Introduction to Premier Foods September 2021 Introduction and strategy
2 WE ARE ONE OF THE UK’s LEADING AMBIENT GROCERY SUPPLIERS
5.6 5.4
4.4
% Share 3.3 3.2 3.1 3.0 2.8 2.5 2.3 2.0 1.8 1.4
Mondelez Nestle Coca-Cola PepsiCo Mars Premier Britvic Heinz Pladis (UB) Kellogg's Unilever ABF Douwe Foods Egberts
Source: Kantar Worldpanel, 52 weeks ending 13 June 2021, excludes Foodservice and out of home 3 STRONG BRAND EQUITY Strong market shares and high household penetration
Categories
Brands Position Share Penetration
Flavourings & Seasonings 1 44% 73%
Quick Meals, Snacks & Soups 1 33% 45%
Ambient Desserts 1 37% 59%
Cooking Sauces & Accompaniments 1 16% 54%
Ambient Cakes 1 25% 65%
Sources: Category position & market share: IRI 52 w/e 27 March 2021; Penetration: Kantar Worldpanel 52 w/e 21 March 2021 4 DEMONSTRABLE TRACK RECORD OVER THE LAST 4 YEARS
Trading profit (£m)1 Adjusted PBT (£m)1
115 148
93 133 88 129 123 79 74 117
FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21
Net debt (£m)2 Net debt/EBITDA2
523 496 3.93 470 3.56 3.23 408 2.72
1.90 314
FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 1 – Stated on a 52 week comparable basis; 2 – Net debt stated on pre-IFRS 16 basis 5 FULL YEAR NET DEBT PROGRESSION SINCE FY16/17 Accelerating debt reduction
Net debt /EBITDA 3.93x 3.56x 3.23x 2.72x 1.90x
550 £m 523 496 500 27 26 470 450 62 408 400 94 350 314 300
250 Net debt Debt Net debt Debt Net debt Debt Net debt Debt Net debt FY16/17 reduction FY17/18 reduction FY18/19 reduction FY19/20 reduction FY20/21 ▪ Significant acceleration in Net debt reduction over last 12 months ▪ Leverage reduced by 0.8x during FY20/21 to 1.9x at year end ▪ Cash interest declining as average debt levels fall ▪ Net debt/EBITDA target approximately 1.5x in medium term FY19/20 and FY20/21 Net debt and Net debt/EBITDA stated on pre-IFRS 16 basis 6 CAPITAL STRUCTURE OVERVIEW £330m Fixed Rate Notes coupon priced at 3.5%
Year ago Today1
£m 350 330 £m 350 300 300 300 250 250 210 200 175 200 177 150 150 100 100 50 50 0 0 2020 2021 July 2022 Dec 2022 Oct 2023 2021 2022 2023 May 2024 2025 Oct 2026 RCF Fixed notes Floating notes Fixed notes RCF
Ratchet grid broadly in line RCF % Margin 2.75% + 3M L RCF % Margin with previous Annualised interest £39m Annualised interest Below £25m2
S&P and Moody’s B/Stable and B2/Negative S&P and Moody’s B+/Positive and B1/Stable
1 – RCF has two 1yr extension options beyond 2024; 2 – Reflects full year effect of FRN redemptions in FY20/21 7 PREMIER FOODS IS A VERY DIFFERENT BUSINESS TO 5 YEARS AGO A successful branded growth model with reduced leverage and de-risked pensions
2016 2021
Flat to marginally positive 4 year Revenue CAGR Trading sales growth +4.0%
Leverage 3.6x 1.9x
Pensions NPV: £400-420m NPV: £175-185m1
New management team taking a fresh look at everything with renewed energy and impetus to deliver value
1 – Assuming a buyout surplus and refers to projected high-case assumption RHM investment strategy returns of Gilts +3.25% 8 OUR BRANDED GROWTH MODEL STRATEGY IS DELIVERING A combination of agility, pace and scale
£
Sustainable Cost control Cash & profitable & efficiency generation revenue growth
• Leading brand positions • Disciplined working capital • Lean SG&A cost base • Insight driven innovation management • Operational Excellence • Sustained marketing investment • Tight focus on Capex • Capital projects • Collaborative retail partnerships • Options for cash deployment in • Agility, pace & energy • International markets expansion short and medium term
9 THE BRANDED GROWTH MODEL Underpins business growth and cash generation
1 Leading brand positions 2 Insight driven new products
• Our brands are leaders in their categories • Launch new product development linked to key • High household penetration consumer trends • Major focus on health & nutrition
3 Sustained marketing investment 4 Retailer partnerships
• Marketing and advertising to build brands, • Focused on driving mutual category growth maintain awareness and keep them contemporary • Deliver outstanding instore execution • Create emotional connections through media
10 UK REVENUE PERFORMANCE Established track record of delivering sustainable, profitable revenue growth
Quarterly UK revenue growth 2 year UK growth rate % movement year on year
22.9%
4.3%
2.8% 7.3% 7.8% 7.4% 4.8% 4.4% 4.4% 4.0% 3.4% 3.6% 2.6% 3.0% +4.0% 1.2% 1.6%
UK 2yr CAGR UK Branded 2yr CAGR
(14.0%) Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
FY17/18 FY18/19 FY19/20 FY20/21 FY21/22
Note: Knighton Foods included from FY19/20 Q3, following re-integration 11 THE NEXT STAGE IN OUR GROWTH AMBITIONS Capturing category and overseas opportunities based on established foundations
£ Phase 1 Sustainable Cost Branded growth Branded growth & profitable control & Cash model delivered model & revenue growth efficiency generation leverage below 2.0x deleveraging
1 UK category expansion • Applying the branded growth model across additional categories Applying brand Phase 2 2 building & Overseas expansion Business growth • Build overseas businesses with existing UK brands expansion capabilities 3 Bolt-on acquisitions • UK: expand category presence • Overseas: to build critical mass 12 NEW INTERNATIONAL STRATEGY Application of Branded Growth Model strategy
Application of Branded Growth Model strategy
1 Small teams now in place in selected markets with local Market focus expertise
2 New leadership Implemented change from functional to country structure leadership
3 Execution Consumer dynamics, ensuring right product at the right obsession +3000 price, with optimal promotional plans in place distribution points
4 Optimised route Several key changes, e.g. appointed Weston Foods in to market USA to distribute Mr Kipling cake
13 ESG
14 OUR ESG STRATEGY Five pillars which stretch across our business
• Enhance nutrition profile of existing range Encourage • Extend our range of healthier foods healthier • Educate consumers & colleagues on healthier choices choices
Realise • Attract talent & developing skills people’s • Inclusion and diversity potential • Caring for our people
• Corporate charity partner, Together for short lives Support our • Supporting our industry, Grocery Aid communities • Support local charities ↓ • Sustainable raw materials Drive ethical • Drive high ethical and compliance standards sourcing across supply chain
Reduce our • Climate action environmental • Food waste reduction footprint • Packaging recyclability
Appointed new ESG role to Executive Leadership Team, reporting to CEO 15 ESG
Healthier choices Realise people’s potential Drive ethical sourcing
100% certified sustainable palm oil
100% certified 1. Top 100 apprenticeship employer (direct) for 4th year ↓ soya, up 2. 550 leaders and managers from 89% undertaken I&D programme in PY • 17 new better for you ranges 3. Best in class safety record: this year Accident rate (0.02 RIDDORs) at BBFAW • 84% of ranges have a better for operational sites is 26 times Tier 2 for you option better than industry average 2nd year • 1,102 tonnes of sugar removed plus higher since 2015 score 16 ESG
Supporting our communities Reducing our environmental footprint
1 • Reduced CO emissions by 5.8% last year 550,000 meals1 donated to 2 and by 43% since 20082 those in need via Fareshare Climate 550,000 • Maintain zero waste to landfill record during Covid pandemic action • Water usage reduced by 58% compared to 2007
2 • Zero food waste to landfill Food Raised £70,000 so far for our • 11% reduction in food waste per tonne waste corporate charity, Together for compared to prior year £70,000 Short Lives 3 • Founding member of UK Plastics Pact • Only 12% of our packaging is plastics • 70% of our plastics is recyclable (from 3rd year running Gold level Packaging 63%) supporter for Grocery Aid • Removed 400 tonnes of non-recyclable plastic packaging this year • 94% of packaging by weight is recyclable
1 – Equivalent meals based on tonnes donated; 2 - Like for like basis, re-stated for site disposals 17 Recent results: FY20/21 Full year results & FY21/22 Q1 Trading update
18 HEADLINE FULL YEAR RESULTS Exceptionally strong year of trading driving substantial debt reduction
10.3% +13.6% £148m £115m ↓£94m +4.0% +7.0% +12% +23% 1.9x
FY & Q4 FY & Q4 branded Net debt2 reduction FY Trading profit1 FY Adjusted PBT Revenue growth1 Revenue growth1 & Net debt2/EBITDA
Dividend reinstated after thirteen years
1 – Stated on a 52 week comparable basis; 2 – Net debt stated on pre-IFRS 16 basis, compared to prior year 19 FINANCIAL PROGRESS IN FY20/21 Lower interest costs, pensions agreement, reduced leverage and dividend
1 Substantial interest cost reduction 2 Transformative pensions agreement
39
33
27
19 3 Reduced leverage 4 Dividend
FY19/20 FY20/21 FY20/21 pro Post Bond re-fi forma
▪ Progressive net regular interest reduction since Net debt DPS FY19/20 /EBITDA ▪ FY20/21 pro forma for FY effect of FRN 1.9x 1.0p redemptions ▪ FY21/22 confirmed following bond issuance pricing 2 0 STRONGLY POSITIONED WITH OUR BRANDED GROWTH MODEL Market share and household penetration gains, exceptional online growth
+128bps Grocery share gain +32bps 4,500,000 Sweet Treats +113bps PF Market
1 2 3 Market share growth1 Online growth +104%2 New households3
1 – IRI, 52 weeks 27 March 2021; 2 – Kantar Worldpanel; 3 – Kantar Worldpanel PF categories, vs prior year, based on Group’s top 8 brands 21 REVENUE FROM NEW PRODUCTS AHEAD OF LAST YEAR Extensive TV advertising across six major brands
New product ranges including better for you Sharwood’s 6 key brands supported with TV advertising
New New
Another year of increased revenue from new products
22 GROWING AHEAD OF THE MARKET + MORE HOUSEHOLDS Reflect leading market positions, product innovation and investment
Markets/categories New households gained in year
Share +32bps +113bps
+1.2million +1.1million 13.6% 12.3%
YoY PF growth growth Market growth +1.1million
2.4%
+1.0million +0.7million (2.3)% Grocery Sweet Treats
Sources: IRI 52 w/e 27 March 2021, Kantar Worldpanel, 52 w/e 21 March 2021 23 EXCEPTIONALLY HIGH ONLINE GROWTH Consistently grown faster than the channel in all categories
Online growth vs market Online growth x category
140% 120.0% 120%
100.0% 100%
80.0% 80%
60.0% 60%
40.0% 40%
20.0% 20%
0.0% 0% Cake Desserts Flavourings Cooking QMS Total & Sauces & Seasonings Accomps Total Market PF Growth PF growth Market growth
• Online growth +104%, taking 128bps of share • eCommerce/online strategy a focus for the last three years, increasing resource in this growth channel • Brands are promoted and displayed using techniques pertinent to online
Source: Major retailers, 52 w/e 21 March 2021, year on year growth 24 NEW INTERNATIONAL STRATEGY DELIVERING CONSISTENT GROWTH Revenue up +23%1 with double digit growth in each quarter
Application of Branded Growth Model strategy FY20/21 quarterly revenue growth profile
1 Small teams now in place in Market focus selected markets with local expertise 43%
2 Implemented change from New leadership functional to country 24% 23% structure leadership 13% 13% 3 Consumer dynamics, ensuring Execution right product at the right obsession +3000 price, with optimal distribution promotional plans in place Q1 Q2 Q3 Q4 FY points
4 Several key changes, e.g. Optimised route appointed Weston Foods in • Strong double-digit growth in each quarter to market USA to distribute Mr Kipling cake • Underpinned by progress against revised strategy
1 – At constant currency rates 25 APPLICATION OF BRANDED GROWTH MODEL OVERSEAS Replicating the successful sustainable UK model in Ireland and Australia
Ireland Australia
Consumer marketing
New product launches
1. Replicating UK branded growth model 1. FY21 revenue growth strong in Sharwood’s; 2. Mr Kipling advertising in H1 and H2, also launched leadership in branded cake premium Signature range; FY sales up +17% 2. Sharwood’s new product launches including 3. Advertising extended to Bisto in Q4; FY sales up +42% low fat cooking sauces helped sales grow 39% 4. New product launches in new categories through Soba 3. Mr Kipling leadership of branded cake & Noodles and baking mixes advertised with TV for first time in Q4 26 CAPITAL ALLOCATION PRINCIPLES
Context A cash generative business with leading sector margins
• Maintenance of Trading profit margins with progressive investment in consumer Margins & 1 marketing PBT • Trading profit and adjusted PBT of equal importance in monitoring future progress
• Accelerated capital investment behind infrastructure and to drive growth and cost 2 Capex reduction
3 Dividends • Dividend recommenced after 13 years; targeting progression from 1.0p base
4 M&A • Explore targeted bolt-on acquisitions in the UK and selected international markets
5 Leverage • Target of c.1.5x Net debt/EBITDA over medium term
27 DIVIDEND REINSTATED FOR FIRST TIME IN 13 YEARS Final dividend of 1.0 pence per share
1 A final dividend of 1.0p was paid in respect of FY20/21 Net debt/EBITDA
2 First dividend paid to shareholders since July 2008 3.93 3.56 3.23 1. With leverage now significantly reduced, the Board proposed to 2.72 3 re-instate a dividend 1.90
41. Expectation the pay-out ratio to progress from this base
FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 1. Dividend matching arrangement with Group’s pension schemes 5 negotiated more favourably as part of segregated merger
28 Q1 HEADLINE RESULTS Very encouraging start to the year; full year adjusted PBT at top end of expectations
Q1 vs 1 year ago Q1 vs 2 years ago Sales % change Grocery Sweet Treats Group Grocery Sweet Treats Group
Branded (19.6%) 3.2% (13.9%) 12.0% 3.7% 9.3%
Non-branded (6.0%) (16.2%) (8.0%) (10.1%) (14.9%) (10.9%)
Total (17.9%) 1.4% (13.2%) 8.2% 2.0% 6.3%
+13% +17%1 £6.5m
Volume Grocery ex International Sales from market share Foodservice vs 2YA sales vs 2YA category expansion
1 – Constant currency basis 29 Pensions
30 COMBINED PENSION SCHEMES Accounting combined surplus £540m; Triennial combined valuation £214m
Accounting Valuation trend (£m) Actuarial Triennial Valuation (£m)
2,000
RHM Premier Foods Surplus/(Deficit) 1,500 2019 2016 2013 RHM 338 135 (504) 1,000 923 Premier Foods (552) (551) (538) 500 Ireland 0 0 (20) 0 Total schemes (383) (214) (416) (1,062) (500)
(1,000) Dec 2013 Apr 2021
▪ Strong performance in RHM portfolio benefitting from a successful hedging strategy and investment performance ▪ Over the medium term on an IAS19 basis, RHM schemes surplus has continued to increase while Premier Foods schemes deficit ▪ All valuations above except 2019 RHM valuation are based broadly stable until reduction in March 2020 on liabilities assumption of Gilts +1.0% ▪ RHM 2019 valuation based on Gilts +0.5%
31 LANDMARK PENSIONS AGREEMENT NOW IN PLACE Set to deliver value for many stakeholders
How do the benefits work through?
1 2 3 4 On buyout, Creates greater Utilises strength RHM scheme in prospective funding of RHM scheme healthy surplus1 RHM surplus2 certainty for & successful and moving would transfer Premier Foods investment closer to buyout to fund deficits scheme strategy in PF schemes members
5 Expected significant reduction in future pension deficit contributions
1 – Surplus on the current ongoing actuarial valuation basis 2 – Currently any surplus returned to the Company would be net of 35% tax 32 Appendix
33 CAUTIONARY STATEMENT
This presentation 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 presentation 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 presentation apply only as at the date of this presentation and are not intended to give any assurance as to future results. Premier Foods will update this presentation 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.
34 DEFINITIONS
▪ The period ‘FY20/21’ refers to the 52 weeks ended 27 March 2021, unless where otherwise stated. The period ‘FY19/20’ refers to the 52 weeks ended 28 March 2020.
▪ The period ‘Q4’ refers to the thirteen weeks ended 27 March 2021, unless where otherwise stated and the comparative period the thirteen weeks ended 28 March 2020.
▪ The period ‘Q1’ refers to the thirteen weeks ended 3 July 2021, unless where otherwise stated and the comparative period the thirteen weeks ended 27 June 2020.
▪ Trading profit is defined as Profit/(loss) before tax before net finance costs, amortisation of intangible 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 and net interest on pensions and administration expenses and past service costs.
▪ Adjusted profit before tax is defined as Trading profit less net regular interest. Net regular interest is defined as net finance cost after excluding write-off of financing costs, other finance income and other interest payable. Adjusted earnings per share is defined as Adjusted profit before tax less a notional tax charge of 19.0% divided by the weighted average of the number of shares of 851.3 million (52 weeks ended 28 March 2020: 846.6 million).
35 GROUP OVERVIEW
Grocery (68% of sales) • Listed on the London Stock Exchange since 2004
• One of the UK’s largest food manufacturers
• Manufactures, distributes, sells and markets a wide range of predominantly branded products in the ambient grocery sector
• Market leading product portfolio including cakes, gravies, stocks, cooking sauces & accompaniments, Sweet Treats (26% of sales) desserts, soups and pot snacks
• Operates from 16 sites in the UK
International (6% of sales)
Sales £934m EBITDA £165m
Note: Sales and EBITDA based on FY20/21 52 week basis pre-IFRS 16 36 UK GROCERY MARKET Ambient grocery shows lowest prevalence of retailer brand in UK grocery
18% 34% Chilled Ambient Frozen 46% & Fresh 54% 66% 82%
Branded Non-branded Branded Non-branded Branded Non-branded
Market size £37bn £52bn £7bn
Flavourings & Ambient Ambient QMS Cooking Sauces Seasonings Desserts Cake Market size £472m £411m £1,034m £345m £990m
PF share 44.1% 33.0% 15.5% 37.0% 24.5%
Own label share 12.9% 5.7% 26.1% 20.3% 48.1%
Sources: Kantar Worldpanel, 52 weeks ended 21 March 2021, IRI 52 weeks ended 27 March 2021 37 OUR INNOVATION STRATEGY Core to the delivery of organic growth
1 Consumer trends Insight Consumer at the heart of the innovation process
1 Building in depth Health & Nutrition consumer understanding
2 2 Convenience Innovation
3 Developing new Snacking and On the go products that make consumers lives easier
4 3 Indulgence Execution
Collaborative retail 5 partnerships with Packaging sustainability outstanding in-store execution 38 HEALTHIER FOR YOU CHOICES ARE CORE TO INNOVATION AGENDA Supported by three key strategies
1
Enhance ▪ Targeting reduction in salt, sugar and calories nutrition profile ▪ Stealth reduction across categories of existing core ▪ So far, removed over 1,100 tonnes of sugar across our cake and range dessert categories, exceeding 1,000 tonnes target
2 Extend our ▪ By 2025, every core range will include at least one better-for-you range of option; now up to 84% at end of FY20/21 healthier ▪ From 2019, we have introduced at least one new range each year Alignment to UN SDGs options that enables consumers to improve their diet
3 Educate ▪ Use clear and transparent labelling across the portfolio to help consumers and consumers make informed decisions colleagues on ▪ Extended Healthy Eating in the Workplace programme across all choices sites in the year
39 NON-BRANDED PLAYS AN IMPORTANT AND SUPPORTIVE ROLE IN OUR BUSINESS
Non-branded revenue by type Key principles & criteria
• Application of a Capex light approach Knighton B2B & flour • To play an important & incremental role • Assists in supporting Manufacturing overhead recoveries • Strict financial hurdles apply for new 20% 24% business
FY20/21 commentary
25% • FY20/21 Non-branded revenue declined Grocery (6.3%): 31% other • Sweet Treats (5.3%) decrease due to contract exits and lower discounter volumes Cake all year • Grocery (5.4%) due to B2B volumes round and lower at Knighton Foods and seasonal ranges Charnwood, partly offset by increased retailer own label volumes 40 FY21/22 GUIDANCE
FY21/22 guidance £m Working capital Slightly negative Depreciation c.£20m Capital expenditure £25-30m Interest – cash Lower than £25m Interest – P&L Lower than £25m Tax – cash Nil Tax – notional P&L rate 19.0% Pension deficit contributions £38m Pension administrative & PPF levy cash costs £4-6m Cash restructuring costs c.£5m Re-financing costs c.£12m Dividend (includes pension match) c.£11m
• Low single digit £m cash tax payable medium-term due to tax legislation changes on brought forward losses and lower relief due to expected lower pension deficit contributions • Interest to be confirmed following bond issuance and pricing • Dividend payment includes matching component to pension schemes 41