Premier Foods plc (PFD) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us for today's Premier Foods Half Year '24-'25 Results Bond Call. [Operator Instructions]. I'll now hand you over to Duncan Leggett, CFO, to begin. Please go ahead.

Thank you very much. [indiscernible] a bit excited about sharing [indiscernible]. Welcome, everyone. Thanks for those who have dialed in. [indiscernible] Richard got in there. I just wanted to -- I guess, I'll start off by taking 3 or 4 slides from the analyst presentation that we went through on the call this morning and then hand over for any questions. So -- so on that basis, I'll start on Slide 3 of the presentation. I mean, look, I think in terms of the summary of the overall half, I think it's been a good half. We had a good first quarter where we saw a lot of volume-led growth, and that's continued through the second quarter. So you can see total revenue up 4.6%, but particularly pleasing is branded revenue up 6.8%, and that's backed by double-digit volume growth in terms of volume. And as we said before, we are investing in sharper promotional pricing than this time last year, and that's driving volume nicely. Market share, we've had a pretty sustained run of market share having gained 200 basis points in the Grocery business over the last couple of years. We have built on that. So you can see strong triple-digit volume growth and good double-digit value growth in terms of U.K. market share. [indiscernible] How that's turning out. And then trading profit is growing slightly ahead of turnover. So margins [indiscernible], but trading profit up 5.5% versus this time last year. And as we go further down the P&L because we're building cash and earning a bit of interest on it, then the metrics further down increased by a higher percentage. So interest is down year-on-year, which is why adjusted PBT is up nearly 9% and then adjusted EPS is up 8%. So that's working nicely. Net debt and EBITDA, I'll come on to shortly. I think [indiscernible], yes, what is driving these results, [indiscernible] it comes back to our strategy, and you can see on Slide 4 the progress against our strategic pillars. So first of all, we've got the U.K. core. This is where we see the benefit of our [indiscernible] program, our customer execution and that's growing 5.6% at branded level. I'll talk about capital allocation again separately shortly, but a key part is investing into our site. We've got a lot of opportunity to do that, and we've managed to step up quite significantly in the first half, which is really positive in terms of getting through the projects and accessing the benefits. New category expansion, so this is a relatively small base, but growing quickly, so another 67% growth in the half on top of, I think, [ 70-odd percent ] in terms of growth last year. So growing, and growing much more quickly and particularly our branded porridge performing really well and also ice cream performing really well. And our Oxo Marinades [ range ] also doing really well. So a good success rate and what in the market is performing really well. In international, we discussed quite a lot about. It had another good half, up 31%. That's good growth across all our regions. I think probably Australia in particular is one to call out, but also really strong growth in North America and EMEA. And our acquisitions FUEL10K and TST continue to perform really well. We're really excited about what's to come. We're really pleased with how they're going. And then you can see here that now our Chocolate Granola is the #1 selling SKU in the market in the second quarter. So really pleased on that. So moving into some numbers to Slide 9. We talk about leverage. We are at our lowest leverage at 1.1x following on from the lowest at March, which is 1.2x. I mean clearly we're generating a bit more profit year-on-year. We've always had a good operating cash flow conversion. That continues with the pension contributions falling away, that really helps the deleveraging story. And I think we're about GBP 52 million lower than this time last year. CapEx, as I said, GBP 22.5 million. That used to be what we spent a year to spend that in the half is a bit more of an even H1, H2 phasing and very much got a lot of momentum behind that program and a great list of projects that are well paying back. And then CapEx of GBP 40 million to GBP 45 million for the full year, very much in line with that. And then finally, clearly, with the leverage position and, I guess, the flexibility we've got, we'll continue to, I guess, deploy the capital allocation framework, which is [ all about ] for us making sure we put capital to work in the most efficient way possible to generate the highest returns. So CapEx, we talked about a lot of really strong payback projects between 2 and 4 years. We're still seeing those. M&A, as I said, really good progress on the acquisitions that we've done so far. We continue to be picky both from commercially, i.e. these brands that are going to respond to our model, but also financially in terms of return on invested capital and leverage will continue to go down until we find something to buy, but there's a lot of activity and a lot of looking there as you probably expect. And then finally, dividends, [indiscernible] expect to grow ahead of earnings [indiscernible] we did [indiscernible] increase in dividends during the first half, very much the plan in terms of continuing to progress it going forward. So that's moving according to plan. And as I say, whilst we're below the 1.5x target now, that still remains sort of where we see things over the medium term. It will just be a bit lumpy depending on M&A timing. We'll be a bit below it and then we'll buy something and then we'll go towards it or maybe go slightly above it, but then look to get towards it thereafter. So hopefully, that gives a bit of a through certainly the headline of the results and happy to now pass for any questions.

[Operator Instructions] Our first question today comes from Ritasha Gupta from Aviva.

Apologies, I just joined the call, so I missed the last part. But can you just clarify in terms of from a leverage point of view, how far above you're willing to take that leverage, even it's on a temporary basis, for M&A?

Yes, sure. Thank you for the question. I mean I think it all depends, but if you assume that there's the right [ deal ] or probably more practically the right 2 or 3 [ deals ] in terms of getting ourself there or slightly above. I suppose the right opportunity possibly that we can get to maybe 2x, maybe very slightly above, but with a clear path for cash generation to get us up to 1.5x. So I think that gives a bit of a feel. I think we are conscious of where we come from and all the hard work that's taken to get us down to these levels, and we're not about to go up to 3 or 4x anytime soon for sure.

Okay. Great. And is there a desire to get to IG? Or are you happy with where you are in terms of rating right now?

Yes, I think we're happy with the progress we've made clearly a number of upgrades over the last few years. Clearly, financial profile has improved significantly. I suppose the harder piece for us is the customer concentration and the geographical reach. I think that will always be a bit harder to navigate or overcome in the shorter term. But we'll continue to execute the strategy and hopefully, we continue the acquisitions. And our [ category ] expansion plans, [ and things like that ] [indiscernible].

[Operator Instructions] It looks like we have no further questions in the queue. So I'll hand back over to Duncan Leggett.

Okay. Well, thank you very much for listening. As I say, another decent first half in terms of progress, and we'll look to kick on that in the second half. You can see our full year guidance is unchanged. So very much in the thick of our biggest quarter. So we need to see where we landed that, but I think comfortable with certainly where things sit at the moment. So as I say, thank you all for your time. Enjoy the rest of your day, and we'll speak to you soon.

Thank you all for joining today. That concludes today's call. You may now disconnect your lines.