22 Change
(GBPm)
Trading profit (1) - new definition 157.5 141.2 11.5%
Less: Net regular interest(5) (20.3) (19.8) (2.6%)
-------- -------- --------
Adjusted profit before tax 137.2 121.4 13.0%
Less: Notional tax (19%) (26.1) (23.1) (13.0%)
-------- -------- --------
Adjusted profit after tax(6) 111.1 98.3 13.0%
Average shares in issue (millions) 861.2 858.8 0.3%
-------- -------- --------
Adjusted earnings per share
(pence) 12.9 11.5 12.7%
-------- -------- --------
Net debt (GBPm)
Net debt(11) at 2 April 2022 285.0
Movement in cash (9.1)
Movement in debt issuance costs 1.2
Movement in lease creditor (2.8)
Net debt at 1 April 2023 274.3
------
Adjusted EBITDA 182.3
Net debt / Adjusted EBITDA 1.5x
Free cash flow (GBPm) FY22/23 FY21/22
Trading profit (1) - new definition 157.5 141.2
Depreciation & software amortisation 24.8 26.3
Other non-cash items 4.7 4.1
Capital expenditure (20.0) (23.2)
Working capital (24.8) (21.0)
-------- --------
Operating cash flow (17) 141.9 127.4
Interest (19.6) (20.8)
Pension contributions (45.1) (41.4)
Free cash flow(12) 77.5 65.2
Non-trading items (8.3) 0.9
Net (payments)/proceeds from
share issue (1.1) 1.3
Re-financing fees (0.7) (13.2)
Taxation (1.5) -
Dividend (including pensions
match) (13.0) (11.0)
Acquisition (43.8) -
-------- --------
Movement in cash 9.1 43.2
Repayment of borrowings - (320.0)
Proceeds from borrowings - 330.0
-------- --------
Net increase in cash and cash
equivalents 9.1 53.2
-------- --------
The following table outlines the basis on which the Group will
report headline revenue for FY23/24.
This includes The Spice Tailor but excludes sales from Knighton
which will be managed for exit during the course of FY23/24,
following the decision to close the site. In FY22/23, all Knighton
revenue was all reported in Grocery - Non-branded.
Group sales ex Knighton FY22/23 revenue by quarter
Foods (GBPm)
Quarter Quarter Quarter Quarter Total
1 2 3 4
Group sales (including
The Spice Tailor) 197.0 222.9 318.0 268.5 1,006.4
Knighton (6.2) (7.2) (9.8) (7.6) (30.8)
------- ------- ------- -------
Group sales
(including The Spice
Tailor, ex Knighton) 190.8 215.7 308.2 260.9 975.6
Notes and definitions of alternative performance measures
==========================================================
The Company uses a number of alternative performance measures to
measure and assess the financial performance of the business. The
directors believe that these alternative performance measures
assist in providing additional useful information on the underlying
trends, performance and position of the Group. These alternative
performance 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 brand assets, non-trading
items (items requiring 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) , fair value movements on foreign exchange
and other derivative contracts, net interest on pensions
and administration expenses and past service costs. The
revised definition of Trading profit includes software amortisation
as the Group considers this should be treated in the same
way as tangible asset depreciation for definitional purposes.
FY21/22 has been re-stated accordingly.
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 and software amortisation.
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 finance cost 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%
(2021/22: 19.0%).
7. References to Adjusted earnings per share are on a non-diluted
basis and is calculated using Adjusted profit after tax
as defined in (6) above divided by the weighted average
of the number of shares of 861.2 million (52 weeks ended
2 April 2022: 858.8 million).
8. International sales exclude The Spice Tailor and remove
the impact of foreign currency fluctuations and adjusts
prior 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. The constant currency adjustment
is calculated by applying a blended rate.
GBPm Reported (including Reported (excluding Adjustment Constant currency
The Spice Tailor) The Spice Tailor)
FY22/23 63.3 59.4 (0.7) 58.7
FY21/22 53.4 53.4 N/A 53.4
Growth/(decline)
% 18.5% 11.3% N/A 10.0%
9. 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.
10. Software amortisation is the annual charge related to the
amortisation of the Group's software assets during the period.
11. Net debt is defined as total borrowings, less cash and cash
equivalents and less capitalised debt issuance costs.
12. 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, net proceeds from share issues, tax, acquisitions
and non-trading items.
13. IRI, 52 weeks ended 1 April 2023.
14. Revenue growth excludes The Spice Tailor
15. The schedule of future contributions are as agreed per the
2022 actuarial funding valuation for the Premier Foods sections,
discounted using the Company post tax WACC of 9.1%.
16. Acquisition accounting pertaining to The Spice Tailor acquisition
can be found in Note 15.
17. Operating cash flow excludes interest and pension contributions.
18. SBTi refers to the Science Based Targets initiative, a coalition
which defines and promotes best practice emissions reductions
and net zero targets in line with climate science
19. Champions 12.3 refers to a coalition who are dedicated to
the pursuit of reducing food waste and loss
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 brand asset
amortisation and impairment are excluded from Trading profit
because they are non-cash items.
-- Non-trading items 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 reported segment
and are disclosed at total Group level.
-- In line with accounting standards, the International operating
segment, the results of which are aggregated within the
Grocery reported segment, are not required to be separately
disclosed for reporting purposes.
Consolidated statement of profit or loss
52 weeks 52 weeks ended
ended
1 April 2023 2 April 2022
Note GBPm GBPm
----------------------------------------- ----- ------------- ------ -------------
Revenue 3 1,006.4 900.5
Cost of sales (648.2) (573.4)
----------------------------------------- ----- ------------- ------ -------------
Gross profit 358.2 327.1
Selling, marketing and distribution
costs (142.0) (133.4)
Administrative costs (87.8) (62.6)
Other income 3.8 -
Operating profit 3 132.2 131.1
Finance cost 4 (21.7) (29.0)
Finance income 4 1.9 0.5
----------------------------------------- ----- ------------- ------ -------------
Profit before taxation 112.4 102.6
Taxation 5 (20.8) (25.1)
Profit for the period attributable to owners
of the parent 91.6 77.5
------------------------------------------------ ------------- ------ -------------
Earnings per share (pence)
----------------------------------------- ----- ------------- ------ -------------
Basic 6 10.6 9.0
Diluted 6 10.4 8.8
----------------------------------------- ----- ------------- ------ -------------
Consolidated statement of comprehensive
income
52 weeks 52 weeks ended
ended
1 April 2023 2 April
2022
Note GBPm GBPm
------------------------------------------- ----- ------------- -------------
Profit for the period 91.6 77.5
Other comprehensive income, net of tax
Items that will never be reclassified
to profit or loss
Remeasurements of defined benefit schemes 7 (245.6) 357.3
Deferred tax credit / (charge) 5 52.7 (114.2)
Current tax credit 5 7.2 6.4
Items that are or may be reclassified
subsequently to profit or loss
Exchange differences on translation 0.6 (0.4)
Other comprehensive income, net of tax (185.1) 249.1
------------------------------------------- ----- ------------- -------------
Total comprehensive income attributable
to owners of the parent (93.5) 326.6
------------------------------------------- ----- ------------- -------------
Consolidated balance sheet
As at As at
1 April 2 April
2023 2022
Note GBPm GBPm
----------------------------------------- ----- -------- ----------
ASSETS:
Non-current assets
Property, plant and equipment 185.9 190.9
Goodwill 680.3 646.0
Other intangible assets 294.4 293.5
Deferred tax assets 5 22.4 23.1
Net retirement benefit assets 7 960.1 1,148.7
2,143.1 2,302.2
Current assets
Inventories 93.7 78.1
Trade and other receivables 103.9 96.5
Cash and cash equivalents 8 64.4 54.3
Derivative financial instruments 10 0.8 2.4
262.8 231.3
----------------------------------------- ----- -------- ----------
Total assets 2,405.9 2,533.5
----------------------------------------- ----- -------- ----------
LIABILITIES:
Current liabilities
Trade and other payables (255.4) (254.0)
Financial liabilities
- short-term borrowings 9 (1.0) -
- derivative financial instruments 10 (0.5) (0.3)
Lease liabilities 9 (2.1) (2.1)
Provisions for liabilities and charges (13.3) (2.3)
(272.3) (258.7)
Non-current liabilities
Long-term borrowings 9 (324.4) (323.2)
Lease liabilities 9 (11.2) (14.0)
Net retirement benefit obligations 7 (194.6) (203.8)
Provisions for liabilities and charges (6.6) (8.3)
Deferred tax liabilities 5 (177.9) (212.9)
Other liabilities (12.9) (5.7)
(727.6) (767.9)
----------------------------------------- ----- -------- ----------
Total liabilities (999.9) (1,026.6)
----------------------------------------- ----- -------- ----------
Net assets 1,406.0 1,506.9
----------------------------------------- ----- -------- ----------
EQUITY:
Capital and reserves
Share capital 86.8 86.3
Share premium 2.5 1.5
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Retained earnings 974.3 1,076.7
----------------------------------------- --------
Total equity 1,406.0 1,506.9
----------------------------------------- ----- -------- ----------
Consolidated statement of cash flows
52 weeks 52 weeks
ended ended
1 April 2 April
2023 2022
Note GBPm GBPm
-------------------------------------------- ------ --------- -----------
Cash generated from operations 8 108.3 110.9
Interest paid (20.4) (21.2)
Interest received 0.8 0.4
Taxation paid (1.5) -
--------------------------------------------- ----- --------- -----------
Cash generated from operating activities 87.2 90.1
Acquisition of subsidiaries, net of cash
acquired 15 (43.8) -
Purchases of property, plant and equipment (15.5) (19.5)
Purchases of intangible assets (4.5) (3.7)
--------------------------------------------- ----- --------- -----------
Cash used in investing activities (63.8) (23.2)
Repayment of borrowings - (320.0)
Proceeds from borrowings - 330.0
Principal element of lease payments (2.3) (3.3)
Financing fees(1) (0.7) (8.5)
Early redemption fee(1) - (4.7)
Dividends paid 11 (10.3) (8.5)
Purchase of shares to satisfy share awards (2.5) (0.4)
Proceeds from share issue 1.5 1.7
--------------------------------------------- ----- --------- -----------
Cash used in financing activities (14.3) (13.7)
Net increase in cash and cash equivalents 9.1 53.2
Cash, cash equivalents and bank overdrafts
at beginning of period 54.3 1.1
---------------------------------------------------- --------- -----------
Cash, cash equivalents and bank overdrafts
at end of period(2) 8 63.4 54.3
--------------------------------------------- ----- --------- -----------
(1) Financing fees in the prior period relate to payments made
as part of the refinancing of the Group's debt in June 2021. See
note 9 for further details.
(2) Cash and cash equivalents of GBP63.4m (2021/22: GBP54.3m)
includes bank overdraft of GBP1.0m (2021/22: GBPnil) and cash
and bank deposits of GBP64.4m (2021/22: GBP54.3m). See notes 8
and 9 for more details.
Consolidated statement of changes in equity
Note Share Share Merger Other Retained Total
capital premium reserve reserves earnings(1) equity
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- ------ --------- --------- --------- ---------- ------------- --------
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
--------------------------- ------ --------- --------- --------- ---------- ------------- --------
At 3 April 2022 86.3 1.5 351.7 (9.3) 1,076.7 1,506.9
Profit for the period - - - - 91.6 91.6
Remeasurements of defined
benefit schemes 7 - - - - (245.6) (245.6)
Deferred tax charge 5 - - - - 52.7 52.7
Current tax credit 5 - - - - 7.2 7.2
Exchange differences on
translation - - - - 0.6 0.6
Other comprehensive income - - - - (185.1) (185.1)
----------------------------------- --------- --------- --------- ---------- ------------- --------
Total comprehensive income - - - - (93.5) (93.5)
Shares issued 0.5 1.0 - - - 1.5
Share-based payments - - - - 4.6 4.6
Purchase of shares to
satisfy share awards - - - - (2.5) (2.5)
Deferred tax movements
on share-based payments 5 - - - - (0.7) (0.7)
Dividends 11 - - - - (10.3) (10.3)
------ ---------
At 1 April 2023 86.8 2.5 351.7 (9.3) 974.3 1,406.0
--------------------------- ------ --------- --------- --------- ---------- ------------- --------
(1) Included in Retained earnings at 1 April 2023 is GBP3.4m in relation
to cumulative translation losses (2020/21: GBP3.3m loss, 2021/22: GBP3.7m
loss).
1. General information
The financial information included in this preliminary
announcement does not constitute the Company's statutory accounts
for the 52 weeks ended 1 April 2023 and for the 52 weeks ended 2
April 2022, but is derived from those accounts. Statutory accounts
for the 52 weeks ended 2 April 2022 have been delivered to the
registrar of companies, and those for 52 weeks ended 1 April 2023
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 9. 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 1 October
2022 and 1 April 2023.
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 1 April 2023 the Group had total assets less current
liabilities of GBP2,133.6m, net current liabilities of GBP9.5m and
net assets of GBP1,406.0m. Liquidity as at that date was GBP245.4m,
made up of cash and cash equivalents, and undrawn committed credit
facilities of GBP175m expiring between May 2025 and 2026. The
covenants linked to the facilities are shown in note 9. At the time
of the approval of this report, the cash and liquidity position of
the group has not changed significantly.
The directors have rigorously reviewed the current global
political and economic uncertainty driven by the conflict in
Ukraine and the inflationary pressures across the industry, and
have modelled a severe but plausible downside case 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. The downside case represents severe but
plausible assumptions related primarily to the impact of inflation
during the review period. The directors have also considered the
impact of the outbreak of an infectious disease, climate change,
cyber-attacks and changes in consumer preferences in the downside
cases modelled and have assumed all scenarios within the downside
cases impact during the periods reviewed.
Whilst the downside scenario is deemed severe but plausible, it
is considered by the directors to be a robust stress test of going
concern, having an adverse impact on revenue, margin, profit and
cash flow. Should circumstances mean there is further downside,
whilst not deemed plausible, the directors, in response have
identified mitigating actions within their control, that would
reduce costs, optimising cashflow and liquidity. This includes
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. None of the scenarios modelled are
sufficiently material to prevent the Group from continuing as a
going concern.
The Directors, after reviewing financial forecasts and financing
arrangements, have a reasonable expectation 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 the
financial statements. Accordingly, the Directors are satisfied that
it is appropriate to continue to adopt the going concern basis (in
accordance with the guidance 'Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting' issued by the
FRC) in preparing its consolidated financial statements.
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. See note 7
for further details on how the trustee of the Group's pension
scheme plans to integrate climate change considerations into their
investment strategy. 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.
Results may differ from actual amounts.
Significant accounting estimates
The following are considered to be the key estimates within the
financial statements:
2.1 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 7.
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
2022 are rolled forward for cash movements to end of March 2023 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.
2.2 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.
2.3 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. If the Commercial accruals balance moved by 5% in
either direction this would have an impact of GBP3.4m.
Judgements
The following are considered to be the key judgements within the
financial statements:
2.4 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 pre-tax profit/loss
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 1 April 2023 and for
the period ended 2 April 2022 and the reconciliation of the segment
measures to the respective statutory items included in the
consolidated financial statements are as follows:
52 weeks ended 1 52 weeks ended 2 April
April 2023 2022
------------------------------------- ---------------------------- ---------------------------
Grocery Sweet Total Grocery Sweet Total
Treats Treats
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- -------- -------- -------
External revenues 746.8 259.6 1,006.4 647.7 252.8 900.5
------------------------------------- -------- -------- -------- -------- -------- -------
Divisional contribution 189.2 27.0 216.2 160.2 33.4 193.6
Group and corporate costs(1) (62.5) (52.4)
Other income 3.8 -
------------------------------------- -------- -------- -------- -------- -------- -------
Trading profit 157.5 141.2
Amortisation of brand assets (20.7) (19.9)
Fair value movements on foreign exchange
and other derivative contracts(2) (1.8) 4.4
Net interest on pensions and administrative
expenses 17.7 4.2
Non-trading items:
- GMP equalisation charge - (0.3)
- Impairment of fixed assets(3) (3.6) -
- Restructuring costs(4) (11.1) -
- Other non-trading items(5) (5.8) 1.5
Operating profit 132.2 131.1
Finance cost (21.7) (29.0)
Finance income 1.9 0.5
Profit before taxation 112.4 102.6
------------------------------------- -------- -------- -------- -------- -------- -------
Depreciation(6) (11.9) (8.0) (19.9) (11.2) (8.0) (19.2)
------------------------------------- -------- -------- -------- -------- -------- -------
(1) The definition of Trading Profit has been changed from 2022/23,
amortisation of software is included within 'Group and corporate costs'
from the current year. 2021/22 Trading Profit has been re-presented
in line with the revised definition.
(2) The loss of GBP1.8m (2021/22: gain of GBP4.4m) reflects changes
in fair value rate during the 52-week period and movement in nominal
value of the instruments held at 1 April 2023 from the 2 April 2022
position.
(3) Impairment of fixed assets relates
to the closure of the Knighton site.
(4) Restructuring costs in the current period includes GBP7.6m which
relates to the closure of the Knighton site with the remainder primarily
relating to some supply chain restructuring.
(5) Other non-trading items relate primarily to M&A transaction costs
and other one-off supply chain charges. Other non-trading items in
the prior period related primarily to the resolution of a legacy legal
matter.
(6) Depreciation in the period ended 1 April 2023 includes GBP1.6m
(2021/22: GBP2.0m) of depreciation of IFRS 16 right of use assets.
Revenues in the period ended 1 April 2023, from the Group's four
principal customers, which individually represent over 10% of total
Group revenue, are GBP242.6m, GBP142.7m, GBP114.4m and GBP96.2m
(2021/22: GBP224.8m, GBP129.0m, GBP97.6m and GBP91.7m). 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 52 weeks
ended ended
1 April 2 April
2023 2022
GBPm GBPm
----------------- --------- ---------
United Kingdom 943.1 847.1
Other Europe 28.1 26.2
Rest of world 35.2 27.2
-------------------- --------- ---------
Total 1,006.4 900.5
-------------------- --------- ---------
Non-current assets
As at As at
1 April 2 April
2023 2022
GBPm GBPm
-------------------- -------- --------
United Kingdom 1,160.6 1,130.4
----------------------- -------- --------
Non-current assets exclude deferred tax assets and net
retirement benefit assets.
4. Finance income and costs
52 weeks 52 weeks
ended ended
1 April 2 April
2023 2022
GBPm GBPm
------------------------------------------------------- ---------- ---------
Interest payable on bank loans and overdrafts (7.4) (4.3)
Interest payable on senior secured notes (11.5) (13.4)
Interest payable on revolving facility (0.3) (0.3)
Other interest (payable) / receivable(1) (0.6) 0.1
Amortisation of debt issuance costs (1.9) (2.1)
(21.7) (20.0)
Write off of financing costs(2) - (4.3)
Early redemption fee(3) - (4.7)
Total finance cost (21.7) (29.0)
------------------------------------------------------- ---------- ---------
Interest receivable on bank deposits 0.8 0.3
Other finance income(4) 1.1 0.2
Total finance income 1.9 0.5
------------------------------------------------------- ---------- ---------
Net finance cost (19.8) (28.5)
------------------------------------------------------- ---------- ---------
(1) Included in other interest (payable) / receivable is GBP0.6m
charge (2021/22: GBP0.8m charge) relating to non-cash interest costs
on lease liabilities under IFRS 16.
(2) Relates to the refinancing of the senior
secured fixed rate notes due 2023 and revolving
credit facility in the previous period.
(3) Relates to a non-recurring payment arising on the early redemption
of the GBP300m senior secured fixed rate notes due to mature in October
2023 as part of the refinancing of the Group's debt in June 2021.
(4) Other finance income primarily relates
to the unwind of the discount on certain of
the Group's long-term provisions.
5. Taxation
52 weeks ended 52 weeks ended
1 April 2023 2 April 2022
GBPm GBPm
---------------------------------------- --------------- ---------------
Current tax
- Current period (8.1) (6.4)
Deferred tax
- Current period (15.8) (16.5)
- Prior periods 0.7 1.9
- Changes in tax rate on the opening
balance 2.4 (4.1)
Income tax charge (20.8) (25.1)
---------------------------------------- --------------- ---------------
Tax relating to items recorded in other comprehensive income
included:
52 weeks 52 weeks
ended ended
1 April 2 April
2023 2022
GBPm GBPm
---------------------------------------------- --------- ---------
Corporation tax credit on pension movements 7.2 6.4
Deferred tax charge on increase of corporate
tax rate - (17.9)
Deferred tax credit on prior year - 1.6
Deferred tax credit / (charge) on pension
movements 52.7 (97.9)
59.9 (107.8)
---------------------------------------------- --------- ---------
The applicable rate of corporation tax for the period is 19%.
Per the Finance Act of 2021, the corporation tax rate will increase
from the current 19% to 25% starting in April 2023 and the impact
of the move to a blended rate on the deferred tax balances was
reflected in the prior year. The current year deferred tax balances
have been remeasured to reflect the year end rate of 25% resulting
in a tax credit of GBP2.4m which has been recorded in the
consolidated statement of profit or loss.
The tax charge for the period differs from the standard rate of
corporation tax in the United Kingdom of 19.0% (2021/22: 19.0%).
The reasons for this are explained below:
52 weeks 52 weeks ended
ended
1 April 2023 2 April 2022
GBPm GBPm
----------------------------------------------- ------------- ---------------
Profit before taxation 112.4 102.6
Tax charge at the domestic income tax rate
of 19.0% (2021/22: 19.0%) (21.4) (19.5)
Tax effect of:
Non-deductible items (0.1) (0.8)
Recognition of previously unrecognised losses 0.2 -
Adjustment due to change in tax rate on
the opening balances 2.3 (4.1)
Difference between current and deferred
tax rate (3.5) (3.1)
Tax incentives 1.0 0.5
Adjustments to prior periods 0.7 1.9
Income tax charge (20.8) (25.1)
------------------------------------------------ ------------- ---------------
Corporation tax losses are not recognised where future
recoverability is uncertain.
The difference between current and deferred tax rate of GBP3.5m
relates to the impact of the current tax rate being 19% and the
future year deferred tax movements being measured at 25%.
The adjustments to prior periods of GBP0.7m (2021/22: GBP1.9m)
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.
2022/23 2021/22
GBPm GBPm
-------------------------------------------------- -------- --------
At 3 April 2022 / 4 April 2021 (189.8) (57.4)
Acquisition of The Spice Tailor (5.0) -
Charged to the statement of profit or loss (12.7) (18.7)
Credited/(charged) to other comprehensive income 52.7 (114.2)
(Charged)/credited to equity (0.7) 0.5
At 1 April 2023 / 2 April 2022 (155.5) (189.8)
-------------------------------------------------- -------- --------
The Group has not recognised GBP2.2m of deferred tax assets
(2021/22: GBP2.2m not recognised) relating to UK corporation tax
losses. In addition, the Group has not recognised a tax asset of
GBP67.8m (2021/22: GBP83.9m) relating to Advanced Corporation Tax
(ACT) and GBP75.8m (2021/22: GBP76.6m) relating to capital losses.
Under current legislation these can generally be carried forward
indefinitely.
Deferred tax liabilities Intangibles Retirement Leases Other Total
benefit
obligation
GBPm GBPm GBPm GBPm GBPm
-------------------------- ---------------------- ----------------- ----------------- ------------------ ----------------
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)
-------------------------- ---------------------- ----------------- ----------------- ------------------ ----------------
At 3 April 2022 (64.5) (233.9) (3.8) (1.3) (303.5)
Acquisition of The Spice
Tailor (5.0) - - - (5.0)
Charge due to change in corporate
tax rate
- To statement of profit
or loss (0.3) - - - (0.3)
Current period
credit/(charge) 1.5 (6.7) 3.0 - (2.2)
Credited to other
comprehensive
income - 52.7 - - 52.7
At 1 April 2023 (68.3) (187.9) (0.8) (1.3) (258.3)
-------------------------- ---------------------- ----------------- ----------------- ------------------ ----------------
Deferred tax assets Accelerated Share-based Losses Other Total
tax depreciation payments
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------------------ ------------ ------- ------ --------
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
----------------------------------- ------------------ ------------ ------- ------ --------
At 3 April 2022 51.3 3.9 57.7 0.8 113.7
Credit due to change in corporate tax
rate
- To statement of profit or
loss 2.3 - 0.3 0.1 2.7
Current period (charge)/credit (13.9) 0.5 (2.2) 2.0 (13.6)
Charged to equity - (1.2) - - (1.2)
Prior period credit
- To statement of profit or
loss 0.5 0.2 - - 0.7
- To equity - 0.5 - - 0.5
At 1 April 2023 40.2 3.9 55.8 2.9 102.8
----------------------------------- ------------------ ------------ ------- ------ --------
Deferred tax asset on losses and accelerated tax depreciation GBPm
------------------------------------------------------------------------------ ------ --------
As at 1 April 2023 22.4
As at 2 April 2022 23.1
----------------------------------- ------------------ ------------ ------- ------ --------
Net deferred tax liability GBPm
----------------------------------- ------------------ ------------ ------- ------ --------
As at 1 April 2023 (177.9)
As at 2 April 2022 (212.9)
----------------------------------- ------------------ ------------ ------- ------ --------
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 GBP22.4m
(2021/22: GBP23.1m). 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 GBP91.6m (2021/22:
GBP77.5m profit) by the weighted average number of ordinary shares
of the Company.
2022/23 2021/22
Number Number
(m) (m)
------------------------------------------------ -------- --------
Weighted average number of ordinary shares for
the purpose of basic earnings per share 861.2 858.8
Effect of dilutive potential ordinary shares:
- Share options 19.5 17.0
Weighted average number of ordinary shares
for the purpose of diluted earnings per share 880.7 875.8
------------------------------------------------ -------- --------
52 weeks ended 1 52 weeks ended 2 April
April 2023 2022
Basic Dilutive Diluted Basic Dilutive Diluted
effect effect
of share of share
options options
----------------------------- ------ ---------- -------- ------ ---------- --------
Profit after tax (GBPm) 91.6 91.6 77.5 77.5
Weighted average number
of shares (m) 861.2 19.5 880.7 858.8 17.0 875.8
-----------------------------
Earnings per share (pence) 10.6 (0.2) 10.4 9.0 (0.2) 8.8
----------------------------- ------ ---------- -------- ------ ---------- --------
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% (2021/22:
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 52 weeks
ended ended
1 April 2023 2 April 2022
GBPm GBPm
----------------------------------------------- ------------- -------------
Trading profit (note 3)(1) 157.5 141.2
Less net regular interest (20.3) (19.8)
------------- -------------
Adjusted profit before taxation 137.2 121.4
Notional tax at 19.0% (2021/22: 19%) (26.1) (23.1)
Adjusted profit after taxation 111.1 98.3
----------------------------------------------- ------------- -------------
Average shares in issue (m) 861.2 858.8
Adjusted basic EPS (pence) 12.9 11.5
----------------------------------------------- ------------- -------------
Dilutive effect of share options (0.3) (0.2)
Adjusted dilutive EPS (pence) 12.6 11.3
----------------------------------------------- ------------- -------------
Net regular interest
Net finance cost (19.8) (28.5)
Exclude other finance income (1.1) (0.2)
Exclude write-off of financing costs - 4.3
Exclude early redemption fee - 4.7
Exclude other interest (payable) / receivable 0.6 (0.1)
Net regular interest (20.3) (19.8)
----------------------------------------------- ------------- -------------
(1) 2021/22 Trading Profit has been re-presented in
line with the revised definition.
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 (Scheme wound up 10
February 2023)
(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 triennial valuation at 31 March 2022 for all three Sections
of the RHM Pension Scheme has been agreed. The results show that
the combined actuarial deficits of the two Premier Sections have
fallen by a further GBP58m since the interim valuations carried out
on 31 March 2021. This has allowed the deficit contributions to be
reduced by GBP5m per year for the current valuation period.
The exchange rates used to translate the overseas euro based
schemes are GBP1.00 = EUR1.1582 (2021/22: GBP1.00 = EUR1.1774) for
the average rate during the period, and GBP1.00 = EUR1.1377
(2021/22: GBP1.00 = EUR1.1881) 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 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. The Premier Foods Section is currently hedged to around 60%
for interest rates and inflation and the Premier Grocery Products
Sections is currently hedged to around 75% for interest rates and
inflation.
The liabilities of the schemes are approximately 35% in respect
of former active members who have yet to retire and approximately
65% 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 13.0 years (12.8 years for
the RHM Section; 13.9 years for the PF Section and 13.4 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 1 April 2023 At 2 April 2022
Premier RHM Premier RHM Schemes
Schemes Schemes Schemes
Discount rate 4.80% 4.80% 2.75% 2.75%
Inflation - RPI 3.30% 3.30% 3.60% 3.60%
Inflation - CPI 2.85% 2.85% 3.20% 3.20%
Future pension increases
* RPI (min 0% and max 5%) 3.05% 3.05% 3.35% 3.35%
* CPI (min 3% and max 5%) 3.55% 3.55% 3.65% 3.65%
------------------------------------------------- --------- --------- ----------- ------------
For the smaller overseas schemes, the discount rate used was
3.65% (2021/22: 1.75%) and future pension increases were 2.45%
(2021/22: 2.60%).
At 1 April 2023 and 2 April 2022, 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% (2021/22: 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 (2021/22:
0.1% lower 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 0.45%
(2021/22: 0.40%) per annum.
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, these are the most recently
published projections at the reporting date. 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 5%
(2021/22: 2%) has been applied, which reflects the expected long
term negative outlook from the impact of Covid-19 on future life
expectancy. The increase in scaling factor from the prior year
reflects experience that has emerged over the past 12 months. The
estimated impact of the 3% addition to the mortality scaling
factors is approximately 0.8% decrease in defined benefit
obligation in respect of the schemes.
An adjustment to the base mortality tables has been made for the
RHM scheme to reflect the latest scheme mortality studies which
were commissioned by the trustee in 2022. The life expectancy
assumptions are as follows:
At 1 April 2023 At 2 April 2022
Premier RHM Schemes Premier RHM Schemes
Schemes Schemes
------------------ --------------------- --------- ------------ --------- ------------
Male pensioner, currently aged
65 86.5 84.7 86.6 85.2
Female pensioner, currently aged
65 88.2 87.1 88.3 87.7
Male non-pensioner, currently
aged 45 87.4 86.0 87.5 86.5
Female non-pensioner, currently
aged 45 89.7 89.0 89.8 89.3
------------------------------------- --------- ------------ --------- ------------
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 Decrease/increase by GBP39.2m/GBP39.8m
by 0.1%
Inflation Increase/decrease Increase/decrease by GBP16.6m/GBP11.9m
by 0.1%
Assumed life expectancy Increase/decrease Increase/decrease by GBP122.0m/GBP125.0m
at age 60 (rate of mortality) by 1 year
------------------------------- --------------------- -----------------------------------------
The sensitivity information has been derived using projected
cash flows for the Schemes valued using the relevant assumptions
and membership profile as at 1 April 2023. Extrapolation of these
results beyond the sensitivity figures shown may not be
appropriate.
Premier % of total RHM % of total Total % of total
Schemes Schemes
GBPm % GBPm % GBPm
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
Assets with a quoted price in an active market at 1 April 2023:
Government bonds 197.8 35.8 815.1 25.2 1,012.9 26.7
Cash 8.2 1.5 59.1 1.8 67.3 1.8
Assets without a quoted price in an active market at 1 April 2023:
UK equities 0.1 0.0 - - 0.1 0.0
Global equities 2.3 0.4 4.6 0.1 6.9 0.2
Government bonds 30.5 5.5 2.1 0.1 32.6 0.9
Corporate bonds 7.4 1.4 4.9 0.2 12.3 0.3
UK property 68.7 12.4 213.8 6.6 282.5 7.4
European property 44.7 8.1 204.8 6.3 249.5 6.6
Absolute return products 6.8 1.2 426.6 13.2 433.4 11.4
Infrastructure funds 27.4 5.0 342.5 10.6 369.9 9.8
Interest rate swaps - - 286.6 8.8 286.6 7.6
Inflation swaps - - 43.4 1.3 43.4 1.1
Private equity 48.8 8.8 310.8 9.6 359.6 9.5
LDI - - 7.1 0.2 7.1 0.2
Global credit 4.3 0.8 205.9 6.4 210.2 5.5
Illiquid credit 101.4 18.3 227.5 7.0 328.9 8.7
Cash 0.5 0.1 0.1 0.0 0.6 0.0
Other(1) 3.7 0.7 85.3 2.6 89.0 2.3
Fair value of scheme assets
as at 1 April 2023 552.6 100% 3,240.2 100% 3,792.8 100%
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
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
as at 2 April 2022 826.3 100% 4,273.7 100% 5,100.0 100%
--------------------------------- ---------- ------------ ---------- ----------- -------- -----------
(1) Included in Other in the RHM Schemes is GBPnil (2021/22: GBP111.2m) of assets which have
been sold during 2020/21 and were awaiting settlement at the year-end date.
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.
Pension assets have been reported using 31 March 2023 valuations
where available. As is usual practice for pensions assets where
valuations at this date were not available, the most recent
valuations (predominantly at 31 December 2022) have been rolled
forward for cash movements to 31 March 2023 and recognised as
lagged valuations. This is considered by management the most
appropriate estimate of valuations for these assets using the
information available at the time. At 1 April 2023 the financial
statements include GBP371m of assets using lagged valuations and
were these lagged valuations to move by 1% there would be a GBP3.7m
impact on the fair value of scheme assets. This approach is
principally relevant for Private Equity, Property Assets, Illiquid
Credits and Global Credits asset categories. Pension assets
valuations are 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 1 April 2023 At 2 April 2022
Premier RHM Schemes Total Premier RHM Schemes Total
Schemes Schemes
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- --------- ------------ ---------- ---------- -------------- ------------
Present value of
funded obligations (735.4) (2,291.9) (3,027.3) (1,020.2) (3,134.9) (4,155.1)
Fair value of scheme
assets 552.6 3,240.2 3,792.8 826.3 4,273.7 5,100.0
---------------------- --------- ------------ ---------- ---------- -------------- ------------
(Deficit)/surplus
in schemes (182.8) 948.3 765.5 (193.9) 1,138.8 944.9
---------------------- --------- ------------ ---------- ---------- -------------- ------------
The aggregate surplus of GBP944.9m has decreased to a surplus of
GBP765.5m in the current period. This decrease of GBP179.4m
(2021/22: GBP405.0m increase) is primarily due to a lower return on
scheme assets partly offset by 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 7 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 7 reconcile to those disclosed on
the balance sheet as shown below:
At 1 April 2023 At 2 April 2022
Premier RHM Schemes Total Premier RHM Schemes Total
Schemes Schemes
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- --------- -------------- ------------ --------- -------------- -----------
Schemes in net
asset position 11.8 948.3 960.1 9.9 1,138.8 1,148.7
Schemes in net
liability position (194.6) - (194.6) (203.8) - (203.8)
----------------------- --------- -------------- ------------ --------- -------------- -----------
Net (Deficit)/surplus
in schemes (182.8) 948.3 765.5 (193.9) 1,138.8 944.9
----------------------- --------- -------------- ------------ --------- -------------- -----------
Changes in the present value of the defined benefit obligation
were as follows:
Premier RHM Schemes Total
Schemes
GBPm GBPm GBPm
--------------------------------------- ---------- ------------ ----------
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)
Interest cost (27.0) (83.9) (110.9)
Settlement 0.3 - 0.3
Remeasurement gain 271.9 787.3 1,059.2
Exchange differences (1.6) (1.1) (2.7)
Benefits paid 41.2 140.7 181.9
--------------------------------------- ---------- ------------ ----------
Defined benefit obligation at 1 April
2023 (735.4) (2,291.9) (3,027.3)
--------------------------------------- ---------- ------------ ----------
Changes in the fair value of scheme assets were as follows:
Premier RHM Schemes Total
Schemes
GBPm GBPm GBPm
-------------------------------------- --------------- ------------ ----------
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(1) 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
Interest income on scheme assets 22.1 115.1 137.2
Remeasurement losses (295.7) (1,009.1) (1,304.8)
Administrative costs (4.2) (4.4) (8.6)
Settlement (0.3) - (0.3)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences 2.3 1.1 3.4
Benefits paid (41.2) (140.7) (181.9)
-------------------------------------- --------------- ------------ ----------
Fair value of scheme assets at
1 April 2023 552.6 3,240.2 3,792.8
-------------------------------------- --------------- ------------ ----------
(1) 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
GBPm GBPm GBPm
-------------------------------------------------- --------- ------------ -------
(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
Amount recognised in profit or loss (9.1) 26.8 17.7
Remeasurements recognised in other comprehensive
income (23.8) (221.8) (245.6)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences recognised in other
comprehensive income 0.7 - 0.7
(Deficit)/surplus in schemes at 1 April
2023 (182.8) 948.3 765.5
(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:
52 weeks ended 1 April 52 weeks ended 2 April
2023 2022
Premier RHM Total Premier RHM Total
Schemes Schemes Schemes Schemes
GBPm GBPm GBPm GBPm GBPm GBPm
Remeasurement gain
on scheme liabilities 271.9 787.3 1,059.2 139.7 333.5 473.2
Remeasurement (loss)/gain
on scheme assets (295.7) (1,009.1) (1,304.8) 17.5 (133.4) (115.9)
Net remeasurement
(loss)/gain for the
period (23.8) (221.8) (245.6) 157.2 200.1 357.3
The actual return on scheme assets was a GBP 1,167.6m loss
(2021/22: GBP 13.3m loss), which is GBP1,304.8m less (2021/22:
GBP115.9m less) than the interest income on scheme assets of
GBP137.2m (2021/22: GBP102.6m).
The remeasurement gain on liabilities of GBP1,059.2m (2021/22:
GBP473.2m gain) comprises a gain due to changes in financial
assumptions of GBP1,089.8m (2021/22: GBP413.3m gain), a loss due to
member experience of GBP69.7m (2021/22: GBP3.2m loss) and a gain
due to demographic assumptions of GBP39.1m (2021/22: GBP63.1m
gain).
The Group expects to contribute GBP6m annually to its defined
benefit schemes in relation to expenses and government levies and
GBP33m of additional annual contributions to fund the scheme
deficits up to 2 April 2024.
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:
52 weeks ended 1 April 52 weeks ended 2 April
2023 2022
Premier RHM Schemes Total Premier RHM Schemes Total
Schemes Schemes
GBPm GBPm GBPm GBPm GBPm GBPm
Operating profit
Past service cost - - - (0.1) (0.2) (0.3)
Settlement costs - - - (0.1) - (0.1)
Administrative costs (4.2) (4.4) (8.6) (4.2) (2.5) (6.7)
Net interest (cost)/credit (4.9) 31.2 26.3 (7.4) 18.4 11.0
Total (cost)/credit (9.1) 26.8 17.7 (11.8) 15.7 3.9
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 GBP8.2m
(2021/22: GBP8.0m) 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 taxation to cash flows from operations
52 weeks 52 weeks ended
ended
1 April 2023 2 April
2022
GBPm GBPm
Profit before taxation 112.4 102.6
Net finance cost 19.8 28.5
Operating profit 132.2 131.1
Depreciation of property, plant and equipment 19.9 19.2
Amortisation of intangible assets 25.6 27.0
Loss on disposal of non-current assets 0.3 0.7
Impairment of tangible assets 3.6 -
Fair value movements on foreign exchange
and other derivative contracts 1.8 (4.4)
Net interest on pensions and administrative
expenses(1) (17.7) (4.2)
Equity settled employee incentive schemes 4.6 3.4
GMP equalisation and past service cost
related to defined benefit pension schemes - 0.3
Increase in inventories (12.4) (9.3)
Increase in trade and other receivables (1.9) (13.1)
Increase in trade and other payables
and provisions 0.1 4.1
Additional employer contribution(2) (2.7) (2.5)
Contribution to defined benefit pension
schemes (45.1) (41.4)
Cash generated from operations 108.3 110.9
(1) For 2021/22 GBP4.2m has been re-classified from Contribution
to defined benefit pension schemes to Net interest on pensions
and administrative expenses to aid comparability.
(2) Contribution by the Group to the Premier schemes due to the
payment of dividends during the year.
Reconciliation of cash and cash equivalents to net
borrowings
52 weeks 52 weeks
ended ended
1 April 2 April
2023 2022
GBPm GBPm
Net inflow of cash and cash equivalents 9.1 53.2
Movement in lease liabilities 2.8 2.5
Increase in borrowings - (10.0)
Debt issuance costs in the period 0.7 8.5
Other non-cash movements (1.9) (6.5)
Decrease in borrowings net of cash 10.7 47.7
Total net borrowings at beginning of period (285.0) (332.7)
Total net borrowings at end of period (274.3) (285.0)
Analysis of movement in borrowings
As at Cash flows Non-cash Other As at
2 April interest non-cash 1 April
2022 expense movements 2023
GBPm GBPm GBPm GBPm GBPm
Bank overdrafts - (1.0) - - (1.0)
Cash and bank deposits 54.3 10.1 - - 64.4
Net cash and cash
equivalents 54.3 9.1 - - 63.4
Borrowings - Senior
Secured Fixed Rate
Notes maturing October
2026 (330.0) - - - (330.0)
Lease liabilities (16.1) 2.9 (0.6) 0.5 (13.3)
Gross borrowings
net of cash(1) (291.8) 12.0 (0.6) 0.5 (279.9)
Debt issuance costs(2) 6.8 0.7 (1.9) - 5.6
Total net borrowings(1) (285.0) 12.7 (2.5) 0.5 (274.3)
Total net borrowings
excluding lease liabilities(1) (268.9) 9.8 (1.9) - (261.0)
(1) Borrowings exclude derivative financial instruments.
(2) The non-cash movement in debt issuance costs relates to the
amortisation of capitalised borrowing costs only.
Cash outflows of GBP2.9m (2021/22: GBP3.3m) in relation to
repayments of lease liabilities have been included in the
consolidated statement of cash flows, including GBP0.6m included in
interest paid within cash flows from operating activities.
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 1 April 2023 As at 2 April 2022
Net Net
Offset Offset offset Offset Offset offset
asset liability liability asset liability asset
Cash, cash equivalents
and bank overdrafts 12.6 (13.6) (1.0) 8.1 - 8.1
9. Bank and other borrowings
As at As at
1 April 2 April
2023 2022
GBPm GBPm
---------
Current:
Bank overdrafts (1.0) -
Lease liabilities (2.1) (2.1)
Total borrowings due within one year (3.1) (2.1)
Non-current:
Transaction costs(1) 5.6 6.8
Senior secured notes (330.0) (330.0)
(324.4) (323.2)
Lease liabilities (11.2) (14.0)
Total borrowings due after more than one
year (335.6) (337.2)
Total bank and other borrowings (338.7) (339.3)
(1) Included in transaction costs is GBP1.7m (2021/22: GBP1.9m)
relating to the revolving credit facility.
Secured senior credit facility - revolving
The RCF of GBP175m 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 Net debt
/ EBITDA(1) / Interest(1)
2022/23 FY 3.50x 3.00x
2023/24 FY 3.50x 3.00x
(1) Net debt, EBITDA and Interest are
as defined under the revolving credit facility.
During the period, 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.
On 11 May 2023 the Group extended GBP148.5m of its revolving
credit facility (RCF) by one year to May 2026. The covenant package
attached to the RCF and tested bi-annually is unchanged. See note
16 for further details.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock
Exchange. The notes totalling GBP330m mature in October 2026 and
attract an interest rate of 3.5%.
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 1 April As at 2 April
2023 2022
Carrying Fair Carrying Fair
amount value amount value
GBPm GBPm GBPm GBPm
Financial assets not measured at fair value:
Cash and cash equivalents 64.4 64.4 54.3 54.3
Financial assets at amortised cost:
Trade and other receivables 63.7 63.7 65.7 65.7
Financial assets at fair value through profit or loss:
Trade and other receivables 4.2 4.2 3.3 3.3
Derivative financial instruments
- Forward foreign currency exchange contracts 0.7 0.7 0.1 0.1
- Commodity and energy derivatives 0.1 0.1 2.3 2.3
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts (0.5) (0.5) (0.3) (0.3)
- Commodity and energy derivatives - - - -
Other financial liabilities at fair value through profit or loss:
- Deferred contingent consideration (note
15) (8.2) (8.2) - -
Financial liabilities at amortised cost:
Trade and other payables 248.3) (248.3) (247.4) (247.4)
Senior secured notes (330.0) (297.8) (330.0) (305.8)
Bank overdrafts (1.0) (1.0) - -
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 1 April 2023 As at 2 April 2022
Level Level Level Level Level Level
1 2 3 1 2 3
GBPm GBPm GBPm GBPm GBPm GBPm
Financial assets at
fair value through profit
or loss:
Trade and other receivables - 1.8 2.4 - - -
Derivative financial instruments
- Forward foreign currency
exchange contracts - 0.7 - - 0.1 -
- Commodity and energy derivatives - 0.1 - - 2.3 -
Financial liabilities at
fair value through profit
or loss:
Derivative financial instruments
- Forward foreign currency
exchange contracts - (0.5) - - (0.3) -
Other financial liabilities
at fair value through profit
or loss:
- Deferred contingent consideration
(note 15) - - (8.2) - - -
Financial liabilities at amortised cost:
Senior secured notes (297.8) - - (305.8) - -
11. Dividends
The following dividends were declared and paid during the
period:
52 weeks 52 weeks
ended ended
1 April 2 April
2023 2022
GBPm GBPm
Ordinary final of 1.2 pence
per ordinary share (2021/22:
1.0 pence) 10.3 8.5
After the balance sheet date, a final dividend for 2022/23 of
1.44 pence per qualifying ordinary share
(2021/22: 1.2 pence) was proposed for approval at the Annual
General Meeting on 20 July 2023 and will be payable on 28 July
2023. Dividend distributions are recognised as a liability in the
period in which the dividends are approved by Group's
shareholders.
12. Capital commitments
The Group has capital expenditure on property, plant and
equipment contracted for at the end of the reporting period but not
yet incurred at 1 April 2023 of GBP8.9m (2021/22: GBP5.7m).
13. Contingencies
There were no material contingent liabilities at 1 April 2023
(2021/22: none).
14. Related party transactions
There has been no material change to transactions with related
parties during the period.
15. Acquisition of subsidiary
On 31 August 2022, the Group acquired 100% of the ordinary share
capital of The Spice Tailor Limited ('Spice Tailor') and its wholly
owned subsidiaries, The Spice Tailor (Direct) Limited, The Spice
Tailor (Canada) Limited and The Spice Tailor (Australia) Pty Ltd
for initial consideration of GBP43.8m (this comprises GBP44.5m cash
consideration less GBP0.7m cash acquired). Additional consideration
is dependent on future performance with an earn out structure over
a three year period from FY2024, subject to further growth targets
with a maximum cap of total consideration of GBP72.5m. The
acquisition is well aligned to the Group's growth strategy, being
highly complementary to the Group's Sharwoods and Loyd Grossman
brands and having a strong geographical fit, with a presence in the
UK, Australian, Canadian and Irish markets, significantly expanding
the Group's ethnic foods business in Australia.
The following table summarises the Group's provisional
assessment of the consideration for Spice Tailor, and the amounts
of the assets acquired and liabilities assumed.
IFRS book value Fair value Fair
at acquisition adjustments value
Recognised amounts of identifiable GBPm GBPm GBPm
assets acquired and liabilities assumed
Property, plant & equipment 0.1 - 0.1
Brands and other intangible assets - 20.5 20.5
Inventories 3.0 0.2 3.2
Trade and other receivables(1) 2.4 2.4 4.8
Trade and other payables (3.4) - (3.4)
Provisions (0.1) (2.4) (2.5)
Cash and cash equivalents 0.7 - 0.7
Deferred tax liability - (5.0) (5.0)
Total identifiable net assets 2.7 15.7 18.4
Goodwill on acquisition 34.3
Initial consideration transferred in
cash 44.5
Deferred contingent consideration 8.2
Total consideration 52.7
(1) Fair value adjustment relates to the recognition of indemnification
assets in relation to contingent liabilities acquired
Identifiable net assets
The fair values of the identifiable assets and liabilities
acquired have been determined provisionally at the acquisition
date. As permitted under IFRS 3 the Group may, within twelve months
of the acquisition date, retrospectively adjust the provisional
amounts recognised to reflect new information obtained about facts
and circumstances that existed and, if known, would have affected
the measurement of the amounts recognised as at the acquisition
date.
As a result of the business combination, the Group recognised
provisions of GBP2.5m, including GBP2.4m in relation to the fair
value of contingent liabilities acquired which relate primarily to
future tax liabilities in line with IAS 37.
The fair value of the trade and other receivables acquired as
part of the business combination was GBP4.8m. This includes an
indemnification asset of GBP2.4m in relation to the contingent
liabilities assumed, and trade receivables amounting to GBP2.4m
which approximated to the contractual cash flows.
Consideration transferred
Consideration included cash of GBP44.5m transferred on
completion of the acquisition. An additional GBP8.2m was recognised
in relation to the fair value of deferred contingent consideration
which is dependent on future performance with an earn out structure
over a three year period from FY2024, subject to further growth
targets. The deferred contingent consideration is included within
non-current other liabilities.
The fair value of deferred contingent consideration represents
the present value of estimate payments measured at the time of
acquisition based on the Group's estimate of future performance.
The fair value is based on unobservable inputs and is a classified
as a level 3 fair value estimate under the IFRS fair value
hierarchy. See note 10 for further details.
Acquisition-related costs amounting to GBP2.7m are not included
as part of consideration transferred and have been recognised as an
expense in the consolidated statement of profit or loss, as part of
administrative expenses.
Goodwill
Goodwill amounting to GBP34.3m was recognised on acquisition and
while The Spice Tailer brand forms much of the enterprise value of
the business, there is a premium associated to the purchase of a
pre-existing, well positioned business. This goodwill is not
expected to be deductible for tax purposes and is allocated to the
Group's Grocery CGU.
Spice Tailor contribution to the Group results
From the date of the acquisition to 1 April 2023, Spice Tailor
contributed GBP10.0m to the Group's Revenues and a profit before
taxation of GBP0.3m. Had the acquisition occurred on 3 April 2022,
on a pro forma basis, the Group's Revenue for the period to 1 April
2023 would have been GBP1,013.4m and profit before taxation for the
same period would have been GBP111.5m.
16. Subsequent events
On 11 May 2023 the Group extended GBP148.5m of its revolving
credit facility (RCF) by one year to May 2026. The covenant package
attached to the RCF is to be tested bi-annually and they are
unchanged (see note 9 for details).
On 18 May 2023, the directors have proposed a final dividend for
the period ended 1 April 2023 for approval at the Annual General
Meeting. See note 11 for more details.
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FR GSGDUBGBDGXI
(END) Dow Jones Newswires
May 18, 2023 02:00 ET (06:00 GMT)
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