The Best in British Food with Brands You Really Love
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Premier Foods plc www.premierfoods.co.uk Annual report and accounts 2009 Premier Foods plc Annual report and accounts 2009 Premier House Centrium Business Park Griffi ths Way THE BEST IN BRITISH St Albans Hertfordshire AL1 2RE FOOD WITH BRANDS T 01727 815850 F 01727 815982 YOU REALLY LOVE 17128Premier_CVR.indd 1 17128 12/03/2010 Proof 14 17128 12/03/2010 Proof 14 12/03/2010 18:58 ALL THE NATION’S FAVOURITES Premier Foods is home to some of the nation’s favourite food brands. Last year over 99% of British households bought a Premier Foods’ brand, so you’re likely to find us in every British kitchen and on every British table. Did you know that 99.4% of British households bought one of our brands last year and 47.2 million people eat a Premier Foods’ branded product in an average two week period . the best in British food with brands you really love. Pages 1 to 17 Pages 18 to 49 Pages 50 to 73 Pages 74 to 126 Pages 127 to 128 Our business Business review Governance Financial Other information statements 01 Highlights 18 Operating review 50 Board of directors 74 Independent auditors’ 127 Shareholder 02 Chairman’s statement 22 Divisional review and senior report — Group and information 04 About our business 28 Financial review management Company 128 Glossary Cadbury is a trade mark of Cadbury Ltd, Erin is a trade mark of Erin Foods Limited, Ormo is a trade mark of A H Foods Ltd and Rose’s is a trade mark of L. Rose & 06 Group at a glance 36 Risk management and 52 Directors’ report 76 Principal statements IBC Premier Foods’ Company Limited, all of which are used under licence. The Group has an exclusive worldwide licence to use the Loyd Grossman name on certain products. 08 Chief Executive’s risk factors 55 Corporate 81 Notes to the fi nancial brands statement 42 People at Premier governance statements 13 Marketplace 44 Corporate social 61 Directors’ 123 Company balance remuneration report sheet Cautionary Statement 14 Consumers responsibility 124 Notes to the Company The purpose of this annual report is to provide information to shareholders of Premier Foods plc (“the Company”). The Company, its directors, employees and 16 Key product fi nancial statements advisers do not accept or assume responsibility to any other person to whom this document is shown or into whose hands it may come and any such responsibility developments or liability is expressly disclaimed. It contains certain forward-looking statements with respect to the fi nancial condition, results, operations and businesses of the Company. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Nothing in this annual report and accounts should be construed as a profi t forecast. In this report we make references to market size, share and growth, retail sales data and household penetration which are sourced from independent market research and consumer data providers including Kantar and IRI. 17128Premier_CVR.indd 2 17128 12/03/2010 Proof 14 17128 12/03/2010 Proof 14 12/03/2010 18:59 Our business Business review Highlights for 2009 Branded Total Sales Trading Profit Profit * Governance Sales before Tax 6.5% 2.2% 4.5% £47m to £1,678m to £2,661m to £323m (2008: £1,576m) (2008: £2,604m) (2008: £309m) (2008: loss of £405m) Operational Highlights Financial statements — Underlying cash generation of £60m — Net debt at 31 December 2009 £1,365m — Financial position now secure with banking facilities arranged until 2013 — Implementing strategy of growing branded sales, delivering efficiencies and generating cash — Confident of making progress in 2010 despite difficult consumer and competitive environment * Trading profit is defined as operating profit before exceptional items, amortisation of intangible assets, the revaluation of foreign exchange and other derivative contracts under IAS 39 and pension credits or charges in relation to the difference between the expected return on pension assets, administration costs and interest costs on pension liabilities. Other information www.premierfoods.co.uk Premier Foods plc Annual report and accounts 2009 01 17128PREMIER.indd 01 17128 12/03/2010 Proof 14 12/03/2010 19:16 Chairman’s statement David J Kappler, Chairman BUILDING A STRONG BRANDED FOOD COMPANY “We have built a stable platform from which to drive branded growth and deliver shareholder value” Performance In the face of these challenges, I am pleased to report a 2009 was dominated by concerns over the economy with solid performance from the business. We have seen sales of the impact of the financial crisis and the continuing recession £2,661m up 2.2% on 2008. Trading profit for the year was in the UK. £323m, an increase of 4.5% year on year and broadly in line with expectations. Branded sales in particular have performed There was also uncertainty over how this would impact the strongly in the year, up 6.5% with market share gains in food industry — would consumers switch to discounters and many of our key categories. I believe that this is a creditable would they trade down from branded products to own label? achievement in the current economic climate and a testimony The growth of discounters, whilst certainly a feature of the both to the success of our strategy of focusing on branded year, has not been as significant as some had anticipated. sales and also the work and commitment of management and More important has been the resilience of food brands employees. despite the spending pressure on consumers. Refinancing A very important event during the year was the refinancing of the business which raised approximately £380m under a placing and open offer announced in March. The refinancing has been successful both in removing the uncertainty over the Company’s debt position and also in providing Premier with a stable position from which to drive performance. As shareholders will be aware, prior to the refinancing the Board considered it appropriate to suspend dividend payments. Future payments will be dependent on the limitations imposed by our current debt arrangements. Board There have been a number of changes to the Board over the last year. Following the refinancing, Warburg Pincus became a major shareholder of the Company and under the terms of the placing and open offer have the right to nominate the appointment of a director to the Board. As a result, in June we welcomed Charles Miller Smith as an additional non-executive director. Charles has a wealth of experience in both the consumer goods and financial markets, which has enabled him to make a valuable contribution to the Board and support the achievement of the Company’s strategic goals. 02 Premier Foods plc Annual report and accounts 2009 Stock code: PFD 17128PREMIER.indd 02 17128 12/03/2010 Proof 14 12/03/2010 19:16 After seven years with the Group, Paul Thomas stepped down CSR Our business as Finance Director in August 2009. Paul was instrumental in We have made important strides in the area of corporate the Company’s flotation in 2004 and contributed significantly social responsibility and for the first time have a produced to the development of the Group. The Board would like to a stand-alone CSR report which is available on our website thank him for his dedication to Premier and wish him well for www.premierfoods.co.uk. Key achievements in the year have the future. been a 5.2% reduction in energy consumption and a 37.7% reduction in waste sent to landfill. Further information on our In October Jim Smart was appointed to the Board as Chief achievements can also be found in the CSR section of this Financial Officer. Jim, who previously held the role of CFO at report. both Friends Provident plc and Boots Group plc, is a well- known and respected CFO and has made an immediate and Looking Forward positive impact on the Group. There are indications that the UK economic outlook may now be improving slightly. Food inflation which has been Business review Christine Cross who was appointed as a non-executive a significant factor over the last couple years, whilst still director in January 2008 retired from the Board at the end of above traditional levels, fell back in the final quarter of 2009. January 2010 in order to take up a new role as Chief Retail However, the outlook for consumers remains uncertain and Adviser to PricewaterhouseCoopers. The Board would like to the pressure on spending continues. thank Christine for her valuable contribution to the Company. We believe that with the integration of the business now During the year a new Finance Committee was established to largely completed we can focus on our business model of provide additional focus and review in respect of the Group’s growing branded sales, using our scale to deliver value to ongoing financial strategy. David Beever was appointed customers and gaining efficiency benefits from our supply Chairman of the Committee which meets quarterly. chain. Employees In addition we have a full programme of product development The last few years have been a period of major change for for the coming year designed to help drive sales growth. I am employees at Premier as a result of the rationalisation of the confident that 2010 will be a year of significant progress for Governance business following the acquisitions of Campbell’s and RHM. Premier Foods.