London / UK. (pf) British Premier Foods PLC announced its third quarter trading statement for the 13 weeks ended 28 December 2019. The Company reports about a strong Q3 performance. Profit expectations are unchanged and the full year Net debt / Ebitda target of 3.0 times is on track, Premier Foods said in its statement.
Financial headlines
- Q3 Group sales up +2.6 percent and up +2.5 percent Q3 year to date
- Q3 UK sales up +3.6 percent and +3.3 percent Q3 year to date; 10th consecutive quarter of growth
- Outperforming the market, with share gains in 7 out of 8 major brands
- Mr. Kipling sales up +10 percent in Q3
- Non-branded sales returned to growth in Q3
- Profit expectations for the full year remain unchanged
- On track to meet target of 3.0x Net debt/Ebitda by March 2020
Chief Executive’s Statement
Alex Whitehouse, Chief Executive Officer: «Today we’re reporting another strong quarter with Group sales up +2.6 percent and UK sales up +3.6 percent. Our UK business has now delivered 10 consecutive quarters of revenue growth and has consistently outperformed the market. Our biggest brand, Mr. Kipling, has again been instrumental to this continuing momentum, with increased sales of 10 percent supported by TV advertising and new product ranges. Our more seasonally focused brands grew by over 5 percent in the quarter and in 2019 we sold over 200 million mince pies, 7 percent more than 2018.»
«Our proven branded growth model of delivering new product innovation based on consumer trends together with high quality advertising behind our major brands continues to work very well. In Q3 we doubled our UK marketing investment with more to come in Q4, along with a number of new product launches including Cadbury Crème Egg choc cakes and Mr. Kipling mini pies and tarts. We are making good progress towards our cost savings goals and are on track to deliver GBP 5 million savings over the next 2 years to further increase investment into the branded growth model. This performance, in our key trading period, reconfirms our unchanged profit expectations for the full year and we remain on track to meet our Net debt/Ebitda leverage target of 3.0×5 by March 2020.»
Percent change in sales
| Q3 | Q3 Year to date | |||||
| Grocery | Sweet Treats | Group | Grocery | Sweet Treats | Group | |
| . | ||||||
| Branded | 0.5% | 7.6% | 2.3% | 2.4% | 6.3% | 3.5% |
| Non-branded | (0.8%) | 8.8% | 3.9% | (0.4%) | (4.2%) | (1.8%) |
| Total | 0.3% | 8.0% | 2.6% | 1.9% | 3.8% | 2.5% |
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Trading update
The Group reported sales growth of +2.6 percent in Q3 compared to the prior year, particularly reflecting very good Sweet Treats sales which increased +8.0 percent. Grocery sales grew by +0.3 percent in the quarter, as a better UK performance was partly offset by weaker International sales. The UK, which represents c.94 percent of the Group’s annual sales, saw revenues increase by +3.6 percent in Quarter 3 year on year.
The Group continues to outperform its markets, with seven of its largest eight brands growing market share on a year to date basis.
In the Grocery business, Bisto and Ambrosia both grew sales in the third quarter, reflecting advertising investment for Bisto and continued share gains for Ambrosia. Sales of Paxo stuffing were excellent in the run up to Christmas while Nissin Soba noodles and Cup Noodle continued their very strong trajectory, growing revenues by nearly 70 percent in the quarter. Non-branded sales declined by (0.8 percent) in the third quarter as a result of decreased business to business volumes.
In Sweet Treats, Mr. Kipling recorded an eighth consecutive quarter of sales growth, with revenues up +10 percent as the benefits from increased marketing investment and new product launches continue to realise great progress for the Company’s largest brand. Mr.Kipling mince pies sales also grew by +10 percent in the quarter, supported by the launch of its new mini Mr. Kipling mince pies. In total, the Group sold over 200 million mince pies during the course of 2019; a 7 percent volume increase on the prior year. Sales of Cadbury licensed product ranges were ahead on a year to date basis, although slightly tempered in December as lower promotional levels on cake offset the launch of new Cadbury cake mixes.
As expected, Non-branded Sweet Treats sales returned to growth in the quarter with sales up +8.8 percent compared to last year. This reflected the lapping of softer comparatives associated with impacts from the Group’s logistics transformation programme a year ago.
The International business delivered a disappointing result with sales4 (17 percent) lower in the third quarter. With new leadership now in place, the Group is implementing a revised and more focused approach in order to deliver more consistent sustainable growth, building bigger businesses in selected markets. As it transitions to this new approach, further progress is expected to be deferred to the FY-2020/2021 financial year.
In the final quarter of the year, Mr. Kipling will be launching a range of mini pies and tarts including Cherry Bakewells and Fruit Pies. Quarter 4 also sees the launch of Cadbury Crème Egg choc cakes for Easter and Plantastic grain pots.
Cost + efficiency
As previously announced, the Group is targeting a GBP 5 million cost savings programme over the next two years, the proceeds of which will primarily be used to reinvest in its brands. Very good progress is already being made in achieving these savings with further news to follow in due course.
Knighton Foods
Following an internal review, the Group has decided to fully integrate its Knighton Foods subsidiary into its core UK business. This move is expected to generate a number of commercial opportunities together with a range of operational synergies.
Strategic review update
As previously announced, the Group’s strategic review is nearing conclusion and a further update is expected to be provided as appropriate.
Pensions update
The triennial actuarial valuation of the Group’s pension schemes is continuing and dialogue with all Trustees remains ongoing; a further update will be provided in due course.
Outlook
The Group has delivered a strong Q3, its key trading period, and this reconfirms its confidence of delivering progress in FY-2019/2020. Its target of 3.0x Net debt/Ebitda is expected to be met by March 2020.
