Premier Foods H2 2024 Earnings Report

Premier Foods EPS Results

• Actual EPS: GBX 14.50
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Premier Foods Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Premier Foods Announcement Details

• Quarter: H2 2024
• Date: 5/15/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 4:00AM ET

Premier Foods (LON:PFD), together with its subsidiaries, manufactures and distributes branded and own label food products in the United Kingdom, other European countries, and internationally. The company operates through Grocery, Sweet Treats, and international segments. It offers a portfolio of product categories, including flavorings and seasonings under the Bisto, OXO, Paxo, and Saxa brands; cooking sauces and accompaniments under the Sharwood's, Loyd Grossman, Spice Tailor and Homepride brands; quick meals, snacks, and soups under the Batchelors and Smash brands; ambient desserts under the Ambrosia, Bird's, and Angel Delight brands; and ambient cakes under the Mr Kipling and Cadbury brands. The company also provides dumplings under the Atora brand name; plain flour under the Be-Ro brand; dried milk under the Marvel brand name; plain and self-raising flour under the McDougalls brand; and plant based food under the Plantastic brand name. It offers its products through supermarkets, discounters, convenience stores, and wholesale and food service facilities, as well as through e-commerce channels. The company was founded in 1975 and is headquartered in Saint Albans, the United Kingdom.

Premier Foods H2 2024 Earnings Call Transcript

Key Takeaways

• Premier Foods’ full-year revenue rose 3.5% to £1,148m, with brand sales up 5.2% crossing £1bn for the first time and gaining volume market share in the UK (+80bps) and Australia (+66bps).
• Trading profit increased 6% to £188m, adjusted PBT rose 8.8% to £169m and EPS grew 7.3% to 14.5p, while net debt fell by £92m to 0.7x EBITDA enabling a 62% dividend uplift.
• All five pillars of the growth strategy delivered strong progress: UK core business +4.4%, infrastructure investment +26% to £41m, new categories +46%, overseas markets +23% and organics acquisitions double-digit growth.
• Sustainability commitments advanced with non-HFSS product sales up 9%, scope 1&2 emissions cut by 10%, over one million meals donated to food poverty initiatives and 48% of management roles now held by women.
• The company merged its pension schemes to improve governance, ceased deficit contributions and repurposed the pension dividend match into a higher ordinary dividend, targeting full pension buy-in by late 2026.

Presentation

[Alex Whitehouse, CEO at Premier Foods]

We'll make a start. So welcome to Premier Foods full year results for the year that ended on the March 29 this year. So as usual, Duncan and will take you through the performance, I'll give us some headlines, Duncan can take us through the numbers, and then we'll round up by going through the progress against the five pillars of the growth strategy. So I'm pleased to say it's been another really good year for the business.

[Alex Whitehouse, CEO at Premier Foods]

That's been driven once again by the strength and the growth from our brands. So overall, of $1,148,000,000 that's up 3.5% versus last year. But importantly, our brands grew up 5.2% and actually crossed GBP 1,000,000,000 of turnover for the first time for the business in its current format. And that growth was again ahead of market, so we took 21 basis points of market share in The UK and that was actually 80 basis points of volume share. So you might remember at the beginning of the year, I said that we were going to see we're going to sharpen our promotional prices and we'd see volume growth tracking ahead of value growth and you can see that flowing through market share as well.

[Alex Whitehouse, CEO at Premier Foods]

So volume market share growing ahead of our value market share. We also, by the way, we don't normally talk about it, we also grew market share in Australia by 66 basis points. That's one of the other markets where we measure these things. Trading profit then, pounds 188,000,000, that's 6% ahead of a year ago and that's just slightly ahead of that upgraded guidance that we gave in January. Adjusted PBT at £169,000,000 is up 8.8%.

[Alex Whitehouse, CEO at Premier Foods]

That's obviously tracking ahead of the growth rate for trading profit because what you've got there is you've got lower interest costs as we continue to delever the business. And similarly, adjusted EPS at 14.5p was up 7.3%. As that deleveraged then, pounds 92,000,000 of net debt reduction in the year, down to 0.7x net debt to EBITDA, and that's really helped by the fact, of course, this was the first year where we stopped paying pension deficit contributions. And then linked to that actually is the dividend. So dividend up 62% versus a year ago, and that's driven by two things: strong performance of the business, obviously, ongoing, but also the removal of the pensions dividend match.

[Alex Whitehouse, CEO at Premier Foods]

And what we've done is we've repurposed the cash from that into a stronger dividend, which I know Duncan will talk about pensions in more detail in a little while. So as well as that strong financial performance, we've also made good progress against all five pillars of the growth strategy. So on the left hand side there, growing our UK core business, our UK brands grew by 4.4%. And as I said, that was ahead of markets because we took market share in both volume and value terms. In terms of infrastructure investment, we increased to CHF 41,000,000, so that's up 26% versus a year ago, and that's us investing back into our manufacturing sites.

[Alex Whitehouse, CEO at Premier Foods]

And what we're doing there, of course, is we're putting in automation, we're putting in new faster kit that actually ultimately makes us more efficient and improves our gross margins, and we use that gross margin improvement to invest in growing the brands. And then the third pillar, which is our expansion into new categories, and so we grew 46% there, so still off a fairly modest base, but again another big growth year, so over time it becomes less modest as we progress. And then our overseas businesses grew by a very healthy 23%, with actually all of our key regions in double digit growth. And then finally, in organics, so these are the brands that we bought over the last couple of years, so the Spice Tailor and Fuel ten ks, both of those grew by double digits as well, so contributing more than their fair share to the overall growth. So what you can see playing out here as you look across the growth model is you've got your core UK business which grows and then we're layering on top of it what we get from new categories, what we get from overseas and what we get from the brands we buy and it's that that's going to help us scale up Premier Foods as we progress through time.

[Alex Whitehouse, CEO at Premier Foods]

And if you look at that trend actually over the last five or six years, the top left hand side there you can see our revenue growth and so good, strong, consistent performance year after year after year and in fact a 6.3% average growth, that's a six point three percent five year CAGR. And then similar picture from trading profit top right, that's actually a 7.2% CAGR, trading profit actually consistently going a bit faster than our overall turnover. Adjusted PBT down the left hand side and that's growing at 12.6% on a five year CAGR basis and that's obviously benefiting from the deleveraging that's happening in parallel at the same time and therefore less interest costs and you can see that deleverage in the bottom right there with the net debt to EBITDA falling from 2.72 times down to the 0.67 that we're announcing today. So good strong consistent performance year after year after year. Now at the same time as that, we've continued to make good progress on our sustainability commitments.

[Alex Whitehouse, CEO at Premier Foods]

Obviously, there's a lot more KPIs than the ones I'm going share here. They'll all be in the annual report, of course, but some of the highlights that we're just pulling out today, so on the product pillar, our non HFSS sales, so sales from products which are not high in fat, salt or sugar, they grew by 9%. And so that's doing exactly what we want to do. That's growing faster than our core, our overall business as we gradually make the portfolio healthier by reworking some of the recipes. And one thing that we did change during the year was our FUEL 10 ks granola recipes, so they are now all reworked to be non HFSS.

[Alex Whitehouse, CEO at Premier Foods]

You can't tell the difference, so they're better for you, but also it facilitates us having big displays at the front of store, which we wouldn't be able to do if they were classified as HFSS. On the planet pillar, we've reduced our scope one and two emissions by a further 10%. So it's obviously great in terms of carbon reduction, but obviously it means we're using less energy, and if we use less energy, of course, it costs us less, so it's a win win there. And also during the year, we adopted new water and human rights policies. In terms of the people pillar, for the first time we hit our 2,030 target of donating over a million meals to those in food poverty via fair share.

[Alex Whitehouse, CEO at Premier Foods]

And one the things we're learning here is that where we get the most traction is we run promotions in store where part of the promotional offering is that we're donating a meal to someone in food poverty through fair share. So basically it's a win for everybody, so the retailer and ourselves, we get more volume, the consumer gets a promotion and somebody somewhere gets some benefit out of it through fair share. And then from a gender balance point of view, if we look across our entire management population, we've now reached a point where 48% of those roles are held by women, so we're almost in gender balance across the management population now. And so with that, I'll hand over to Duncan, and Duncan can take us through the numbers.

[Duncan Leggett, CFO & Director at Premier Foods]

Thanks, Alex. Good morning, everyone. So I really just wanted to start off, I guess, with probably the three key themes from the financial performance for the year. Alex has just mentioned we've got a number of years of pretty good trading profit growth. I think this year builds on that.

[Duncan Leggett, CFO & Director at Premier Foods]

So we've got 6% trading profit growth and just over 7% adjusted EPS growth. So that continues the strong progress that we've seen. I think from a cash perspective, you've probably heard me say a few times that actually Premier's underlying cash generation has always been pretty good. It's just generally the cash has gone to debt holders and pension schemes. And I think this year we've really seen the benefit of a, continued lower leverage, but also b, you know, the first year really of not having to pay those pension deficit contributions.

[Duncan Leggett, CFO & Director at Premier Foods]

So therefore, net debt reduction of 92,000,000, reasonably significant and I think more importantly just opens up even more options for investing into high returning projects and getting returns. I'm really pleased to be able to share some further pension progress. I'll talk a bit more about I guess the pensions journey over the last five years or so but you know we're announcing the full merger of our pension schemes today so that is creating one one separate legal pension scheme. I'll talk a bit more about the details of that but one of the things we've done as part of that is removed the dividend match that was a mechanism and we've managed to redeploy that into the dividend hence that underpins the 62% increase we've seen so far. So in terms of performance, it's really the branded business that continues to drive the growth very much in line with strategy.

[Duncan Leggett, CFO & Director at Premier Foods]

So you can see branded revenue is growing just over 5% up to just over a billion pounds and that is good good consistent growth across both grocery and sweet treats. Non branded, I mean clearly we said before much less of a of a strategic focus for us. We do continue to selectively exit some contracts that's down 7%. We do total revenue on a constant currency basis up 3.5% to 1,150,000,000. In terms of margins and looking at divisional contribution there's really two things going on here.

[Duncan Leggett, CFO & Director at Premier Foods]

One is, you know, this growth has been very much volume led and as we get more volume growth going through the factory, it enables us to run the factories more efficiently so we see a leveraging benefit through the P and L. The second is our well established sort of cost reduction and efficiency program particularly in our supply chain and manufacturing sites both of those really combining to be able to grow divisional contribution slightly ahead of turnover so that's up 5.4% to CHF265 million. Growth on corporate costs, they're growing there's a bit of inflation in there we've got efficiency programs within that that we try and use to offset. We've also invested in our IT systems that's really around to simplify the business trying to automate a lot of what we do and all of that leaves trading profit at 188,000,000 which is up 6% and you can see trading profit margins nudging up as well versus last year. From an interest perspective, so as we've continued to build that cash during the year that's been sitting in the bank earning a return and that's helped reduce net regular interest by over 14% to 19,000,000.

[Duncan Leggett, CFO & Director at Premier Foods]

Then you can see adjusted PBT that's up nearly 9% adjusted earnings per share up just over 7% and as I said before we've redeployed what was the dividend much into dividend this year which makes dividend per share of 2.8p. So if you look at across grocery and street shoots it's actually relatively unusually a really similar picture across both. We've got good volume led growth across both. So grocery branded is up 4.6% and that's really good growth across a lot of brands. Nichin, Alex will talk a bit about later but that continues to be a standout performer for us.

[Duncan Leggett, CFO & Director at Premier Foods]

In sweet treats we've got a really good innovation program particularly behind Mr Kipling and that's been a strong driver of the 7.3% branded growth we've seen. As I said, non branded pretty similar picture across both. As I say, we're exiting some contracts. We are seeing some people switching from non brands into brands. So that leaves from a grocery perspective revenue up 3.3% and sweet treats up 4%.

[Duncan Leggett, CFO & Director at Premier Foods]

And again looking further down the P and L we're again seeing the leveraging effect of the efficient manufacturing sites plus the cost saving programs coming through. So grocery, the original contribution is up 5.5 to $229,000,000 and then sweet treats that's up 5% to 35,000,000. So going back to cash, obviously in terms of how the cash flow looks this year, you can see clearly as we grow profits, that's clearly chucking off a load of cash. CapEx, so 41,000,000 spent this year, very much in line with guidance. That's just over double what we spent a couple of years ago.

[Duncan Leggett, CFO & Director at Premier Foods]

So continuing to step up, we're guiding to about 50,000,000 for the year ahead. And again, this all comes back to this untapped opportunity that we've got to invest behind good payback projects, high returning projects, and we very much see a very long list of those that we really want to get after hence the increase in guidance. Interest that continues to nudge down as I say as we build the cash we get the return that's down to 17,000,000 this year. I think looking forward looking forward to FY '26 we've got the bonds the FY '26 bonds in October that mature. We will be looking at options to refinancing those as we go through the year.

[Duncan Leggett, CFO & Director at Premier Foods]

Clearly we're in a bit of a different interest rate environment aren't we today versus 2021 so that's underpinning the higher interest guidance and very much remains to be seen when we access those. Pensions of your said, so first year without any pension deficit contributions. There's actually one in there which is the tail end that fell into this year relating to to the contributions last year. Other than that it's pretty much administration costs. Restructuring is the tail end of the closure of our Knighton and Chalmers sites.

[Duncan Leggett, CFO & Director at Premier Foods]

We wouldn't really expect to see much of that in the year we've just started and all of that gets us to net debt of 144,000,000. So pensions, I thought it'd just be worth just reminding where we've we've come from on that. It really started five years ago where we did this segregated merger of our UK schemes. That was more of a structural solution where the schemes were legally separate there were still three schemes but they were just managed under one trust and by one set of trustees who were the RHM trustees that had done a great job with the RHM scheme. I guess the vision and the plan at the time was that over time we'd be able to use the strength of the RHM scheme to benefit the Premier Food scheme which had been in a deficit for a number of years and in terms of how that's played out it's probably played out a bit quicker than we expected but in a couple of years ago in May 23 we announced the first of those deficit reductions so that's a 5,000,000 reduction and then really last year we saw the full suspension and we've obviously seen that flow into into cash flow this year and I think that really reflects the combined comfort and strength of both company and the trustees in terms of how the scheme position is, and therefore not needing contributions from the company.

[Duncan Leggett, CFO & Director at Premier Foods]

So what we're announcing today, it's really it's a key step to sort of resolution and a and a buy in transaction that that we're still targeting. It's called a full merger. Basically, we've collapsed the ring fencing and the segregation. So rather than three set three legally separate schemes, it is now one one scheme, one set of disclosures on the balance sheet that you may have seen today. What does that do?

[Duncan Leggett, CFO & Director at Premier Foods]

I think really it just further enables the trustees to better manage the scheme. I think if you're spreading, you know, your assets, your returns, your risk, your hedging over the whole population rather than trying to manage it in three distinct buckets, it just helps again manage the smooth the smooth journey from here towards resolution. And as we said, we've negotiated the removal of the dividend match. So we've redeployed that into dividends, which which steps it up here, and still on track for full resolution, which you see as a buy in transaction towards the end of next year. Final word on capital allocation, I mean very much very much the same really.

[Duncan Leggett, CFO & Director at Premier Foods]

I think we still see the best home for our capital investing in the business. So that is in CapEx and sites, the cost out, capacity increases, Alex will talk a bit about the money we've put, last year and this year into increasing capacity for Ambrosia porridge going forward. M and A, again, we're always looking to keep up strategy. Fuel 10 ks and TST, you'll hear about shortly, continue to perform really well for us. We are still very much on the lookout.

[Duncan Leggett, CFO & Director at Premier Foods]

I think dividends, really pleased to be able to do do a bit of a one off rebase if you like. You know, we've always talked about growing it faster than earnings. We continue to do that. It will be from a it will be from a higher base. And then from a leverage perspective, one and a half times target, very much where we are.

[Duncan Leggett, CFO & Director at Premier Foods]

Clearly the timing of M and A will depend exactly, where we get to and how far we pass through it. But in terms of what we see, I guess there's a more efficient leverage that's still where we see things. So that's it for me and I'll hand back to Alex.

[Alex Whitehouse, CEO at Premier Foods]

Thanks Duncan. So if we just walk through the progress against the five pillars of the growth strategy, remember, what's really underpinning this is if our core skill set is in building brands and growing brands in a profitable way, then if we can take that skill set and apply it on a broader base than just our original brands in their core markets in The UK, then in principle, we can build a much bigger business over time. And that's really what this looks to do, therefore. So it starts on the left with actually still doing a good job on that core business because that's where most of our sales and profit gets delivered from today, so it's really important we continue to do a really good job on our core UK business. And the second pillar is that investing back into our manufacturing structure pillar.

[Alex Whitehouse, CEO at Premier Foods]

So we're investing in two things really. One is making our factories more efficient and using more automation. As I said, that releases gross margin. We use gross margin to fund the growth model. And then the other thing is actually investing in the kit that we need in order to manufacture some of the new products we bring to market because you'll be aware that our model is pretty heavy on new product development.

[Alex Whitehouse, CEO at Premier Foods]

The third pillar is extending the business within The UK, but into new categories, and that's new parts of the store where we've historically not played. And I think the image of the porridge pot from Ambrosia, there's a really good example because Ambrosia is obviously a dessert brand, so anything that we sell of porridge from Ambrosia comes completely on top of anything from the original Ambrosia business in the desserts category. And then the fourth pillar is taking our brands and selling them where they're relevant in overseas markets. So again, anything that we sell outside The UK as we start to build businesses overseas is all incremental to what we do in The UK. And then finally, we've got the inorganic opportunities, so looking for brands which we can bring into the business and will benefit from the application of that branded growth model.

[Alex Whitehouse, CEO at Premier Foods]

So you can see how that then all layers on top of what we get from our core UK. And this is all underpinned by the way in which we go about building and growing brands, which is what we call the branded growth model. There's four key levers to this. A top left hand corner where we've got, in The UK, this wonderful situation where we've got these really well known strong brands that are generally market leaders in their core categories, we've got very high household penetration. If we knocked on a random door somewhere in The UK this afternoon, in all probability we'd find several of our Premier Foods brands in the cupboard.

[Alex Whitehouse, CEO at Premier Foods]

But then we need to make them grow and that's where the other levers come in. So one of the key things we know is that for FMCG brands, if you want to make them grow consistently over multiple years, it's really important you've got a strong innovation program. And so we put a lot of energy into understanding our consumers, understanding how they're cooking, how they're eating, how they're shopping, so that we can develop new products that fit with their lifestyle and current trends. So that's a big focus for us and therefore we're constantly bringing new products to market. Bottom left there is sustained marketing investment, so we're lucky that we've got these really strong brands to start with, but they'll only stay strong if we keep investing in them.

[Alex Whitehouse, CEO at Premier Foods]

So we invest in marketing and advertising programs which build the brands, maintain brand awareness and keep them relevant and contemporary for shoppers. And we really focus on trying to build an emotional bond, an emotional connection between the consumer and the brand. And then the fourth but really important lever is the way in which we interact with our retailers where we work to build strategic partnerships with our key retailers so that we're building the size of the category together, which is important if you think about it when we've got leadership positions in most of the categories we're in and therefore will disproportionately benefit from that. And if we look at how that played out as we went through the year, so from a UK perspective, pillar one. So as we said, very strong branded growth of 8% in The UK, leading to 4.4% value growth, and that's as we sharpen some of those promotional prices.

[Alex Whitehouse, CEO at Premier Foods]

That was even more exaggerated in sweet treats, by the way, because sweet treats are more price sensitive. And also, we've got a particularly strong innovation program on sweet treats at the moment. And as I said at the beginning, market share gains then 21 basis points in The UK from a value point of view, but 80 basis points from a volume point of view, and that's reflecting that stronger branded volume growth that you see over on the left hand side. And then within that, one of the things we've been working on is premiumization. So on several of our brands now we've got premium tiers to them and we've seen that continue to build through the year.

[Alex Whitehouse, CEO at Premier Foods]

There's two examples on the page here. On the left you've Kipling Signature Bites, which are small brownie bites, eroded in chocolate, and they grew by a further 78% in the year. And I think this taps into two consumer trends. One is for indulgence, and we've talked about this before that as we all try to eat a bit more healthily, when we do want to treat ourselves, what we hear back from consumers is it's got to be worth it.

[Alex Whitehouse, CEO at Premier Foods]

And I think this touches into that because it's quite a small bite, but they're really, really nice. And the second trend it taps into is sharing. So obviously this is a box with several bites in it it's something that you share with other people. Similarly, Ambrosia Deluxe goes from strength to strength, so 45% growth from Ambrosia Deluxe during the year as we introduced some new formats and flavors. And that actually also helped Ambrosia gain quite a lot of market share during the year.

[Alex Whitehouse, CEO at Premier Foods]

Nissin also performed really well for us. So Nissin, if you look on the left hand side there, that's the revenue trend from the Nissin branded business over the last five or six years. That is a forty one percent five year CAGR, which is something I don't think I've ever seen before and just significant growth year on year on year. We've continued to take market share, so 65% market share now in the authentic noodles category, hitting £62,000,000 of retail sales. And that's under three sub brands now, so Nissin Soba, Nissin Cup Noodles and what we brought into the range this year or this last year was the Nissin Demeraman and Blok Noodles.

[Alex Whitehouse, CEO at Premier Foods]

So the Nissin brand for us now bigger than our OXXO brand actually. And I said as part of the branded growth model that one of the things we do is invest back into the brands and invest into building brand equity. We know that correlates really strongly to long term brand value. And we use a variety of different techniques. So we still use TV for some of our bigger brands and the reason for that is our brands are bought by millions of people every day, so we need tools that have got a strong reach that can get to talk to millions of people in a day.

[Alex Whitehouse, CEO at Premier Foods]

And there's only really TV that's capable of doing that, so we still use that. We use more and more out of home and we use that particularly for highlighting some of the new products that we're bringing into the range because it's great if you see a reminder for that when you're on your way to the store. And then more and more we're working with digital tools as well and also on some of the brands with influencers, which we know is bringing younger shoppers into our brands and particularly at that point when you leave home and go and set up home for yourself. And then that fourth lever of the branded growth model of our relationships with our retailers, and this is helping us get great execution in store. You can see on the left there, that's a breakfast display where we're leveraging the benefit of having both the Fuel 10 ks brand and Ambrosia.

[Alex Whitehouse, CEO at Premier Foods]

And then in the middle, that's actually a Christmas display, so you've got a lot of Ambrosia on there, you've got Paxo, you've got Bisto, you've got OXXO, so all the things that we tend to sell a lot of around Christmas. I think equally important though, on the right hand side there is we've continued to move forward our distribution. So you've got 500 basis points of improvement in distribution for our grocery brands and 300 for our cake brands. So in simple terms, we're getting more products listed in more stores again this last year, so it's a year on year benefit. If I move now on to the second pillar of the growth strategy, and this is investing back into those projects that we've got with really good paybacks actually, still many projects with a three to four year payback in line with our cash allocation principles.

[Alex Whitehouse, CEO at Premier Foods]

You can see the trend of capital investment over recent years on the left hand side there, and we're guiding to about GBP 50,000,000 for the current year, which feels like an appropriate plateau for us to play from. What have we been doing? Well, on the grocery side, we've invested in things like the a new pot filling capability for Ambrosia, and this is really to improve capacity, but it also allows us to run recyclable pots as well. And then Ambrosio porridge pots, so we're investing now in dedicated manufacturing capability for Ambrosio porridge pots because if you remember when we started off with that, we adapted some of our existing kit, which was fine at the beginning, but now this is getting so big and it's got so much further growth potential that we're now starting to put dedicated capability behind it. Another thing we've invested in is the ability to make these, which are Mr. Kipling birthday cake tarts. So this is a trend that we got from The US, which is birthday cake as a flavor, not just as a birthday cake. So this we came up with then a birthday cake tart, which is sort of jam and sponge and icing and sprinkles on top, and we did this as a four pack, which makes the price point a little bit more accessible. And it's really quite incredible how strong the sales of this thing have been since we launched it quite recently. So we've put a bit of capital behind automating how we produce those particularly the ability to make it in a four pack rather than in a six.

[Alex Whitehouse, CEO at Premier Foods]

In terms of the cost reduction projects, a massive list, of course, but there's just a couple of examples here. One is automating phase two of automating actually our sponge pudding manufacturers. This is introducing robotics to manage the cooking process for the sponge puddings, which we call retort, but also more efficient localized generation of steam. And the benefit that's giving us is we're getting reductions in labor costs, we're getting reductions in energy, and as a result, we're also getting reductions in CO2. So that's a win all the way around.

[Alex Whitehouse, CEO at Premier Foods]

And then air compressors, we're gradually replacing all our older air compressors with new technology and actually the paybacks on this are really quite short and we get significant improvement in energy efficiency. So again, saves us money on energy and also reduces CO2 emissions. If I move on to the third pillar, so this is our new categories, these categories that traditionally we've not been present in, and you can see the growth trend on the top left there over the last three or four years, so things continuing to build. The lead horse in this is very much the Ambrosia porridge pots. We've now got a 13 share of porridge pots overall.

[Alex Whitehouse, CEO at Premier Foods]

We've got a 20 in our lead customer in this area. We've continued to support the product range as it's grown. And actually, we gained quite a lot of new distribution during the year, so that's been one of the key drivers here. And we're expecting further distribution gains this year because we know we're going into now from being in all the major retailers, but now going into some of the smaller stores as well. And we introduced the fifth flavor, so as the sales get bigger, we flesh out the range in terms of more flavor choice.

[Alex Whitehouse, CEO at Premier Foods]

We also had good growth from the others as well, so Cape Herbs and Spice, really, really strong double digit growth as we got more listings and really present across all the major retailers now and we also added some new flavors like the Greek lemon herb flavor on the left there. Ice cream continues to grow and we've got more listings for that coming on stream in time for the summer. And then OXO Marinades, also big double digit growth in the year as we fleshed out distribution and we're seeing some really strong repeat rates on this one as well. So really good progress there with sales up 46%. And then moving on to international, so our overseas businesses did really well, grew by 23%.

[Alex Whitehouse, CEO at Premier Foods]

We had double digit growth in all regions. You can see the trend over the last five years there, so we've actually more than doubled sales from our international businesses over the last five years and we expect that trend to continue in that direction as we go forward. A few little things to pull out across the regions, so Australia and New Zealand now this is Australia and New Zealand, we're more developed than anywhere else. As you'll know, we've already got leadership positions in cake and leadership positions in Indian sauces. So what we're doing there is we're fully applying the branded growth model, so supporting the brands with advertising and introducing new products, so new flavors.

[Alex Whitehouse, CEO at Premier Foods]

With Shah Woods, for example, we introduced a family size jar, which has done particularly well during the year. And we're fleshing out the Spice Tailor range, including within Indian, but also stepping out of Indian into broader Asian cuisine types as well. And then the other interesting thing there, given that in this market we've now got a proper business unit on the ground and we're leaders of two categories, so we're now looking at category three, four and five. What's that going to look like? And we made our first step into gravy with the launch of Bistow breast gravy, that's our premium tier of gravy, although it's called Paxo best gravy in Australia.

[Alex Whitehouse, CEO at Premier Foods]

In North America, we continue to make progress. We've been in Canada A Few Years longer and so we've got a bit more traction there where we did extremely well actually in Canada with some significant distribution increases on Mr. Kipling, but also further distribution on the Spice Tailor. And in The U. S, we got the first listing, we got our first retailer taking the spice tailor in The U.

[Alex Whitehouse, CEO at Premier Foods]

S, which seems to be doing pretty well and we're using that as a case study then that we can take around to other retailers over time. And what we're about to do is relaunch our Mr. Kipling cakes with a much more overt British positioning to it. Because one of the things we've learned from talking to U. S.

[Alex Whitehouse, CEO at Premier Foods]

Consumers about our cakes is once they realize they're British, they sort of increase in their expectations and how good they think they are. And we think that's something to do with the fact that bake off gets shown in The U. S. And something to do with sort of British afternoon tea. So going to capitalize on that and we're also going to launch apple pies as well, so apple pies to America.

[Alex Whitehouse, CEO at Premier Foods]

And then finally down the bottom there, Europe, Middle East and Africa. Spice Tailor is now available in four different markets across Europe. And the game here is really about distribution. So it's just constantly plunking away, getting more distribution of Shaw Woods and the Spice Tailor over time. As I say, all three regions delivered double digit growth in the year.

[Alex Whitehouse, CEO at Premier Foods]

And that really brings me to the fifth pillar then. So Spice Tailor and Fuel ten ks, so another double digit growth year from the Spice Tailor. And really, what you're seeing here is you're just seeing the branded growth model being deployed against these acquired brands. So several examples of new products that we launched during the year, extending out into different cuisines beyond Indian, so Japanese, Vietnamese and actually a whole range of Chinese products. We've started to support the brand and start to build brand awareness through advertising.

[Alex Whitehouse, CEO at Premier Foods]

And this is important because one of the things we know about the Spice Tale is one piece people know about it and they try it, they really like it and they come back again and again. It's really up there as one of our absolute best repeat purchase products that we've got in the range. So we're now at the point where we're investing in making more people aware of the brand. So in Australia, we tested our first TV campaign and in The UK, we've been working on digital tools to do a similar thing. So we're going to be looking at that and working out what the best way to go forward is.

[Alex Whitehouse, CEO at Premier Foods]

We're also getting some really impactful displays in store, so you walk into the store and you bump into these things and it just brings it to your attention and gives you a chance to try. And if you look carefully, we're leveraging the combination of the Spice, Taylor and Charlotte's because we've got both brands in that category. And then as you'd expect, there's further new products coming. So we've got some Pad Thai noodles coming and also some authentic premium Papadoms. Similar story on Fuel 10 ks actually, so double digit growth again and we're very excited because our chocolate granola over the full year is now The UK's number one selling granola skew, so we're super excited about that.

[Alex Whitehouse, CEO at Premier Foods]

And we've continued to invest in the brand, so we've had our first outdoor media campaign and also lots of different digital campaigns as well running for the brand, so building awareness over time. And we brought more new products to market, so given the success of the granola, then we also started to bring to market some big box cereal, traditional big box cereal formats with multigrain hoops and multigrain flakes. Now we did this right at the end of the financial year, so this is really early, really early days, but one of the things we're learning from the data is that what this is doing is it's bringing new shoppers, younger shoppers back into that big box cereal part of the category in stores. I think that's quite a positive thing for our retail partners. And then we launched a high protein version of our breakfast shake, so standard range is 15 grams and this is 25 grams.

[Alex Whitehouse, CEO at Premier Foods]

And then what we're seeing for this year is quite an important step, which is something we always envisaged when we bought the brand because we know it was anchored in breakfast, but we always thought that the proposition could extend beyond breakfast into other times of the day and other formats. And so what you're seeing here is a step into other meal occasions. So we've got protein enriched Fuel 10 ks noodles, obviously helped by our friends in Nissen to develop those, and we've got Fuel 10 ks instant soups and this is something called protein bowls, this one's actually a Mexican bean chili, so it's in a microwavable pouch and then it's ready to eat. And then there's lots of other stuff going on here, but commercially I can't quite share that with you yet because we're just not quite in store yet. So by the time we get to November, I'll have more things to share there as we continue to extend the brand.

[Alex Whitehouse, CEO at Premier Foods]

So we do see FUEL ten ks has got the ability to be a lot bigger and a lot broader brand than it is at the moment. And we continue to look. So there's no change in this chart from the one I've shown a couple of times before. The plan is very much we're actively looking for more brands that we think will fit well into the portfolio and we believe that when we apply our branded growth model, we'll be able to deliver more value from. The thing to remember though is that we are very fussy.

[Alex Whitehouse, CEO at Premier Foods]

I think that fussiness has served us well with the two things that we've bought so far, but we are very actively looking for the next one. So if I then briefly look ahead to the current year, as you'd expect, we've got strong plans across all five pillars of the strategy. We've got a whole stream of new products coming to market and the one I'd probably highlight, there's just a few pictures on here, a pasta and sauce. We all know we've had battlers pasta and sauce for many, many years. This is essentially an almost ready to eat version in a pouch, so you microwave this for ninety seconds and it's ready to go.

[Alex Whitehouse, CEO at Premier Foods]

You don't have to rehydrate anything. So think that's quite a big technical step forward. In terms of infrastructure investment, I've talked about we're investing back into the lift and site in order to get dedicated production capability for the porridge pots, which we're going to need given the current rate of growth. And then we've got a whole list of efficiency improvement projects and the one we've put here is an improvement in the cooling process once we've covered the mini rolls in chocolate. New categories, we still expect to see strong growth again.

[Alex Whitehouse, CEO at Premier Foods]

So Ambrosio pot distribution, we know, is going to make a step forward this year. And then we've got some new products on ice cream, so we've got a new version of the Angel Delight handheld ice creams, and we've also got a new flavor of Mr. Kipling, is a caramel tart ice cream, which sounds absolutely delicious. And then if I move quickly on to our overseas businesses, so slightly different story in Australia and New Zealand because it's a bigger, more developed business for us, where it's really building on those leadership positions in cake and Indian sauces and then expanding outwards into new categories. Whereas in North America and Europe, it is really a distribution build game now, so it's about building more stores across those three focused brands.

[Alex Whitehouse, CEO at Premier Foods]

And then as I say, at the same time, looking to find more brands that we can buy and bring into the portfolio over time. So to wrap up from me really, look, it's another year of strong financial performance and good progress against all five pillars of the strategy. So strong branded growth driven by volume, which is great, further profit delivery, which is a bit ahead of the already upgraded expectations from January, and that 62% increase in dividend as the pension match has been repurposed into the dividend. In terms of outlook, this year, we'd expect our revenue growth to be more balanced between volume and pricemix. Obviously, it was very much volume driven for the last year, so we expect a more balanced between volume and pricemix, bearing in mind that pricemix also includes the premiumization impact of price as well.

[Alex Whitehouse, CEO at Premier Foods]

We've got a strong innovation pipeline, which we expect to then to see coming to market as we go through the year. And then as Duncan said, from a capital allocation focus, that's going to remain on infrastructure investments, so back into our manufacturing sites and also on M and A acquisition activity. And so at this point, six weeks in, we're on track to deliver the trading profit growth expectations for the year. And then just some final thoughts to leave you with really. So look, we've got some really strong brands and a proven branded growth model.

[Alex Whitehouse, CEO at Premier Foods]

We've got a strong track record of growth, and in fact, growing faster than market year after year. And the way we're looking at this now, if you look at that five pillar strategy, we're seeing plenty of opportunity to scale the business up over time as we continue to deploy that. So thank you very much, and we're very happy to take questions. Charles

[Charles Hall, Head of Research at Peel Hunt]

All from Peel Hunt. Alex, could you talk a little bit about the phasing of sales growth during this year? Obviously, last year, you started with pretty strong period. So do you see a tough comp in Q1? How do you see the balance of sales growth?

[Alex Whitehouse, CEO at Premier Foods]

Yes. I mean you're absolutely right. We do see that. So if you look at Q1 a year ago, we've got some very strong comps to cycle. But what we see going through the year is that, that sort of tapers off as we go through the year.

[Alex Whitehouse, CEO at Premier Foods]

So I suspect that will have an impact on overall turnover growth shape.

[Charles Hall, Head of Research at Peel Hunt]

And looking out of the window, pretty nice weather. Generally, that's unhelpful you

[Alex Whitehouse, CEO at Premier Foods]

Yes, generally unhelpful.

[Charles Hall, Head of Research at Peel Hunt]

And then secondly, a lot of chat earlier in the year about retail pricing and price wars. Do you see any impact on Premier from what's going on in the retail Not really.

[Alex Whitehouse, CEO at Premier Foods]

No. I think retail ebbs and flows, and there's always something happening. I think we continue to focus on the fact that we've got these really strong relationships with the retailers and we've got really strong brands as well. So we'll just carry on deploying our branded growth model and it's not really been a major issue for us.

[Charles Hall, Head of Research at Peel Hunt]

Thanks.

[Alex Whitehouse, CEO at Premier Foods]

Thanks.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Great, thank you. Matthew Abraham from Berenberg. Just first question is in reference to the distribution point increase that you called out. Was just wondering if you could put some context to how significant that factor was in the context of the growth that was delivered for top line this year. And then as a follow-up to that question, can you provide a sense of the degree of headroom that you have on distribution points for your existing customer base and how much further that driver has to run?

[Alex Whitehouse, CEO at Premier Foods]

Yes, it's a good question because distribution is the first and most important fundamental thing, isn't it? Because if a product is not in the store, you can't sell any. So constantly moving distribution forward is really important. I haven't got a deconstruction of exactly how much that contributed to overall growth, but it's definitely helpful. And what you're seeing is the benefit

[Alex Whitehouse, CEO at Premier Foods]

As we've got strong growth from our brands, they deserve more shelf space. And also as we launch new products, they've got to fit on the shelf somewhere as well. So those two things are the drivers. I think we'll continue to nudge that forward over time while ever we've got strong performance and more new products coming to market. So I'm not seeing a ceiling to it, although we do remember, of course, that shelves aren't elastic.

[Alex Whitehouse, CEO at Premier Foods]

They only occupy they can only take as many facings as they can. But over time, what you see is some of the weaker players fall out and we gain shelf space from that.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Okay. That's helpful. And just one more, if I may. So we've obviously spoken about the step up in CapEx. Just wondering if we should also be thinking about an increase in marketing investment given the improved cash flow dynamics of the business and how that will link to top line outcomes and the associated lag with that top line outcome.

[Alex Whitehouse, CEO at Premier Foods]

Yes. So I mean I think we've been very clear over time that we're on a journey with our marketing investment. It isn't at the point where we want it to be yet. And that's why we've been working really hard on gross margin improvement and using gross margin improvement as a way to fuel our sort of internally funding and increasing marketing investment. So we're on a journey, would say.

[Alex Whitehouse, CEO at Premier Foods]

There's a long term commitment towards increasing that investment, and we're probably, I would say, about two thirds of the way along that journey. So there's definitely more to do.

[Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg]

Great. Thank you.

[Damian McNeela, Director at Deutsche Numis]

Thank you. Damian McNeither from Deutsche Numis. Just can you talk about the sort of your CapEx program? I know you sort of qualitatively said you're going to increase CapEx, but could you sort of quantify that and also talk about the returns profile that you're likely to expect from that, whether that's sort of as good as what you've been achieving so far? And I think just my second question is, I guess on the pension full resolution.

[Damian McNeela, Director at Deutsche Numis]

Can you just clarify the timing of that 2026? Is that calendar year or your fiscal year please?

[Alex Whitehouse, CEO at Premier Foods]

They both feel like questions for you then.

[Duncan Leggett, CFO & Director at Premier Foods]

Doesn't it? Yes. No, thanks Damien. So yes, so CapEx, so the 41,000,000 we spent is as I said pretty much double what we spent a couple of years ago. We've always talked about I guess the untapped opportunity from this where a few years ago we had to limit how far down our list of opportunities we could go and now obviously with a bit more cash to deploy we're very happily moving down it.

[Duncan Leggett, CFO & Director at Premier Foods]

Continue to be investing in high returning projects. We've taught sort of two, three, four year paybacks. It's very much the sort of thing that we're looking at. Obviously, within that envelope, there's stuff, keeping the lights on, making sure that the sites are a suitable work environment for our colleagues. But clearly, in terms of the step up, we're focusing on the cost out and some of the capacity increases we've talked about.

[Duncan Leggett, CFO & Director at Premier Foods]

So regarding to about £50,000,000 for this year, Damian, and that's probably a reasonable feel for the number going forward. And again, as I say, it reflects just we've just got loads of opportunity that we can still access broadly similar returns profile, I would say. Pensions, so yes, calendar '26. So we've said for a while I think by December 26 is generally how we're thinking about resolution. When I say resolution, we're thinking about a buy in, ultimately a sort of de risking of the scheme, which I think would be logically a buy in.

[Duncan Leggett, CFO & Director at Premier Foods]

Sitting here today, you can never predict these things exactly, can you? But I think by December 26 still feels a decent estimate.

[Damian McNeela, Director at Deutsche Numis]

And have you started talking to potential sort of people that would execute the buy in with you or is it still a bit too early for that?

[Duncan Leggett, CFO & Director at Premier Foods]

Yeah, mean I think probably the best way to explain it is monitoring the scheme really closely. We're taking the necessary actions. There's a load of data cleanse under the bonnet type stuff that we've been out for a long time. And then I think we'd naturally progress to those discussions when we think the timing is right.

[Damian McNeela, Director at Deutsche Numis]

Sorry, just one last one before I hand it to Clive. Just on the distribution point, can you just clarify that it's the entire business, not just UK?

[Alex Whitehouse, CEO at Premier Foods]

No, those are UK stats. So they're UK stats. They're UK stats. It will be obviously more if you included the rest of the because we're constantly adding new stores on, so but we've got no way of measuring that, unfortunately, with the same detail we have in The UK.

[Damian McNeela, Director at Deutsche Numis]

Have you got any idea of the headroom that you've got on distribution then, given that shelves aren't elastic?

[Alex Whitehouse, CEO at Premier Foods]

No, not really. It's sort of it's difficult to try and imagine what it might look like, but wherever we're able to keep bringing great innovation that deserves shelf space to market, then I'd expect us to finish up with a bit more distribution, yes.

[Damian McNeela, Director at Deutsche Numis]

Thanks. I'll sit up.

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Thank you. Clive Black from Shore Capital. I've got three short questions, hope. One, building on Damian's question about CapEx. Why is €50,000,000 the right number?

[Clive Black, VP & Head - Consumer Research at Shore Capital]

And given you're loaded or minted now, why are you saying you've got an optimal manufacturing program and base? Or could that be accelerated, I guess, would be the first?

[Alex Whitehouse, CEO at Premier Foods]

It's really about site disruption. If you look back, obviously, five, six years ago, it was very much about cash constraint. And as that sort of gradually being removed and we've geared ourselves up in terms of having more engineering expertise within the business because if you're going to do more big capital projects, need more engineers. So we've now got all that in place. But it feels like this is probably a happy level if I look at the amount of disruption that we would accept in any one factory at any one time because of course we're making these changes while we're churning out millions of consistent high quality products every day and there's only so much we can do to one factory at once.

[Alex Whitehouse, CEO at Premier Foods]

So that's probably why we get to a sort of a natural ceiling, which feels like about €50,000,000 but we'll see.

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Okay. Thank you. In terms of the margins between grocery and sweet treats, is there scope for any convergence? I don't mean a collapse of the grocery because there is a very wide difference. Is that a potential prize in the medium term, that sweet treat margin?

[Alex Whitehouse, CEO at Premier Foods]

I think there's certainly more automation opportunities in the sweet treat factories than there are in grocery. Whilst there are opportunities in the grocery factories, are already fairly automated as you've seen, but there's definitely more to go for in sweet treats, which will definitely flow through as a margin benefit. But there are some inherent differences, particularly because there's a shorter shelf life between the two, which means the two will probably never quite come together.

[Clive Black, VP & Head - Consumer Research at Shore Capital]

Okay. And then lastly, just in terms of your shopper insight or customer insight, both. What are the really big things that are leading you to think about how your assortment and proposition is going to develop in the sort of medium to long term rather than the next year?

[Alex Whitehouse, CEO at Premier Foods]

I think the big trends that we've seen over the last four or five years remain. And if you think about it, everybody is trying to eat a little bit more healthily. So we are constantly evolving the portfolio in that direction. We know we've got an important trend on convenience and so things like the microwavable pouches, which make creating quick meals easier for people. And some of that's interesting actually because sometimes that's about speed, but also it's about skill set.

[Alex Whitehouse, CEO at Premier Foods]

People don't know how to make some of these things anymore. So actually being able to help people by the Spice Tail is a great example actually of a foolproof kit that gives you something that's as good as you get in the restaurant. So whatever we can help with that, that's great. Indulgence is that sort of slight counter trend to the healthy eating piece. So those big building blocks, they're still there and remain.

[Alex Whitehouse, CEO at Premier Foods]

You get subtle changes within it, but we keep and we're talking to consumers all the time.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

Andy Wade from Jefferies. A couple from me. First one on sort of just building on the question earlier on sort of margin revenue trade off to some extent. This year, obviously, you saw a good performance on the trading profit margin. But thematically, you typically talk to having broadly flattish margin that being reinvested in driving revenue growth.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

Just sort of interested in the dynamics of how it worked through, how it did this year, I. Driving margin rather than more on what could have potentially, I don't know, been more on top line. Was it is it more of a timing thing? Or is just interested

[Alex Whitehouse, CEO at Premier Foods]

as to how that played it's really a consequence of two things actually. It was mix. So if you look at the mix, you've got less non branded and more branded and also that volume leverage through the manufacturing sites and that came through stronger than we expected. I think that's probably the simple answer to the question. It doesn't change our long outlook.

[Duncan Leggett, CFO & Director at Premier Foods]

Yes, it doesn't change long I think we'd expect to follow the similar model in terms of growing gross margins and reinvesting back.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

But a higher base rather than you're going to reinvest again back to where you were later on?

[Alex Whitehouse, CEO at Premier Foods]

No, from the higher base. Yes. Cool.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

And then the second one, just sort of looking at the pass through and source microwaveable ninety seconds. Now I can't imagine the sticking point has been having the idea for that. Presumably there's some innovation required to actually get it to work. Not that I'm going to be putting this in my model anyway, I'm just generally interested to how that

[Alex Whitehouse, CEO at Premier Foods]

We've the recipe.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

Yeah, could you tell me the recipe? How that process worked from an innovation perspective and what needed to be done.

[Alex Whitehouse, CEO at Premier Foods]

Yes, it's something we've been wanting to do for a while. So you're right, the ideas, we've had the idea for quite a long time. The tricky part actually has been how you get the pasta in such a situation that it can then be microwaved and be ready to eat in ninety seconds, but not have gone mushy from being suspended in the source all the while that it was sitting on the shelf or sitting in your cupboard. And actually the chefs have done a really great job kind of getting that right and it took us some years of work to get that to where we wanted it to be. So it was sort of a good experience for the consumer.

[Andrew Wade, SVP Equity Research at Jefferies Financial Group]

Interesting. Thanks.

[Matthew Webb, Consumer Analyst at Investec Group]

Matthew Webb from Investec. I've got three questions then just one quick clarification as well, please. First question is on the revenue growth outlook. I see on Slide five, you've noted your average revenue growth over the last five years, CAGR over 6%. Obviously, there's been some inflation in I just wonder how close you think you can get to that sort of number going forward given all the progress you're making with the business?

[Alex Whitehouse, CEO at Premier Foods]

Yes, sure. So can I take them all at a time? Yes, I've got a hole in my head. So look, I think over the medium term, and you take all the pillars of the growth model, we would expect the business can grow mid single digit. And that will include the benefit from bolt on acquisitions as well.

[Alex Whitehouse, CEO at Premier Foods]

And so yes, there's some inflation in that 6% you saw on there. But I think over the medium term, we can we would be mid single digit.

[Matthew Webb, Consumer Analyst at Investec Group]

Great. Thank you. And then second question on the reformulation of the fuel 10 ks granola, but leaving the taste unchanged, which obviously the holy grail, I guess.

[Alex Whitehouse, CEO at Premier Foods]

Yes, quite.

[Matthew Webb, Consumer Analyst at Investec Group]

Yes. I just wondered how you've managed to achieve that, how easy or otherwise was that, which ingredients have changed, who's helped you, whether any color on that would be interesting.

[Alex Whitehouse, CEO at Premier Foods]

I'm not going to go through what we changed, but what I can tell you, it was not easy and there were multiple versions of granolas that were tasted tested until they came up with one that they were happy with that was essentially imperceptible in terms of how it tasted from the original but actually then not classified as HFSS. So it was not easy but I think they did a really super job actually.

[Matthew Webb, Consumer Analyst at Investec Group]

Yes, fantastic. And then third question, in terms of expanding FUEL 10 ks into Noodles, I think you said with help from Nissan. I mean how does that work? Because presumably, there's the danger of cannibalizing Nissan product. Do you pay a certain amount away to Nissan to accommodate that for their assistance, how does that work?

[Alex Whitehouse, CEO at Premier Foods]

So our noodle parts are manufactured by Nissan for us. So they act in that sense, they act as a co manufacturer for us, but they also help us develop the product. So then we just we're literally just buying the finished good from them that we then sell. There's nothing more complicated to it than that.

[Matthew Webb, Consumer Analyst at Investec Group]

I'm with you. So you're interested in line anyway. Fine. Okay, that's great. And then sorry, just final point of clarification on the Ambrosia porridge pot distribution.

[Matthew Webb, Consumer Analyst at Investec Group]

I think you talked about moving into smaller stores. Did you mean smaller stores of the larger retailers or smaller store chains, right, the former?

[Alex Whitehouse, CEO at Premier Foods]

At least well, it will be both over time. But the thing I know about was one of the big retailers, we've now just had a conversation about, okay, is working so well, even when we've got small stores with a much tighter range, they deserve to be in that range.

[Matthew Webb, Consumer Analyst at Investec Group]

Got it. Fantastic. Thank you. Thanks.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Thanks. It's Andrew from Peel Hunt. Just another question on the margins. Obviously, I know the case is to reinvest it. But with the mix changing volumes coming through, is it possible to reinvest all of it?

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Or is there going to be naturally some kind of progress in that margin inevitably? And what's the kind of are we now at the terminus? Or is there more to come on the trading profit margin? I've got another question.

[Alex Whitehouse, CEO at Premier Foods]

So look, I think the dynamics here are what we're trying to do is expand our gross margin, and you get that from a whole bunch of savings initiatives we have going on all the time in the business, plus the capital investment into the sites. So all that gives us an expanding gross margin percentage. But we're using a lot of that to fuel the growth in the business. As I answered one of the other questions earlier, we know that we need to step up our marketing investment further from where it is. We've made a lot of progress over the last five years, but from where we were, there's still more we need to go after.

[Alex Whitehouse, CEO at Premier Foods]

So we'll continue to do that and it'll take a few more years for us to get that where we need it to be. And so as a consequence, and as Duncan said, we therefore see trading profit moving broadly in line with top line. As I say, this year, it actually grew a bit ahead of that and that's because many things flowed out better than we thought and later in the year as well, which is one of the reasons why we came ahead of our January guidance. Whether that mix and volume benefit flowing through. Does that make sense?

[Duncan Leggett, CFO & Director at Premier Foods]

Yes. And I think just on non branded, we probably expect non branded to sort of normalize a bit more as we go forward. So I think it's been extra pronounced this year, which is probably accentuated the mix over and above what we expect to see going forward.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

That's clear. Thank you. And the next one on capital allocation. You mentioned, obviously, the increase in CapEx, but that's probably a limit now. I know that the dividend is going up.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

But without sort of where you want to maintain the leverage to be, I mean, there could quite easily be quite lot of excess cash kind of building into the business if acquisitions don't come along. I know that you're selective with those. What are your are you having thoughts on what to do with that extra capital as it comes as it builds? Or if acquisitions don't come along? Or you just

[Alex Whitehouse, CEO at Premier Foods]

I think our assumption is the acquisitions will come along. I think that's probably our start point is the priorities are very straightforward. It's investment back into the sites and then it's acquisitions and then dividend. So I think I don't see any change in that.

[Duncan Leggett, CFO & Director at Premier Foods]

No, no, it's spot on.

[Andrew Ford, Equity Research Analyst at Peel Hunt]

Great, thank you.

[Alex Whitehouse, CEO at Premier Foods]

Anymore? No, good. Well, thanks, everybody, for coming today. I think as you can see, sort of another year of good financial performance, progress against all the pillars of the growth strategy. I think what it also tells us is it sort of hints to the future a little bit, doesn't it?

[Alex Whitehouse, CEO at Premier Foods]

Because if we can keep driving the five pillars of that growth strategy, there's a very clear model here. We just keep repeating that and then we'll be able to scale Premier Foods up to a much bigger business than it is today. Thanks very much.

[Duncan Leggett, CFO & Director at Premier Foods]

Thanks all.

Participants

Executives

• Alex Whitehouse, CEO
• Duncan Leggett, CFO & Director

Analysts

• Charles Hall, Head of Research at Peel Hunt
• Matthew Abraham, Vice President, Equity Research - Consumer at Berenberg
• Damian McNeela, Director at Deutsche Numis
• Clive Black, VP & Head - Consumer Research at Shore Capital
• Andrew Wade, SVP Equity Research at Jefferies Financial Group
• Matthew Webb, Consumer Analyst at Investec Group
• Andrew Ford, Equity Research Analyst at Peel Hunt