Premier Foods Annual Report 2020

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FY2020 Annual Report · Premier Foods

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A Recipe For
Outperformance

Annual Report for the 52 weeks ended 28 March 2020

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Highlights

Financial and Operational

Group revenue (£m)

Trading profit1 (£m)

Profit/(loss) before tax (£m)

1
.
7
4
8
£

3
.
4
2
8
£

2
.
9
1
8
£

4
.
0
9
7
£

5
.
8
2
1
£

6
.
2
3
1
£

0
.
3
2
1
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0
.
7
1
1
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9
.
0
2
£

0
.
2
1
£

6
.
3
5
£

)

7
.
2
4
£

(

2016/17 2017/18 2018/19 2019/20

Net debt2 (£m)

NPD as a % Branded revenue3

Total CO2 emissions (tCO2e)

2
.
3
2
5
£

4
.
6
9
4
£

%
5
.
6

%
8
.
5

9
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9
6
4
£

1
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0
4
£

%
6
.
5

%
4
.
4

9
9
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,
6
6

8
3
7
,
2
6

2016/17 2017/18 2018/19 2019/20

2018/19 2019/20

Strategic review
concluded with landmark
pension agreement

+2.8%

Group revenue up
+2.8% to £847.1m

6.5%

of branded revenue
generated from new
product development
(‘NPD’)

+5.4%

Adjusted earnings per
share1 up +5.4% from
8.5p to 8.9p

consecutive quarters
of UK growth, fuelled
by our successful
innovation strategy

2.7x

Net debt to adjusted
EBITDA ratio1 reduced
from 3.2x to 2.7x

1 A definition and reconciliation of non-GAAP measures to reported measure is set out on page 37.
2 Net debt is on an adjusted and pre-IFRS 16 basis as defined on page 37.
3 New product development (NPD) is UK sales from new products launched by the Group in the last three years.

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p09

p11

“Strategic review
now concluded, with
landmark pension
agreement.”

Colin Day
Chairman

“The last financial year
has been one of great
progress for the Group.”

Alex Whitehouse
Chief Executive Officer

p02

Our strategy and branded growth model

136

138

141

Contents

Strategic Report

Our strategy and branded growth model

About Premier Foods

Chairman's statement

Our purpose and values

Chief Executive’s review

Being a responsible business

Key performance indicators

Operating and financial review

Risk management

Governance

Board of directors

Governance overview

Nomination Committee report

Audit Committee report

Directors’ Remuneration report

Other statutory information

Statement of directors’ responsibilities

Financial Statements

Independent auditor’s report

Consolidated financial statements

Notes to the consolidated
financial statements

Company financial statements

Notes to the Company
financial statements

Additional information

p12

p30

p38

Being a responsible
business

Operating and
financial review

Risk management

P O R T

D R

R A N

O
NIT
O
M

T
I

RISK MANAGEMENT
PROCESS

U R E

M E

www.premierfoods.co.uk

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Strategic Report

Our strategy

Our branded growth strategy continues to deliver and enables
us to reduce net debt consistently.

Sustainable
& profitable
revenue growth

Cost control
& efficiency

Cash
generation

• Leading brand positions.
•
Insight driven innovation.
• Sustained marketing

investment.

• Collaborative retail

•

partnerships.
International markets
expansion.

• Lean SG&A cost base.
• Operational Excellence.
• Capital projects.
• Agility, pace & energy.

• Tight focus on Capex.
• Disciplined working capital

management.
• Options for cash

deployment in short and
medium term.

Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020

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Strategic Report03

Our branded growth model

Leading british brands

Outstanding instore execution

Engaging marketing

Responsibilities

Leading brand positions
We have some of the nation's favourite food brands,
with leading positions in their respective categories.

Engaging marketing
Emotionally engaging advertising, that is proven to
deliver industry leading return on investment (ROI).

Innovation that meets customers needs

Outstanding instore execution

Responsible business

Directions?

Innovation that meets
consumers’ needs
Robust innovation programme, underpinned by key
consumer trends and strong consumer insights at
the heart.

Strong customer
partnerships
Working closely with our retail partners to deliver
excellent in-store execution and category growth.

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www.premierfoods.co.uk

Strategic Report04

Strategic Report

Leading british brands

Outstanding instore execution

Leading British brands

Strong market shares and high household penetration.

Read more about Our
strategy on page 02

Read more in our Operating
and financial review on
pages 30 to 37

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www.premierfoods.co.ukStrategic Report12
12

Strategic Report

Responsible business

Being a responsible business

Our purpose is to create the food the nation loves most for modern life, and
we are committed to doing this responsibly and in a way that is sustainable
for our business, our communities and our planet. Our five-pillar responsibility
strategy enables us to focus our efforts on addressing the issues that are
most relevant to people and the planet, both now and in the future.

Working in partnership with
our stakeholders
Our responsibility strategy is shaped by the
issues that matter most to our business and
our stakeholders. When being a responsible
business, we want to create, sustain and
strengthen all of our partnerships. We respect,
support and encourage our colleagues,
engage daily with our suppliers, manufacturers
and customers, and build on strong
relationships with charity and civil society
partners to enable us to meet our ambitions.
We work with Government, shareholders,
trade bodies and industry groups to shape
and challenge our objectives. We care
about being a responsible business for our
consumers, who we always have at the heart
of everything we do when creating the food
the nation loves most for modern life.

Our governance
We have a range of cross-functional steering
groups which are responsible for the delivery
of our ESG strategy, for example: the Plastics
steering group, People’s Potential steering
group and Ethical Sourcing steering group.
We have a network of colleagues who are
key enablers of success, such as our Green
Matters champions and Charity Champions,
who ensure our Environmental, Social
and Governance (ESG) strategy is being
embedded daily across all of our sites. Being a
responsible business also means that we hold
ourselves accountable against national targets
and commitments: as founding members
of the UK Plastics Pact or as signatories of
Courtauld 2025, we push ourselves to deliver
on our responsibility strategy and contribute to
wider change.

Connecting with our
stakeholders
Our responsibility strategy
is shaped by the issues that
matter most to our business
and our stakeholders.
Information in this section
highlights our approach to
the matters set out in section
172(1) of the Companies Act.
Further information is also
provided in the Governance
section on pages 50 to 52.

Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020

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Strategic Report13

Reduce our environmental footprint

Encourage healthier choices

We strive to continually improve our
environmental performance, embedding a
culture that encourages the efficient use of
resources. We seek to reduce and mitigate
our environmental footprint throughout our
operations, moving towards greater sustainability
as we work with charity partners to restore the
natural ecosystems close to our sites.

Alignment to UN SDGs

We’re proud to produce great-tasting
products from affordable British brands that
consumers love and enjoy as part of a healthy,
balanced diet. As one of the UK’s largest
food manufacturers, we believe we have a
responsibility to provide choice and encourage
the nation to try healthier food options.

Alignment to UN SDGs

HEALTHIE

E O

U R
L F O O T P R INT

RE D U
ON M E N T A
VIR
N
E

Working towards
the UN SDGs
Adopted by the United Nations
in 2015, the 17 Sustainable
Development Goals are a
universal call to governments,
businesses and civil society
alike to shift the world onto a
sustainable and resilient path.
Everyone has a role to play in
achieving shared prosperity in
a sustainable world - a world
where all people can live
productive, vibrant and peaceful
lives on a healthy planet
by 2030.

For more information,
please visit: https://
sustainabledevelopment.un.org

This year, we have undertaken
work to identify which of the UN
Sustainable Development Goals
(UN SDGs) we can make an
impact on and mapped them to
our responsibility strategy:

’

S
E
L
P
L
O
A
TI
E
E P
N
E
OT
REALIS
P

D
R

S
O

SUPPORT O U R
COMMUNIT I E S

Drive ethical sourcing

Support our communities

Realise people’s potential

We believe it is important to understand
the impact of our supply chain on the
environment, on animal welfare and on the
people involved in supplying us a range of
ingredients and finished goods. We therefore
have processes and policies in place to
embed and promote ethical and sustainable
sourcing throughout our supply chain.

Alignment to UN SDGs

Supporting our communities both locally and
nationally is at the heart of our business and is
key to reducing inequality within our country.
By working with our charity partners, we aim
to foster a culture of both physical and mental
well-being whilst bringing our colleagues
together to support shared charitable aims.

Alignment to UN SDGs

We want all our colleagues to realise their
full potential and contribute to creating an
environment where everyone can succeed.
From providing bespoke training opportunities,
to encouraging diversity and promoting
an inclusive workplace, to supporting our
colleagues’ physical and mental health – we
are committed to creating a rewarding and
enjoyable place to work.

Alignment to UN SDGs

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www.premierfoods.co.ukStrategic Report

Strategic Report

Encourage healthier choices

We’re proud to produce great tasting products by affordable British brands that consumers
love and enjoy as part of a healthy, balanced diet. Healthy eating is a key consumer trend
and a top priority within our brand innovation programme.

Alignment to UN SDGs

Introduction
of PLANTASTIC
In 2019 we developed a
fresh new plant-based brand,
PLANTASTIC, tapping into the
growing number of consumers
moving towards a vegan or
flexitarian diet. The brand was
launched into market with a
delicious range of flapjacks and
cakes in four modern flavour
combinations - Lemon and
Turmeric, Apricot and Ginger,
Orange and Parsnip and
Cherry and Chocolate - and all
providing a source of fibre to help
consumers improve their diet.

In early 2020, the brand launched
into the chiller aisle too with
Strawberry Mixed Grain Snack
Pots; healthy mixed grains in a
coconut cream with a Strawberry
fruit layer, for a snack that
provides a source of protein and
is low in fat. Our PLANTASTIC
snacks are available at the front-
of-store, providing consumers
with the ultimate healthy on-the-
go snack option.

As one of the UK’s largest food manufacturers, with a presence in around 94% of UK households,
we believe we have a responsibility to encourage the nation to make healthier food choices.
That’s why we’ve made it a core pillar of our responsibility strategy and set ourselves ambitious
KPIs to ensure we deliver on our commitment.

Educate our consumers and
colleagues on the nutrition choices
they are making to encourage
healthier eating:
• Continue to use clear and transparent
labelling across our portfolio to help
consumers easily understand their
nutrition choices.

• Extend our Healthy Eating in the

Workplace programme across all our
sites by 2020.

Our KPIs
Extend our range of healthier foods:
• By 2025, every core range will include

at least one better-for-you option (for
example: reduced/no added sugar,
reduced salt, low in fat, low in calories,
a wholegrain alternative to white, or free
from key allergens).

• From 2019, introduce at least one new

range each year that enables consumers
to improve their diet by eating more
vegetables, protein or fibre, or delivering
products that are fortified for greater
nutrition.

Enhance the nutrition profile of our
existing core range:
• Continue to work with Government to
implement the Childhood Obesity Plan
and reformulation programmes (targeting
salt, sugar and calorie reductions).

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Mr Kipling 30% less sugar cake slices
In 2019 we developed a 30% reduced-
sugar version of our best-selling Mr Kipling
cake slices range, providing consumers
with the first better-for-you version of a
major cake brand.

We achieved this by reducing sugar in
both layers of pink and yellow sponge,
sandwiching a vanilla flavour filling and by
replacing the layer of icing that traditionally
tops the cake with a reduced-sugar icing
decoration.

The range launched with a 30% reduced-
sugar version of our famous Angel Slices,
containing just 6.1g sugar and 100 calories
per 24g slice.

To encourage our consumers to make
healthier choices, we believe it is important
to empower them with knowledge and a
variety of healthier options. To this end, we
innovate to offer alternative better-for-you and
healthier options to their pantry favourites, as
well as enhancing the nutritional profiles of
our existing core range. All of our products
are provided with clear nutrition labelling on
our packaging to help our consumers make
informed choices.

Extend our range of
healthier foods
Our innovative R&D team, working closely with
our Nutrition team, have continued to develop
‘better-for-you’ products to encourage our
consumers to make healthier choices.

Better-for-you variants are defined by having
claimable nutrient benefits, for example a 30%
or more reduction in sugar, fat or calories,
or a 25% or more reduction in salt/sodium.
Consumers can therefore be confident that by
choosing better-for-you options, the products
are not only improved compared to our original
variant, but also against all similar products on
the market. This financial year, we are proud
to have increased our number of better-for-
you options by 29%. We launched 13 new
products across our brands, including: Bisto
25% salt-reduced gravy pot, Oxo 25% salt-
reduced premium stock cube, Ambrosia 30%
sugar & fat reduced custard and Mr Kipling
30% sugar-reduced Lemon Cake Slices.

Every year, we want to offer a new range
of products that enables our consumers to
improve their diets by adding more vegetables
and different sources of fibre and/or proteins.
We also aim to support the increasing number
of consumers switching to a flexitarian,
vegetarian or plant-based diet, by adapting
the recipes of our trusted brands to meet
these modern consumer trends. 41% of our
cooking sauce products include the equivalent
of ‘one of your five a day’ vegetables. This
year, we launched a Loyd Grossman plant-
based Bolognese range with three variants
that provide our consumers with a higher
content of vegetables, fibre and protein.

Having proved popular with consumers,
the range was later extended to include
30% reduced-sugar versions of Mr
Kipling Chocolate and Lemon slices. Each

Most notably, we launched PLANTASTIC,
an entirely new brand that uses plant-based
recipes and offers on-the-go healthy snack
options for consumers moving to a flexitarian,
vegetarian or vegan diet, or those consumers
simply wishing to enjoy a great tasting healthy
snack.

Enhance the nutrition profile of
our existing core range
Working with Government and Public
Health England (PHE), we are committed to
enhancing the nutrition profile of our core
range, including reducing the sugar or salt
content.

We have already reformulated many of
our products to lower their sugar content,
particularly in our cake and dessert categories,
including a circa 10% sugar reduction in
our core Mr Kipling Deep Filled Mince and
Apple Pies, without compromising on taste.
We also achieved a 30% sugar reduction
in our Ambrosia light custard and light rice
pudding recipes across all formats. We are
very proud that in total we have now removed
1,042 tonnes of sugar (against our 2015
baseline), exceeding our commitment to
remove 1,000 tonnes across our dessert and
cake categories.

Having already removed 1,000 tonnes of salt
from our portfolio since the first set of salt
targets were published, we are continuing this
work in all of our New Product Development
(NPD) programmes this year, by meeting
PHE’s 2017 salt targets for their respective
categories. Furthermore, we are compliant
with PHE salt targets in most of the 15
categories in which we committed to meet
2017 targets. We’re making good progress
in the few remaining categories and are also
working closely with PHE as they develop new
salt targets in 80 subcategories.

Calories continue to be a popular way for
consumers to measure and plan their diet, so
we are proud to say that all of our cake and
dessert products meet the PHE calorie caps
set out in their sugar reduction programme.
Furthermore, our reduced-sugar cake slices

individual
cake slice
across all
three variants
contains 100 calories
or less, which, importantly, is in line with
PHE’s portion recommendation.

We are proud to say that both the Angel
and Chocolate slices won Product of the
Year in the snacking category in 2020!

contain only 100 calories per slice, which is in
line with PHE’s recommended energy (calories)
level for a snack.

Educate our customers and
colleagues on their nutrition
choices
We continue to champion transparent nutrition
labelling so that consumers can make
informed choices about the products they buy.
As one of the first food manufacturers to adopt
the voluntary front-of-pack traffic light labelling,
we went on to support the Institute of Grocery
Distribution (IGD) in developing best practice
guidance to encourage consistency across
industry and better consumer understanding
of the nutrition information provided in these
labels. 95% of our UK portfolio carries all
five key pieces of nutrition data – energy,
fat, saturates, sugars, salt – on the front of
pack (the remaining 5% only carry the energy
information due to the small size of the
packaging). This labelling helps our consumers
to make informed choices.

To encourage our colleagues to make healthier
choices, we partnered with the IGD during the
development of their Eat Wise, Work Wise
programme. This programme aims to enhance
healthy eating in the workplace by inspiring
changes in personal diets. We have now
assessed all our sites with canteens and have
rolled out healthier menu options across half,
with a goal to extend to every Premier Foods
location with on-site canteens by 2021.

By working closely with our catering provider,
we have introduced a deli bar in our St
Albans head office café, which includes a
selection of fresh homemade salads that
balance ingredients across the food groups
– i.e. carbs, protein and fibre. We also offer
a ‘goodness’ range, which changes daily to
create added interest and is low in fat, salt
and sugar. All food on offer also carries clear
nutritional labelling, so that our colleagues can
make informed choices.

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Strategic Report

Realise people’s potential

Our five shared values are: we aim higher, we champion fresh ideas, we are agile, we are
united, we respect and encourage one another. These give us a common framework for
decision-making and guide the way we do things.

Alignment to UN SDGs

We want all of our colleagues to realise their full potential and contribute to creating an environment
where everyone can succeed. From providing bespoke training opportunities, to encouraging
diversity and promoting an inclusive workplace, to supporting our colleagues’ physical and mental
health – we are committed to creating a rewarding and enjoyable place to work.

Caring for our people:
• Embed a culture of risk prevention at all
sites with our ‘Be Safe’ and TOPs health
and safety programmes.

• Deliver annual Health and Wellbeing

plans at our sites aligned to the top three
areas of interest of our colleagues.

•

Increase awareness of good mental
health by providing training to all
colleagues by 2021.

Our KPIs
Attracting talent and
developing skills:
• Support and develop graduates and

apprentices to progress their career with
us.

• Provide extensive training opportunities
to our colleagues via online platforms.

• Promote our industry through
collaboration with the IGD.

Diversity and Inclusion (D&I):
• Monitor and report on D&I to understand

and remove potential blocks.

• Deliver face-to-face training and ongoing
support to all leaders within our business
by March 2020.

• Provide awareness training to all

colleagues by the end of 2021.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020

Attracting talent and
developing skills
When we welcome colleagues into our
business – no matter at what level – we help
them develop the confidence and skills to
move up the career ladder.

Our apprenticeship and graduate programmes
feed a future pipeline of skilled individuals
for roles across our business, offer fantastic
career prospects and career progression
for existing colleagues. Our ‘Future Leader’
graduate programme provides an excellent
foundation for a career in the food and drink
industry and enables us to harness and
nurture emerging talent. We offer four distinct
programmes - within our commercial (sales
and marketing), finance, procurement and IT
teams. During their programme, our graduates
also typically undertake three placement roles
and participate in a series of external training
modules designed to help them develop
core business skills including commercial
awareness, presenting, and managing change.

We recruited 66 graduates over the five-
year period 2015-19 and almost 70% have
remained with us to progress their career
within Premier Foods. Most recently in
2019, 100% of our largest so far intake, 19
graduates, remained at Premier Foods to
pursue their careers.

“Since starting the procurement
graduate programme in 2015,
I have had the opportunity
to work in several different areas of
procurement. I liked that I
was given responsibility and
treated as a real part of the team
straight away.”

Naomi Spray
Category Executive

Apprenticeships are one of the most practical
ways for people to learn, enabling them to
develop and hone new knowledge and skills
whilst remaining in paid employment. We offer
apprenticeships to both existing colleagues
and new recruits, with programmes ranging
from technical operators, food technologists,
software development, continuous
improvement and beyond. Our programmes
cover all levels of prior experience, meaning
they are a truly inclusive route to career
progression. This year, we have supported the
training and development of 95 apprentices;
26 were new recruits to the business, with the

remainder recruited from existing colleagues.
We are proud that we remained in the top 100
table of Apprentice Employers for the third
year running!

“As part of my apprenticeship, I
have completed basic continuous
improvement (CI) duties on six
different lines within the factory.
I’m always being exposed to new
elements of the business and
trying out new tasks every day,
which has led me to have a much
wider knowledge of the business
than I might gain somewhere else.”

Gareth Thompson
Improvement Coordinator

We invest in self-led learning tools, including
LinkedIn Learning for all IT-enabled colleagues,
which offers access to over 7,000 on-line
courses. Since its launch in November
2018, more than 600 colleagues (out of our
1,500 connected colleagues) activated their
accounts and 40% have participated in online
learning. With over 27,000 training videos
watched to date, we have seen our colleagues
make use of LinkedIn Learning for more than
1,260 hours of learning which equates to
168 working days. Meanwhile, our leadership
programmes equip our leaders with practical
skills and tools to enable them to lead the
business with authenticity and integrity.

Fairness and equality of
opportunity
We strongly believe that diversity of people
fosters diversity of thought, which is vital
with innovation at the heart of our business
strategy. We are committed to developing
an inclusive culture across our whole
organisation, and this means all colleagues
and potential recruits are treated with respect,
valued and encouraged to give their best at
all times. Our Diversity and Equality policy
statement, approved by the Board in 2017,
sets out our approach to equal opportunities
and our ambition to address discrimination at
work. Our diversity working group monitors
progress against key areas of this statement
and reports annually to the Board.

Rather than focusing on setting specific
targets for diversity (gender and ethnicity),
our focus remains to understand where
issues arise, monitor and remove potential
blocks, while seeking to improve processes
and training.

In 2019, we embarked on a company-wide
Diversity and Inclusion programme. This led to
us holding full-day training sessions, focusing
on raising the awareness of unconscious bias
and inclusive leadership for our mid to senior
level leaders: a total of 263 managers attended
nine workshops and, in addition, we ensured
that our in-house recruitment team and
external agencies were fully engaged in the
objectives of the programme. This represents
an important first stage of our commitment
to a long-term programme, which we are
continuing to develop and expand to support
our strategy.

Evolution of gender split

2019/20

% 2019/18

Total

4,151

4,110

Female

1,504 36.23

1,491 36.28

Male

2,647 63.77

2,619 63.72

Graded

564

532

Female

232 41.13

213 40.04

Male

332 58.87

319 59.96

We have monitored and published our gender
diversity statistics since 2011 and a key target
of our diversity agenda has been to improve
female representation in middle and senior
management. We continue to address this
through further improvements in recruitment,
talent management, flexible working and
maternity provision, as well as line manager
education and development.

Current legislation requires that we report
on our gender pay gap for any legal entities
that employ more than 250 colleagues. We
have decided to go beyond this and monitor
the gender pay gap for all entities within the
Group, as we believe it depicts a truer picture.
Our latest results are as follows:

Gender pay
gap (hourly)

Gender pay
gap (bonus)

Mean

25%

2018: 12%

2018: 34%

We have made progress on closing the gender
pay gap, going from a 12% average difference
in hourly pay between our male and female
population, to a 6% difference. Our full gender
pay gap report is available on our website.

Within our organisation, approximately
90% of our workforce is employed at our
manufacturing sites, where roles attract more
men than women and labour turnover is low.
This makes it difficult to significantly improve
these results in the short to medium term. To
address the skills gap faced by our industry in

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18

critical areas including Science, Technology
Engineering and Manufacturing (STEM)
based roles, we continue to play an active
part in driving awareness of our sector, and
promoting the breadth of career opportunities
that exist within it. We work in partnership with
the IGD to support their Feeding Britain’s
Future schools campaign, and this year
Premier Foods’ volunteers took part in 30
workshops at schools to drive awareness
of Fast-Moving Consumer Goods (FMCG)
roles. We also participate in the IGD’s Schools
Programme initiative, with the majority of
our sites actively supporting local schools to
provide skills training, for example CV writing,
confidence building and interview tips.

Caring for our colleagues
Health and Safety
Health and Safety is taken extremely seriously
at all levels throughout the business, and
we are proud to maintain one of the lowest
accident rates within the food industry.

This year, we successfully completed the
roll-out of our ‘Be Safe’ programme across
all manufacturing sites, which encourages
colleagues to identify and discuss both safe
and unsafe actions within their workplace.
In the last 12 months, colleagues have
identified a total of 4,487 Safe Acts and 2,824
Unsafe Acts. This helps our manufacturing
sites to target their resources and improve
safety in the most effective areas. The Total
Observation Process (TOP) continues to
be successful in identifying hazards in the
workplace and ensuring they are addressed
before an incident can occur. In the last 12
months, 4,236 potential risks were identified
and actions taken to address these across
the business.

In February 2020 our Safety Management
System was reviewed and transitioned across
from the British standard OHSAS 18001, to
the international health and safety norm ISO
45001. Next year, all sites will be audited and
certificated to this standard.

The Board reviews health and safety
performance at every scheduled Board
meeting. This includes two important
measures: Lost Time Accidents (‘LTA’), which
represent accidents that result in a colleague
having to take time off work; and Reporting of
Injuries, Diseases and Dangerous Occurrences
Regulations (‘RIDDOR’) where incidents are
reported to the regulatory body. This covers
accidents resulting in serious injury, over seven
days absence from work and dangerous
occurrences.

LTAs

1
1
.
0

3
1
.
0

0
1
.
0

1
1
.
0

2016/17 2017/18 2018/19 2019/20

* All LTAs per 100,000 hours worked (excludes

Knighton)

Across the UK, the average RIDDOR rate
for the food manufacturing industry is 0.51
RIDDOR reportable accident per 100,000
hours worked. We operate at a significantly
better rate and our goal is to sustain or
improve upon this average. In the last 12
months we are proud to have achieved a
rate of 0.06, almost 10 times better than the
industry average.

RIDDOR

1
5
.
0

3
2
.
0

6
0
.
0

UK manufacture
of food

All UK
manufacture

Premier
Foods

* All RIDDOR accidents per 100,000 hours worked

(excludes Knighton)

Employee health and well-being
We continue to make every effort to look after
the health and well-being of our colleagues.
Through our dedicated Occupational Health
team, we provide professional specialist
advice to colleagues on the effects of work on
their health. We advise our colleagues on ways
to improve physical and psychological well-
being within the workplace and provide them
with strategies to prevent illness and injury.
Last year we invited all colleagues to take part
in our first ever Health Needs Assessment
survey, achieving a strong response rate. This
enabled us this year to start developing Health
and Well-being plans, tailored to the needs of
our colleagues. This has included partnering
with local gyms and community groups to put
health checks in place.

Leveraging our charity partnership with Mind
UK, and as signatories of the Time to Change
pledge, we have put a strong focus on how
to best support our colleagues’ mental health.
Our goal is to have at least two volunteers per
site trained and certified as Mental Health First
Aiders (MHFAs). This year, 36 colleagues
across five sites have been on their
training and are now certified MHFAs.
We believe that mental health awareness
is key to supporting our colleagues’ well-
being and will train all colleagues in mental
health awareness by the end of 2021. As a
first step, managers across the business will
receive training to identify and help colleagues
suffering with mental health issues. Out of our
495 managers, 216 have been trained so far.
The next steps are to complete the training of
all managers before extending the awareness
training to all colleagues.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic ReportStrategic Report

1919

Support our communities

Supporting our communities, both locally and nationally, is at the heart of our business and
a powerful way to engage our colleagues with a shared and meaningful purpose.

Alignment to UN SDGs

Our KPIs
• Support and raise £200,000 over two
years for our charity partner Mind UK.

• Maintain gold level supporter status

with GroceryAid.

• Encourage and support our network of

Charity Champions.

Our dedicated network of Charity
Champions is instrumental in delivering
this strategy. Our champions come from
all corners of our business and represent
colleagues at every one of our sites. Charity
Champions catch up every six weeks and,
in addition, we organise two dedicated
days each year to bring them together and
encourage team building, the exchange of
best practice and to hear news from our
charity partners. These sessions perform a
vital role in motivating the team to support our
communities through fundraising, donations
and volunteering.

This year, we made fundraising even more
accessible to all colleagues, by introducing
a new payroll giving scheme that allows
colleagues to regularly donate a chosen
amount from their pay. This generates vital,
regular donations for our charity partners,
enabling them to effectively forecast and plan
their funding.

We support our
communities in
three ways:

01 – National
By supporting our corporate charity
partner, Mind UK

02 – Industry
By supporting GroceryAid, an industry
charity that makes life better for those
in need who currently or previously
worked in the grocery industry

03 – Local
By supporting community projects
local to our sites

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20

Our partnership with Mind UK
When we embarked on our partnership with
leading UK mental health charity Mind UK in
2018, we set ourselves a £200,000 target,
with all money raised going to support their
Peer-to-Peer Support Service, which aims
to empower people to use their own mental
health experiences to help others either online
or in a group setting, and includes a range of
mental health boosting activities such as crafts,
walking or meeting for coffee.

Across our sites, we’ve worked hard to raise
as much as we can for Mind UK through
a combination of colleague-led fundraising
initiatives, such as summer barbecues,
seasonal raffles, fun runs, bake sales and our
site-based donation stations where colleagues
can donate clothing and homeware to be sold
in Mind UK shops.

This year, our colleagues have come up with
fresh fundraising ideas and events, such as
a Sports Day at our St Albans office, World
Mental Health Day, Miles for Mental Health
month in September and matched fundraising
in March. With the amazing participation of
each site, and the dedication of our network
of Charity Champions, we have managed
to reach our target of £200,000. We’re
incredibly proud of all our colleagues for helping
us achieve this fantastic amount.

When we partnered with Mind UK, we also
wanted to use the collaboration to raise
awareness of the importance of good mental
health, to reduce the stigma around this
topic within the workplace, and to help any
of our own colleagues struggling with mental
health problems. As signatories of the ‘Time
to Change’ pledge, we have encouraged
conversations around mental well-being and
supported our colleagues with training in this
area. This proved crucial in supporting our
colleagues during the challenging Covid-19
lockdown where we were able to share tips
and videos too boost moral and leveraged
our network of Mental Health First Aiders
(see page 18).

In addition, this year we partnered with an
independent Employee Assistance Programme,
‘Lifeworks’, which gives our colleagues free
access to a confidential support service
designed both to encourage mental well-
being and to provide support with many of
life’s challenges from physical ill health and
depression, to a family bereavement or financial
concerns.

As our partnership with Mind UK concludes
in May 2020, our Charity Champions have
been busy selecting our new charity partner
for the next two years. We are very excited to
announce that we will be supporting Together
For Short Lives, the leading UK charity for

“We are so grateful to the
employees at Premier Foods for
their commitment and enthusiasm
in getting behind our partnership.
One in four of us will experience
a mental health problem every
year so it is vital that we provide
advice, information and support
so that no one has to face their
experience alone. The money
raised will help us to achieve
this through our Peer Support
programmes.”

Emma Ihsan
Head of Corporate Partnerships, Mind UK

children and young people with life-threatening
and life-limiting conditions, and their families.
Together for Short Lives provides a lifeline for
those who care for seriously ill children and
represents the 54 children’s hospice services
across the UK. We’ll be working in partnership
for two years to provide much-needed funds
to hospices that are local to our sites, ensuring
families in our nearby communities are
supported and have access to the very best
care that is available.

Supporting our industry

We continue to support GroceryAid, an
industry charity set up to make life better for
grocery people in need and are very proud to
maintain our gold level supporter status for
the second year running – the highest level
available.

Critical to this ongoing success, is our
representation on both GroceryAid’s President
and Southern Network Committees, as well as
our dedicated network of Charity Champions
who are able to engage our wider colleague
population in supporting fundraising activities
and spreading the word about the charity’s
purpose, projects and support services. Over
the last 12 months, as well as celebrating
GroceryAid’s annual Awareness Day and
promoting the Charity through several internal
communication campaigns, our Charity
Champions also helped coordinate a series

of fundraising activities, from quizzes to raffles
and spin classes. In addition, as a business
we support GroceryAid’s own calendar of
fundraising events through paid participation
and through our colleagues volunteering
their time. This included their touch Rugby
tournament, Barcode Festival and annual carol
concert.

“Premier Foods has been fantastic
and really embraced our new
awards scheme. Contributing
across all three pillars of
awareness, fundraising and
volunteering, they have doubled
their support. We can’t praise this
effort highly enough.”

Steve Barnes
GroceryAid Chief Executive

Supporting local charities
Our colleagues are passionate about
supporting their local communities and this
year they have chosen to support projects
such as Wirral Mind, Incubabies, St Albans
Food Bank , Earthworks, LOROS – Leicester
Hospice, Young Carers Bucks, St Albans
Scouts, Launceston Road Runners, Devon
branch of Butterfly Conservation and
Haematology Cancer Care. Supporting local
causes enables our colleagues to make a
visible difference within their local community
and we find this a powerful tool in bringing
both our people and communities together.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic ReportStrategic Report

Drive ethical sourcing

We believe it is important to understand the impact of our supply chain on the
environment, on animal welfare and on the people involved in supplying us
a range of ingredients and finished goods. We therefore have processes and
policies in place to embed and promote ethical and sustainable sourcing.

Alignment to UN SDGs

Moving up
to Tier 2 in
BBFAW’s animal
welfare ranking
Animal welfare is a key business
priority for us and we measure
our performance against the
Business Benchmark on Farm
Animal Welfare (BBFAW). Now in
its eighth year and with analysis
covering 150 of the largest food
companies, BBFAW is the most
authoritative and comprehensive
global account of the impact
of corporate practice on farm
animal welfare. Working with
BBFAW and Compassion
in World Farming, we have
improved our performance this
year and moved from Tier 3 up
to Tier 2, with an overall score
of 64 (sector average score is
35). We obtained noticeably
strong scores in Management
Commitments and Policy
(Premier Foods score: 86
versus sector average: 49) and
Reporting (Premier Foods score:
63 versus sector average: 15).
We are proud of these results
and will continue working to
improve our approach to farm
animal welfare.

The full report is available on
BBFAW’s website:
www.bbfaw.com/benchmark/

We always aim to purchase ingredients and packaging that are certified to recognised
environmental and ethical standards.

The Group works with over 1,200 active suppliers and our aim is to develop long-term,
sustainable partnerships with our key suppliers which deliver mutual benefits. Over the year, 86%
of our total third party spend was with UK-based suppliers. Our top 250 suppliers now account
for in excess of 93% of our total spend on the goods and services that we purchase.

Our KPIs
Drive sustainable raw material
• Maintain 100% Roundtable on

Sustainable Palm Oil (RSPO) sustainable
palm oil.

• Source 100% of Round Table on

Responsible Soy (RTRS) sustainable
soya by 2025.

• Maintain and improve high animal

welfare standards, measured against the
Business Benchmark on Farm Animal
Welfare (BBFAW) – a global industry
animal welfare benchmark.

Drive high ethical and compliance
standards across the supply chain
• Ensure 85% of direct suppliers (by

spend) are signed up to Sedex (Supplier
Ethical Data Exchange platform).

• Achieve zero red rated Sedex supplier
ratings and ensure all our procurement
team has been trained on modern day
slavery.

• Drive even higher levels of Health
and Safety standards across co-
manufacturers, logistics sites and ‘on-
site’ suppliers.

• Maintain high food safety levels and

compliance at all of our sites.

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www.premierfoods.co.uk

Drive sustainable raw material
Our membership of the Roundtable on
Sustainable Palm Oil (RSPO)(1), commits us to
actively support the continuation
of the Roundtable process
and advancing the production,
procurement and use of
sustainable palm oil products.

We reflect our commitment to this throughout
our supply chain and require all of our palm oil
suppliers to sign up as a condition of supply.
Since the beginning of 2010, 100% of
the palm oil used by Premier Foods has
been sourced, as a minimum, through the
Green Palm programme and since early
2015, Premier Foods has sourced 100%
certified sustainable palm oil, playing our
part in helping to preserve the rainforests in
South East Asia. BM TRADA, the leading
independent certification body, has certified
all of our sites that handle palm oil as having
RSPO-approved traceability systems, which
means they are capable of guaranteeing the
use of palm oil from sustainable sources.

(1) License number: 4-0019-06-100-00.

Check our progress at
https://rspo.org/members/103/Premier-Foods-
Group-Limited

We also support the production of responsible
soya bean and for this reason took the
decision to become a member of the Round
Table for Responsible Soy (RTRS). Through
this we can play our role in promoting zero
deforestation and respecting the rights,

customs, and culture of different
communities and indigenous
populations around the globe.
Since 2016, around 60% of the
small amount of soya we buy
directly as an ingredient meets
these standards. Of the soya we
buy indirectly, the vast majority is
used within animal feed and therefore sourced
indirectly via our dairy, egg, meat, stocks,
flavourings and seasoning supply chains. On
our journey to ensure 100% of the soya we
buy meets the RTRS standards by 2025,
we are working with our suppliers to ensure
we have complete transparency on how the
soya within these indirect supply chains is
cultivated.

Animal welfare
We use animal-based ingredients such as
milk, eggs and meat across a range of our
products. We believe all animals should be
treated responsibly and with dignity, and we
work with our suppliers to ensure that our
high standards of animal welfare are met.
Our Animal Welfare Policy embraces the
Farm Animal Welfare Committee’s stated Five
Freedoms, identified to safeguard and improve
the welfare of livestock.

As a business we ensure the ingredients we
buy are sourced to high standards:

• Dairy: ‘Red Tractor’ (UK), ‘Board Bia’
(Ireland), Sustainable Dairy Assurance
Scheme, or ‘Origin Green and Organic.’

• All of our UK and Irish beef is assured
to either ‘Red Tractor’ or ‘Board Bia’
standards.

• All of our UK pork is 100% ‘Red Tractor’.

• 75% of all fish purchased in our supply

chain is from ‘Marine Stewardship Council’
(MSC) sources.

This year, we have signed and agreed to the
principles and policies of the Food Industry
Initiative on Antimicrobials (FIIA). We sit on the
Strategic Delivery Board of this body which
brings together retailers, manufacturers,
processors and foodservice companies, to
promote and support responsible antimicrobial
use and action on antimicrobial resistance.
This means that the farmers we work
with stop using antibiotics as a proactive,
preventative measure and only use critically
important antibiotics, as defined by the
European Medicines Agency (EMA), as a
last resort to safeguard their animals’ welfare
where no alternative treatment option is
available.

To ensure compliance with our animal welfare
policy, we require all relevant suppliers to
complete a set of questions on their approach
and management of animal welfare issues. In
the event of non-compliance with our policy,
appropriate and time-bound corrective action
will be agreed with the supplier. In addition, we
have incorporated animal welfare objectives
into the joint business plans of our key
suppliers to drive outcomes forward.

We are proud to have moved up to Tier 2 on
the BBFAW global ranking! - see page 21)

Drive high ethical and compliance
standards across the supply chain
Ethical audits
We continue to champion high ethical labour
standards throughout our supply chain and
ask all of our ingredients and packaging
suppliers to become members of Sedex,
a not-for-profit membership organisation
dedicated to driving improvements in
responsible and ethical business practices in
global supply chains. This gives us visibility of
their ethical performance during the regular
risk assessments of our supply base and this
is supported by our
own Sedex Member
Ethical Audits

(SMETA) which includes health and safety
and labour rights. By year end, 89% of direct
suppliers were registered with Sedex,

Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020

equating to 95% of our direct spend (excludes
Knighton), therefore helping to improve
our responsible and sustainable business
practices, and to source responsibly.

All supplier food safety audits cover an
element of ethical standards and labour
practices, and where concerns are identified,
we will carry out a SMETA. We assess
suppliers by considering the supplier Sedex
risk rating, geographic sourcing region and
nature of the product supplied. Where this
assessment deems it necessary to complete
an ethical audit, these are carried out by a
member of the compliance team or our third-
party auditing company.

If issues of non-compliance with the standards
are discovered during the audit, we will work
with the supplier to ensure that they have an
appropriate, time-bound corrective action plan
in place. We will then conduct a follow-up
audit to ensure everything is complete. Over
the last 12 months we have completed six
SMETA audits across our supply base.

Modern day slavery
Premier Foods is committed to tackling all
forms of hidden labour exploitation, including
slavery and human trafficking. We have
policies and procedures in place to help
identify and eradicate these practices within
our business and to reduce and eliminate risks
in our supply chain.

To mitigate the risk of labour exploitation
throughout our supply chain, we have
established an Ethical Trading Policy, which
is based around an internationally recognised
code of labour practices. Each year, a copy
of our Ethical Trading Policy is sent to our
active suppliers, encouraging them to follow
our practices. We support the Stronger
Together initiative, a multi-stakeholder group
of colleagues, labour providers, workers
and their representatives, focused on
addressing modern day slavery and third-
party exploitation. All of our manufacturing
sites were audited to support compliance with
our policy, and we intend to continue to audit
them regularly to maintain our focus on this
important issue.

Key members of the HR and supply chain
teams have received specific training on
modern day slavery and trafficking, designed
to raise awareness of the issues and to
empower them to recognise and respond to
indicators of human rights abuse within the
supply chain. All new employees joining our
Procurement team receive this training as part
of their formal induction process.

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Strategic Report23

Health and safety
We take a risk-based approach to assessing
and managing health and safety and have
worked closely with our co-manufacturers in
order to drive greater standards across our
supply chain. The six audits planned in March
were cancelled due to the COVID-19 situation,
which means that we have only been able to
conduct six out of the 12 planned audits this
year across our co-manufacturing suppliers.
These audits identify potential risk and put
in place targeted improvement plans where
required, so the remaining six will be added to
the list of audits planned for 2020.

To progress our work in this area even further,
we have established a Best Practice in Food
Manufacturing Health & Safety Forum which
has been attended by more than 10 other
food manufacturers, where the focus is on
sharing best practices between members.

Food safety and quality
The safety and quality of our products is of
paramount importance to us. We operate a
Food Safety and Quality Management System
based around the British Retail Consortium
Global Food Standard version 8, with all
sites (excluding Charnwood Foods) audited
by an independent accreditation body to
this standard. All audits are unannounced,

and we’re proud that this year all our sites
achieved a rating of B or above, with 88%
achieving A+ or AA+ ratings. We are also
audited by retail customers to their specific
standards where we have achieved above
80% green rated results. Our Charnwood
Foods business predominantly supplies
products to a single customer and so operates
to their specific Quality Management System
and has met their requirements.

Our internal quality compliance team focuses
on controls and standards across all of our
manufacturing sites, auditing to our Corporate
Manufacturing Standard, supporting a
range of initiatives, and driving continuous
improvement quality programmes.

We conduct food safety and compliance
audits on all direct supply manufacturing sites
and co-manufacturers, that are measured at
medium or high risk. This risk is determined
by performance, assessment of the supplier’s
accreditation, geographic sourcing region and
nature of the product supplied. These audits
are carried out by a qualified and experienced
member of the Premier Foods compliance
team or our third-party auditing company.
All suppliers in the lower risk category are
assessed through a detailed remote audit.

A particular focus for the business is the
authenticity of the materials we purchase.
We have been heavily involved in the
establishment of the Food Industry Intelligence
Network (‘FIIN’) where we sit on the Governing
Board and chair their Technical Steering
Group. This is a UK food industry initiative
to share intelligence and data on food
authenticity following the industry horse meat
scandal of 2013. The group includes 43
members across food retail, foodservices and
manufacturing, representing a very significant
element of the UK food industry.

We have a targeted authenticity and safety
surveillance programme in place for raw
materials and have carried out circa 800
tests in the last 12 months. To support our
food safety and quality standards, we have
an internationally recognised laboratory,
Premier Analytical Services (‘PAS’) carrying out
research and analysis of food ingredients and
packaging, employing around 48 scientists
and performing approximately 100,000 tests
per annum.

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www.premierfoods.co.ukStrategic Report24

Strategic Report

Reduce our environmental footprint

We strive for continual improvement when it comes to our environmental performance
and we encourage all colleagues to play their part in driving improvements across
our operations. Our internal Green Matters environmental campaign, supported by 65
Environmental Champions, enables us to deliver our business commitments and objectives.

Alignment to UN SDGs

We are signatories to and active members of the FDF 2025 Ambition, the Courtauld 2025 Commitment, Champions 12.3 and WRAP’s UK Plastics
Pact. Our industry commitments go beyond legislation, are an integral part of our governance and help to inform our ESG strategy and target
setting. Based on these commitments, we have developed additional KPIs to drive our progress forward. We also partner with community groups
and NGOs, such as The Westcountry Rivers Trust and Company Shop Group, to deliver a programme of initiatives.

Our KPIs:
Climate action
• Achieve a 55% absolute reduction

in CO2 emissions by 2025 against a
1990 baseline.

• Contribute to an industry-wide target
to reduce water use by 25% by 2020
compared to 2007.

• Maintain sending zero waste to landfill
and reduce waste sent to energy
recovery.
Food waste
• Monitor, report and reduce our food
waste as part of our commitment to
Courtauld 2025.

• Maintain sending zero food waste

to landfill.

•

Increase food waste redistribution to over
750 tonnes per annum by 2020.

• As we develop new packaging, we will
investigate use of all recyclable plastic
material options as well as reusable
designs, compostable substrates
and also any non-plastic packaging
which may offer improved long-term
sustainability.

Educate consumers and customers
by providing clarity on disposal
options:
• We will continue to clearly and

transparently label our products,
in compliance with OPRL (On Pack
Recycling Labelling) guidelines so that
our consumers can easily understand the
recyclability of any packaging: by the end
of 2019, 100% of our UK retail portfolio to
carry OPRL guidelines.

Packaging
Embed environmentally sustainable
packaging across our portfolio:
• 100% of our plastic packaging to be

recyclable, reusable or compostable by
2025.

• Continuously review our customer and
consumer packaging to minimise it
wherever possible. Through this we aim
to reduce the weight of plastics used by
500 tonnes by 2025.

Engage with our supply chain to
minimise the environmental impact
of our packaging and explore
more sustainable solutions for our
packaging innovation:
• We will aim to remove problematic

plastics (PVC and PS) from our portfolio
by end of 2020.

• Actively seek to increase the use of
recycled plastic content across our
portfolio to help create a market-pull for
recycled polymers, wherever practical, and
in compliance with food safety standards.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020

Strategic Report

Climate action
To achieve greater sustainability, we seek
to reduce and mitigate our environmental
footprint throughout our operations, and this
year, we are proud to have further reduced
our energy consumption across our sites (to
254,856,747 kWh, down from 260,235,458
kWh). All of our manufacturing sites (excluding
Knighton Foods) are accredited to ISO 14001
Environmental Management Systems to drive
efficiency further.

We have reduced our overall CO2 emissions
this year by a further 5.1% which is a
39.8% decrease against our baseline
figure of 103,102 tonnes CO2 (year ended
31 December 2008) when we first started to
collect emissions data on a like-for-like basis,
and this has been adjusted for site disposals.

The main changes implemented in the last
12 months were at our Lifton Devon creamery,
home of Ambrosia. The site has benefitted
from the first full year running of natural gas to
fuel the boilers which emit around 25% less
CO2 per kWh than the previously used heavy
fuel oil and, in addition, we installed a new and
more efficient can retort system.

We have a zero waste to landfill policy and,
as a priority, we work with our waste partner
to recycle wherever we can. This year, 43,333
tonnes have been recycled and the rest
(1,625 tonnes) sent to incineration facilities to
generate energy.

We have met and exceeded our previous
target to reduce water use by 25% (against a
2007 baseline when we started measuring) by
2020. The Courtauld 2025 Water Stewardship
Steering Group, of which our Group
Environmental Manager is the Co-Chair, is now
looking at setting a new target. Our annual
non-ingredient water usage has increased this
year due to leaks, but we have immediately
taken action to fix the issues. Premier Foods is
committed to supporting the Courtauld 2025
Water Ambition and playing its part to improve
the quality and availability of water in key areas
of the UK where ingredients are sourced to
produce food and drink (see case study).

Our environmental performance

2019/2020

2018/2019*

CO2 emissions total (tCO2e)
Scope 1 – direct emissions (tCO2e)
Scope 2 – electricity emissions (tCO2e)

62,738.40

40,277.57

22,460.83

66,099.26

40,938.85

25,160.41

Energy consumption (kWh)

254,856,747

260,235,458

Non-ingredient water usage (m3)**

Waste sent to energy recovery (t)**

Tree planting

669,438

1,639

16,000

662,575

1,625

5,705

* Our reporting period has changed from calendar year to financial year, so figures for 2018 have been

restated accordingly. See page 79 for details of our full statutory GHG emissions reporting.

** Excluded: Knighton.

Packaging
Our products are packaged in a way that
balances the need to ensure food safety,
preserve freshness and taste, prevent food
waste, provide convenience, and share
important information with consumers.
We continue to work hard to optimise our
packaging and to reduce its environmental
impact; using materials from certified
sustainable sources wherever possible,
increasing our use of recycled materials, and
increasing the recyclability of our packaging.

The chart below illustrates the split in our
use of packaging materials by volume weight
and their respective recyclability rates. All
the corrugated paper or carton board we
use within our packaging is from Forestry
Stewardship Council (‘FSC’) or Programme for
the Endorsement of Forest Certification (PEFC)
certified sources and is fully recyclable.

In total, 95% of our packaging, by weight,
is recyclable (both widely recycled and check
locally) using OPRL guidelines.

PACKAGING SPILT BY MATERIAL

93%

100%

81%

37%

42%

10%

12%

Paper

Glass

Metal

Plastic

% total weight

Recyclable

16,000 trees
planted to
reduce water
stress in Devon
We joined the Tamar Water
Stewardship Business
Board, along with other local
organisations such as The
Westcountry Rivers Trust, to
address the issue of water
stress and the associated risks
of water scarcity, flooding and
water pollution in the River
Tamar catchment area in Devon,
where our Ambrosia Creamery
is located. Premier Foods, along
with other companies, provided
financial support to plant 16,000
trees in the area and provide
woodland management for a
minimum of 10 years, ensuring
longevity in the landscape.

We have also helped plant
trees ourselves and over two
days, a volunteering group of
Premier Foods, Westcountry
Rivers Trust, South West Water
and South West Lakes Trust
colleagues planted 2,000 trees
at Roadford Forest, which is
adjacent to a reservoir and a
key location for the quality of
water. The newly planted trees
will enhance and increase levels
of biodiversity, soil retention and
carbon sequestration.

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www.premierfoods.co.uk26

Removing 500
tonnes of black
plastics
Black plastic has been identified
as particularly problematic
because, whilst technically
recyclable, UK recycling centres
do not currently have the optical
sorting equipment needed to
identify and recycle it. As a
result, black plastic will often get
sent to landfill or incineration.

To address this challenge,
at the start of 2019 we took
action to remove black plastic
from our portfolio – first from
our Mr Kipling cakes, pies, and
secondly from our Cadbury
cakes – switching instead to
using a clear, recyclable plastic
tray. These contain a minimum
of 50% recycled content, an
important attribute given our
ambition to support a circular
plastics economy.

This project has resulted in us
removing 500 tonnes of non-
recyclable black plastic from the
UK market annually.

Plastics
Our packaging portfolio is made up of a
variety of materials like glass, cardboard
and plastic to ensure that our products are
kept fresh and arrive safely with consumers.
Plastic currently represents just 12% of our
packaging portfolio and we are adopting a
recycle, reduce and remove strategy to make
further improvements. We support a vision
for a circular plastics economy, where plastic

is valued and kept in the
economy, but out of the
environment. That’s why, in
April 2018, we signed up as
a founding member of the

UK Plastics Pact and pledged to work with
governments, businesses, local authorities,
NGOs and citizens to help transform the UK
plastics packaging sector by 2025.

Our dedication to improve the environmental
impact of our plastic packaging predates the
launch of the UK Plastics Pact. Our journey
started four years ago to remove unnecessary
plastic materials from our packaging, whilst
always following the Packaging Essential
Requirements legislation. In the last 24
months, we have removed 500 tonnes of
hard-to-recycle or problematic plastics
from our portfolio. Our work here has focused
on removing polystyrene and black plastic
trays and pots across a variety of brands. Our
Mr Kipling six flatpack slices have changed to
a clear RPET material so they can be easily
recycled and by Christmas 2019, our popular
mince pies were in clear trays, over 200 million
of them!

With our approach to improve the recyclability
of plastic packaging across our portfolio, we
are focusing on using new and alternative
recyclable materials across our brands.
Through this process, we have found instances
where a change would mean increasing the
overall weight of the packaging, as there is not
always a lighter-weight recyclable alternative
available. Therefore, the current KPI to remove
an additional 500 tonnes of packaging from
our portfolio is no longer aligned with our
broader recyclability and circular economy
commitment, so we have chosen to no
longer measure this. Instead, we will continue
working on increasing the percentage of
recycled content in our packaging to foster a
circular economy as per our UK Plastics Pact
commitment. To date, we have achieved 81%
recyclability of our plastic packaging, which is
an increase from 69% in the last 12 months.

This progress has been possible because
we have instituted a new cross-functional
Plastics Steering Group which is systematically
reviewing the recyclability and volume of
plastics used within our packaging, to identify
where we can make improvements. Where
an alternative packaging material is available,
is deemed suitable and is more sustainable
for the environment, we will look to remove
plastic. There are more than 40 projects
within the programme, including: recyclability,
PVC removal, headroom reduction, inclusion
of recycled content and packaging weight
reduction. Plastics remains a complex issue
and so we have been working with our
suppliers, customers and peers this year
to deepen our understanding and make
improvements on plastics use.

We recognise that key to a circular economy
is creating a market for more recycled content
and help consumers to physically recycle
material which is recyclable. On both points,
we are making progress. Overall, 17% of our
plastic packaging across our portfolio
now has a recycled material content
to help create a market-pull for recycled
polymers, whilst remaining in compliance
with food safety standards. All of our UK
packaging is compliant with OPRL
guidelines to ensure that our consumers
can easily understand how to dispose of our
packaging. We have this year also joined the
Citizen Collaborative Action Group of WRAP’s
UK Plastics Pact to support its campaigns.
We have actively participated in the Clear on
Plastics campaign which aims to cut through
the confusion on plastic packaging and give
UK citizens clear, evidence-based information,
which allows them to make their own informed
choices.

Food waste
The UN has a number of sustainability
goals (SDGs) and SDG 12 seeks to “ensure
sustainable consumption and production
patterns.” The third target under this goal
(Target 12.3) calls for cutting in half per capita
global food waste at the retail and consumer
level, and reducing food losses along
production and supply chains (including post-
harvest losses) by 2030. In our commitment
to support this, we have signed up to WRAP
and IGD’s initiative Target, Measure, Act. We
share the ambition to halve food waste globally
by 2030 and are a member of Champions 12.3,
a coalition of executives from governments,
businesses, international organisations,

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic Report27

Food waste figures (in tonnes)
based on WRAP’s food waste hierarchy*
2019/20

P
r
e
v
e
n
t
i
o
n

W
a
s
t
e

455

20,932

333

5,095

310

2,038

Redistribution
2018/19: 306

Animal feed
2018/19: 21,950

Bio-Material
Processing
2018/19: 259

Anaerobic digestion
2018/19: 5,354

Composting
2018/19: 179

Land spreading
2018/19: 1,748
Energy recovery
2018/19: 0

Landfill
2018/19: 0

* The data above is calculated on a financial year basis, with the exception of Redistribution

which is calendar year.

research institutions, farmer groups, and
civil society dedicated to inspiring ambition,
mobilising action, and accelerating progress
toward achieving SDG Target 12.3 by 2030.
At Premier Foods, we are working to monitor,
report and reduce our food surplus in line with
this and are proud of our record of sending 0%
to landfill since 2013 and are working to move
our waste up the food waste hierarchy.

Our total food production for this period was
347,168 tonnes. We have measured our overall
food waste to be 7,791 tonnes, which equates
to 2.24% of food produced (on a calendar
year basis, as reported with Champions
12.3). The waste can be created by many
different issues, such as not meeting quality
standards, production over-runs, short shelf
life of warehouse stock and floor waste during
the packing process. The split of disposal
of our 7,791 tonnes of waste is between
anaerobic digestion and land injection of on-site
effluent plant waste as fertiliser. Working on
redistributing more of our surplus stock, we
are proud to partner with Company Shop
and support those most in need within our
communities. Company Shop takes our edible

but damaged and therefore unsaleable food
and sells it to community members in need,
at a discounted price. Profits are used to help
fund activities and workshops for the local
community which take place at Community
Shop centres and include, for example, cookery
lessons, craft sessions, lunch clubs and CV
writing workshops.

This year, we strengthened our partnership
with Company Shop and met our target to
double the number of our manufacturing sites
partnered with them, from three to six. With
the Harnessing Harder to Reach Surplus
initiative, Company Shop have been able to
help us identify surplus stock created on our
production lines. An example of this work is
on our surplus OXO cubes, which are now
repackaged and labelled before being sold to
the members-only shops.

We redistributed around 1.5 million units via
Company Shop to their members. These
equate to 455 tonnes of food waste, or the
equivalent of 1 million meals, which is an
uplift of 49% compared with the previous year.
This is also estimated to save 1,821 tonnes of
CO2 emissions.

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www.premierfoods.co.ukStrategic Report28

Key performance indicators

We use a number of performance indicators to monitor financial, operational and responsibility performance
These are reviewed on a regular basis by our senior management teams and the Board. Performance indicators are used to encourage focus on
the delivery of our key strategic priorities. They are used to measure performance, highlight areas for attention and corrective action, as well as
recognising good performance and celebrating success. Trading profit, Net debt and nutrition also form part of management’s bonus objectives,
and an overview of how remuneration links to our strategy is set out on page 59.

Group revenue
Year-on-year growth in
revenue

Trading profit
Trading profit is defined in
the Operating and financial
review on page 37.

Net debt to adjusted
EBITDA ratio
The ratio measures the
Group’s overall level of debt.
Net debt and EBITDA are
defined in the Operating and
financial review on page 37.

Free cash flow
Free cash flow is defined in
the Operating and financial
review on page 37.

+2.8% +3.2% 0.5x

Reduction

+123%

m
1
.
7
4
8
£

m
3
.
4
2
8
£

m
2
.
9
1
8
£

m
4
.
0
9
7
£

m
6
.
2
3
1
£

m
5
.
8
2
1
£

m
0
.
3
2
1
£

m
0
.
7
1
1
£

9
.
3

6
.
3

2
.
3

7
.
2

m
1
.
5
6
£

m
8
.
8
2
£

m
2
.
9
2
£

m
1
.
5
1
£

16/17 17/18 18/19 19/20

Why is this important?
Delivering revenue growth
is one of our strategic
priorities. This captures both
branded and non-branded
performance across all
channels we operate in.

Progress we’ve made
Group revenue increased
by 2.8% in the full year
to £847.1m. This growth
was driven by our branded
growth model of delivering
new product innovation
based on consumer trends,
together with emotionally
engaging advertising and
strategic relationships with
our retail partners.

Why is this important?
This measure reflects
the revenues and costs
associated with the
operational performance
of the business and is also
a good proxy for the cash
generative capacity of the
business.

Progress we’ve made
Trading profit increased
by 3.2% in the year. This
improvement was driven by
our strong branded revenue
growth in both business
segments.

Why is this important?
This ratio is the key metric
used by the Group in
measuring its debt level
relative to the overall
performance of the
business.

Progress we’ve made
Net debt reduced by £61.8m
from £469.9m in 2018/19
to £408.1m in 2019/20 (on
a pre-IFRS 16 basis). As a
result of this deleveraging
and EBITDA growth, the
ratio of Net debt to EBITDA
reduced from 3.2x to 2.7x
which is now below our
previously announced target
of 3.0x.

Why is this important?
Free cash flow is a measure
of the cash generated by the
Group to pay down debt.
It is also a good indicator
of the underlying quality of
earnings and the overall
health of the business.

Progress we’ve made
Free cash flow increased by
123% in 2019/20 to £65.1m.
Cash flow benefitted from
the increase in Trading
profit, working capital inflow
reflecting lower stock holding
levels at year end and a
reduction in out flows related
to Non-trading items.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic Report29

Environmental and Health and Safety performance is reported in more detail in the section on being a responsible business on pages 12 to 27.
Following the launch of our new responsibility programme based around five key pillars, our KPI on ‘better-for-you’ choices has been updated to
focus on ensuring products with a claimable nutritional benefit are available across our entire core range.

Branded market share
This is our branded retail
sales expressed as a
percentage of the retail
sales of the categories in
which we operate (based
on IRI data for the 52 weeks
ending 28 March 2020 and
30 March 2019).

+60bps Grocery
+20bps Sweet Treats

Grocery Sweet Treats1

%
8
.
4
2

%
2
.
4
2

%
5
.
3
2

%
3
.
3
2

SG&A as a % of
Group revenue
SG&A represents the selling,
general and administration
costs of the central functions
across the business.

% of products testing
superior or at par
with competitors
Consumer panel blind
testing of our major branded
products against their main
competitor, whether branded
or non-branded.

%
8
.
8

%
2
.
8

%
9
.
7

%
6
9

%
5
9

%
3
9

%
6
8

By 2025, every core
range to include at
least one ‘better-for-
you’ option
A core range is a branded
product range or sub-range
within our portfolio that
delivers 10% or more of the
turnover within its category.
A better-for-you option is a
claimable nutritional benefit
such as reduced/no added
sugar, reduced/no added salt
or wholegrain alternative.

%
4
7

)
e
n

i
l

(

e
s
a
B
%
8
5

18/19

19/20

18/19

19/20

16/17 17/18 18/19 19/20

18/19 19/20

Why is this important?
Increasing market share
indicates consumer
preference for our products.

Progress we’ve made
Grocery market share
increased by 60 basis points
in the 52 weeks ended 28
March 2020, with all the
Group’s Grocery categories
growing share.

Sweet Treats grew market
share in the year with a
range of exciting new
product launches, including
Cadbury Creme Egg Choc
cakes and Cadbury Dairy
Milk Slices.

1 During the course of the year
we redefined how we view the
Sweet Treats category with our
customers and, as a result,
the prior year figure has been
restated.

Why is this important?
As part of our cost and
efficiency strategy we
intend to maintain a lean
organisational structure,
ensuring complexity is kept
to a minimum.

Progress we’ve made
SG&A as a % of revenue has
reduced slightly year-on-year
and reflects cost savings
following the changes to the
leadership team during the
year.

Why is this important?
This is an important measure
of the quality of our product
portfolio. It drives recipe
improvements and ensures
focus on consistent product
quality.

Progress we’ve made
Our overall performance
improved again over the
financial period, reflecting
an increase in the quality
of our branded products,
with continued focus in the
year on the Group’s top-
selling Grocery and Sweet
Treat products to ensure
that all test superior to our
competitors.

The review covered 69%
of our branded portfolio (by
retail sales value) as part of a
four-year rolling programme.

Why is this important?
As a business, we believe
we have a responsibility to
offer consumers ‘better-for-
you’ options and also aligns
with a key consumer trend
for healthier eating. Further
information on health and
nutrition is set out on pages
14 and 15.

Progress we’ve made
Over the course of the
period, we have increased
the number of core ranges
that have at least one
‘better-for-you’ option to
74% from a base of 58% for
the last financial year. This
was driven by NPD launches
across our portfolio,
including Mr Kipling,
Ambrosia, Bisto, OXO and
Loyd Grossman.

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30

Operating and financial review

“Our branded growth model continues
to drive revenue and our cost savings
programme is now expected to deliver
ahead of its original £5m target over the
next two years.”

Duncan Leggett
Chief Financial Officer

We have now grown Group revenues, Trading profit and adjusted
earnings for each of the last three years, driven by our successful
branded growth model. Most of our major brands grew revenues in the
year and sales of Nissin branded products nearly doubled. Additionally,
our cost savings programme is now expected to deliver ahead of its
original £5m target over the next two years.

Revenue
Group revenue (£m)
Branded
Non-branded
Total
% change
Branded
Non-branded
Total

Grocery Sweet Treats
190.9
44.6
235.5

514.7
96.9
611.6

+3.3%
(1.8%)
+2.4%

+5.6%
(3.9%)
+3.6%

Group
705.6
141.5
847.1

+3.9%
(2.5%)
+2.8%

Group revenue for the 52 weeks ended 28 March 2020 was £847.1m,
up +2.8% on the prior year. Branded revenue increased by +3.9% to
£705.6m while Non-branded revenue declined (2.5%) to £141.5m.
In the fourth quarter of the year, Group revenues accelerated to finish
3.6% higher than the same quarter last year. Within this, the Group’s
branded revenues increased +5.0% in Q4.

The Group employs a branded growth model strategy which utilises
the strength of its market leading brands, to launch insightful new
product innovation, supported by emotionally engaging advertising and
strategic retail partnerships. In following this strategy, revenues in the
UK increased every quarter compared to the equivalent quarters in the
prior year. This culminated with growth of +7.3% in the fourth quarter,
representing the eleventh consecutive quarter of UK revenue growth.
Additionally, the Group saw market share gains in all its categories
during the year, and overall, delivered 47 basis points of share growth in
the 52 weeks to 28 March 2020.

Grocery
Grocery branded revenues grew +3.3% to £514.7m in the year and
increased +5.6% in the fourth quarter. In overall terms, this reflected
benefits from the Group’s innovation strategy and increased consumer
marketing investment in the year. Over the course of the year, the UK
Grocery business (i.e. excluding International) grew revenues each
quarter and by +4.5% in the full year. Additionally, the Group’s grocery
categories and brands saw a sharp increase in volumes in the last three
weeks of the financial year, as large numbers of consumers in the UK
sought to build household stocks of some grocery products during the
COVID-19 pandemic.

The vast majority of brands in the Grocery business grew revenues
in the year. Bisto and Batchelors; the largest two brands, delivered
revenue growth during 2019/20, with both benefitting from emotionally
engaging media advertising and innovation during the year. Bisto saw
the launch of microwave-ready gravy pots while Batchelors extended its
very popular range of Super Noodles pots and Pasta ‘n’ Sauce pots.

Nissin Soba Noodles & Cup Noodles continue to grow very strongly,
with sales in the year up 88% compared to the prior year. Performance
as measured by market share data is equally strong, with the Nissin
range reaching a 2.9% market share of the Quick Meals, Snacks & Soup
category in the 52 weeks ended 28 March 2020. In the narrower Pot
Snacks category, the Nissin range reached a market share of 5.0% in the
same period, making it the leading authentic brand of noodle pots in the
UK market.

In cooking sauces, Sharwood’s and Loyd Grossman, delivered
increased volumes following recent range reviews with UK retailers and
strong product innovation performance. Loyd Grossman in particular
saw good revenue growth during 2019/20 and both brands saw
high levels of demand in the latter half of the fourth quarter, reflecting
consumer patterns associated with COVID-19. Sharwood’s also
launched new Rice Pots, a range of convenient curry pots in three
flavour variants, building on the success of the pots ranges under the
Group’s Batchelors brand. This is an example of stretching one of the
Group’s brands into adjacent categories and the Group considers there
to be further similar opportunities in the future.

A number of the Group’s smaller brands also saw volumes and
revenues rise significantly in the fourth quarter as consumer buying
patterns changed following the effects of COVID-19. McDougall’s
flour, for example, saw very marked increases in demand, as more
consumers turned to baking at home.

Sales of Ambrosia benefitted from increased off-shelf execution with
retailers, more favourable weather conditions compared to the prior year
in the second quarter and COVID-19 related demand in the fourth quarter.

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Sweet Treats
Branded revenues in Sweet Treats grew +5.6% to £190.9m in 2019/20,
building on the excellent progress in the prior year. Revenues of Mr
Kipling increased by 4% at a Group level and to its highest ever annual
revenues. The last twelve months have seen Mr Kipling benefitting from
further TV advertising, and in the second quarter saw the launch of its
new ‘Signature’ range. This new offering of premium cakes includes
After Dinner Mint Fancies; Apple, Pear & Custard Crumble Tarts and
Chocolate, Caramel & Pecan slices all of which align to one of the
Group’s key consumer trends of ‘indulgence’ and targeting evening
eating occasions. The second half of the year saw the launch of new
mini Mr Kipling Mince Pies, Fruit pies and Bakewells. The introduction of
these new mini versions of some of Mr Kipling’s most popular products
demonstrates enhanced cake product capability following the significant
re-configuration of an existing manufacturing line at its Stoke bakery. This
has vastly improved the flexibility of different cake sizes and types and
facilitates the development of more new products which closely match
consumer trends.

The performance of Mr Kipling is a prime example of how the Group’s
branded growth model strategy is working well. Following the relaunch of
Mr Kipling in 2018, revenues of the Group’s largest brand are 17% higher
than they were two years ago.

Cadbury cake revenues were also strong in 2019/20, increasing by
nearly 8%. This performance reflected the introduction of new Cadbury
cake slices and also new Easter ranges, including Cadbury Crème Egg
Choc cakes which supported market share gains in the year.

Collaboration with its retail customers remains a high priority for the
Group. Against the backdrop of tightening retailer ranges, the Group
has delivered increased distribution of its products across its categories
in the year; including benefits from new products launched under the Mr
Kipling and Cadbury cake portfolio.

Also in 2019/20, the Group launched the first products under its new
PLANTASTIC brand. First to market were a range of delicious Flapjacks
using plant-based ingredients targeting the growing trend of consumers
looking for plant-based and vegan products. In the second half of the
year, the Group extended the brand to include Dessert Grain pots with
flavours including Strawberry, Raspberry and Mango & Passion Fruit.

International
The International business experienced a disappointing year as
revenues fell (19%). Mr Kipling continued to grow in Australia and the
USA, due to some new product launches and store listings respectively.
Elsewhere, progress was limited.

While the International business did not deliver sales and profit progress
in 2019/20, the Group continues to believe a clear opportunity exists
for its brands to grow internationally. The Group has reviewed its
International strategy and is adopting a new approach to deliver a
sustainable profitable business as evidenced in the UK business. A new
Head of International has been appointed to lead a fresh new approach.
Functional director heads are being replaced with new market heads
with a switch of resources from the UK to be present in relevant markets.
There will be a change of emphasis underpinned by a strong focus on
in-market execution, which involves ensuring the right products, are
presented to the consumer at the right price combined with an optimum
promotional strategy. Route to market solution will include using the
carefully chosen local partners with appropriate capabilities.

Non-branded
In the Grocery business, Non-branded revenue declined (1.8%) in the
year while Sweet Treats saw revenue fall by (3.9%) to £44.6m. Grocery
saw a fall in revenues at Knighton due to a large contract loss which
has since been partially regained. In Sweet Treats, the sales decline was
attributed to contract exits from lower margin business in all year round
cake ranges partly offset by some contract wins in seasonal cake,
although these effects were largely seen in the first half of the year. In
H2, revenue trend recovered to grow +7.3%.

In overall terms, the Group’s Non-branded business is one which plays
an important and supportive role. The principles used are: to deploy
low levels of capital investment; support the recovery of manufacturing
overheads; and apply strict financial hurdles on new contracts.

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Operating and financial review CONTINUED

Trading profit
Divisional
contribution2 (£m)
Grocery
Sweet Treats
Total

Group & corporate
costs

Trading profit

2019/20
148.2
23.7
171.9

2018/19
138.3
23.6
161.9

(39.3)

132.6

(33.4)

128.5

Change
7.2%
0.4%
6.2%

(17.7%)

3.2%

The Group reported Trading profit of £132.6m in 2019/20, £4.1m ahead
of the prior year. Divisional contribution increased by £10.0m to £171.9m
while Group & corporate costs were £5.9m higher than 2018/19. The
Grocery business was the larger contributor to the progress in Divisional
contribution, delivering an increase of £9.9m compared to the prior year.
Sweet Treats Divisional contribution was £0.1m higher in the year at
£23.7m as strong revenue performances from Mr Kipling and Cadbury
cake due to benefits from the branded growth model were supported by
increased consumer marketing investment.

Grocery benefitted from good performances across its branded portfolio
as described above flowing through to increased Divisional contribution.
This was partly offset by increased consumer marketing investment, with
Batchelors, Bisto and Oxo all benefitting from media advertising in the
year. Additionally, while Knighton delivered improved margins in the year,
the International business encountered a decline in revenues and profits.

In Sweet Treats, Divisional contribution was slightly higher than the prior
year as the growth in branded revenues were largely offset by increased
marketing costs. In particular, Mr Kipling benefitted from increased
media investment with further airing of its successful ‘Little Thief’
campaign.

Consumer marketing investment is expected to increase in 2020/21
with up to six of the Group’s largest brands in line to benefit from media
advertising in the year, with the continued focus on delivering strong
branded revenue growth.

Group & corporate costs increased by £5.9m in 2019/20 to £39.3m due
to higher depreciation charges following the adoption of IFRS 16 and
higher Group wider management incentive schemes costs, covering a
management population of nearly 500 colleagues.

Operating profit
£m
Adjusted EBITDA3
Depreciation
Trading profit
Amortisation of intangible assets
Fair value movements on foreign
exchange & derivatives
Net interest on pensions and
administrative expenses and past
service costs
Non-trading items:
GMP equalisation
Restructuring costs

Impairment of goodwill &
intangible assets

Other non-trading items
Operating profit

2019/20
152.5
(19.9)
132.6
(29.4)

2018/19
145.5
(17.0)
128.5
(34.4)

Change
7.0
(2.9)
4.1
5.0

1.7

(1.3)

3.0

(4.6)

(1.3)

(3.3)

-
(4.1)

-
(0.9)
95.3

(41.5)
(16.8)

(30.6)
1.9
4.5

41.5
12.7

30.6
(2.8)
90.8

The Group delivered Operating profit of £95.3m in the year, a £90.8m
increase on the prior year. The growth was due to a number of factors,
including: an improved trading performance as described above,
the non-repeat of certain non-trading items in the year and lower
amortisation of intangible assets.

Amortisation of intangibles was £29.4m in the year, £5.0m lower than
the prior year. This follows the full amortisation of certain SAP software
modules at the Group’s main manufacturing sites during the second half
of 2018/19 and brand impairments taken in the prior year. Fair valuation
of foreign exchange and derivatives was a gain of £1.7m in the year.

Net interest on pensions and administrative expenses was a charge
of £4.6m. Expenses for operating the Group’s pension schemes were
£10.2m in the period, partly offset by a net interest credit of £9.3m due
to an opening surplus of the Group’s combined pension schemes. Also
included is a non-cash charge of £3.7m which reflects settlement costs
associated with enhanced transfer value payments made to certain
RHM scheme deferred members.

Non-trading items were £5.0m in 2019/20; an £82.0m reduction on the
equivalent period a year ago. In the prior year, the Group also reflected
a Guaranteed Minimum Pensions (GMP) equalisation charge of £41.5m
and impairment of intangible assets and goodwill of £30.6m. The Group
also experienced restructuring costs in 2018/19 associated with the
consolidation of the Group’s logistics operations to one central location
which has since been completed. Restructuring costs incurred in
2019/20 include advisory costs relating to the Group’s strategic review,
costs associated with a commercial re-organisation of the Group and
costs related to the departure of the previous Acting CEO.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic Report
Finance costs
£m
Senior secured notes interest
Bank debt interest – net

2019/20
31.0
5.0
36.0

2018/19
31.7
5.1
36.8

Change
0.7
0.1
0.8

Amortisation of debt issuance
costs
Net regular interest5
Write-off of financing costs & early
redemption fees
Discount unwind
Other finance income
Other finance cost
Net finance cost

3.3
39.3

1.3
-
1.1
41.7

3.7
40.5

11.3

3.0
(7.6)
-
47.2

0.4
1.2

11.3

1.7
(7.6)
(1.1)
5.5

Net finance cost was £41.7m in the year; a decrease of £5.5m
compared to 2018/19. Net regular interest in 2019/20 was £39.3m, a
reduction of £1.2m compared to the prior year. Consistent with recent
years, the largest component of finance costs in the period was interest
due to holders of the Group’s senior secured notes, which was £31.0m.
The interest on the senior secured notes was £0.7m lower compared to
the prior year. This followed a full year benefit of the re-financing in June
2018 of the June 2021 £325m fixed rate notes at a coupon of 6.5% to
the October 2023 £300m fixed rate notes at the slightly lower coupon
of 6.25%.

Bank debt interest of £5.0m was £0.1m lower in the year due to lower
levels of average debt and a lower margin on the revolving credit facility
following the refinancing completed in May 2018. Amortisation of debt
issuance costs was £3.3m, £0.4m lower than the prior year. As there
has been no re-financing of the Group’s bank debt or Senior Secured
Notes in the year, there was no repeat of the write off of financing fees
and early redemption fees incurred last year.

A charge of £1.3m in the period relating to a discount unwind
associated with properties held by the Group. In the prior year, a £3.0m
discount unwind charge was reflected in reported Net finance cost and
due to a movement in discount rates impacting Group provisions. Other
finance costs of £1.1m related to non-cash interest costs following the
adoption of IFRS 16 – Leases.

Taxation
£m
Profit/(loss) before tax
- Tax (charge)/credit at rate of 19.0%
Tax effect of:
Changes in tax rate
Other items
Income tax (charge)/credit
Net deferred tax liability

2019/20
53.6
(10.2)

2018/19
(42.7)
8.2

4.9
(1.8)
(7.1)
184.9

-
0.7
8.9
13.5

A tax charge in the year of £7.1m compared to a credit of £8.9m in the
prior year. The current year’s charge reflects a charge of £10.2m on
profit before tax at the rate of 19%. This is partly offset by a credit of
£4.9m due to a change in the opening deferred tax balances rate from
17% to 19% following the repeal of the 2016 Finance Act.

A net deferred tax liability at 28 March 2020 of £184.9m is an increase
of £171.4m compared to the prior year position. This is substantially due
to a charge of £160.6m to other comprehensive income in relation to an
increase in the combined surplus of retirement benefit obligations of the
Group’s pension schemes.

The Group currently retains brought forward losses which it can utilise
to offset against future tax liabilities. Due to changes in tax legislation
with respect to tax shields, and the expectation of lower pension deficit
contribution payments which are allowable for tax, the Group may
recommence paying cash tax in low single digit £millions from 2022/23.

Earnings per share
Earnings per share (£m)
Operating profit
Net finance cost
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation
Average shares in issue
Basic earnings/(loss) per share
(pence)

2019/20
95.3
(41.7)
53.6
(7.1)
46.5
846.6

2018/19
4.5
(47.2)
(42.7)
8.9
(33.8)
841.5

Change
90.8
5.5
96.3
(16.0)
80.3
5.1m

5.5

(4.0)

9.5

The Group reported a profit before tax of £53.6m in the year, an increase
of £96.3m compared to the prior year. Profit after tax was £46.5m,
compared to a loss of £(33.8)m in 2018/19.

Adjusted earnings per share
(£m)
Trading profit
Less: Net regular interest
Adjusted profit before tax
Less: Notional tax (19%)
Adjusted profit after tax6
Average shares in issue (millions)
Adjusted earnings per share
(pence)

2019/20
132.6
(39.3)
93.3
(17.7)
75.6
846.6

2018/19
128.5
(40.5)
88.0
(16.7)
71.3
841.5

Change
+3.2%
+3.1%
+6.0%
(6.0%)
+6.0%
+0.6%

8.9

8.5

+5.4%

Adjusted profit before tax increased by 6.0% in 2019/20 to £93.3m,
due to both further Trading profit growth in the year and lower net
regular interest costs as described above. Adjusted profit after tax also
increased by 6.0%, to £75.6m in the year after deducting a notional
19.0% tax charge of £17.7m. Based on average shares in issue of 846.6
million shares, adjusted earnings per share grew +5.4% to 8.9p.

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Operating and financial review CONTINUED

Free cash flow
£m
Statutory cash flow statement
Cash generated from operating activities
Cash used in investing activities
Cash generated from/(used in) financing
activities
Net increase in cash & cash equivalents

2019/20

2018/19

85.9
(18.0)

82.2
150.1

57.7
(17.7)

(35.8)
4.2

On a statutory basis, cash generated from operations was £121.5m
compared to £80.2m in 2018/19. Cash generated from operating
activities was £85.9m after deducting net interest paid of £35.6m. Cash
generated from financing activities was £82.2m in 2019/20 versus
£(35.8m) cash used in the prior year. This was largely due to the prudent
decision by the Group to draw down £85m of its £176.6m committed
revolving credit facility in light of events associated with COVID-19.

The Group reported an inflow of Free cash in the period of £65.1m.
Trading profit of £132.6m was ahead of the prior year for the reasons
outlined above, while depreciation of £19.9m was £2.6m higher as
operating leases are now treated as an asset following the adoption
of IFRS 16. Other non-cash items of £1.7m was predominantly due to
share based payments.

Net interest paid of £35.6m was £5.5m higher than the prior year, but
this was due to the later timing of the first interest payment on the
Group’s £300m fixed rate notes, which were issued in the first half of last
year. As with the prior year period, no taxation was paid in the period
due to the availability of brought forward losses and capital allowances.

£m
Trading profit
Depreciation
Other non-cash items
Interest
Pension contributions
Capital expenditure
Working capital & other
Non-trading items
Proceeds from share issue
Sale of property, plant & equipment
Hovis repayment of loan note
Financing fees
Free cash flow10

2019/20
132.6
19.9
1.7
(35.6)
(44.7)
(18.0)
14.6
(6.6)
1.1
0.1
-
-
65.1

2018/19
128.5
17.0
2.4
(30.1)
(41.9)
(17.7)
(7.7)
(18.1)
1.4
-
7.6
(12.2)
29.2

Pension contributions in the period were £44.7m; £2.8m higher than
2018/19 due to the previously agreed planned increases in deficit
contribution payments to the Premier Foods pension scheme. Pension
deficit contributions payments made to the Premier Foods pension
schemes of £38.2m were the largest component of cash paid in the
year; the balance being expenses connected to administering both the
RHM and Premier Foods schemes and government levies. As previously
announced, pensions administrative costs in 2020/21 are expected to
reduce by £4m to £4-£6m.

Capital expenditure was £18.0m in the period, slightly higher than the
prior year. One of the key projects in the year was the completion of a
line at its Stoke cake manufacturing site which will provide enhanced
and varied product innovation capabilities. In 2020/21, the Group
expects to increase its capital expenditure to circa £25m to fund
investment in both growth projects supporting the Group’s innovation
strategy and cost release projects to deliver efficiency savings.

A working capital inflow of £14.6m in the year compared to an outflow
of £7.7m in 2018/19. This reflected lower stock holding levels at the
year end as the Group experienced higher than expected demand from
its retail customers in the final three weeks of the financial year due to
impacts associated with COVID-19.

Non-trading items of £6.6m were paid in the year and reflect the cash
impact of the final tranche of the Group’s logistics transformation
programme costs, costs associated with the Group’s strategic
review and cash outflows relating to the departure of previous senior
management. In the prior year the Group received a partial repayment of
its loan note and associated interest from Hovis of £7.6m.

Net debt and sources of finance
Net debt at 28 March 2020 was £429.6m, a reduction of £40.3m
compared to the previous year, and after including the impact of
reflecting IFRS 16 which included £21.5m in reported Net debt which
is not in the comparative year. On a pre-IFRS 16 basis, Net debt was
£408.1m which represents a reduction of £61.8m compared to the prior
year. Free cash inflow in the period was £65.1m and the movement in
debt issuance costs was £3.3m.

There were no changes to the Group’s lending facilities or its issued
Senior Secured Notes in the period. At 28 March 2020, the Group held
cash and bank deposits of £177.9m. This included £85m of drawings
against the Group’s £176.6m committed revolving credit facility.

Net debt at 30 March 2019
Free cash inflow in year
Movement in debt issuance costs
Net debt pre-IFRS 16 Leases
IFRS 16 Leases
Net debt at 28 March 2020
Adjusted EBITDA
Net debt / EBITDA
Adjusted EBITDA (pre-IFRS 16)
Net debt / EBITDA (pre-IFRS 16)

£m
469.9
(65.1)
3.3
408.1
21.5
429.6
152.5
2.82x
149.9
2.72x

On a pre-IFRS 16 Leases basis, Net debt / EBITDA was 2.72x, which
was comfortably ahead of the Group’s target of 3.0x by March 2020.
On a reported basis, Net debt / EBITDA was 2.82x. Under the Group’s
financing documents with its bank lending group, the Company is
restricted from making a distribution to shareholders until its Net debt
/ EBITDA ratio is less than 3.0x. The definition of this ratio is slightly
different to the reported ratio, the main difference includes adding back
the Group’s invoice discounting facility of £30m to Net debt.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic Report
35

Pensions
Following an extensive strategic review which has explored all options
available to the Group, on 20 April 2020 the Board announced a
landmark agreement with its pension schemes which is transformational
for both the Group and its pension scheme members by significantly
improving its long standing pension funding situation. In particular, the
Board expects this will provide greater funding certainty for Premier
Foods pension schemes members by leveraging the strength of the
successful RHM pension scheme investment strategy. Alongside the
strong progress the Group has delivered through its branded growth
model strategy, this new pensions agreement provides the platform for
further value creation for all stakeholders. The Group has now agreed
and signed legal documentation with the scheme trustees for the merger
to be implemented as planned on 30 June 2020.

The IAS 19 pension schemes valuation reported a surplus for the
combined RHM and Premier Foods’ pension schemes at 28 March
2020 of £1,230.4m, £857.3m higher than 30 March 2019 and
equivalent to £1,021.2m net of a deferred tax charge of 19.0%. A
deferred tax rate of 19.0% is deducted from the IAS 19 retirement
benefit valuation of the Group’s schemes to reflect the fact that pension
deficit contributions made to the Group’s pension schemes are allowable
for tax. An increase in the RHM surplus of £667.5m to £1,505.3m was
a major factor behind the growth in the combined surplus, although the
Premier Foods deficit reduced by £189.8m to £274.9m.

IAS 19 Accounting Valuation (£m)
Assets
Liabilities
Surplus/(Deficit)
Net of deferred tax (19.0%/17.0%)

28 March 2020
Premier
Foods
774.7
(1,049.6)
(274.9)
(222.7)

RHM
4,745.3
(3,240.0)
1,505.3
1,219.3

Combined
5,520.0
(4,289.6)
1,230.4
996.6

30 March 2019
Premier
Foods
707.1
(1,171.8)
(464.7)
(385.7)

RHM
4,333.6
(3,495.8)
837.8
695.4

Combined
5,040.7
(4,667.6)
373.1
309.7

Assets in the combined schemes increased by £479.3m to £5,520.0m
in the period. RHM scheme assets increased by £411.7m to
£4,745.3m while the Premier Foods’ schemes assets increased by
£67.6m to £774.7m. The increase in assets can largely be attributed
to Government bonds which increased by £456.1m in the year,
predominantly in the RHM scheme.

Liabilities in the combined schemes decreased by £378.0m in 2019/20
to £4,289.6m. The value of liabilities associated with the RHM scheme
were £3,240.0m, a reduction of £255.8m while liabilities in the Premier
Foods schemes were £122.2m lower at £1,049.6m. The decrease
in the value of liabilities in both schemes is due to lower inflation rate
assumptions and a change in mortality rate assumptions. The discount
rate assumption was 2.5% at 28 March 2020; five basis points higher
than the prior year, which also contributed to the lower valuation of
liabilities at this date. Additionally, and as a standard part of the triennial
valuation process, scheme membership composition was assessed,
reviewing various scheme data such as mortality. Following this review,
a reduction in scheme liabilities has been reflected in the position at 28
March 2020.

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Operating and financial review CONTINUED

Executive Leadership Team
The Group restructured its Executive Leadership Team (ELT) during
the year to deliver sharper consumer, customer and operational focus.
These changes are expected to accelerate the pace and agility of
decision making and streamline internal processes and reporting.

With a more functional approach, three new appointments to the
ELT were confirmed; Chief Customer Officer, Chief Marketing Officer
and Operations Director. Consequently, the leadership structure
changed and resulted in the removal of the UK Managing Director and
International Managing Director roles; however, this does not detract
from the Group’s aspirations for its International business.

Outlook
The Group expects to make further progress this year, employing
its successful branded growth model which has been instrumental
in delivering eleven successive quarters of UK revenue growth.
Additionally, a new international strategy is being implemented with the
objective of delivering sustainable profitable growth.

The first quarter of 2020/21 has seen particularly strong trading, with
Group revenues set to increase approximately 20% compared to
the prior year, as it continues to see elevated levels of demand for its
Grocery brands during the COVID-19 pandemic. The Group recognises
it is at an early stage of its financial year, and that it also remains
unclear as to how consumers’ eating habits may change as lockdown
measures ease over the coming weeks. However, in light of the strong
first quarter’s trading, the Group expects to exceed current expectations
for 2020/21 Revenue and Trading profit, despite the Group incurring
some additional operational costs across its supply chain. The Group
also expects options for cash deployment and capital allocation will
improve as a result of anticipated further Net debt reduction in 2020/21.

Duncan Leggett
Chief Financial Officer

24 June 2020

Combined pensions schemes (£m)
Assets
Equities
Government bonds
Corporate bonds
Property
Absolute return products
Cash

Infrastructure funds

Swaps
Private equity
LDI
Other
Total Assets
Liabilities
Discount rate

Inflation rate (RPI/CPI)

28 March
2020

30 March
2019

11.5
1,802.6
25.3
445.2
1,198.2
32.4
309.8
487.1
510.1
268.3
429.5
5,520.0

179.5
1,346.5
26.9
436.1
1,342.0
37.3
255.8
498.4
446.1
223.2
248.9
5,040.7

2.50%

2.45%
2.65%/1.65% 3.25%/2.15%

The Triennial actuarial valuation of the Group’s Pension Schemes as at
March and April 2019 (depending on scheme date) has now concluded;
the results of these are outlined in the accompanying table and which
shows actuarial valuations from 2016 and 2013 as previously disclosed.
The scheme valuations for 2016 and 2013 used a discount rate of Gilts
+1.0% in valuing scheme liabilities. For the RHM 2019 valuation only,
the discount rate used was Gilts +0.5%; all other valuations used a
discount rate of Gilts +1.0%.

Actuarial valuation surplus/(deficit) £m
RHM
Premier Foods
Irish schemes
Combined schemes

2019
338
(552)
0
(214)

2016
135
(551)
0
(416)

2013
(504)
(538)
(20)
(1,062)

The net present value of future deficit payments, to the end of the
respective recovery periods, remains at circa £300-320m. However,
following the transformational agreement agreed with the pension
Trustees as described above, the net present value of future deficit
payments is projected to reduce by up to 45% to £175-185m in
future years.

IFRS 16 – Leases
A new accounting standard, IFRS 16 – Leases, came into effect for
accounting periods commencing on or after 1 January 2019, replacing
the previous standard, IAS 17. Accordingly, the 52 weeks ending 28
March 2020 is the first accounting period that the Group is adopting
IFRS 16. As previously stated, the Group has elected to transition to
IFRS 16 using the Modified Retrospective Approach, and as such,
comparatives will not be re-stated at 28 March 2020. It is important to
note that there is no economic or cash impact to the Group as a result
of this accounting standard change.

As at 28 March 2020, the increase in leases held on the Group’s
balance sheet compared to 30 March 2019 was £21.5m following the
adoption of IFRS 16. Accordingly, reported Net debt has increased to
reflect this change. The Group’s depreciation charge has also increased
and was £19.9m in the year. It should be noted that in future years,
there may be a degree of volatility in the value of assets and liabilities
recognised with respect to leases, reflecting the timing of lease renewals
and any fluctuations to discount rates.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Strategic Report

Additional notes:
• The Directors believe that users of the financial statements are most
interested in underlying trading performance and cash generation of
the Group. As such, intangible asset amortisation and impairment
are excluded from Trading profit because they are non-cash items.

• Restructuring costs have been excluded from Trading profit because
they are incremental costs incurred as part of specific initiatives that
may distort a user’s view of underlying trading performance.

• Net regular interest is used to present the interest charge related to
the Group’s ongoing financial indebtedness, and therefore excludes
non-cash items and other credits/charges which are included in the
Group’s net finance cost.

• Group & corporate costs refer to group and corporate expenses
which are not directly attributable to a business unit and are
reported at total Group level.

•

In line with accounting standards, the International and Knighton
business units, the results of which are aggregated within the
Grocery business unit, are not required to be separately disclosed
for reporting purposes.

Appendices
The Group’s preliminary results are presented for the 52 weeks ended
28 March 2020 and the comparative period, 52 weeks ended
30 March 2019. All references to the ‘quarter’, unless otherwise stated,
are for the 13 weeks ended 28 March 2020 and the comparative period,
13 weeks ended 30 March 2019.
Quarter 4 Sales

Q4 Sales (£m)
Branded
Non-branded
Total
% change
Branded
Non-branded
Total

Grocery
142.5
24.0
166.5

+5.6%
(6.1%)
+3.7%

Sweet
Treats
47.1
4.6
51.7

+3.5%
(1.2%)
+3.0%

Group
189.6
28.6
218.2

+5.0%
(5.3%)
+3.6%

Notes and definitions of non-GAAP measures
The Group uses a number of non-GAAP measures to measure and
assess the financial performance of the business. The Directors believe
that these non-GAAP measures assist in providing additional useful
information on the underlying trends, performance and position of the
Group. These non-GAAP measures are used by the Group for reporting
and planning purposes and it considers them to be helpful indicators for
investors to assist them in assessing the strategic progress of the Group.

1. The Group uses Trading profit to review overall Group profitability.

Trading profit is defined as profit/(loss) before tax before net finance
costs, amortisation of intangible assets, non-trading items, fair value
movements on foreign exchange and other derivative contracts, and
net interest on pensions and administration expenses.

2. Divisional contribution refers to Gross profit less selling, distribution

and marketing expenses directly attributable to the relevant business
unit.

3. Adjusted EBITDA is Trading profit as defined in (1) above excluding

depreciation.

4. Adjusted profit before tax is Trading profit as defined in (1) above

less net regular interest.

5. Net regular interest is defined as net finance cost after excluding

write-off of financing costs, other finance income, early redemption
fee, fair value movements on interest rate financial instruments and
other interest payable.

6. Adjusted profit after tax is Adjusted profit before tax as defined in (4)

above less a notional tax charge of 19.0% (2018/19: 19.0%).

7. Adjusted earnings per share is Adjusted profit after tax as defined in
(6) above divided by the weighted average of the number of shares
of 846.6 million (52 weeks ended 30 March 2019: 841.5 million).

International sales remove the impact of foreign currency fluctuations
and adjusts prior year sales to ensure comparability in geographic
market destinations. The constant currency calculation is made by
adjusting the current year’s sales to the same exchange rate as the
prior year.

9. Net debt is defined as total borrowings, less cash and cash

equivalents and less capitalised debt issuance costs.

10. Free cash flow is defined as the change in Net debt as defined in (9)

above before the movement in debt issuance costs.

11. Net debt on a pre-IFRS 16 basis.

12. Assumptions on future deficit contributions subject to: (i) Investment
returns of RHM scheme; (ii) no change to deficit recovery period
length. Also subject to future actuarial valuations and associated
negotiations.

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Risk management

Our approach
As with any business we face risks and
uncertainties. We believe that effective risk
management supports the successful delivery
of our strategic objectives. We have an
established risk management framework to
identify, evaluate, mitigate and monitor the risks
we face as a business. Our risk management
framework incorporates both a top-down
approach to identify our principal risks and a

bottom-up approach to identify our operational
risks. The Executive Leadership Team (ELT)
perform a robust risk assessment on a periodic
basis and the output is reviewed with the Audit
Committee at least twice a year. This review
includes an assessment of the movement in
the risks, the strength of the controls relied
on and the status of mitigating actions. The
principles of risk management have also been
embedded into the day-to-day operations of
the business units and corporate functions.

The long-term viability statement on page
43 provides a broader assessment of the
longer term prospects of the Group after
consideration of the principal risks and
availability of funding.

n
w
o
d
p
o
T

p
u
m
o
t
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o
B

RISK MANAGEMENT FRAMEWORK

Board of Directors
Assess principal risks and set risk appetite.
Overall responsibility for maintaining sound
risk management and internal controls.

Audit Committee
Set risk management framework. Assess
effectiveness of the Group’s risk framework
and internal controls.

Executive Leadership Team
Implement risk management framework. Assess
effectiveness of the Group’s risk framework and
internal controls

Risk and Internal Audit
Test internal controls and co-ordinate risk
management activity, provide support to business risk
owners and report risk information across the Group.

• Periodic reports provided to the ELT

and Board on how effectively risks are
being managed.

• Strategic reviews with ELT.

• Group's principal risks reviewed and
agreed with ELT and the Board.

P O R T

D R

R A N

O
NIT
O
M

RISK MANAGEMENT
PROCESS

T
I

A S U RE

Operational Management
Own and review operational risks, operate
controls and implement mitigation actions.

• Controls defined to address risks within
tolerance and ownership defined.

• Risk action plans created to manage

risks within appetite.

• Risk appetite set by the Board for all

principal risks.

• Measurement of risks against appetite

and escalation process.

Principal Risks and Uncertainties
The Board has carried out a robust
assessment of the principal risks facing the
Group, including those that would threaten its
business model, future performance, solvency
or liquidity. We are exposed to a variety of
other risks but we report those we believe are
likely to have the greatest current or near-
term impact on our strategic and operational
plans and reputation. These risks (gross) and
uncertainties are identified in the heatmap
opposite (in no particular order), followed by
a more detailed description, including key
mitigating activities in place to address them.
We have also considered the broad potential
impacts of the COVID-19 pandemic, which
impacts a number of our principal risks. The
‘Changes since 2018/19’ highlight changes in
the profile of our principal risks or describe our
experience and activity over the last year.

Risk appetite
Our approach is to minimise exposure
to reputational, financial and operational
risk, while accepting and recognising a
risk/rewards trade-off in pursuit of our
strategic and commercial objectives. As a
food manufacturing company, with many
well-known brands, the integrity of our
business is crucial and cannot be put at risk.
Consequently, we have a zero tolerance for
risks relating to Occupational Health & Safety
and food safety. We operate in a challenging
and highly competitive market place and, as a
result, we recognise that strategic, commercial
and investment risks will be required to seize
opportunities and deliver results at pace. We
are therefore prepared to make certain financial
and operational investments in pursuit of
growth objectives, accepting the risks that the
anticipated benefits from these investments
may not always be fully realised. Our
acceptance of risk is subject to ensuring that
potential benefits and risks are fully understood
and sensible measures to mitigate those risk
are established.

Emerging risks
There are two ways in which we have
identified our emerging risks in this report.
First, for our principal risks, we have noted in
the following pages some emerging threats
regarding these risks. These uncertainties
may relate to future regulatory, economic or
political changes. Secondly, we also face a
number of uncertainties where an emerging
threat may potentially impact us in the longer
term. In some cases, there may be insufficient
information available to understand the likely
scale and impact of the risk. We also might not
be able to fully define a mitigation plan until we
have a better understanding of the threat. We
have created a watchlist of these risks which
we will review on a regular basis to monitor any
changes to the likely impact on our business.
Some examples of these are:

Healthy eating
The UK Government has in recent years
introduced guidelines and legislation to help
influence consumers to make healthy eating
choices, for example the Department of Health

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1 Macroeconomic and
geopolitical instability

2 Market and retailer

actions

3 Operational integrity

4 Technology

5 Legal compliance

6 Product portfolio

7 HR and employee risk

8 Strategy delivery

9 International expansion

10 Treasury & pensions

Exceeding risk appetite

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i
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e
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L

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M

Within risk appetite

w
o
L

Low

Risk trend

Risk increased

Risk stable

Medium

Impact

High

Risk decreased

New risk

Arrows indicate the change
in risk since the prior year

and Social Care (‘DHSC’) issued proposals
on curbing promotions on High Fat, Salt
and Sugar (HFSS) products. Whilst we are
confident that our product ranges cater to
and enable healthy choices for consumers,
continued government intervention in this
area could have an impact on our product
formulation and innovation pipeline. We will
continue to engage with the DHSC on any
proposed legislation.

Climate change
There is clear evidence that global
temperatures are rising rapidly and a
consensus among scientists and policymakers
that human-made greenhouse gases (‘GHGs’)
are having a direct impact on the climate. We
support the view that urgent action is needed
to address climate change. Climate change
poses a number of potential risks for us from
both a physical (e.g. isolated events such as
increased intensity of storms, heatwaves or
higher average operating temperatures) and
regulatory (e.g. new or strengthened carbon
reduction commitments) perspective. For
further information on how we are working to
reduce our environmental impact see pages
24 to 27 of Being a responsible business.

Risk management enables our strategy

Sustainable & profitable revenue growth

Cost control & efficiency

Cash generation

1 Macroeconomic and geopolitical instability

Link to strategy

Risk and potential impact

How we manage it

Changes since 2018/19

Our business has been subject to a period
of prolonged uncertainty owing to political
developments related to Brexit which presents
a significant risk to our business and may
affect our supply chain and expose us to the
risk of a further devaluation of sterling against
the euro, thereby increasing the Group’s cost
base. The outbreak of COVID-19 has created
wide macroeconomic uncertainty that has the
potential to impact the Group, although to
date it has seen an elevated level of consumer
demand. A prolonged period of disruption
could expose the Group to operational
risks such as securing supplies of key
ingredients which could disrupt production or
increase costs (see Risk 3). A more detailed
assessment of the potential impact of the
UK's withdrawal from the EU and COVID-19
on our business and the viability statement
can be found on page 43.

• We manage the impact of commodity
price inflation and foreign exchange
volatility through hedging activity and
ongoing supplier risk management.

The Withdrawal Agreement and
Implementation Bill received Royal Assent on
23 January 2020 and the UK left the EU on
31 January 2020.

• A cross-functional committee headed by
the Group CFO and Group Procurement
Director has been put in place to manage
the Group’s readiness for Brexit. See
page 43 for more details.

• The Executive Leadership Team closely
monitors the COVID-19 threat to ensure
appropriate incident and response plans
are in place. Above all, we maintain our
commitment to the health and safety of
our employees and customers by putting
people first.

The UK subsequently entered a transition
period which is due to end on 31 December
2020.

The UK Government imposed a lockdown
on the general population with the exception
of key workers on 23 March 2020 to slow
the rate of COVID-19 infections. As a
food manufacturing business our factories
remained open and modifications were made
to enable social distancing while non-factory
employees were told to work remotely.

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Risk management CONTINUED

2 Market and retailer actions

Link to strategy

Risk and potential impact

How we manage it

Changes since 2018/19

As a primarily UK based company, our sales
are concentrated with a relatively small
number of major customers who operate in a
highly competitive market. Actions taken by
these retailers (for example changes in pricing
and promotion strategies), may negatively
impact on our financial performance and can
also have an impact on the overall market for
our products.

• We have strong relationships with the

• The discounters continue to outperform

major retailers built on the strength of our
brands, our expertise in our categories
and shopper insight.

• We have a programme of continuous

innovation rooted in customer insight and
designed to build category growth for our
customers and brands.

• We are growing our International business
which reduces dependence on the UK
market.

the major retailers who could respond by
further dropping prices and moving to
own-label products. This could negatively
impact on our margins and demand for
our brands.

• Our international business has under-
performed. We have a new strategy
in place with the intent of delivering
sustainable growth (see Risk 9).

3 Operational integrity

Link to strategy

Risk and potential impact

How we manage it

Changes since 2018/19

Delivery of our strategy depends on our ability
to minimise operational disruption from issues
with facilities, factory infrastructure as well as
procurement and logistics functions. Supply
chain weaknesses, e.g. disruption due to
unforeseen events and single supplier risks,
may impact negatively on our reputation,
financial performance and key customer
relationships.

4 Technology

• We have a crisis management process
and business continuity plans are
reviewed and refreshed on an ongoing
basis.

•

Insurance cover mitigates against the
financial impact of material site issues.

• We consolidated our warehousing and
distribution capability to increase our
operational efficiency. There are close
relationships at all levels of the business
with our outsourced logistics provider.

• Procurement category plans are in place
to mitigate against single supplier risk.

• We have robust quality management
standards applied and rigorously
monitored across our supply chain.

• The COVID-19 pandemic has caused

significant disturbance to global supply
chains. Our suppliers have risen to the
challenge to continue supplying us with
raw materials and bought-in finished
goods. Our Procurement, Operational
and Technical teams have also managed
to source alternative suppliers.

• We have seen unprecedented levels
of demand from consumers and our
customers. Our factories have had to
increase production levels while putting
modifications to ensure compliance with
WHO and UK Government guidelines to
keep employees safe.

• We worked with our logistics partner to
ramp up operations at our Tamworth
distribution centre to cope with the
extremely high levels of orders and
maintain customer service levels.

Link to strategy

Risk and potential impact

How we manage it

Changes since 2018/19

A successful cyber-attack or other systems
failure could result in us not being able to
manufacture or deliver products, plan our
supply chain, pay and receive money, or
maintain proper financial control. This could
have a major customer, financial, reputational
and regulatory impact on our business.

• We use a range of techniques, including

firewalls, anti-virus software, and
duplicated systems that are comparable
to those used in peer companies.

• Cyber insurance has been purchased to
insure the Group against potential losses
arising from a cyber-security breach.

• Our information technology infrastructure
remains secure and has been able to
cope with the additional network traffic
as a result of our employees working
from home during the lockdown with
no significant loss of connectivity or
productivity.

• We are working to enhance the security
of our factory operational technology
environment.

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Risk trend

Risk management enables our strategy

Sustainable & profitable revenue growth

Cost control & efficiency

Cash generation

Risk increased

Risk stable

Risk decreased

New risk

5 Legal compliance

Link to strategy

Risk and potential impact

How we manage it

Changes since 2018/19

• There were no significant changes to this
risk profile in the current financial year.

Our business is subject to a number of
legal and regulatory requirements and must
continuously monitor new and emerging
legislation (domestic and international) in
areas such as Health & Safety, Listing Rules,
competition law, intellectual property, food
safety, labelling regulations and environmental
standards. Failure to comply with such
requirements may have a significant negative
impact on our reputation and incur financial
penalties.

• We have leading food industry processes
to manage Health & Safety and food
safety issues (including an ongoing
programme of internal and external
audits).

• We have dedicated Legal and Regulatory
teams to monitor laws and regulations to
ensure compliance, protect intellectual
property and defend against litigation
where necessary.

• We work closely with our external

advisers and the regulators, government
bodies and trade associations regarding
current and future legislation which would
impact upon the Group.

• Whistleblowing processes are in place.

6 Product portfolio

Link to strategy

Description and potential impact

How we manage it

Changes since 2018/19

Demand for our products is subject to
changes in consumer trends and government
legislation. Furthermore, sales of many of
the Company’s products can be adversely
affected by warm seasonal weather
conditions. Failure to keep our product ranges
contemporary and relevant to our consumers
would lead to a diminishing consumer
demand which will impact negatively on our
reputation and financial performance.

• We have a programme of innovation,

based on deep rooted consumer insights,
to continuously modernise our portfolio
of distinctly British brands to ensure they
remain relevant to today’s shoppers.

• We continue to review the impact of
weather on sales during our monthly
product performance reviews.

• The DHSC's proposal to curb multi-buy
promotions for HFSS (High Fat, Salt and
Sugar) products by late 2020 is still under
consultation. We will continue to engage
with the DHSC during the consultation
process.

• The current increased demand of grocery
products has placed operational pressure
on our major customers, some of whom
have consequently delayed their range
reviews. This may delay the launch of our
new product ranges but this is balanced
against increased demand for our core
product ranges.

7 HR and employee risk

Link to strategy

Description and potential impact

How we manage it

Changes since 2018/19

We may be unable to attract and retain the
critical capabilities, or develop the skills,
required by the business to deliver our
strategy, business plan and projects.

• We continue to invest in colleague

development and engagement initiatives
on a focused basis.

• We have processes in place to attract
talent into the business with the right
capabilities and behaviours, and recruit
the majority of colleagues through our
‘in-house’ team.

• We have succession plans in place to
retain and progress our internal talent
pipeline.

• We have a well-established and

successful graduate recruitment and
development programme, and invest
heavily in apprenticeship training.

• We benchmark pay to make sure we
remain competitive in the market.

• The Group introduced a leadership-led
development programme to embed
Diversity & inclusion throughout the
business.

• There has been significant investment
in on-line learning through the LinkedIn
learning platform.

• As a result of COVID-19, we introduced
measures in line with the government’s
advice on social distancing, including
remote working arrangements and even
more stringent Health & Safety measures
in our sites, to protect the well-being of
our colleagues.

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Risk management CONTINUED

Risk trend

Risk management enables our strategy

Sustainable & profitable revenue growth

Cost control & efficiency

Cash generation

Risk increased

Risk stable

Risk decreased

New risk

8 Strategy delivery

Link to strategy

Description and potential impact

How we manage it

Changes since 2018/19

Our balanced strategy seeks to deliver
revenue growth, cash generation and cost
efficiency. The strategy focuses marketing
investment behind key brands. Our strategy
may take longer than expected to deliver
results which may impact on the speed at
which we can deliver shareholder value.

• Given the seasonal nature of many of our

• Our branded growth strategy for

brands, media investment is targeted in
the periods of peak consumer demand
and through the most cost effective
channels.

delivering new product innovation based
on consumer trends, together with high
quality advertising behind our major
brands, continues to work very well.

• Our new and existing product

• We concluded our strategic review

development programmes are based
on deep consumer insight and continue
to make our product ranges more
relevant to the ever-changing lives of our
consumers.

• Our strong strategic relationships with

our key customers facilitate the creation
and joint ownership of plans for mutual
growth.

which resulted in a landmark pensions
agreement between the Company and its
pension Trustees.

• Our strategy has delivered trading profit

at the top end of market expectations on
the back of consistent growth. Volumes
in the fourth quarter rose sharply to fulfil
increased consumer demand as a result
of the COVID-19 pandemic in the last
three weeks of March 2020.

9 International expansion

Link to strategy

Description and potential impact

How we manage it

Changes since 2018/19

Our ambitious plans to expand our
international business are subject to global
market forces; fluctuations in national
economies and currency movements; societal
and political changes; a range of consumer
trends; and evolving legislation. Failure to
recognise and respond to any of these
factors could directly impact upon our future
profitability and rate of growth.

10 Treasury and pensions

• We carry out careful due diligence prior to

• The Group has reviewed and realigned

entering a new market.

• We closely monitor current and forecast
performance of our business and where
required adapt our marketing approach.

the strategy for the International business
to position it to achieve sustainable
growth.

• A new International structure is in place to

deliver the international strategy.

Link to strategy

Description and potential impact

How we manage it

Changes since 2018/19

We are the sponsoring employer of a number
of large historical pension schemes and also
have significant amounts of long-term debt,
these items taken together are a substantial
liability on the balance sheet. Tri-annual
pension fund valuations, and hence requests
for deficit repair contributions (‘DRCs’), are
heavily impacted by financial market conditions
over which the Group has no control. Trustees
could potentially request DRC’s which are not
compatible with the Group’s ability to pay.
Furthermore, our ability to manage our debt
capital structure may be impacted by market
trends which are outside of our control, e.g.
interest rate movements or volatility in the high
yield debt markets. Our revolving credit facility
expires in December 2020.

• Our executive directors are actively

• We announced a landmark pensions

engaged with the pension Trustees on
scheme funding and investment matters.
The RHM scheme has a high degree of
hedging.

• We have a strong relationship with our

banking group and continue to review our
debt capital structure and revolving credit
facilities.

agreement between the Group and its
pension Trustees. The agreement, once
executed, could potentially provide
a more secure future for the Group’s
pension scheme members and reduce
future funding requirements.

• The Group continues to monitor

performance of the pension assets.

• The Group has ensured that it has

adequate credit facilities in place and
continues to monitor its covenants during
the COVID-19 lockdown.

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the nature of the Group’s activities and the
degree to which the businesses change and
evolve in the relatively short-term. The Board
considered the Group’s profitability, cash flows
and key financial ratios over this period and
the potential impact that the principal risks and
uncertainties set out on pages 38 to 43 could
have on the solvency or liquidity of the Group.

Sensitivity analysis was applied to these
metrics and the projected cash flows were
stress tested against a number of severe but
plausible scenarios. As of 28 March 2020,
£92m of committed borrowing facilities
available to the Group were undrawn. The
Board considered the level of performance
that would cause the Group to breach its
debt covenants (see note 2 of the financial
statements) and a variety of factors that
have the potential to reduce trading profit
substantially. These included the rate and
success of the Group’s strategy; and macro-
economic influences such as fluctuations in
world currency, commodity markets, climate
change, COVID-19 and the implications of the
UK’s withdrawal from the EU.

The Board has considered the principal risks
or uncertainties and the potential impact of
these on the Group’s profitability or available
cash resources. In assessing the Group’s
viability, the Board also considered all the
severe but plausible scenarios simultaneous
materialising and for a sustained period, in
conjunction with mitigating actions such as
reducing discretionary costs. The likelihood of
the Group having insufficient resources to meet
its financial obligations and remain within its
covenants is unlikely under this analysis.

Based on this assessment, the Board confirms
that it has a reasonable expectation that the
Group will be able to continue in operation
and meet its liabilities as they fall due over the
three-year period to 1 April 2023.

The strategic report on pages 1 to 43
was approved by the Board on 24 June
2020 and signed on its behalf by:

Alex Whitehouse
Chief Executive Officer

UK Withdrawal from the EU
The UK’s withdrawal from the EU has the
potential to significantly change the terms of
trade which currently exist between the EU and
the United Kingdom. The Group will continue
to monitor the ongoing political situation
and upcoming trade negotiations. While the
outcome of these talks is difficult to predict, the
Group has considered a number of different
scenarios and appropriate mitigation plans
have been developed.

Our fundamental objective is to ensure that
we offer continuity of service and supply to
our customers, wherever they are, and the
purpose of this statement is to provide further
information on how we plan to achieve this
objective.

Background
Although we are a UK based business
we purchase a meaningful amount of our
commodities from the EU, which leaves us
exposed to movements in Sterling and Euro
quoted commodities. Our supply chain is also
primarily UK based although we do have a
seasonal labour workforce from EU countries in
our Sweet Treats business.

Focus areas
Our initial risk assessment identified a number
of key areas that may potentially be impacted.
If a UK-EU Free Trade Agreement (FTA) is
not agreed by the end of the 2020 transition
period, and no extension of talks is agreed, the
default trading scenario implies the application
of tariffs in line with World Trade Organisation
(WTO) rules. This may have implications for the
Group which will need to be managed through
its sourcing policy and pricing model and by
utilising operational flexibility to realign supply
chains as appropriate. Reduced access to EU
labour supply and a more restrictive migration
policy may result in a tighter or more expensive
UK labour market.

We recognise that the current climate makes
the final outcome of the negotiations between
the UK and the EU more uncertain. While we
would prefer a negotiated trade deal, we are
prepared for any potential outcome, including
trading on WTO terms. Our established Brexit
Committee has fully assessed each area and
the likely impacts have been evaluated. The
Group has taken reasonable steps to mitigate
the potential risks. The key risks identified, and
the actions taken are as follows:

Trading model
We made minor amendments to our internal
trading model within Europe (principally the
Republic of Ireland (ROI)) to ensure that our
ability to move UK manufactured product into
the EU and vice-versa is not at risk. These
amendments include reviewing which ports
and airports are best placed to offer the
appropriate service levels as well as ensuring
that we have the right Group companies (i.e.
those with full EU recognition) looking after
our imports and exports. We do not expect
customers or suppliers to be significantly
affected by our changes.

Customer service and supply chain
We worked with our customers and supply
chain partners to prepare for a WTO trading
arrangement. We developed contingency plans
to ensure supply continuity and the effective
operation of our manufacturing sites and the
likely resulting confusion and delays at borders.
These included a programme of building our
inventory of finished goods and critical raw
materials for our key products, which we
are able to execute while closely monitoring
political developments. We also secured
additional warehousing capacity in ROI to
ensure continuity of supply.

Tariffs
We have researched the implications of
potential tariffs and considered the potential
impact on our cost base and explored
strategies to mitigate them, should the UK
be required to trade on WTO terms. The
actions we have undertaken include a review
of our supply chain for components and raw
materials, a plan to build stocks in-country,
i.e. ROI, prior to the date the UK leaves the
EU and changes to systems and processes to
capture and report on the new tariffs under any
new trading arrangement.

Regulatory
The Brexit Committee has reviewed the
potential regulatory impact of moving to WTO
terms on our products, which are produced
and packaged in the UK. We have put in place
measures to ensure our products remain
compliant so as to protect customer service
levels.

Viability statement
The Board has determined that the most
appropriate period over which to assess the
Company’s viability, in accordance with the UK
Corporate Governance Code, is three years.
This is consistent with the Group’s business
model which devolves operational decision-
making to the businesses, each of which sets
a strategic planning time horizon appropriate
to its activities which are typically of three
years duration. The Board also considered

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Board of directors

Colin Day
Non-executive Chairman

Appointed to the Board:
August 2019.

Alex Whitehouse
Chief Executive Officer

Appointed to the Board:
August 2019.

Duncan Leggett
Chief Financial Officer

Appointed to the Board:
December 2019.

Richard Hodgson
Senior Independent Director
Appointed to the Board:
January 2015 (appointed SID on
30 May 2019).

Skills and experience: Alex
joined the Company in July 2014
and was appointed Managing
Director of the Grocery Strategic
Business Unit in September
2014. He was promoted to UK
Managing Director in April 2017.
Alex has more than 20 years senior
international, marketing, sales,
strategy, innovation and general
management experience gained
across multiple geographies.
He spent 18 years with Reckitt
Benckiser plc where he held
senior marketing and general
management roles including
Managing Director, New Zealand
and most recently Worldwide Head
of Shopper & Customer Marketing.
Earlier in his career, he held a
number of retail management
positions with Whitbread plc.

Daniel Wosner
Non-executive director

Appointed to the Board:
February 2019 (having previously
served as a non-executive director
from March 2017 to March 2018).

Skills and experience: Daniel
is Managing Director & Head of
Europe at Oasis Management
Company Ltd (‘Oasis’), having
joined Oasis in 2016, where he
is also a member of the firm’s
Strategies Group and Corporate
Governance Group. As Head of
Europe, Daniel oversees the firm’s
UK and Continental European
investments. Prior to joining Oasis,
Daniel served as Head of the Asia
Pacific Equity Syndicate team at
Barclays in Hong Kong and, before
that, he worked with Barclays and
Lehman Brothers based in London.
Daniel, a UK national, received a
Bachelor of Arts in Politics from
Leeds University.

Skills and experience: Colin
retired as Chief Executive of
Essentra plc in 2017, was
previously Chief Financial Officer
at Reckitt Benckiser plc for over
10 years and prior to that at Aegis
Group plc. He has served as a non-
executive director on the boards
of major UK plc’s including Amec
Foster Wheeler, WPP, Cadbury,
Imperial Brands and easyJet.

Colin is currently a board member
of the Department for Environment,
Food and Rural Affairs and chairs
the Defra Audit and Risk Assurance
Committee. He is a non-executive
director and Audit Committee Chair
at Meggitt plc and Euromoney
Institutional Investor plc. He is
also a member of the Board and
Finance Committee of Cranfield
University. Colin is a Fellow of the
Association of Chartered Certified
Accountants and has an MBA from
Cranfield School of Management.

Shinji Honda
Non-executive director

Appointed to the Board:
March 2018.

Skills and experience: Shinji is
Managing Executive Officer and
Chief Strategy Officer of Nissin
Foods Holdings Co., Ltd (‘Nissin’),
with responsibility for Nissin’s long-
term growth strategy and overseas
operations, including Europe. Prior
to joining Nissin in January 2018,
Shinji spent his entire professional
career at Takeda Pharmaceutical
Company Limited (‘Takeda’), a
leading Japanese pharmaceutical
company. He was named Member
of the Board of Takeda in June
2013 and Senior Managing Director
and Corporate Strategy Officer in
October 2014, having previously
had responsibility for creating
the company’s long-term growth
strategy and overseeing Takeda’s
international operations, including
the role of President and CEO
of Takeda North America. Shinji
received a Master of Science
in Management from Stanford
Business School in California, USA.

Skills and experience: Duncan’s
responsibilities currently include
operational and corporate finance,
corporate development, investor
relations and property. Duncan
joined the Company in September
2011 and has held a number
of senior roles within finance,
including Group Financial Controller
and most recently Director of
Financial Control and Corporate
Development. Prior to joining the
Company, Duncan spent nine
years at KPMG working with clients
across a variety of industries. He is
a qualified Chartered Accountant.

Skills and experience: Richard
is Chief Executive Officer of
YO! Sushi and has over 20 years
of experience in the food industry.
He was previously Chief Executive
Officer at Pizza Express, a role
he held for four years until May
2017. In 2010 he was appointed
Commercial Director at Morrisons,
a newly created role, combining
Trading and Marketing. Richard
joined Waitrose in 2006 as
Commercial Director and prior
to that spent 10 years at Asda
holding a number of senior roles,
culminating in his appointment as
Marketing & Own Brand Director.

Committee membership:

Audit committee

Remuneration committee

Nomination committee

Committee chair

Independent

Orkun Kilic
Non-executive director

Appointed to the Board:
February 2019.

Skills and experience: Orkun
is founder and Chief Investment
Officer of Berry Street Capital
Management LLP. He was, until
May 2019, the Managing Partner of
Paulson Europe LLP and Portfolio
Manager of the Paulson European
Opportunities Fund, having joined
the company in 2011, becoming
Head of European Investments
in 2015. Prior to joining Paulson
Europe, Orkun worked in
Investment Banking with Morgan
Stanley, focusing on mergers and
acquisitions. Orkun received his
Masters of Business Administration
from Harvard Business School in
2009. He graduated magna cum
laude in business administration
and economics from Koç
University, Turkey. Orkun also
received his Masters of Science in
Financial Engineering from Bog˘ aziçi
University, Turkey.

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45

Biographies for the Executive Leadership Team can be found on our website:
www.premierfoods.co.uk/about/leadership

Pam Powell
Non-executive director
Appointed to the Board:
May 2013 (appointed Chair of the
Remuneration Committee on 30
May 2019).

Simon Bentley
Non-executive director
Appointed to the Board:
February 2019 (appointed Chair
of Audit Committee on 28 March
2019).

Tim Elliott
Non-executive director
Appointed to the Board:
May 2020

Helen Jones
Non-executive director
Appointed to the Board:
May 2020

Skills and experience: Pam has
more than 20 years’ marketing
experience developing some of
the world’s leading consumer
brands. Most recently, she was
the Group Strategy and Innovation
Director for SAB Miller, one of the
world’s leading brewers. Pam spent
nine years at SAB Miller in senior
management roles and prior to
that held numerous marketing roles
in the home and personal care
sector during a 13-year career at
Unilever plc, culminating in her role
as global Vice-President of the Skin
Care category. Pam is also a non-
executive director at A.G. BARR
p.l.c. and Cranswick plc.

Skills and experience: Simon
is Executive Chairman of UK
mobile cash operator Cash on
the Move. Simon has over 30
years’ experience in finance and
retail, having previously served as
Chairman and Chief Executive of
Blacks Leisure Group plc, Acting
Chairman/Senior Independent
Director of Frasers Group plc
(formerly Sports Direct International
plc), Chairman of Umberto Giannini,
and Deputy Chairman of Mishcon
de Reya. Earlier in his career, Simon
spent 10 years with accountancy
firm Landau Morley, latterly as a
Senior Partner. Simon is also Senior
Independent Director of SimiGon,
a global leader in modelling,
simulation and training solutions.
He is a qualified Chartered
Accountant.

Skills and experience: Tim has
nearly 40 years’ experience in
investment banking and corporate
finance, advising a wide range
of companies and industries,
particularly those in the consumer
and retail sectors. During his
career, Tim held Managing Director
roles at both Barclays Capital and
JP Morgan and, more latterly, was
a Partner and Consultant at KPMG.
Tim has deep knowledge and
experience of capital markets and
is currently a non-executive director
and Audit Committee chair of CPP
Group plc.

Skills and experience: Helen
brings 35 years of commercial and
general management experience
for FMCG and multi-site consumer
businesses. During her executive
career, Helen was previously Group
Executive Director of Caffe Nero
Group Ltd and Managing Director of
Zizzi restaurants. Prior to this, Helen
spent nine years at Unilever and was
the successful architect of launching
the Ben & Jerry’s brand in the UK
and Europe culminating in her
appointment as Brand Development
Director Europe for Ben & Jerry’s
Homemade Inc. Helen is currently
non-executive director of Halfords
plc and also serves on the Board of
Fuller, Smith & Turner plc.

Board attendance
During the year there were 10 scheduled
meetings of the Board and six meetings of
the Audit Committee, four meetings of the
Remuneration Committee and three meetings
of the Nomination Committee. In addition,
a number of other Board and Committee
meetings and calls were convened for specific
business.

All directors are expected to attend the
AGM, scheduled Board meetings and
relevant Committee meetings, unless
they are prevented from doing so by prior
commitments. Where a director is unable to
attend a meeting they have the opportunity to
read the papers and ask the Chairman to raise
any comments. They are also updated on the
key discussions and decisions which were
taken at the meeting. Non-executive directors
also have the opportunity to meet without
management present.

Details of Board and Committee membership
and attendance at scheduled Board meetings
and Committee meetings are set out in the
table opposite.

All directors (serving at the time) attended the
2019 AGM, with the exception of Orkun Kilic,
who was unable to attend the AGM and the
Board meeting held after the AGM, due to a
serious family illness.

Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Executive directors

Alex Whitehouse1

Duncan Leggett2

6/6

3/3

Non-executive directors

Colin Day3

Simon Bentley

Richard Hodgson

Shinji Honda

Orkun Kilic

Pam Powell

Daniel Wosner

Former directors

Alastair Murray4

Keith Hamill5

6/6

10/10

9/10

10/10

4/4

–

6/6

–

5/6

–

4/4

–

4/4

–

2/2

3/3

–

3/3

–

1/1

Pam Powell was unable to attend one Board
conference call and one Audit Committee
meeting due to another business commitment
when both meetings were rescheduled at short
notice. Tim Elliott and Helen Jones were both
appointed as non-executive directors on 15
May 2020, following the end of the financial
year.

1. Appointed to the Board on 30 August 2019.
2. Appointed to the Board on 10 December 2019.
3. Appointed to the Board on 30 August 2019.
4. Resigned as a director on 30 August 2019.
5. Resigned as a director on 17 July 2019.

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Governance overview

Chairman’s introduction

Dear shareholder
On behalf of the Board, I would like to
introduce the Group’s corporate governance
statement for 2019/20.

Corporate governance and how
it supports the delivery of the
Group’s strategic objectives
The purpose of corporate governance is to
facilitate effective, entrepreneurial and prudent
management that promotes the long-term
success of the Company and generates value
for shareholders and contributes to all our
stakeholders whether customers, suppliers,
employees, the government or wider society.
The Board of directors is responsible for the
governance of the Group. The responsibilities
of the Board include setting the Group’s
purpose, values and strategy, providing the
leadership to put them into effect, supervising
the management of the business, monitoring
performance and reporting to shareholders on
their stewardship.

The Board and Committees have reviewed the
new UK Corporate Governance Code 2018
(the ‘Governance Code’) on several occasions
over the year. The Board was pleased to note
that, in a number of areas, the Group was
already compliant. However, certain new areas
of focus were identified and work streams put
in place to address them.

Purpose, values and culture
One of the Board's responsibilities is to assess
and monitor culture to ensure it is aligned
with the Group's strategy. Over the last few
years, significant progress has been made in
embedding the Group’s purpose and values
across the business, increasing investment
in communication and engagement with
colleagues, and up-weighting training in areas
such as leadership and diversity & inclusion.
Progress is monitored via Group-wide
colleague surveys, site visits by the Board,
issues raised in whistle-blowing helpline
calls, colleague retention levels and with the
appointment of Pam Powell as our Workforce
NED.

The Board most recently reviewed the Group’s
purpose, values, strategy and culture as part
of the review and approval of the Group’s
three-year strategic plan in February 2020.
The Board’s effectiveness in monitoring
the culture and behaviours throughout the
organisation was also considered as part
of this year’s external Board evaluation and,
while rated positively, it was felt that this would
be strengthened through the introduction of
the Workforce NED and developing a more
flexible and modern approach to conducting
engagement surveys.

Workforce NED
During the year, Pam Powell was appointed as
the Board’s Workforce NED in order to enhance
effective engagement with the workforce,
enable the Board to be kept informed of the
views of the workforce and ensure these views
are taken into consideration as part of the
Board’s decision-making process.

As part of this process, the Company is in the
process of establishing new joint consultative
committees at each site, known as the Voice
Forum. The forums consist of management
and elected representatives from across
the site and meet on a quarterly basis. The
Workforce NED is invited to join forums on
a periodic basis, with the aim of covering all
sites across the business over a three-year
period. The Workforce NED will then feed
back to the Board on the issues raised at
the site Voice Forums. In addition, as part of
her role as Workforce NED, Pam Powell will
also have oversight of the plans of the HR
and Communications team to engage with
colleagues, through programmes such as
annual and pulse engagement surveys.

Remuneration Committee
The remit of the committee (which already
included senior management remuneration)
has been extended to cover oversight of
the wider workforce and the Remuneration
Report has been revised to reflect the new
Governance Code reporting requirements.

Compliance with the UK
Governance Code 2018
The Board supports the principles laid
down by the UK Governance Code 2018
(the Governance Code) as issued by the
Financial Reporting Council, which applies
to accounting periods beginning on or after
1 January 2019 (available at www.frc.org.uk).

There were a number of Board vacancies, over
the course of the financial period, including
Chairman, CEO, CFO, SID and Remuneration
Committee Chair. All these positions have now
been filled on a permanent basis.

Over the course of the financial year, the
level of Board independence was below that
recommended by the new Governance Code.
However, this has now been rectified following
the appointment of Tim Elliott and Helen
Jones (see Board independence on page 47).

After a review of post cessation shareholdings
for executive directors, the Remuneration
Committee and the Board concluded that
sufficiently robust retention measures exist
under the current plan rules to ensure
a significant number of shares are held
post cessation and therefore it was not
recommended to introduce a formal policy
(this is discussed in more detail in the
Remuneration Report on page 60).

Board changes in the year
There have been a number of changes to
the Board over the year. I was appointed
Chairman in August 2019, following the
retirement of Keith Hamill in July. At the
same time, we appointed a new executive
management team with Alex Whitehouse
appointed as CEO and Duncan Leggett
appointed as CFO (initially on an interim basis).
These two key internal appointments highlight
that the Group has developed a robust talent
pipeline. Following these changes, Alastair
Murray, who joined the business in 2013
as CFO and was appointed Acting CEO in
February 2019, stepped down from the Board.
I would like to thank both Keith and Alastair
for their contributions to the business during a
period of significant change.

Finally, I am pleased to welcome Tim Elliott
and Helen Jones, who both joined the
Board on 15 May 2020, and have also
been appointed as members of the Audit,
Remuneration and Nomination Committees.
I look forward to their contributions as we
continue on our path to future value creation.

AGM
As a consequence of the COVID-19 pandemic
we are making changes to the way in which
we conduct this year’s AGM. We understand
the importance of the AGM to shareholders
and value the opportunity to meet in person.
However, the health and safety of our
shareholders, employees and the broader
community is of paramount importance.

In light of the UK Government’s current
guidance on public gatherings, the Board
has concluded that shareholders cannot be
permitted to attend the AGM in person this
year. The AGM, which will be held at 11:00
am on 12 August 2020, will be conducted
by electronic means and the format of the
meeting will be purely functional to comply
with relevant legal requirements.

We will continue to monitor the evolving
impact of the pandemic and, if it becomes
appropriate or necessary to make changes to
the proposed format of the 2020 AGM, we will
inform shareholders as soon as we can.

We would like to thank all shareholders for
their co-operation and understanding in these
challenging times.

Colin Day
Non-executive Chairman
24 June 2020

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Only independent NEDs are members of
the Company’s Board committees, with the
exception of the Chair of the Nomination
Committee. The Chairman, who was
considered independent on appointment,
chairs the Nomination Committee but is not
a member of the Audit or Remuneration
Committees. Shinji Honda, Orkun Kilic and
Daniel Wosner, who represent our three
largest shareholders, are fully independent
of management but are not considered
independent.

Conflicts of interest
The Group has procedures in place for
managing conflicts of interest and directors
have continuing obligations to update the
Board on any changes to these conflicts. This
process includes relevant disclosure at the
beginning of each Board meeting and also
the Group’s annual formal review of potential
conflict situations, which includes the use of a
questionnaire.

Under our Relationship Agreements with
Nissin, Oasis and Paulson, each is entitled
to nominate an individual for appointment
to the Board, so long as they retain an
interest in shares in the Company (for Nissin
this represents 15% of issued share capital
and for Oasis and Paulson this represents
10% of issued share capital). As a result,
approximately 43% of the shareholder register
are now represented on the Board. During the
period to 28 March 2020, no other director
had a material interest at any time in any
contract of significance with the Company
or Group other than their service contract or
letter of appointment.

Induction
All directors receive a tailored induction on
joining the Board covering their duties and
responsibilities as directors. Non-executive
directors also receive a full briefing document
on all key areas of the Group’s business and
they may request further information as they
consider necessary. A typical induction would
include meetings with Board colleagues, the
ELT and key management, site visits and an
induction and governance pack.

Board roles and responsibilities
The Chairman is responsible for the leadership
of the Board, ensuring its effectiveness and
promoting the highest standards of corporate
governance. He chairs Board meetings,
ensuring timely and accurate distribution of
information and full review and discussion
of agenda items. The Senior Independent
Director (SID) supports the Chairman and
leads the non-executive directors in the
oversight of the Chairman. He is also available
to shareholders if they have concerns that
cannot be raised through normal channels.
The other non-executive directors (NEDs)
bring a range of knowledge and experience to
the Board. Their role is to use their experience,
objectivity and sound judgement to scrutinise
and challenge executive management’s plans
and performance and the development of the
Group’s vision, values and strategy.

The CEO is responsible for the day-to-day
management of the Group, working with
the Executive Leadership Team (‘ELT’) to
ensure the implementation of the agreed
strategy. The role of the Company Secretary
is to ensure that there is an effective flow of
information between executive management
and the Chairman and NEDs. The Company
Secretary also advises the Board on legal and
governance matters and supports the Board
evaluation process and induction programme.

Board Committees and the ELT
The Board delegates responsibility for
the oversight of Board composition,
financial performance, internal controls and
remuneration strategy to its three Committees.
Their terms of reference are available on the
Company’s website. Details of the work of
the Nomination, Audit and Remuneration
Committees are set out on pages 53, 54 and
77, respectively.

In addition, the Board delegates day-to-day
responsibility for managing the business to
the ELT and its sub-committees. The ELT
comprises the heads of the commercial
business units and key corporate functions.
The ELT meets weekly and members regularly
present to the Board.

Stakeholder engagement
A key role of the Board is to understand
the needs of various stakeholders and our
engagement in the year is provided on pages
50 and 51.

Board tenure
The average length of appointment of our
NEDs was 2.6 years, as at year end. The
breakdown for the full Board can be seen in
the following chart.

n 0-1 years: 3
n 1-3 years: 4
n 3-6 years: 1
n 6-9 years: 1
n 9+ years:
0

(As at 28 March 2020)

Board independence
The new Governance Code recommends
that at least half the Board, excluding the
Chairman, should comprise non-executive
directors determined by the Board to be
independent. The Board has been through
a period of transition with the appointment
of a new Chairman, CEO and CFO and, as
at year end, less than half the Board were
considered independent (see the chart below).
Following the appointment of Tim Elliott and
Helen Jones, as independent non-executive
directors on 15 May 2020, the level of
Board independence is now in line with the
Governance Code recommendation.

n Chairman:
n Independent directors:
n Non-independent directors:

1
3
5

(As at 28 March 2020)

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Governance overview CONTINUED

Colin Day was appointed Chairman in August
2019. A key part of his induction has been
to meet with a wide range of shareholders
to understand their views on the Company’s
strategy, performance and strategic priorities.
He has undertaken a number of site visits to
meet colleagues across the business. He has
also engaged with a range of key advisers,
pension trustees and other key stakeholders.

Alex Whitehouse was appointed as CEO in
August 2019 and Duncan Leggett as CFO
in December 2019. Additional mentoring,
training and support has been provided by the
Chairman, with support from the Company
Secretary and HR Director, recognising that
this is their first appointment as executive
directors.

Board information
The main source of information is via the
Board pack which is designed to keep
directors up to date with all material business
developments in advance of Board meetings.
In addition, training on specific issues is
provided as and when required. Non-executive
directors also meet with senior management
outside of Board meetings to discuss specific
areas of interest in more detail, e.g. brand
and marketing plans, customer strategy and
pension investment strategy. The Board pack
generally contains the following standing
items: CEO business review; Health and
Safety, employee and corporate affairs
updates; commercial updates; new product
development; customer service levels;
operations and logistics; strategic projects;
capital expenditure; CFO report; management
accounts; investor relations; and treasury
report.

Key Board activities in the year
Set out below are details of the key areas of
focus over the course of the financial period.

Strategic development &
implementation
• Strategic review – detailed review of

options to accelerate shareholder return.

•

International strategy – reviewed new
strategy to return the International
business to long-term sustainable growth.

• Three Year Strategic Plan – detailed review
of business plans for the medium-term.

• Knighton – approved plan to re-integrate
the business into the rest of the Group.

• Ongoing updates from management on

implementation of strategy throughout
the year.

Operational performance
• Monthly trading updates from the Grocery,
Sweet Treats, International and Knighton
businesses.

• Review of the implications of the

COVID-19 pandemic on the business and
key stakeholders.

• Monthly management accounts.

• Review of the implications of Brexit.
Financial performance & risk
• Approval of budget, re-forecasts and
monthly management accounts.

• Review of key risks facing the business.

• Review of viability statement over the next

three years.

• Approval of Half Year and Full Year results.

• Approval of Q1 and Q3 trading

statements.

• Review of annual report to confirm it is fair,

balanced and understandable.

Governance & culture
• Board and committee evaluations.

• Appointment of workforce NED.

• Review of governance best practice and

the new Governance Code.

Responsibility & sustainability
• The Board reviewed the Group’s approach
to Health and Safety, product safety and
the control of allergens as well as trends
and issues relating to nutrition, modern
day slavery, gender pay, diversity &
inclusion and plastic packaging.

Board allocation of time
over the year

n Strategic development &

implementation:

n Operational performance:
n Financial performance & risk:
n Governance & culture:
n Responsibility & sustainability:

40%
15%
25%
10%
10%

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Assessment of Chairman’s
performance
As part of the annual Board evaluation
process, Richard Hodgson, the Senior
Independent Director, led a review of the
Chairman’s performance. A conference
call was held with the other non-executive
directors, without the Chairman being
present. The review focused on the
relationship between the Chairman and the
CEO, the overall leadership of the Board,
the governance process, the conduct of
Board meetings and the quality of debate.
In addition, the Chairman’s relationship with
major shareholders and his understanding of
their priorities was discussed.

A summary of the key findings was shared
at a subsequent call between the SID and
the Chairman. The review concluded that
Colin Day was highly effective as Chairman,
following his appointment in August 2019.
It was also noted that the Chairman had no
other significant external commitments and
was able to dedicate sufficient time to the role.

Outcomes
Overall, the responses to the Board and
Committee questions were very positive and
demonstrated that the Board had strong
foundations and was well placed to deal
with future challenges. Board composition,
Board dynamics, the conduct of meetings,
Committee reporting, Board support and
risk management, were all rated highly. The
performance of the Chairman, who was
appointed in August 2019, was considered to
be highly effective, having developed strong
relationships with directors and shareholders
and it was confirmed that the Board and its
Committees continued to operate effectively. In
addition, it was noted that the new executive
management team, also appointed during the
year, had established positive relationships
with the rest of the Board.

The following areas to enhance the
effectiveness of the Board were identified:

• The need to address Board balance and

diversity.

• Continued focus on engagement with the
wider workforce and the monitoring of
culture.

• Monitoring of the implementation of the

new International strategy.

• Continued focus on succession planning

and talent management.

• The strategic priorities for the next 12

months were discussed and agreed.

Board and committee evaluation
The Board conducts a three-year rolling
evaluation process, which normally follows the
following format:

Year 1
An externally facilitated evaluation is carried
out to assess the effectiveness of the Board,
each committee and the Chairman. The input
of each Board member is kept confidential to
foster open, honest and in-depth feedback. A
report is presented to the Board and an action
plan drawn up.

Years 2 and 3
An internally facilitated evaluation is managed
by the Company Secretary. A questionnaire
is prepared by the Company Secretary, in
conjunction with the Chairman, focusing on
core responsibilities of the Board. It also builds
on the key development areas identified in the
prior year. The input of each Board member is
kept confidential to foster open, honest and in-
depth feedback. A report is presented to the
Board and an action plan drawn up.

2019/20 evaluation
Following a tender process, conducted by the
Company Secretary and Chairman, Lintstock
was appointed to conduct the 2019/20
evaluation. Lintstock has no other connection
with the Group.

Lintstock worked with the Company Secretary
and Chairman to devise comprehensive
questionnaires covering core areas such as
Board composition, expertise and dynamics,
strategic and operational oversight, risk
management and internal control, and
succession planning. Separate questionnaires
were prepared for each of the Board’s
Committees. The review also considered a
number of issues specific to the Company,
including the conduct of the Group’s strategic
review and the preparation of the Company’s
new Remuneration Policy.

Lintstock created a report compiling the
feedback and presented this to the Board with
recommendations for areas of focus. Following
review, the Board approved an action plan to
address areas highlighted by the evaluation for
focus over the forthcoming year.

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Governance overview CONTINUED

Connecting with our stakeholders
We believe that how we work with our stakeholders has an important role to play in achieving our branded growth strategy, helping us to be a
responsible business and delivering long-term sustainable growth.

Stakeholder

Customers and
consumers

Why these
stakeholders are
important to our
business

Customers and consumers buy and eat
our products – they are at the heart of
the Group’s business model.

Colleagues

Suppliers

We have an experienced and dedicated
workforce of over 4,000 colleagues
at 16 sites across the UK. We have a
responsibility to ensure all colleagues
work in a safe environment and have
opportunities to learn and develop in their
careers.

We are one of Britain’s largest food
manufacturers and we are proud to work
with many British suppliers. Over the year,
86% of our total third party spend was
with UK based suppliers.

Issues and factors
which are most
important to these
stakeholders

Engagement and
outcomes

• Category leadership
• Excellent customer service levels
•

Innovative, relevant products which
meet consumers’ needs
• Great tasting products
• Convenient and responsible

packaging formats

• Environmental, nutritional and

sustainability issues

We seek to develop sustainable
partnerships with our customers that
deliver long-term benefits to both
parties. Regular meetings take place at
many levels, through the sales team,
senior management and CEO. These
cover range reviews, new products,
promotions, displays and service levels.
Feedback from customers is also
provided via an annual customer survey.

Customer insights, from a number of
channels, are shared and discussed at
Board meetings, including details on
consumer behaviours, market trends
and competitor activities. Product
tastings and NPD are showcased
at Board meetings. Customer and
consumer feedback is reported to the
Board via KPIs.

It is essential that we engage with our
consumers so that we can understand
consumption and lifestyle trends in
order to help us to create products
that meet their needs. We also
regularly benchmark our products with
consumers in blind panel tests.

• Understanding our purpose, strategy

• Understanding the Group's strategy

• How our factories impact on

•

Food safety

• Being kept up to date with

• Shareholder return over the

and values

• Reward and recognition
• Safe and pleasant working conditions
•
Learning & development opportunities
• Health and wellbeing
• Diversity & inclusion
• Brexit implications for EU citizens

•

and growth plans
Forming long-term collaborative
partnerships

• Transparent terms of business
•

Fair payment terms

We communicate and engage with
colleagues in many ways to ensure they
understand our business priorities and
performance. This ensures that, in turn, we
can listen to their issues and concerns.

It is crucial that we develop strong
relationships with our suppliers, based
upon mutual trust and respect, to
ensure that we can source high quality
ingredients at the right price.

We have regular Company briefings led
by the CEO and shared by video feed
to all sites across the Group. There are
regular site briefings from management to
give presentations and listen to feedback,
supplemented by ELT and Board visits.

Feedback is received via Group employee
surveys, line management and HR
teams, resulting in targeted action plans
to address key areas for improvement.
The Board receives regular updates
on key employee issues and internal
communications.

Additionally, during the year, the Board
appointed a Workforce NED and we
are introducing employee forums at all
sites to increase the focus on two-way
communication.

A formal whistleblowing procedure is in
place to allow employees to raise any
concerns or issues they have confidentially
and details of all cases raised are fed back
to the Board via the Audit Committee.

We have open, constructive and
effective relationships with suppliers
through regular meetings which provide
both parties the ability to feed back on
successes, challenges and our ongoing
strategy.

Regular audits of suppliers are undertaken
to ensure compliance with ethical
sourcing standards. Feedback from
suppliers is also provided via feedback
surveys. The Company’s whistleblowing
hotline has been extended to cover
suppliers to allow them to raise any
concerns anonymously.

Key supplier contracts are discussed by
the Board as appropriate.

Payment policies, practice and
performance are reported through
the Government’s Payment Practices
Reporting portal.

Further information Encourage healthier choices – pages
14 and 15.

Realise people's potential – pages 16 to
18.

Drive ethical sourcing – pages 21 to 23

Support our communities – pages

Being a responsible business –

Net debt and free cash flow KPIs -

Remuneration Policy and engagement

19 to 20.

pages 12 to 27.

page 28.

with shareholders – pages 56 and 57.

Workforce NED – page 46.

Reduce our environmental footprint

– pages 24 to 27.

Strategic review – page 52.

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Communities and

environment

Government and

Bond holders, banks and

Shareholders, investors

society

pension schemes

and analysts

As a responsible food

The Board believes in the

The Group’s bond holders and

manufacturer, we consider the

importance of acting responsibly

lending group provide essential

An important role of the Board is to

represent and promote the interests

impact we have in the areas

and operating with high

financing that supports the long-

of its shareholders, as well as

we operate, including local

businesses, residents and

charities. We also have an

standards of business conduct.

term viability of the Group. The

The Group also takes an active

Group also has three pension

being accountable to them for the

performance and activities of the

role in seeking to shape and

schemes, with approximately 45,000

Group.

important role to play in ensuring

influence debates around key

pensioners and deferred pensioners,

we reduce our impact on the

issues in society relating to food

who depend on the Group’s long-

environment.

safety, nutrition and health &

term ability to fund the schemes.

wellbeing issues.

local communities

• Nutrition

• Volunteering and supporting

• Brexit preparations

charities

• Reducing carbon emissions

• Environmental commitments

• Plastic packaging

•

Tax

fair way

• Conducting business in a

current trading and performance

medium-term

• Cash flow and Net debt levels

• Good governance and

•

The strength of our employer

stewardship of the Group and its

covenant

• Ongoing schedule of

contributions

brands

• Delivery of financial performance

• De-leveraging the business

Updates are provided to the

Board on ESG (Environmental

The Board receives regular

updates from the Corporate

Management engages regularly with

The Board believes it is very important

the Group’s lenders, bond holders

to engage with its shareholders and

Social and Governance) matters

Affairs Director on key regulatory

and banking group via conference

does this in a number of ways.

affecting the business, so that

issues affecting the Group

calls, conferences and face-to-face

the longer-term prospects of the

and the food industry, such as

meetings.

Group can be considered in its

nutritional guidelines, advertising

decision-making.

and promotions.

The CFO maintains a regular

This includes the financial results

presentations and conference calls for

shareholders and analysts, face-to-

dialogue via attendance at Trustee

face meetings, investor road shows

The Board receives updates on

The General Counsel & Company

and Investment Committee meetings

and anonymous shareholder feedback

KPIs relating to our economic

Secretary provides updates on

for each of the principal pension

via brokers.

contribution and environmental

governance, legal, regulatory and

schemes and regularly reports on

impact, as well as our

compliance matters.

the Group’s trading performance.

contributions to the community,

both at a local site level and

via the work we do with our

corporate charity partners.

During the year, the Board

reviewed the Group’s new

approach to reporting on ESG

matters, including aligning all our

goals to the UN’s Sustainable

Development Goals.

We seek to take an active

role through membership of

organisations such as the

During the year the Group has

reduced net debt by 13.2% to

£408.1m and both our corporate

existing corporate broker, Jefferies

Institute for Grocery Distribution

credit ratings have been maintained

International.

and the Food and Drink

with ‘Stable’ outlooks.

During the year the Group reviewed

it’s corporate broking arrangements

and appointed Peel Hunt LLP to act

as joint corporate broker alongside

Federation.

The Chairman and CEO have met

As part of the Group’s strategic

regularly with shareholders following

review, a segregated merger has

their appointments in August 2019.

been agreed with the Group’s three

The Chair of the Remuneration

main pension schemes.

Committee has also engaged closely

with shareholders in connection

with the introduction of a new

Remuneration Policy.

Board members also have the

opportunity to meet with private

shareholders at the Company’s AGM

Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance51

Section 172(1) Statement
Like many major UK businesses, the Group operates in a complex and interconnected commercial and regulatory environment which impacts and
touches many different stakeholders. By understanding and engaging with stakeholders, the Board can consider their interests and priorities when
making key decisions and ensure that the business works constructively with them as we promote the success of the Group. The table below
summarises our key stakeholders and our engagement with them, additional information on the Board’s response to the COVID-19 pandemic and
the conclusion of the Group’s strategic review is set out on page 52. Further details of our engagement with key stakeholders is also set out in the
section on Being a responsible business, on pages 12 to 27.

Communities and
environment

Government and
society

Bond holders, banks and
pension schemes

Shareholders, investors
and analysts

As a responsible food
manufacturer, we consider the
impact we have in the areas
we operate, including local
businesses, residents and
charities. We also have an
important role to play in ensuring
we reduce our impact on the
environment.

• How our factories impact on

local communities

• Volunteering and supporting

charities

• Reducing carbon emissions
• Environmental commitments
• Plastic packaging

Updates are provided to the
Board on ESG (Environmental
Social and Governance) matters
affecting the business, so that
the longer-term prospects of the
Group can be considered in its
decision-making.

The Board receives updates on
KPIs relating to our economic
contribution and environmental
impact, as well as our
contributions to the community,
both at a local site level and
via the work we do with our
corporate charity partners.

During the year, the Board
reviewed the Group’s new
approach to reporting on ESG
matters, including aligning all our
goals to the UN’s Sustainable
Development Goals.

The Board believes in the
importance of acting responsibly
and operating with high
standards of business conduct.
The Group also takes an active
role in seeking to shape and
influence debates around key
issues in society relating to food
safety, nutrition and health &
wellbeing issues.

The Group’s bond holders and
lending group provide essential
financing that supports the long-
term viability of the Group. The
Group also has three pension
schemes, with approximately 45,000
pensioners and deferred pensioners,
who depend on the Group’s long-
term ability to fund the schemes.

An important role of the Board is to
represent and promote the interests
of its shareholders, as well as
being accountable to them for the
performance and activities of the
Group.

Food safety

•
• Nutrition
• Brexit preparations
•
• Conducting business in a

Tax

fair way

• Being kept up to date with

• Shareholder return over the

current trading and performance

medium-term

• Cash flow and Net debt levels
The strength of our employer
•
covenant

• Ongoing schedule of

contributions

• Good governance and

stewardship of the Group and its
brands

• Delivery of financial performance
• De-leveraging the business

The Board receives regular
updates from the Corporate
Affairs Director on key regulatory
issues affecting the Group
and the food industry, such as
nutritional guidelines, advertising
and promotions.

The General Counsel & Company
Secretary provides updates on
governance, legal, regulatory and
compliance matters.

Management engages regularly with
the Group’s lenders, bond holders
and banking group via conference
calls, conferences and face-to-face
meetings.

The CFO maintains a regular
dialogue via attendance at Trustee
and Investment Committee meetings
for each of the principal pension
schemes and regularly reports on
the Group’s trading performance.

We seek to take an active
role through membership of
organisations such as the
Institute for Grocery Distribution
and the Food and Drink
Federation.

During the year the Group has
reduced net debt by 13.2% to
£408.1m and both our corporate
credit ratings have been maintained
with ‘Stable’ outlooks.

As part of the Group’s strategic
review, a segregated merger has
been agreed with the Group’s three
main pension schemes.

The Board believes it is very important
to engage with its shareholders and
does this in a number of ways.

This includes the financial results
presentations and conference calls for
shareholders and analysts, face-to-
face meetings, investor road shows
and anonymous shareholder feedback
via brokers.

During the year the Group reviewed
it’s corporate broking arrangements
and appointed Peel Hunt LLP to act
as joint corporate broker alongside
existing corporate broker, Jefferies
International.

The Chairman and CEO have met
regularly with shareholders following
their appointments in August 2019.
The Chair of the Remuneration
Committee has also engaged closely
with shareholders in connection
with the introduction of a new
Remuneration Policy.

Board members also have the
opportunity to meet with private
shareholders at the Company’s AGM

Stakeholder

Customers and

Colleagues

Suppliers

consumers

our products – they are at the heart of

the Group’s business model.

Why these

stakeholders are

important to our

business

Customers and consumers buy and eat

We have an experienced and dedicated

We are one of Britain’s largest food

workforce of over 4,000 colleagues

at 16 sites across the UK. We have a

responsibility to ensure all colleagues

work in a safe environment and have

opportunities to learn and develop in their

careers.

manufacturers and we are proud to work

with many British suppliers. Over the year,

86% of our total third party spend was

with UK based suppliers.

Issues and factors

• Category leadership

• Understanding our purpose, strategy

• Understanding the Group's strategy

which are most

• Excellent customer service levels

and values

important to these

•

Innovative, relevant products which

• Reward and recognition

•

Forming long-term collaborative

stakeholders

meet consumers’ needs

• Safe and pleasant working conditions

• Great tasting products

•

Learning & development opportunities

and growth plans

partnerships

•

Transparent terms of business

Fair payment terms

• Convenient and responsible

packaging formats

• Environmental, nutritional and

sustainability issues

• Health and wellbeing

• Diversity & inclusion

• Brexit implications for EU citizens

Engagement and

We seek to develop sustainable

We communicate and engage with

It is crucial that we develop strong

outcomes

partnerships with our customers that

colleagues in many ways to ensure they

relationships with our suppliers, based

deliver long-term benefits to both

understand our business priorities and

upon mutual trust and respect, to

parties. Regular meetings take place at

performance. This ensures that, in turn, we

ensure that we can source high quality

many levels, through the sales team,

can listen to their issues and concerns.

ingredients at the right price.

senior management and CEO. These

cover range reviews, new products,

promotions, displays and service levels.

Feedback from customers is also

provided via an annual customer survey.

We have regular Company briefings led

We have open, constructive and

by the CEO and shared by video feed

effective relationships with suppliers

to all sites across the Group. There are

through regular meetings which provide

regular site briefings from management to

both parties the ability to feed back on

give presentations and listen to feedback,

successes, challenges and our ongoing

Customer insights, from a number of

supplemented by ELT and Board visits.

strategy.

channels, are shared and discussed at

Board meetings, including details on

consumer behaviours, market trends

and competitor activities. Product

tastings and NPD are showcased

at Board meetings. Customer and

consumer feedback is reported to the

Board via KPIs.

It is essential that we engage with our

consumers so that we can understand

consumption and lifestyle trends in

order to help us to create products

that meet their needs. We also

regularly benchmark our products with

consumers in blind panel tests.

Feedback is received via Group employee

Regular audits of suppliers are undertaken

surveys, line management and HR

to ensure compliance with ethical

teams, resulting in targeted action plans

sourcing standards. Feedback from

to address key areas for improvement.

suppliers is also provided via feedback

The Board receives regular updates

on key employee issues and internal

communications.

Additionally, during the year, the Board

surveys. The Company’s whistleblowing

hotline has been extended to cover

suppliers to allow them to raise any

concerns anonymously.

appointed a Workforce NED and we

Key supplier contracts are discussed by

are introducing employee forums at all

the Board as appropriate.

sites to increase the focus on two-way

communication.

Payment policies, practice and

performance are reported through

A formal whistleblowing procedure is in

the Government’s Payment Practices

place to allow employees to raise any

Reporting portal.

concerns or issues they have confidentially

and details of all cases raised are fed back

to the Board via the Audit Committee.

Further information Encourage healthier choices – pages

Realise people's potential – pages 16 to

Drive ethical sourcing – pages 21 to 23

14 and 15.

18.

Workforce NED – page 46.

Support our communities – pages
19 to 20.

Being a responsible business –
pages 12 to 27.

Net debt and free cash flow KPIs -
page 28.

Remuneration Policy and engagement
with shareholders – pages 56 and 57.

Reduce our environmental footprint
– pages 24 to 27.

Strategic review – page 52.

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Governance overview CONTINUED

Connecting with our stakeholders (continued)
Further details on how the Board has considered the interests of stakeholders when making key decisions over the course of the financial period, is
set out in the two case studies below:

Strategic review

In April 2020 the Group concluded its strategic review,
announced on 27 February 2019, with a landmark
agreement with its pension schemes which is expected to be
transformational for both the Group and its pension scheme
members by significantly improving its long-standing pension
funding situation.

The agreement was the result of extensive discussions between
management, led by the CFO, the trustee boards of the three
UK defined benefit schemes and other key stakeholders.
The Board considered the interest of the pension members
(approximately 45,000 pensioners and deferred pensioners)
and it was agreed that the proposed segregated merger of the
three schemes represented a much more secure future for the
Group’s pension scheme members. The agreement also has
potential to significantly reduce future funding requirements for
the Group and it was therefore considered to be in the best
long-term interest of the Group and shareholders as a whole.

In addition, as part of the strategic review, over the course of
the financial period, the Board has explored a wide range of
options available to the Group, including potential M&A activity.
This required the Board to evaluate the extent to which these
options would be value accretive to the business and, therefore,
in the long-term interests of the Group and its shareholders.
The Board also assessed the potential impact on the Group’s
employees, pension schemes, customers and suppliers.

The Group’s response to the
COVID-19 pandemic

The Board has regularly monitored the impact of the COVID-19
outbreak on the Company and its key stakeholders. The Group
has established a COVID-19 steering Group, headed by the
CEO, and regular updates have been provided to the Board.
The Group’s key priority has been the health and wellbeing
of our colleagues and other stakeholders. A wide range of
additional health, safety and hygiene protocols have been
adopted in our factories and offices and across our supply
chain. These were initiated in early March and are monitored
on an ongoing basis in line with Government and WHO
guidelines. Measures include changes to the procedures for
shift changeovers, additional hygiene protocols and social
distancing measures. There has also been extensive two-
way communication with colleagues across the business to
provide assurance and to address areas of concern. This
includes weekly update calls with the senior leadership team, a
dedicated information section on the Group’s intranet, regular
communication via email, a comms pack posted to all factory
based colleagues and factory briefings.

The Group takes its responsibilities as a major UK food
manufacturer seriously and the Board recognises the
importance of supplying food to the nation at a time of need.
We have worked closely with our suppliers to ensure continued
supply of ingredients and, where necessary, identifying
new sources of supply. It has also been essential to work
collaboratively with customers to understand their priorities and
ensure timely delivery of orders.

The CEO and ELT have been working closely with the
Government through the IGD Policy Issues Council, FDF
Presidents Committee, Food Resilience Industry Forum and
DEFRA’s Agri Food Chain Directorate to ensure a coordinated
response from the whole food industry. As a consequence of
these actions, to date, the Group’s manufacturing and logistics
operations have been able to remain fully operational.

The Board has also closely monitored the financial impact of the
pandemic on the Group’s cash flow, liquidity, banking covenants
and ongoing sources of long-term finance to ensure the Group’s
long-term viability.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance53

Helen Jones on 15 May 2020, I am pleased
to confirm that the Board is now once again in
compliance with its policy on gender diversity.

Further information on our approach to
diversity and inclusion across the business is
set out in the section on Being a responsible
business on pages 12 to 27.

Gender diversity

33%

11%

2020

Key
n Board – (1 of 9 directors)
n Senior management – (0 of 8 ELT members)
n Direct reports – (15 of 45 ELT direct reports)

(As at 28 March 2020)

Review of non-executive director
performance
Over the course of the year, a review of
the contribution and performance of the
independent non-executive directors was
undertaken and this was considered by
the Nomination Committee as part of its
assessment of the composition of the
Board. Following this review, it was agreed
that the Board had an appropriate balance
of skills, experience and knowledge of the
Group to enable it to discharge its duties and
responsibilities effectively. In addition, the
current Board was felt to have a broad range
of retail, marketing, commercial and financial
experience which is appropriate for the size
and complexity of the Group. Consequently,
the Nomination Committee recommended the
re-election (or election) of all directors at the
2020 AGM.

Colin Day
Nomination Committee Chairman

24 June 2020

Nomination Committee report

Dear shareholder
On behalf of your Board, I would like to
present the Nomination Committee report
for the period ended 28 March 2020. The
Committee is responsible for:

• considering the size, structure and

composition of the Board;

•

leading the formal, rigorous and
transparent process for the appointment
of directors;

• making appointment recommendations so
as to maintain an appropriate balance of
skills, knowledge and experience on the
Board; and

• ensuring a formal and rigorous Board and
Committee evaluation is undertaken on an
annual basis.

The Committee also reviews the succession
requirements of the Board and senior
management and makes recommendations
to the Board as appropriate. With the
exception of myself, as Group Chairman, only
independent non-executives are members of
the Committee. Details of the Committee’s
membership and meeting attendance are set
out on pages 44 and 45.

Appointment process for new
Chairman, CEO and CFO
Keith Hamill stepped down from the Board
in July 2019. Following his departure Richard
Hodgson, Senior Independent Director, was
appointed Chair of the Nomination Committee
to lead the search process for a new
Chairman and, at the same, a new executive
leadership team, supported by the Nomination
Committee and HR Director.

Lygon Group (‘Lygon’), who have no other
connection with the Group, were engaged
to assist and advise on the search and
appointment process. Following consultation,
Lygon drew up a clear specification for the
desired candidate and a longlist of potential
candidates was prepared. Following review by
the Committee, a shortlist was prepared and
interviews held with the Committee members.
I was identified as the preferred candidate,
with the appropriate FMCG experience and
skill set to lead the Board.

At the same time, the Committee assessed
the options for the roles of CEO and CFO.
Russell Reynolds Associates, who have
no other connection with the Group, were
engaged to assist with the CEO search
process and Lygon were engaged to assist
with the CFO search process. Specifications
were prepared for both roles and a longlist of
potential candidates was produced.

The Committee also recognised that there
was a robust succession pipeline within the
business and assessed internal candidates
for the roles. Following a full review process,
it was recommended that the Board appoint
Alex Whitehouse as CEO. It was felt that Mr
Whitehouse had detailed knowledge of the
business, having joined the Group in 2014,
and had a proven track record with the
successful turnaround of the UK business,
following his appointment as UK Managing
Director in 2017. It was also recommended
that Duncan Leggett, who had been with the
Company since 2011 and had an in-depth
knowledge of the business and its financing
arrangements, be appointed as CFO.

Appointment process for new
independent non-executive
directors
As outlined at the time of my appointment,
we intended to strengthen the Board with
two further independent NEDs. Lygon
were engaged to assist and advise on the
search and appointment process. Following
consideration of a number of contenders,
from various sources, the Committee identified
Helen Jones and Tim Elliott as the preferred
candidates. Both were considered to have a
wealth of highly relevant experience in their
respective fields, and they agreed to join the
Board with effect from 15 May 2020.

Succession management
There is a strong culture of succession
planning and talent management within the
organisation. This has resulted in a significant
proportion of senior roles being filled internally,
with the majority of ELT positions being
internal promotions. Colleagues see this as
positive, helping not only in attracting talent
externally, but also with internal retention.
There is an established leadership programme
in place designed to help prepare senior
managers to take on more challenging
roles and this is complemented at a more
junior level with our graduate recruitment
programme.

Board balance and diversity
When selecting a new director, the Board
considers a broad range of skills, backgrounds
and experience, reflecting both the type of
industry and the geographical locations in
which we operate. The Committee is also
mindful of the benefits that an inclusive culture
can bring to our organisation as a whole.

In 2011, the Board adopted a policy to have at
least two female Board directors by 2015 and
this target was successfully achieved in May
2013. Whilst we have had two female Board
members since 2013, following the Board
changes announced in February 2019, the
number of female directors reduced to one as
at year end. However, with the appointment of

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www.premierfoods.co.ukGovernance
54

Audit Committee report

Dear shareholder
On behalf of your Board, I am pleased to
present the Audit Committee report for the
period ended 28 March 2020. The Committee
has responsibility, on behalf of the Board, for
reviewing the effectiveness of the Group’s
financial reporting systems and the internal
control policies and procedures for the
identification, assessment and reporting
of risk.

The Committee also keeps under review the
relationship with the external auditor, including
the terms of their engagement and fees, their
independence and expertise, resources and
qualification, and the effectiveness of the audit
process. The Committee met with the internal
and external auditor on five occasions in the
year without the presence of management.

All members of the Committee are
independent non-executives, with a broad
range of FMCG, commercial and marketing
experience relevant to the Group’s business.
Details of Committee membership, their
qualifications and meeting attendance are
set out on pages 44 and 45. In addition to
the Committee members, the CEO, CFO,
Chairman, Director of Financial Control, Head
of Internal Audit and external audit partners
are regularly invited to attend and present at
the Committee’s meetings.

Areas of review
During the financial period the Committee:

• monitored financial reporting, including the
annual report and the full-year, half-year
and quarterly results announcements;

• considered the going concern and viability

statements for the Group;

•

reviewed the ongoing negotiations
regarding Brexit, the potential impact
on the Group and its stakeholders and
mitigating actions;

reviewed the potential impact of the
COVID-19 pandemic on the Group’s
performance and viability and also the
potential impact on the timing of the
audit of the full-year results and results
announcement;

received regular reports from the internal
audit function, ensured it was adequately
resourced, monitored its activities and
effectiveness, and agreed the annual
internal audit plan;

• conducted a bi-annual review of key risks
facing the business and assessed the
Group’s mitigation plans;

•

reviewed and approved an update to the
Group’s policy on Auditor Independence
and Non-Audit Services;

•

reviewed the Group’s IT systems and
controls, cyber security and business
continuity management; and

reviewed calls received from
the whistleblowing helpline and
management's response to them.

Committee evaluation
As part of the external Board evaluation
exercise conducted by Lintstock during the
year (see page 49 for more information), a
review of the Committee's effectiveness was
also undertaken and an action plan for the
coming year agreed.

Auditor appointment,
independence and non-audit
services
KPMG were appointed as external auditor in
September 2015 following a comprehensive
tender process.

In accordance with our Auditor Independence
Policy, the Committee has continued to review
the level of non-audit fees with management
during the year. The Committee also received
an update from KPMG’s lead partner on
the internal controls that they employ to
safeguard their independence, integrity and
objectivity. In December 2019, the FRC
released the Revised Ethical Standard 2019
for auditors. This has replaced the previous list
of prohibited non-audit services with a much
shorter list of permitted services, all of which
are ‘closely related’ to an audit or required
by law and/or regulation (known as the
“whitelist”). As a consequence, the Group’s
policy on Auditor Independence and Non-
Audit Services has been updated to replace
the previous list of prohibited services with
the new FRC whitelist (a copy of the policy is
available on the Group’s website).

KPMG undertook non-audit work during the
period which related to audit related assurance
services in respect of the Half Year results and
the provision of royalty statements required
under our Cadbury licence with Mondelēz
International and our licence agreement
with Loyd Grossman. As a consequence,
non-audit fees for the period amounted to
£84,000 (2018/19: £493,020) representing
15% of the audit fee. The Committee is
mindful of guidelines in respect of non-audit
services and the potential threat to auditor
independence. The Committee assessed that,
in both cases, the nature of the royalty work
would be best performed by KPMG due to
their knowledge of the business, the timescale
required for completing the assignments
and the overall cost in undertaking the work.
In addition, KPMG consulted their own
internal Audit Quality and Risk Management

team prior to agreeing the engagements.
KPMG’s procedures for ensuring compliance
with quality control standards, maintaining
independence, integrity and objectivity were
also reviewed and no matters were identified
which might impair the auditor’s independence
and objectivity.

External auditor effectiveness
Over the course of the year, the Committee
has continued to review the effectiveness
and independence of the auditor and
assessed the effectiveness of the external
audit process by reference to the scope of
the audit work undertaken, presentations to
the Committee, feedback from management
involved in the audit process and separate
review meetings held without management.
Following this assessment, the Committee has
recommended to the Board that KPMG be
reappointed at the AGM in 2020 (the Board’s
recommendation is set out on page 81).

Risk management
Details of our risk management process are
set out in the risk management section on
pages 38 to 43.

Internal controls
In accordance with the FRC guidance on audit
committees and the Governance Code, an
annual review of internal controls is conducted.
The Board has delegated authority to the
Audit Committee to monitor internal controls
and conduct the annual review. This review
covers all material controls, such as financial,
operational and compliance, and also the
overall risk management system in place
throughout the year under review, up to the
date of this annual report. The Committee
reports the results of this review to the Board
for discussion and, when necessary, agreement
on the actions required to address any material
control weaknesses. The Committee confirms
that it has not been advised of any failings or
breaches which it considers to be significant
during the financial period and found the
internal controls to be effective.

Internal audit
Audit work over the year focused on the
following five core areas:

Governance and oversight – Data
protection, anti-bribery and corruption and
Competition law.

Business and operations – Trade
promotions management, business continuity
planning, accounts payable and inventory
management.

Finance, HR & admin – Payroll, expenses
and the control framework.

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Site/Factory – Financial and operational
control environment.

Technology – Cyber security systems,
policies, procedures and controls.

In addition, the Chair of the Audit Committee
held a number of meetings with the Head
of Internal Audit. The Committee has also
considered the effectiveness of the function
as part of its review and approval of the
three-year audit plan and its interaction with
the external auditor. The Committee has
concluded that the internal audit function
remains effective.

Fair, balanced and understandable
The Board requested that the Audit
Committee confirm whether the annual report
and accounts taken as a whole were fair,
balanced and understandable and whether
it provided the necessary information for
shareholders to assess the Group’s position
and performance, business model and
strategy. The Audit Committee recommended
that the Board make this statement which is
set out on page 81.

In making this recommendation the
Committee considered the process for
preparing the annual report, which included
regular cross functional reviews from the
teams responsible for preparing the different
sections of the report, senior management
review and verification of the factual
contents. It also considered the balance and
consistency of information, the disclosure of
risk and the key messages presented in the
report.

Significant issues in relation to the
financial statements
The Committee considered the following
significant issues in relation to the financial
statements with management and the internal
and external auditor during the year:

Commercial arrangements
Commercial payments to customers in the
form of rebates and discounts represent
significant balances in the income statement
and balance sheet. Calculations of these
balances require management assumptions
and estimates, including volumes sold and the
period of the arrangements. The Committee
reviewed the assumptions and estimates and
the level of accruals and provisions in detail.
Further information is set out in note 3.4 on
page 105.

Carrying value of goodwill and
brands
Goodwill and brands represent a significant
item on the balance sheet and their valuation
is based on future business plans whose
outcome is uncertain. The value of goodwill
is reviewed annually by management and
the Committee and brands are reviewed
where there is an indicator of impairment. The
impairment testing for goodwill and brands is
based on a number of key assumptions which
rely on management judgement.

The brands, trademarks and licences are
deemed to be individual Cash Generating
Units (CGUs). For the purpose of goodwill, the
Group has four CGUs – Grocery, Sweet Treats,
International and Knighton. The Committee
reviewed the results of goodwill impairment
testing of the CGUs and the review of the
carrying value of certain of the Group’s brands.
There is no goodwill attributable to the Sweet
Treats or Knighton CGUs and the International
CGU has no goodwill or intangible assets.
The results of the impairment testing included
management’s assumptions in respect of cash
flows, long-term growth rates and discount
rates. The Committee also considered
sensitivities to changes in assumptions and
related disclosure as required by IAS 36. This
year’s review concluded that no impairment
of Goodwill or brands was required. A brand
impairment of £30.6m was recognised during
the prior period relating, primarily, to the
Sharwood's brand. Further information is set
out in notes 11 and 12 on pages 114 and
115.

Defined benefit pension plans
The Group operates a number of defined
benefit schemes. The main schemes are
closed to future accrual but hold substantial
assets and liabilities. Valuation of the
scheme liabilities is based on a number of
assumptions, such as inflation, discount rates
and mortality rates, each of which could have
a material impact on the valuation under IAS
19 included in the balance sheet. The Group’s
RHM Pension Scheme also holds assets
for which quoted prices are not available.
As at 28 March 2020 the RHM Pension
Scheme reported a surplus of £1,505.3m
and the Premier Schemes reported a deficit
of £274.9m (2018/19: RHM Pension Scheme
surplus of £837.8m; Premier Schemes deficit
of £464.7m), largely driven by the return
on scheme assets and change in financial
assumptions. The Committee reviewed the
basis for management’s assumptions and the
movements in the IAS 19 valuation in detail
over the year. The financial assumptions were
based on the same methodology as last
year, updated for the 2019 triennial valuation.
Further information is set out in note 13 on
pages 116 to 121.

At the reporting date, the property asset
class carried an uncertainty clause over the
valuation performed by independent valuers of
the property funds. This reflects the difficulty in
assigning a value to the underlying properties
held by the respective funds due to the current
economic environment caused by COVID-19.

The inclusion of the ‘uncertainty’ clause
does not invalidate the valuation, nor does
it mean that the valuation cannot be relied
upon. The declaration has been included in
the investment manager’s valuation report as
a precaution to ensure transparency of the
fact that less certainty can be attached to the
valuation than would otherwise be the case
under normal market conditions.

Management has reviewed the asset values
that make up the property asset class, to
ensure the values appropriately reflect current
market conditions, recognising that there
is short-term volatility driven by the current
market conditions.

Deferred tax
Deferred tax arises due to timing differences
and can either be an asset or liability on
the balance sheet. An asset may be used
to reduce future taxable income; a liability
represents a future tax payment that is
expected to be made. Calculating the value
of the asset or liability accurately involves
assessing several factors such as forecasts
of future taxable profits and growth rates
and an assessment of historic forecasts as
well as accessibility of losses held in Group
companies and any periods open to HMRC
enquiry. The current year liability of £184.9m
was compared to a liability of £13.5m in
2018/19, largely driven by the large increase
in the pension scheme combined surplus.
Further information is set out in note 8 on
pages 110 and 111.

Viability and going concern
The Audit Committee conducted a number of
detailed reviews of the Group’s viability and
going concern, taking into account severe
but plausible business downsides, including
the potential impact of the current COVID-19
pandemic. The Committee concluded that it
was reasonable for the Board to expect that
the Group would have adequate resources
to operate for the foreseeable future and
therefore recommended that the viability
statement (set out on page 43) and the going
concern statement (set out on page 99) could
be supported.

Simon Bentley
Audit Committee Chairman

24 June 2020

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Directors’ Remuneration report

Annual Statement

Dear shareholder
I was appointed Chair of the Remuneration Committee in May 2019, following the retirement of Jennifer Laing, having been a member of the
Committee since 2013. I am pleased to present the Directors’ Remuneration report for the period ended 28 March 2020.

New Remuneration Policy
In accordance with the requirements of the Companies Act 2006, we are required to put the Company’s remuneration policy to shareholder vote
every three years. Set out on pages 61 to 67 is the Company’s 2020 Remuneration Policy which will be put to shareholders at the 2020 AGM.

The Committee considers that the current Remuneration Policy operated as anticipated over the financial period. However, there are a number of
changes proposed to reflect the remuneration of the newly appointed CEO and CFO, as compared to the remuneration of their predecessors, and
to reflect changes in the UK Governance Code and in best practice. These represent an overall decrease in quantum of salary, pension and the
maximum opportunity for both elements of variable pay. The Committee believes these levels of reward are commensurate with the Company’s level
of turnover, enterprise value and complexity, while still providing an appropriately motivating incentive.

The key policy changes are detailed below:

Pension

The maximum contribution or allowance for executive directors was 20% of basic salary. It has been decreased to be in
line with that available to the majority of the workforce. Currently this equates to a contribution of 7.5% of basic pay up to
an earnings cap.

Annual bonus

Maximum (as a percentage of salary) for the CEO has been decreased from 150% to 125% and for the CFO from 105%
to 100%.

Financial targets will represent not less than 70% of the total bonus opportunity (an increase from not less than 50%),
with the balance consisting of non-financial targets subject to the delivery of a threshold level of trading profit.

Long-Term
Incentive Plan
(LTIP)

Shareholding

Annual bonus will no longer be subject to personal performance.

Maximum individual limit (as a percentage of salary) has decreased from 200% to 150%.

Multiple of salary that the executives must hold in shares, which was previously a guideline, is now a requirement and has
been increased from 100% of salary to 200% of salary.

Services contracts The standard notice period was set at 12 months from the executive director and the Company. This has been decreased

to six months. To assist with recruitment, upon appointment to the Board, the notice period may be set at up to 12
months, decreasing to six months after six months of employment.

Policy on payment
for loss of office

The policy previously enabled the Company, where appropriate, to provide a departing executive director with
outplacement services. The policy has been expanded to enable the Company to pay for the provision of outplacement
support and the reasonable fees for a departing executive director to obtain independent legal advice in relation to his or
her termination arrangements and nominal consideration for any agreement to introduce contractual terms protecting the
Company’s rights following termination.

Board changes
As highlighted in the Chairman’s Statement on page 09, there have
been a significant number of Board changes in the financial year.
Alastair Murray was appointed Acting CEO on 1 February 2019, in
addition to his role of Chief Financial Officer, on a temporary basis whilst
the Board conducted a search process for a new CEO. On 30 August
2019 we announced the appointment of Colin Day as non-executive
Chairman, Alex Whitehouse as CEO and Duncan Leggett as acting CFO
(appointed permanent CFO on 10 December 2019).

Following these appointments, it was agreed that Alastair Murray would
step down from the Board, also with effect from 30 August 2019,
having served as CFO for six years and acting CEO for the past seven
months. The Committee exercised discretion to treat Mr Murray as a
‘good leaver’ in relation to his leaving arrangements (which were made
available following his departure on the Group’s website) and full details
are provided on page 69. All payments were made pursuant to the
terms of his service agreement and in line with the Company’s current
Directors’ Remuneration Policy and applicable share plan rules.

Executive Directors’ Salary
Alex Whitehouse, CEO, has been appointed with a salary of £475,000
and Duncan Leggett, CFO, has been appointed with a salary of
£275,000. The salary levels reflect the fact that this is their first
appointment as CEO and CFO, respectively.

The Committee aims to increase their salaries over the next two years
to a level at, or near, the FTSE 250 lower quartile, which the Committee
feels would be appropriate given the Company’s level of turnover,
enterprise value and complexity. Any such increases over the next
two years (which are at the Committee’s discretion and subject to
performance) are likely to be higher than the annual increase awarded to
all other colleagues not involved in collective bargaining.

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New LTIP
The Company’s existing Long-Term Incentive Plan (‘2011 LTIP’) is due
to expire in April 2021. The Committee believes the LTIP continues to
play an important role in the overall remuneration of executive directors
and other members of senior management (please see pages 58 and
59 for further information on the Group’s remuneration strategy). It is
therefore proposed to seek shareholder approval for a new 10 year
LTIP (‘2020 LTIP’) at the AGM in August 2020. The terms of the 2020
LTIP are designed to be largely the same as the 2011 LTIP but with the
removal of the matching share award element (which was discontinued
in 2017) and appropriate changes to bring it in line with prevailing best
practice and the Company’s new Remuneration Policy. A summary of
the key elements of the 2020 LTIP is set out in the AGM Notice.

New Governance Code
The Committee has reviewed and considered the recommendations of
the new UK Governance Code 2018 over the course of the year and
these have been incorporated into the Remuneration Report.

Shareholder engagement
Over the course of the year, there has been extensive engagement with
shareholders both in advance of the drafting of the new Remuneration
Policy and in reviewing the key changes we have proposed and I would
like to thank shareholders for providing helpful feedback.

I look forward to receiving your support for the Annual Report on
Remuneration, our new Remuneration Policy and the 2020 LTIP Plan at
the 2020 AGM.

On behalf of the Board
24 June 2020

Pam Powell
Chair of the Remuneration Committee

Performance outcome for 2019/20
The Committee believes that the executive remuneration is closely
aligned with the Group’s strategic priorities, with a high proportion of
total remuneration delivered through variable pay linked to financial
performance and delivery of strategy. When agreeing the final outcome
for the year, the Committee considered the performance of the
business as a whole, the quality of earnings delivered, the remuneration
arrangements for the wider workforce and the market in which the
business operates. This also included an assessment of the impact of
the current COVID-19 pandemic on consumer shopping habits in the
final month of the financial year. The Committee considered whether it
was appropriate to exercise discretion but it believes that the outcome
of both the annual bonus and LTIP assessment reflect the Group’s
underlying financial performance and delivery against strategy over the
appropriate performance periods. A summary of annual bonus, LTIP
and total pay for the financial period are set out below.

Annual Bonus performance outcome for 2019/20
The Committee reviewed the performance of executive directors over
the financial period and assessed the extent to which the financial
and non-financial targets had been achieved. This resulted in a bonus
of £284,112 for Mr Whitehouse (representing 81.5% of opportunity),
£70,464 for Mr Leggett (representing 81.5% of opportunity) and
£118,069 for Mr Murray (representing 64.2% of opportunity). All three
awards were paid pro rata for their period of service and full details of
the assessments are set out on pages 69 to 71.

One-third of any annual bonus payment to Mr Whitehouse and Mr
Leggett will be made in the form of shares deferred for a three-year
period under the Deferred Bonus Plan (DBP), details of the DBP are set
out on page 72.

LTIP
The Committee assessed the performance conditions for the 2017
LTIP award. The targets relating to adjusted EPS have been achieved,
meaning that this element of the award (one-third) vested in full on
13 June 2020. Following an assessment of TSR performance it was
determined that this element of the award (two-thirds) would lapse in
full. The targets for the annual bonus and LTIP awards for 2020/21 are
aligned with the Group’s strategic priorities and this is illustrated on
page 59. Further details of the measures for 2020/21 are provided on
page 73.

Summary of 2019/20 remuneration outcomes

Alex
Whitehouse
£’000
277
-
19
7
284
74

Duncan
Leggett
£’000
85
-
6
4
70
18

Alastair
Murray
£’000
177
100
19
15
118
121

661

183

550

Salary
Salary supplement
Taxable benefits
Pension
Annual bonus
Share based awards
Single figure for total
remuneration

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Overall approach to remuneration
The Committee follows the following broad principles when considering
the design, implementation and assessment of remuneration in line
with the recommendations set out in Provision 40 of the 2018 UK
Governance Code:

Clarity – remuneration arrangements should be transparent
and promote effective engagement with shareholders and
the workforce
The Company’s remuneration policy is designed to support the delivery
of the Group’s strategic objectives which are aligned with the long-term
interest of both shareholders and key stakeholders. The Committee
is committed to being transparent in respect to the elements of
remuneration, quantum, the rationale for targets set and performance
outcomes. The Committee engages with shareholders and is keen to
understand their views and priorities when considering key remuneration
issues and any major changes.

Simplicity – remuneration structures should avoid
complexity and their rationale and operation should be
easy to understand
The Committee believes the current arrangement for executive directors
to be simple and these consist of three elements:

• A fixed element that comprises salary, pension and taxable benefits.

• A variable element that is subject to performance conditions and

comprises:

− short-term goals via the annual bonus plan; and

− long-term goals via the Long-Term Incentive Plan.

The Committee has made a number of changes to remuneration
policy over the last few years to remove complexity and reflect market
practice and considers that the current arrangements are clear, easy to
understand and provide an appropriate balance.

Risk – remuneration arrangements should ensure
reputational and other risks from excessive rewards, and
behavioural risks that can arise from target-based incentive
plans, are identified and mitigated
Targets are reviewed to ensure they reflect the overall risk appetite
set by the Board and do not encourage inappropriate behaviours or
excessive risk taking.

Mitigation is provided through the recovery provisions that apply to
both the cash and share elements of the annual bonus plan and
the recovery and withholding provisions that apply to the LTIP. The
Committee reviewed arrangements for all elements of remuneration
in the financial year to update the malus and clawback provisions in
line with current best practice expectations. This included introducing
additional trigger events in the event of corporate failure and/or material
damage to the Company’s business or reputation and the LTIP rules
have been updated to include a discretion to override the vesting result
in exceptional circumstances.

In addition, holding periods are in place for awards under the Deferred
Bonus Plan and LTIP, see page 60 below.

Predictability – the range of possible values of rewards
to individual directors and any other limits or discretions
should be identified and explained at the time of approving
the policy
The Committee assesses the potential outcome of future reward by
reference to potential pay-outs that can be received at a range of
outcomes (minimum, mid-point and maximum) as set out on page 64.
In addition, the effect of future share price growth under the LTIP is also
considered based on a 50% increase in share price over the period.

Proportionality – the link between individual awards, the
delivery of strategy and the long-term performance of the
company should be clear. Outcomes should not reward
poor performance
As referred to under ‘Alignment to culture’ below, the Committee
seeks to ensure that targets for annual bonus and long-term incentives
are aligned with the Group’s strategy and the long-term sustainable
development of the business.

The focus of our remuneration strategy is on rewarding performance –
the majority of executive remuneration (approximately 70% at maximum)
is variable and only payable if demanding performance targets are met.
The majority of variable pay is payable in the form of shares.

When setting targets for variable elements of pay the Committee
carefully considers the targets to minimise the risk of excessive reward
by reference to the maximum potential award that could be achieved.

When assessing performance against annual bonus and LTIP the
Committee also considers:

•

the overall performance of the business;

the quality of earnings when assessing the achievement of financial
targets; and

•

the market in which the Company operates.

The Committee retains discretion to override formulaic outcomes
produced by the performance conditions where, in the Committee’s
view, they do not reflect the performance of the business over the
period, individual performance or where events happen that cause the
Committee to determine that the conditions are unable to fulfil their
original intended role.

Alignment to culture – incentive schemes should drive
behaviours consistent with company purpose, values and
strategy
As part of the preparation of the 2020 Remuneration Policy the
Committee reviewed the overall design of the Group remuneration
strategy and believes that it is consistent with the Company’s purpose,
values and strategy and is aligned with the Group’s culture. When
setting the annual goals for the annual bonus and LTIP award, the
Committee considers a range of different potential measures in order
to select those that it believes are most likely to drive the successful
delivery of the Group strategy and are aligned with shareholders’
interests to deliver earnings growth and improved shareholder value in
the medium-term.

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How remuneration links to our strategy
The following table summarises the performance measures for
executive directors’ annual bonus and LTIP arrangements and how
they are aligned with our strategy (see our strategy and branded growth
model on pages 02 and 03).

Strategic
priority

Drive
revenue
growth

Cost control
& efficiency

Cash
generation

Reducing
Net debt

Delivering
shareholder
value

Responsible business

Being a
responsible
business

LTIP targets
(see page
73)
• Adjusted

EPS

Group KPIs
(see pages 28
and 29)
• Group revenue

• Trading profit

• Branded market

Annual Bonus
goals
(see page 71)
• Trading profit

• Non-financial
objectives

• SG&A as a % of
Group revenue

• Net debt

• Non-financial
objectives

• Free cash flow

• Net debt

• Net debt/
EBITDA

• Non-financial
objectives

• Net debt

• Non-financial
objectives

• Relative
TSR

• Non-financial
objectives

• Healthier choices

• Health and

safety

• Environmental

Senior management and the wider workforce
The remit of the Committee already includes the oversight of
remuneration for senior management (who are defined as the Group’s
Executive Leadership Team) and has been extended to include
the review of workforce remuneration and related policies, and the
alignment of incentives and rewards with culture.

Remuneration for executive directors is set within the wider context
of the Group’s remuneration policy for the wider workforce. The key
differences of quantum and structure in pay arrangements across the
Group reflect the different sizes of roles and levels of accountability
required for the role and that executive directors and senior
management have a much greater emphasis on performance-based
pay through the annual bonus and the LTIP.

Salaries for management grades are normally reviewed annually
(currently in July each year) and take account of both business and
personal performance. Specific arrangements are in place at each
site and these may be annual arrangements or form part of a longer-
term arrangement and the Board is kept regularly updated on these
arrangements.

The Committee reviews the level of salary increases for colleagues not
involved in collective bargaining and also reviews and approves the
annual bonus plan for the general management population. Financial
objectives for executive directors and the management population
are aligned and strategic objectives cascaded down the management
structure. In 2018/19, the Committee approved changes to the
management scheme to make it more competitive and aid recruitment
and retention. Senior management participate in long-term incentive
arrangements reflecting their contribution to Group performance and
enhancing shareholder value. All employees are encouraged to own
shares in the Company via the Sharesave Plan and executive directors
through our shareholding guidelines.

Gender pay gap reporting
Details of gender pay gap reporting is provided on page 17.

CEO pay ratio
The table below sets out a comparison of the CEO’s total earnings
as compared to the wider workforce based on colleagues' pay at
the 25th percentile, median and 75th percentile. Premier Foods is a
food manufacturing business employing around 4,000 colleagues, the
majority of whom are based at our manufacturing sites. As a result,
all three of the CEO pay ratio reference points compare our CEO’s
remuneration with colleagues based at our manufacturing sites. We
apply the same reward principles for all colleagues – that overall
remuneration should be competitive when compared to similar roles
in similar organisations. For manufacturing colleagues, we benchmark
against the general pay conditions for similar roles in the local area,
including other food manufacturers. For the CEO, we benchmark
against salaries at companies with a similar level of turnover, enterprise
value and complexity. The key differences of quantum and structure in
pay arrangements between the CEO and the majority of colleagues,
reflect the different levels of responsibilities, skill and experience required
for the role. The CEO's has a much greater emphasis on performance-
based pay through the annual bonus and the LTIP. The ratios may
therefore vary significantly year-on-year depending on bonus and LTIP
outcomes.

Year
2019/20
2019/20
2019/20

Method
A
Base salary
Total pay and
benefits

25th
percentile
51:1
22,719
£23,927

Median
42:1
21,218
£28,890

Pay ratio
75th
percentile
30:1
37,650
£40,381

The CEO total figure for remuneration was £1,211,697, as set out on
page 75 of this report. Alastair Murray served as CEO from 31 March to
30 August 2019 and Alex Whitehouse served as CEO from 30 August
to 28 March 2020.

We have calculated the ratio in line with the reporting regulation using
method A, which determines total full-time equivalent remuneration
for all UK colleagues for the relevant financial year and ranks the data
to identify colleagues whose remuneration places them at the 25th,
50th and 75th percentile. We believe this is the most accurate means
of calculating the workforce comparison. The Board confirms that the
ratio is consistent with the Company’s wider policies on employee pay,
reward and progression.

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The workforce comparison is based on:

1. Payroll data from 1 April 2019 to 28 March 2020 for all colleagues

including the CEO but excluding non-executive directors,
annualised to provide a full data set for the year ended 28 March
2020.

2. Part-time colleagues have been included by calculating the full-time

equivalent value of their pay and benefits.

3. Total pay comprises salary and taxable benefits (including shift

allowance, overtime, car allowance and performance related pay).
Employers’ pension contributions were not included in the data
used to identify colleagues at the three percentile ranges due to
the complexity of the exercise, resulting from the number of part-
time colleagues and variable working hours. However, employers’
pension contributions have been included in the total pay and
benefits figures for the three colleagues listed in the table above for
comparative purposes.

Share ownership, vesting and retention periods
To align executive directors’ interests with those of shareholders they
are expected to retain 50% of shares from vested awards under the
Deferred Bonus Plan (DBP) and the LTIP (other than sales to settle any
tax or NICs due) until they reach a value at least equal to 200% of their
annual salary (valued at the time of purchase or vesting). In addition, to
encourage a focus on the long-term sustainable development of the
business, retention periods have been introduced for both the annual
bonus scheme and Long-Term Incentive Plan. One-third of any annual
bonus award is deferred into shares for three years under the DBP. In
addition, any shares which vest under LTIP awards granted since 2018
will be deferred for a further two-year period.

Annual bonus (Deferred Bonus Plan)

LTIP

Performance period
Retention period

Post employment holding periods
Our current approach to incentives is designed to ensure that executive
directors continue to have significant shareholdings for at least two
years after departure (and in many cases longer) which are subject
to robust clawback and malus provisions. Under our current policy,
unvested share awards on cessation (both deferred bonuses and long-
term incentive awards) continue to vest at their normal vesting date
which can be up to three years from the date of cessation (i.e. three
years from grant). In addition, there is a two-year post vesting holding
period which applies to long-term incentive awards which will continue
post cessation, as a result of which executive directors will need to hold
any shares subject to vested awards at cessation for up to two years
from cessation and will need to hold shares that vest post cessation for
two years post vesting. In the latter case, for an award granted in their
last year this means that they will need to hold any shares that vest for
up to five years from cessation (i.e. five years from grant of the award).

The members of the Remuneration Committee reviewed the
recommendation set out in the new Corporate Governance Code
regarding the introduction of a formal post-employment holding
period. It was felt that the current arrangements provide an adequate
disincentive against inappropriate short-term actions by departing
executive directors. Extending post-cessation shareholding
arrangements further, in either quantum or duration, was not judged
to be appropriate by the Committee, as executive directors would no
longer have the ability to influence the strategic direction or financial
performance of the business, which operates in a dynamic and
changing FMCG environment.

Non-executive directors
Fees payable to non-executive directors are determined by the Board.
The level of fee is set in the context of the time commitment and
responsibilities required by the role. As a result, additional fees are
payable to the Chairs of the Audit and Remuneration Committees and
also for the role of Senior Independent Director. These are reviewed on
an annual basis. No change has been made to the basic NED fee since
2009.

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Remuneration Policy
Set out below is the Directors’ Remuneration Policy which, if approved, will apply from the close of the 2020 AGM.

Total remuneration is made up of fixed and performance-linked elements, with each element supporting different strategic objectives.

Base salary

Benefits

Pension

Link to strategy
To offer a level of benefit in line with that
offered to the majority of the workforce to
help recruit and retain and to recognise long-
term commitment to the Group.

Operation
Executive directors may participate in the
Group’s defined contribution scheme on the
same basis as all other new employees, or
receive an equivalent allowance in lieu of
pension provision.

Executive directors may also salary sacrifice
additional amounts into this scheme but will
not receive any additional contribution from
the Group. Only basic pay is pensionable.

Maximum opportunity
The maximum contribution or allowance
for executive directors is the same as is
available to the majority of the workforce.
Currently this is either a contribution or a
salary supplement of 7.5% of basic pay up
to an earnings cap (£166,200 for 2019/20),
but increasing each April in line with the
Retail Prices Index as at the previous
September).

Performance
Performance measures: N/A.

Performance period: N/A.

Link to strategy
Provides an appropriate level of fixed
income.

Link to strategy
Help to recruit, retain and promote the
efficient use of management time.

Set at levels to attract and retain talented
individuals with reference to the Committee’s
assessment of:

Operation
The Company typically provides the following
benefits:

• The specific needs of the Group by

• Cash allowance in lieu of company car;

• Fully expensed fuel;

• Private health insurance;

• Life insurance;

• Permanent incapacity benefit:

• Telecommunication services;

• Professional memberships;

• Allowance for personal tax and financial

planning; and

• Other ancillary benefits, including
relocation expenses (as required).

Maximum opportunity
There is currently no maximum level,
however, the provision and level of
allowances and benefits are considered
appropriate and in line with market practice.

Performance
Performance measures: N/A.

Performance period: N/A.

reference to the size and complexity of
the business;

• The specific experience, skills and

responsibilities of the individual; and

• The market rates for companies of

comparable size and complexity and
internal Company relativities.

Operation
Normally reviewed annually (currently with
effect from 1 July) in conjunction with those
of the wider workforce.

Maximum opportunity
Salaries for the relevant year are detailed in
the Annual Report on Remuneration.

Whilst the Company does not have a cap
on salaries, increases are normally expected
to be in line with increases across the
management grades, subject to particular
circumstances such as a significant change
in role, responsibilities or organisation. Where
an executive is appointed at a salary lower
than the assessed market rate, subject to
performance, their salary may be increased
to the assessed market rate which could
result in increases above the salary increase
awarded to all employees not involved
in collective bargaining. An explanation
of differences in remuneration policy for
executive directors compared with other
employees is set out later in this Directors’
Remuneration Policy.

Performance
Performance measures: Group performance
is taken into consideration when determining
an appropriate level of base salary increase
for the Group as a whole and personal
performance is taken into account when
determining an appropriate level of base
salary increase for the executive.

Performance period: N/A.

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Directors’ Remuneration report CONTINUED

Annual bonus

Long-Term Incentive Plan (LTIP)

Sharesave Plan

Link to strategy
To offer all employees the opportunity to
build a shareholding in a simple and tax-
efficient manner.

Operation
The Company’s Sharesave Plan is an HMRC
compliant scheme which is usually offered
annually to all employees. The key terms
of the plan will only be changed to reflect
HMRC changes.

Maximum opportunity
Participants may save up to the statutory
limit (currently £500 per month but subject to
any lower limit set by the Committee) over a
three-year period, following which they have
the opportunity to buy Company shares at
a price set at the beginning of the savings
period.

Performance
Performance measures: None, other than
continued employment.

Performance period: Three years.

Link to strategy
The Premier Foods Long-Term Incentive
Plan (‘LTIP’) provides a clear link to our
strategic goal of delivering profitable growth
with sustainable share price growth over the
medium to long-term.

Operation
Annual grant of Share Awards.

Share Awards are the conditional award
of shares or nil cost options which
normally vest after three years, subject to
performance conditions.

Awards under the LTIP, including the
determination of any relevant performance
conditions, will be considered and
determined on an annual basis at the
discretion of the Committee.

The rules contain a dividend equivalent
provision enabling payments to be made
(in cash or shares) at the time of vesting, in
an amount equivalent to the dividends that
would have been paid on the participant’s
vested shares between the date of grant of
the relevant award and the date of vesting.

Clawback and malus provisions apply.

Maximum opportunity
Maximum individual limit in respect of any
financial year of 150% of salary in that
financial year.

Performance
Performance measures: Performance
conditions are based on a range of targets
focused on the delivery of increased
shareholder value over the medium to long-
term.

Currently, these include a combination
of total shareholder return and adjusted
earnings per share.

No more than 20% of the LTIP award
will vest for threshold performance with
full vesting taking place for equalling or
exceeding the maximum target.

Performance period: Three years.

Holding period: Two years (post vesting).

Link to strategy
Designed to incentivise delivery of annual
financial and operational goals and directly
linked to delivery of the Group’s strategy.

Operation
An annual bonus is earned based
on performance against a number of
performance measures which are linked to
the Group’s strategy. Maximum of two-thirds
of the bonus is paid in cash and a minimum
of one-third deferred into shares under the
Premier Foods Deferred Bonus Plan (‘DBP’)
which are released after three years subject
to continued employment.

The rules of the DBP contain a dividend
equivalent provision enabling payments
to be made (in cash or shares) at the time
of vesting, in an amount equivalent to the
dividends that would have been paid on the
participant’s vested shares between the date
of grant of the relevant award and the date
of vesting.

Clawback and malus provisions apply for
both the cash and share elements.

Maximum opportunity
Maximum (as a percentage of salary):

• CEO: 125%

• Other Directors: 100%

Performance
Performance measures: Performance
conditions are designed to promote the
delivery of the Group’s strategy and can be
made up of a range of:

• Financial targets (e.g. turnover, trading
profit and cash flow) representing
not less than 70% of the total bonus
opportunity, subject to the delivery of a
threshold level of trading profit;

• Non-financial targets subject to

the delivery of a threshold level of
profitability.

• No more than 20% of the bonus will
vest for threshold performance with
full vesting taking place for equalling or
exceeding the maximum target.

• Specific details of the performance
measures for the relevant year can
be found in the Annual Report on
Remuneration to the extent that they are
not commercially sensitive.

Performance period: One year.

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Shareholding requirements

Non-executive director fees

Link to strategy
To align executives’ interests with
shareholders.

Operation
Executive directors are expected to retain
50% of shares from vested awards under the
DBP and the LTIP (other than sales to settle
any tax or NICs due) until they reach their
required multiple of salary in shares (which
is currently 200% of salary). The Committee
will review progress against the requirements
(which are set out in the Annual Report on
Remuneration) on an annual basis.

Maximum opportunity
N/A

Performance
Performance measures: N/A.

Performance period: N/A.

Link to strategy
Provides an appropriate level of fixed fee to
recruit and retain individuals with a broad
range of experience and skill to support the
Board in the delivery of its duties. Fees are
reviewed annually.

Operation
The remuneration of non-executive directors
is determined by the Chairman and executive
directors. The remuneration of the Chairman
is determined by the Remuneration
Committee.

Includes a Chairman’s fee and standard non-
executive fee. Additional fees are payable for
additional responsibilities, for example the
roles of Committee Chairs and the Senior
Independent Director.

Any reasonable business related expenses
(including tax thereon) which are determined
to be a taxable benefit can be reimbursed.

Maximum opportunity
Increases are normally expected to be in
line with the market, taking into account
increases across the Group as a whole,
subject to particular circumstances such as
a significant change in role, responsibilities or
organisation.

The current aggregate maximum under the
Company’s Articles of Association for the
Chairman and the non-executive directors is
£1,000,000.

Performance
Performance measures: N/A.

Performance period: N/A.

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Directors’ Remuneration report CONTINUED

1. Notes to the policy table
For the avoidance of doubt, in approving this Directors’ Remuneration
policy, authority is given to the Company to honour any commitments
entered into with current or former directors that have been disclosed to
shareholders in previous remuneration reports. Details of any payments
to former directors will be set out in the Annual Report on Remuneration
as they arise as required under the Remuneration Regulations.

The Committee operates the Annual Bonus plan, DBP, and LTIP
according to their respective rules, which include flexibility in a number
of areas. These include:

•

the timing of awards and payments;

the size of an award, within the maximum limits;

the participants of the plan;

the performance measures, targets and weightings to be used for
the annual bonus plan and long-term incentive plans from year-to-
year;

the assessment of whether performance conditions have been met;

the treatment to be applied for a change of control or significant
restructuring of the Group;

the determination of a good/bad leaver for incentive plan purposes
and the treatment of awards thereof; and

the adjustments, if any, required in certain circumstances (e.g.
rights issues, corporate restructuring, corporate events and special
dividends).

Choice of performance measures and approach to
target setting
The Committee reviews the performance measures used in the incentive
arrangements on an annual basis to ensure that they remain appropriate
and aligned to the delivery of the annual business plan and Group
strategy. Currently the annual bonus measures consist of financial (70%)
and non-financial (30%) targets. This approach is adopted in order to
link pay to the delivery of overall Group performance measured across
a balance of key strategic aims. The targets will be set by reference to
internal budgeting and strategic plans.

It is expected that the LTIP will continue to use a combination of
adjusted earnings per share and total shareholder return based
measures to reflect both an internal measure of Group performance
as well as the delivery of shareholder value. Targets are set taking into
account both internal and external assessments of future performance
and what constitutes good and superior returns for shareholders. The
Committee also retains the discretion within the policy to adjust the
targets and/or set different measures and/or alter weightings for future
awards.

In addition, the Committee also retains the discretion within the policy
to amend the existing performance conditions for the incentive plans if
events happen that cause it to determine that the conditions are unable
to fulfil their original intended purpose.

The Committee will consider the bonus and LTIP outcomes against
all of the pre-set targets following their calculation and in exceptional
circumstances may moderate (up and down) these outcomes to take
account of a range of factors, including the Committee’s view of overall
Group performance for the year. In the case of bonus, this may also
result in upward moderation, however, no upward moderation would be
undertaken without first consulting with major shareholders.

2. Remuneration scenarios and weighting
This chart indicates the level of remuneration that could be earned by the current executive directors at minimum, target, maximum and maximum
+50% share price growth, under the Company’s current Directors’ Remuneration Policy.

Chief Executive Officer

Chief Financial Officer

Notes:

£2,176

49%

£1,820

39%

£1,167

31%

25%

33%

27%

£2,000

£1,800

£1,600

£1,400

£1,200

£1,000

£800

£600

£514

100%

44%

28%

24%

£400

£200

£0

)

0
0
0
'
£

(

n
o
i
t
a
r
e
n
u
m
e
R

£993

42%

£856

32%

28%

36%

30%

£581
24%
24%

52%

£306

100%

Minimum

Target Maximum Max +50%

Minimum

Target Maximum Max +50%

growth

Fixed pay

Annual bonus

LTIP

1. As the DBP is a portion of annual bonus it is included within this

segment.

2. The executive directors can participate in the Sharesave Plan on
the same basis as other employees. For simplicity, the value that
may be received from participating in the Sharesave Plan has
been excluded from the scenario charts.

3. Assumptions when compiling the charts are:

Minimum = fixed pay only (base salary, benefits and pension).

Target = fixed pay plus 50% of annual bonus payable and 50%
of LTIP vesting.

Maximum = fixed pay plus 100% of annual bonus payable and
100% of LTIP vesting.

Maximum +50% growth = fixed pay plus 100% of annual bonus
payable and 100% of LTIP vesting at a 50% higher share price
than when the LTIP was awarded.

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65

3. Service contracts
The executive directors have rolling service contracts. The executive directors’ service contracts contain the key terms shown in the table below.
The CEO’s notice period (which was agreed prior to the current policy) reduces to six months after 12 months of employment rather than after six
months of employment). In the event that any additional executive directors are appointed, it is likely that their service contracts will contain broadly
similar terms.

Provision
Remuneration

Change of control

Notice Period

Payment in lieu of notice

Detailed terms
Salary, benefits, pension, annual bonus and share incentives entitlements in line with the above Directors’
Remuneration Policy table.
The service agreement does not provide for any enhanced payment in the event of a change of control of the
Company.
Standard notice period is set at six months from the executive director and Company. To assist with recruitment, upon
appointment to the Board, notice period may be set at up to 12 months, decreasing to six months after six months of
employment.
The Company may, at its discretion, pay a sum equal to base salary, benefits, and pension contributions which
would have been earned during the Notice Period as payment in lieu of notice. This payment is payable in two equal
instalments or until such earlier date alternative employment is secured, subject to mitigation.

In the event of the Company serving notice within 12 months following a change of control then employment will
terminate immediately and the Company will make a payment in lieu of notice.

There is no entitlement to a pro rata bonus payment in lieu of notice.

The terms and conditions for the Chairman and non-executive directors are set out in their letters of appointment, which are available for inspection
at the Company’s registered office and will be available at the AGM, as are executive service contracts. The letters of appointment entitle the non-
executive directors and the Chairman to receive fees but do not have provisions on payment for early termination. The appointment of non-executive
directors is for a fixed term of up to three years which may be terminated by three months’ notice from either party, with the exception of Messrs
Honda, Kilic and Wosner whose appointments are governed by their Relationship Agreements between the Company and Nissin Foods Holdings
Co., Ltd, Paulson & Co. Inc. and Oasis Management Company Ltd, respectively.

4. External directorships
The Company recognises that its executive directors may be invited to become non-executive directors of companies outside the Company
and exposure to such non-executive duties can broaden experience and knowledge, which would be of benefit to the Company. Any external
appointments are subject to Board approval (which would not be given if the proposed appointment was with a competing company, would lead
to a material conflict of interest or could have a detrimental effect on a director’s performance). At the discretion of the Board, the executive director
may be able to retain any fees received.

5. Policy on payment for loss of office
The Committee aims to deal fairly with cases of termination, while attempting to limit compensation and honour contractual remuneration
entitlements. The principles that would be followed are:

• The executive directors have rolling contracts. Standard notice period is set at six months, however, upon appointment to the Board, an

executive director’s notice period may be set at 12 months, decreasing to six months after six months of employment.

• The Company may elect to terminate employment immediately in circumstances where it considers it to be appropriate by making a payment
in lieu of notice equivalent to the executive director’s salary, pension and benefits for the notice period in two equal instalments (the first within
28 days of termination and the second three months (or where the notice period is 12 months, six months) following the date of termination).
These payments are subject to the executive director’s duty to mitigate his or her loss by finding alternative employment. If the executive director
finds an alternative position, future payments will be reduced by the amount of remuneration received by the executive director pursuant to that
alternative remunerated position.

• Salary, pensions and benefits will generally not be paid to a ‘bad leaver’ in lieu of notice. The Company may terminate an executive director’s
employment without notice (or payment in lieu) in certain circumstances, including where he or she commits an act of dishonesty, is guilty of
gross misconduct or a serious breach of his or her service agreement.

• A time pro-rated bonus (where relevant in respect of that bonus year) may be payable for the period of active service from the start of the bonus
year to the date on which the director’s employment terminates for ‘good leavers’. Any unpaid bonus for the preceding completed bonus year
may also be payable ) to a ‘good leaver’. The amount of such bonus will be determined at the discretion of the Committee taking into account
performance. Any bonus payable could, at the discretion of the Remuneration Committee, be paid entirely in cash. There is no entitlement to
any bonus (in respect of that or any previous bonus year) following notice of termination (or cessation of employment) for ‘bad leavers’ and they
will not receive any bonus in such circumstances. Any share-based entitlements granted to an executive director under the Company’s share
plans will be determined based on the relevant plan rules or award agreement. The default treatment is that any outstanding awards lapse on
cessation of employment. However, in certain prescribed circumstances, such as death, disability, injury, redundancy (not in respect of the DBP),
transfer of the employing company or business out of the Group or other circumstances at the discretion of the Committee (taking into account
the individual’s performance and the reasons for their departure) ‘good leaver’ status can be applied. The ‘good leaver’ treatment under the
various plans is as follows:

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− DBP and LTIP awards will vest on the normal vesting date (unless the Remuneration Committee decides that the awards should vest on the
date of cessation) subject to, in the case of LTIP awards, performance conditions (measured over the original time period or a shorter period
where the LTIP awards vest on cessation of employment) and are reduced pro-rata to reflect the proportion of the period from grant actually
served. The Remuneration Committee has the discretion to disapply time pro-rating if it considers it appropriate to do so. However, it is
envisaged that for the LTIP awards this would only be applied in exceptional circumstances. In determining whether an executive should be
treated as a ‘good leaver’ or not, the Committee will take into account the performance of the individual and the reasons for their departure.

− The Remuneration Committee may agree that the Company will pay for the provision of outplacement support and the reasonable fees for a
departing executive director to obtain independent legal advice in relation to his or her termination arrangements and nominal consideration
for any agreement to introduce contractual terms protecting the Company’s rights following termination.

− Where it is necessary to discharge an existing legal obligation (or by way of damages for breach of such an obligation) or by way of

settlement or compromise of any claim arising in connection with the termination of a director’s office or employment the Committee may
make a payment to a departing executive director.

− In the event of change of control of the Company, if the Company gives notice to terminate or the executive director is constructively

dismissed, his or her employment shall terminate immediately and he or she will be entitled to a payment in lieu of notice equivalent to the
executive director’s salary, pension and benefits for his or her notice period. Any share-based entitlements will be dealt with in accordance
with the rules of the relevant schemes.

6. Recruitment policy
On the recruitment of an executive director the Committee will aim to align the executive’s remuneration package with the approved Directors’
Remuneration Policy. In arriving at a remuneration package, the Committee will take into account the skills and experience of the individual and the
market rate for a candidate. The details of the recruitment policy are set out below:

Reward element
Base salary

Detailed terms
In line with the above Directors’ Remuneration Policy table. However, includes discretion to pay lower base salary with
incremental increases as new appointee becomes established in the role.
In line with the above Directors’ Remuneration Policy table.

Pension and benefits
Performance based pay Executive directors are entitled to participate in the Company’s Annual Bonus, DBP and Long-Term Incentive Plans in
line with the above Directors’ Remuneration Policy table. The maximum variable pay for the CEO will be 275% of the
base salary and 250% of base salary for the CFO and other directors. In its discretion, the Committee may set different
performance measures to apply to awards made in the year of appointment if it considers that to be appropriate.
To assist with recruitment, upon appointment to the Board, an executive director’s notice period may be set at up to 12
months, decreasing to the standard notice period of six months after six months of employment.
In order to facilitate external recruitment of executive directors, it may be necessary for the Committee to consider buying
out existing incentive awards which would be forfeited on the individual leaving their current employment. The Committee
would seek, where possible, to provide a buy-out structure which was consistent with the forfeited awards in terms of
quantum, vesting period and performance conditions.

Notice Period

Buy outs

The buy-out award may necessitate the use of the flexibility in the Listing Rules to make such awards outside the
existing LTIP.

Notes:
1. Should an executive appointment be made for an internal candidate, such an individual would be allowed to retain any and all provisions of their current remuneration

package.

2. The Committee has discretion to authorise the payment of reasonable relocation costs (and tax thereon) which may be necessary to secure the appointment of an

executive director.

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7. Consideration of employees/wider Group
The Committee is responsible for reviewing and approving the
remuneration arrangements for senior management. The Group
HR Director is a regular attendee at meetings of the Remuneration
Committee and is able to brief the Committee on remuneration levels for
the wider workforce and meetings which have been held with employee
representative bodies. The Committee reviews workforce remuneration,
salary increases within the Group, and the level of annual bonus awards,
as well as overseeing participation in long-term incentives for below
Board level senior management. As a result, the Committee is aware
of how typical employee total remuneration compares to the potential
total remuneration packages of executive directors and takes this
into account when setting policy for executive director remuneration.
However, in line with current market practice, the Group does not
actively consult with employees on executive remuneration.

Differences in Remuneration Policy for executive directors
compared to other employees
The executive directors’ remuneration policy is set within the wider
context of the Group’s remuneration policy for the wider workforce.
The key differences of quantum and structure in pay arrangements
across the Group reflect the different levels of responsibilities, skill and
experience required for the role. Executive directors have a much greater
emphasis on performance-based pay through the annual bonus and the
LTIP. Salaries for management grades are normally reviewed annually
(currently in July each year) and take account of both business and

personal performance. Specific arrangements are in place at each site
and these may be annual arrangements or form part of a longer term
arrangement.

The majority of management grades participate in the Annual Bonus
plan to ensure alignment with the Group’s strategic priorities. Senior
management participate in long-term incentive arrangements reflecting
their contribution to Group performance and enhancing shareholder
value. All employees are encouraged to own shares in the Company via
the Sharesave Plan and executive directors through the shareholding
guideline.

8. Consideration of shareholders’ views
The Remuneration Committee and the Board consider shareholder
feedback received in relation to the AGM each year at a meeting
immediately following the AGM and any action required is incorporated
into the Remuneration Committee’s action plan for the ensuing period.
This, and any additional feedback received from shareholders from time
to time, is then considered by the Committee and as part of its annual
review of remuneration arrangements.

Specific engagement with major shareholders may be undertaken when
a significant change in remuneration policy is proposed or if a specific
item of remuneration is considered to be potentially contentious. During
the design of the new policy, the Committee consulted with the major
shareholders..

9. Key changes to the Remuneration Policy
The proposed policy differs from the policy that was approved by shareholders at the AGM held on 20 July 2017 in the following areas:

Pension

Annual bonus

Maximum (as a percentage of salary) for the CEO has been decreased from 150% to 125% and for the CFO from 105%
to 100%.

Long-Term
Incentive Plan
(LTIP)

Shareholding

Annual bonus will no longer be subject to personal performance.

Maximum individual limit (as a percentage of salary) has decreased from 200% to 150%.

Multiple of salary that the executives must hold in shares, which was previously a guideline, is now a requirement and has
been increased from 100% of salary to 200% of salary.

Services contracts The standard notice period was set at 12 months from the executive director and the Company. This has been decreased

to six months. To assist with recruitment, upon appointment to the Board, the notice period may be set at up to 12
months, decreasing to six months after six months of employment.

Policy on payment
for loss of office

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Directors’ Remuneration report CONTINUED

Annual Report on Remuneration
An advisory vote on this Annual Report on Remuneration will be put to shareholders at the 2020 AGM.

Single figure table for total remuneration (audited)
Single figure for the total remuneration received by each executive director for the 52 weeks ended 28 March 2020 (2019/20) and 30 March 2019
(2018/19).

Salary
Salary supplement
Taxable benefits
Pension
Annual Bonus
Share based awards
Single figure for total remuneration

Alex Whitehouse

Duncan Leggett

Alastair Murray

2019/20
£’000
277
–
19
7
284
74
661

2018/19
£’000
N/A
N/A
N/A
N/A
N/A
N/A
–

2019/20
£’000
85
–
6
4
70
18
183

2018/19
£’000
N/A
N/A
N/A
N/A
N/A
N/A
–

2019/20
£’000
177
100
19
15
118
121
550

2018/19
£’000
416
40
27
36
232
–
751

Base salary and fees (executive directors) (audited)
The Committee sets base salary by reference to the size and complexity
of the business based on factors such as revenue, market share, and
total enterprise value rather than just market capitalisation

Alex Whitehouse, CEO, was appointed with a salary of £475,000
and Duncan Leggett, CFO, was appointed with a salary of £275,000.
The salary levels reflect the fact that this is their first appointment as
CEO and CFO, respectively. The Committee aims to increase their
salaries over the next two years to a level at, or near, the FTSE 250
lower quartile, which the Committee feels would be appropriate given
the Company’s level of turnover, enterprise value and complexity. Any
such increases over the next two years (which are at the Committee’s
discretion and subject to performance) are likely to be higher than the
annual increase awarded to all other colleagues not involved in collective
bargaining.

The Company has moved the annual salary review date from 1 April
to 1 July so that it takes place after the completion of the Group’s
annual performance review. The Committee reviewed the proposals for
2019/20 and approved an increase of 2.5% to Mr Murray’s CFO salary,
in line with all colleagues not involved in collective bargaining with effect
from 1 July 2019. In this transitional year, the increase was backdated
to 1 April 2019. For Mr Whitehouse and Mr Leggett, this represents their
salaries on the date of their appointment as CEO and CFO.

Executive director
Alex Whitehouse
Duncan Leggett
Alastair Murray

Salary from
1 July 2019
£475,000
£275,000
£426,606

Change
–
–
+2.5%

Salary from
1 April 2018
–
–
£416,201

Alex Whitehouse
Mr Whitehouse was appointed CEO on 30 August 2019 and all
payments relate to the period from this appointment. He received a
basic salary of £475,000 per annum and an annualised pension benefit
of £12,465, which equates to 7.5% of the Earnings Cap (£166,200 for
the 2019/20 tax year). Mr Whitehouse received a bonus of £284,112.
Benefits provided for the period related to the provision of car
allowance, private medical insurance and private fuel.

Duncan Leggett
Mr Leggett was appointed CFO on 10 December 2019 and all
payments relate to the period from this appointment. He received
a basic salary of £275,000 per annum and an annualised pension
benefit of £12,465, which equates to 7.5% of the Earnings Cap
(£166,200 for the 2019/20 tax year). Mr Leggett received a bonus of
£70,464. Benefits provided for the period related to the provision of car
allowance, private medical insurance and professional membership.

In line with the current Remuneration Policy, one-third of the annual
bonus awards to Mr Whitehouse and Mr Leggett will be in the form of
shares deferred for three years.

Alastair Murray
Mr Murray stepped down as Acting CEO and CFO on 30 August 2019
following the appointments of Mr Whitehouse and Mr Leggett. He
received a basic salary for the period of £426,606 per annum and an
annualised supplement in lieu of pension of 7.5% of the Earnings Cap
(£166,200 for the 2019/20 tax year) which equates to £5,194 for the
period together with an additional RPI adjusted pensions supplement
of £10,419. In addition, he received a monthly salary supplement of
£20,000 (which does not count towards pension, annual bonus or long-
term incentives) for carrying out the role of Acting CEO, in addition to his
role of CFO. Mr Murray received a bonus of £118,069 for the financial
period. Benefits related to the provision of a company car, use of an
executive driver service (following his appointment as Acting CEO) and
private medical insurance. All payments were on a pro rata basis for the
period of his appointment up to 30 August 2019.

The figures for share based payments represent an estimate of the value
of the 2017 LTIP award, which will part vest in June 2020, based on
the three-month average price to 28 March 2020 of 32.6p. The share
price at the date of grant was 40.5p and therefore there was no gain
attributable to share price appreciation over the three-year performance
period (see page 72 for more information).

Full details of the annual bonus performance assessments for Mr
Whitehouse, Mr Leggett and Mr Murray are set out on pages 69 to 71.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance69

Annual bonus (executive directors) (audited)
Each year, the Committee sets individual performance targets and
bonus potentials for each of the executive directors. Annually, the
Committee reviews the level of achievement against the performance
targets set and, based on the Committee’s judgement, approves the
bonus of each executive director. Annual bonus payments are not
pensionable.

Performance assessment for 2019/20
The Committee undertook a full and detailed review of the performance
of each executive director against their financial and non-financial
targets. Following the appointment of Mr Whitehouse as CEO and the
appointment of Mr Leggett as acting CFO, a new set of non-financial
goals were agreed covering the period of their appointment. The
weightings were also amended to bring them in line with the Company’s
new Remuneration Policy, so that 70% were subject to financial targets
and 30% were subject to non-financial targets (previously the weighting
was 50:50). As well as reviewing the specific targets, the Committee
also considered the financial performance of the business as a whole
and the wider market in which the Group operates. This included an
assessment of the impact of the current COVID-19 pandemic on trading
performance in the final month of the financial year.

As discussed in the Chairman’s statement and Chief Executive’s review
on pages 09 and 11, the Group delivered a strong overall performance
in 2019/20 with Trading profit up +3.2% to £132.6m and Net debt
(on a pre-IFRS 16 basis) reduced significantly from £469.9m to
£408.1m, both ahead of market expectation. The Committee reviewed
performance against each of the non-financial targets (also subject to a
financial underpin) and the extent to which they were achieved.

Following the review, the Committee assessed that bonus awards of
81.5% of opportunity for Mr Whitehouse and Mr Leggett and 64.2%
of opportunity for Mr Murray were appropriate (all three were time pro
rated to reflect their respective periods of service). Further details of
the specific financial and non-financial targets and the performance
outcomes are set out in the tables on pages 70 and 71. One-third of the
annual bonus payment to Mr Whitehouse and Mr Leggett will be made
in the form of shares deferred for a three-year period under the Deferred
Bonus Plan (DBP), details of the DBP are set out on page 72. The
time pro-rated bonus payable to Mr Murray will be paid fully in cash, in
accordance with the ‘Policy on payment for loss of office’.

Payments for loss of office and payments to former
directors (audited)
Payments for loss of office in the year totalled £989,112 (2018/19:
£498,654) and no other payments were made to former directors.

The Committee exercised discretion to pay Mr Murray £478,360 in lieu
of his 12-month notice period in respect of salary, contractual benefits
and pension supplement. This was paid in two equal instalments,
the first was paid immediately following Mr Murray’s resignation as
a director and the second payment made six months following the
resignation date. In the event of him becoming otherwise employed or
engaged before the second payment was made, it would have been
reduced by the amount received (or to be received over the next six
months) in respect of such employment or engagement, save for the
potential for one permitted non-executive directorship, as contemplated
by his service agreement. In addition, the Company agreed to make
a payment of £8,973 in lieu of 3.5 days accrued holiday. Mr Murray
received a salary supplement of £20,000 per month in recognition of
him acting as Chief Executive Officer. The Committee agreed to pay Mr
Murray £60,000 (less tax and National Insurance) in lieu of providing
three months’ notice of the termination of his appointment as acting
Chief Executive Officer. A capped contribution of £10,000, excluding
VAT, was paid towards Alastair’s legal fees incurred in connection with
his departure.

The Remuneration Committee exercised its discretion to treat Mr Murray
as a ‘good leaver’ in relation to his annual bonus, Long-Term Incentive
Plan and Deferred Bonus Plan awards.

As a result, he was eligible to receive a pro rata bonus in respect of time
served in the financial year ended 28 March 2020.

Awards under the Premier Foods Long-Term Incentive Plan will, in
accordance with the Company’s Remuneration Policy and the rules
of the Plan, after a time pro rata reduction to reflect the period of time
served during the applicable vesting period, vest on the normal vesting
dates, subject to satisfaction of the applicable performance conditions
at the end of the performance period. The value of any shares that may
vest will be calculable at the relevant dates of vesting.

Awards under the Premier Foods Deferred Bonus Plan will, in
accordance with the Directors’ Remuneration Policy, vest on the normal
vesting date in full without time pro-rating. The value of the shares will
be calculable at the date of vesting. The Remuneration Committee
exercised its discretion to disapply time pro-rating in respect of the
award.

In accordance with the rules of the Sharesave plan, Mr Murray’s
Sharesave options lapsed when his employment ended.

A payment of £431,779 was paid to Mr Darby, who stepped down
as CEO on 31 January 2019, representing the second half of his 12
months’ notice.

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Directors’ Remuneration report CONTINUED

Alex Whitehouse (audited)

Performance measure
Financial targets (subject to a Trading profit underpin of £127.0m)
Trading profit
Net debt

Annual bonus

Target

Stretch

Performance
outcome

Weighting

Performance
(% of max
bonus)

£130.0m
£440.0m

£140.0m
£430.0m

£132.6m
£408.1m

Performance measure
Non-financial targets (subject to a Trading profit underpin of £127.0m )
CEO transition

Performance outcome

Strategic review

Business development

Introduced new executive leadership team members, simplified ways of working, and
successfully realigned management structures across the Group to refocus the business
and enhance the delivery of the Group’s branded growth model strategy.
Successful completion of the Group’s strategic review with the announcement of a
landmark agreement with the Group’s pension schemes, which is transformational for
both the Group and its pension scheme members by significantly improving its long-
standing pension funding situation.
Appointed Head of the International business, implemented revised operating structure,
and presented a new International strategy for approval by the Board, to deliver
improved long-term sustainable growth. Completed review of the Knighton business
resulting in the announcement to integrate Knighton into the Group.

Final outcome

Duncan Leggett (audited)

Performance measure
Financial targets (subject to a Trading profit underpin of £127.0m)
Trading profit
Net debt

Annual bonus

Target

Stretch

Performance
outcome

Weighting

Performance
(% of max
bonus)

£130.0m
£440.0m

£140.0m
£430.0m

£132.6m
£408.1m

Performance measure
Non-financial targets (subject to a Trading profit underpin of £127.0m)
Strategic review

Performance outcome

Business development

Shared service centre

Worked closely with the Board, advisers, pension trustees and other key stakeholders to
obtain agreement for a segregated merger of the Group’s three main pension schemes,
which will place all the UK defined benefit schemes under one Trust.
Presented plans to the Board for the delivery of savings across central functions and
operations over the next two years. Supported the review and implementation of the
strategy for the integration of the Knighton business.
Completed robotics implementation solutions in line with budgeted savings. Successful
introduction and delivery of key financial KPIs to improve efficiency and reduce costs at
the Group’s shared service centre.

Final outcome

50.0%
20.0%
70.0%

31.5%
20.0%
51.5%

Performance
(% of max
bonus)

Weighting

10.0%

30.0%
100.0%

30.0%
81.5%

50.0%
20.0%
70.0%

31.5%
20.0%
51.5%

Performance
(% of max
bonus)

Weighting

10.0%

30.0%
100.0%

30.0%
81.5%

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020GovernanceAlastair Murray (audited)

Performance measure
Financial targets (subject to a Trading profit underpin of £127.0m)
Trading profit
Net debt

Annual bonus

Target

Stretch

Performance
outcome

Weighting

Performance
(% of max
bonus)

£130.0m
£440.0m

£140.0m
£430.0m

£132.6m
£408.1m

40.0%
10.0%
50.0%

25.2%
10.0%
35.2%

Performance
(% of max
bonus)

Weighting

30.0%

16.0%

10.0%

50.0%
100.0%

6.0%

7.0%

29.0%
64.2%

Performance measure
Non-financial targets (subject to a Trading profit underpin of £127.0m)
Strategic Review

Performance outcome

Business development

Logistics transformation

Led review with the Board to identify potential strategic opportunities, appointed
advisory team and worked closely with them to deliver initial phase of the strategic
review.
Stabilisation of performance at Knighton and initiated the review into the long-term
strategy for the business.
Delivery of improvement in day-to-day operational and financial performance of the UK
logistics operation.

Final outcome

Annual bonus measures for 2020/21
As part of the arrangements proposed for the new Remuneration Policy, during the year the Committee agreed to simplify the weightings for the
annual bonus performance measures. Financial targets will represent not less than 70% of the total bonus opportunity (an increase from not less
than 50%), with the balance consisting of non-financial targets and the element subject to personal performance has been removed.

The Committee agreed that, for 2020/21, the financial targets would represent 75% of the total bonus opportunity. The performance measures are
linked to the Group’s strategy to focus on revenue growth, cost efficiency and cash generation with the aim to de-leverage the business. Trading
profit and Net debt are both Group KPIs (see page 28). Non-financial objectives are focused on commercial opportunities to drive sales, generate
cost savings and improve free cash flow. The Board considers the financial targets and certain of the non-financial targets to be commercially
sensitive but has agreed that they will be disclosed as part of the performance assessment in next year’s annual report. The financial and non-
financial targets both contain Trading profit underpins. The Committee noted that, given the current uncertainty regarding the ongoing impact of the
COVID-19 pandemic, it would monitor performance over the financial year and consider the need, if any, to exercise discretion when determining the
final outcome for the period.

One-third of any annual bonus awarded in respect of the 2020/21 financial year will be deferred in shares for three years under the Deferred Bonus Plan.

Maximum opportunity as a % of salary
Performance measure
Financial objectives (subject to a Trading profit underpin)
Trading profit
Net debt

Non-financial objectives (subject to a Trading profit underpin)
Strategic
Operational
Environmental, Social and Governance

Alex
Whitehouse
125%
Weighting

Duncan
Leggett
100%
Weighting

50%
25%
75%

15%
5%
5%
100%

50%
25%
75%

15%
5%
5%
100%

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Directors’ Remuneration report CONTINUED

Deferred Bonus Plan (DBP)
One-third of any annual bonus payment awarded to executive directors is made in the form of shares. These shares are awarded under the terms
of the DBP which was approved by shareholders in July 2017. Awards will normally be made within six weeks following the announcement of the
Group’s full year results in the form of nil cost options. The awards will normally vest on the third anniversary of grant and, if awarded in the form of nil
cost options, will then be exercisable up until the tenth anniversary of grant. The shares are subject to forfeiture and clawback provisions. Details of
the DBP award granted on 7 June 2019 is set out below:

Alastair Murray

2018/19 Annual
bonus
£231,615

Bonus deferral
(one-third)
£77,205

Shares
awarded
219,832

Deferral period
07.06.19 – 07.06.22

Long-Term Incentive Plan (LTIP)
The current LTIP was approved by shareholders in 2011 (‘2011 LTIP Plan’); awards can be made as either performance shares or matching shares.
In 2017 the Committee reviewed the use of the matching shares and concluded that they were no longer common practice in the market and
therefore no further awards will be made as matching shares under the LTIP.

The 2011 LTIP Plan is due to expire in April 2021. The Committee believes the LTIP continues to play an important role in the overall remuneration
of executive directors and other members of senior management and is therefore seeking shareholder approval for a new 10 year LTIP (‘2020 LTIP
Plan’) at the 2020 AGM. The terms of the 2020 LTIP Plan are designed to be largely the same as the 2011 LTIP Plan but with the removal of the
matching share award element and appropriate changes to bring it in line with prevailing best practice and the Company’s new Remuneration Policy.
A summary of the key changes is set out in the AGM Notice.

Performance assessment for the 2017 LTIP award
The performance conditions for the 2017 LTIP award were based on a relative TSR condition (comprising two-thirds of the award) and an adjusted
EPS condition (comprising one-third of the award). The Committee assessed the two performance conditions in May 2020 and concluded that the
adjusted EPS target had been fully achieved whereas the relative TSR target had not been achieved. The adjusted EPS outcome for 2019/20 was
8.9p versus a target of 8.7p and this will result in one-third of the LTIP award vesting in June 2020.

Performance measure
Relative TSR¹
Adjusted EPS2
% of relevant portion of award vesting3

Weighting
2/3
1/3

Targets

Below
threshold
< Median
< 7.8p
0%

Outcome

Threshold

Actual
performance
Stretch
Median Upper quartile Below median
8.9p

7.8p
20%

8.7p
100%

Payout
0%
33.3%

1. Measured against the constituents of the FTSE All Share Index (excluding investment trusts) at the start of the period.
2. 2016/17 base year adjusted EPS was 7.2p.
3. Straight-line vesting between threshold and stretch.

LTIP award for 2019/20 (audited)
Details of the LTIP award granted on 7 June 2019 is set out below.

Alastair Murray

150%

£624,302

01.04.19 – 31.03.22

Basis of award

Max value on
award date

Performance
period

Performance measure
Relative TSR1
Adjusted EPS2
% of relevant portion of award vesting3

Weighting
2/3
1/3

Targets

Below
threshold
< Median
< 10.1p
0%

1. Measured against the constituents of the FTSE All Share Index (excluding investment trusts) around the start of the period.
2. 2018/19 base year adjusted EPS was 8.5p.
3. Straight-line vesting between threshold and stretch.

Threshold

Stretch
Median Upper quartile
11.1p
100%

10.1p
20%

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance73

Pro rata LTIP awards
On the appointment of Mr Whitehouse as CEO and Mr Leggett as
acting CFO it was agreed that they would be eligible to receive a pro
rata award under the 2019/20 LTIP award to reflect the award levels
of their new roles. This would ordinarily have been made immediately
following appointment, however, members of the Board were in a
prohibited period until the results of the Group’s strategic review were
announced in April 2020 and the awards have therefore been delayed.
To ensure consistency with the original 2019/20 LTIP Award made in
June 2019, the same performance conditions, performance period and
share price will be applied. The vesting date will be three years from the
date of grant and a two-year post vesting holding period will apply.

LTIP award for 2020/21
For the 2020/21 award the Committee proposes to use the same
measures as the 2019/20 LTIP award, i.e. a relative TSR condition
(comprising two-thirds of the award) and an adjusted EPS condition
(comprising one-third of the award), which is aligned with the
Company’s focus on revenue, cost efficiency and cash generation
in order to reduce Net debt and improve shareholder return over the
medium-term. The Committee believes that these measures are fully
aligned with the interests of shareholders and that awards will only vest
following the achievement of stretching performance targets. When
setting the targets, the Committee also considered the potential impact
of the current COVID-19 pandemic on both performance measures.
Following this review, it was agreed between the Committee and
management, that it would be appropriate to raise the adjusted EPS
targets from the provisional targets previously agreed upon by the
Committee.

The TSR condition requires at least a median ranking to be achieved for
20% of this part of the award to vest, with full vesting taking place for
an upper quartile ranking against the constituents of the FTSE All Share
Index (excluding investment trusts). The Committee considers that the
FTSE All Share Index is an appropriate index to use as it includes a wide
range of companies, including the members of the FTSE Small Cap
Index. The Compound Annual Growth Rate (CAGR) for the adjusted
EPS target ranges from 9.5% to 12.5%. The Committee considers
the targets to be challenging, particularly in the context of current
growth levels in the markets in which we operate. Further details of all
outstanding LTIP awards are provided in the table on page 74.

Alex Whitehouse

Basis of
award
150%

Max value
on
award date
£712,500

Duncan Leggett

100%

£275,000

Performance
period
01.04.20 –
31.03.23
01.04.20 –
31.03.23

Dilution limits
Awards under certain executive and all-employee share plans may be
satisfied using either newly issued shares or shares purchased in the
market and held in the Group’s Employee Benefit Trust (which held
81,714 shares as at 28 March 2020). The Group complies with the
Investment Association guidelines in respect of the dilutive effect of
newly issued shares. The current dilutive impact of share awards over a
10-year period is approximately 2.9%.

Pension payments
The table below provides details of the executive directors’ pension
benefits:

Company
contributions to
Group’s DC pension
plan
£'000
3
2
-

Cash in lieu of
contributions to
DC-type pension plan
£’000
4
2
15

Alex Whitehouse
Duncan Leggett
Alastair Murray

Under the Company’s new Remuneration Policy, pension entitlements
for executive directors are now aligned with those available to the
majority of the workforce, which currently equates to a contribution of
7.5% of basic pay up to an earnings cap (£166,200 for the 2019/20
tax year). Executive directors have the right to participate in the Group’s
defined contribution (‘DC’) pension plan or elect to be paid some, or all,
of their contributions in cash. During the year Mr Whitehouse and Mr
Leggett both participated in the Group’s DC pension plan. Mr Murray
was also entitled to an additional pension supplement which amounted
to £10,419.

Share ownership guidelines
To align executive directors’ interests with those of shareholders, the
new Remuneration Policy has increased the multiple of salary that
the executives must hold in shares from 100% of salary to 200% of
salary. They are expected to retain 50% of shares from vested awards
under the DBP and the LTIP (other than sales to settle any tax or NICs
due) until they reach this target (valued at the time of purchase or
vesting). The Committee will review progress against the requirements,
recognising that both current executive directors were appointed in the
year. In February 2019, the Company announced it was conducting
a review of its strategic options to increase shareholder value and the
Board determined that it would be inappropriate for directors to deal in
shares of the Company until the outcome of the strategic review was
concluded. The conclusion of the strategic review was announced by
the Company in April 2020, after the end of the financial year.

Performance
measure
Relative TSR1

Adjusted EPS2
% of relevant portion
of award vesting3

Targets

Below

Weighting

threshold Threshold
Median

2/3 < Median

1/3

< 11.69p
0%

11.69p
20%

Stretch
Upper
quartile
12.69p
100%

1. Measured against the constituents of the FTSE All Share Index (excluding

investment trusts) around the start of the period.

2. 2019/20 base year adjusted EPS was 8.9p.
3. Target EPS of 12.29p (at which 50% vests) with straight-line vesting between

threshold and target and between target and stretch.

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Directors’ Remuneration report CONTINUED

Share interests table (audited)
The following table shows executive directors’ interests in Company shares. Awards under the LTIP are subject to a three-year vesting period and
will only vest if stretching performance conditions are met. In July 2017 the Company adopted a two-year holding period post vesting. The figures
shown represent the maximum number of shares a director could receive following the end of the vesting period if all performance targets were
achieved in full.

Share ownership guidelines and share interest table (audited)

Shares owned
as at 28 March
20201
336,692
60,407
409,784

Shares owned
as at 31 March
20191
N/A
N/A
392,878

Extent to which
share ownership
guidelines met2
13%
5%
34%

Alex Whitehouse
Duncan Leggett
Alastair Murray

DBP Awards
–
–
344,397

LTIP Awards
2,350,436
161,500
1,790,263

Sharesave
Awards
24,862
24,862
–

Total
2,711,990
246,769
2,544,444

1. Mr Whitehouse was appointed CEO on 30 August 2019, Mr Leggett was appointed CFO on 10 December 2019 and Mr Murray stepped down from the Board on 30

August 2019.

2. The Shareholding guidelines were increased from 100% of salary to 200% of salary during the course of the financial period.

Executive share awards (audited)

Balance as
at 1 April
20191

Date of
grant

Awarded
in the year

Exercised
in the year

Vested
in year2

Lapsed in
the year3

Balance
as at 28
March
20201

Share
price on
date of
grant

Share
price on
date of
exercise

Date of
vesting/
becomes
exercisable

Maximum
expiry
date

Alex Whitehouse
LTIP

Sharesave Plan

Duncan Leggett
LTIP
Sharesave Plan

Alastair Murray
LTIP3

DBP

Sharesave Plan4

03.06.16
13.06.17
08.08.18
07.06.19
20.12.16
17.12.18
16.12.19

648,063
677,557
772,538
–
7,826
8,160
–
2,114,144

–
–
–
900,341
–
–
8,876
909,217

13.06.17
20.12.16
17.12.18
16.12.19

161,500
7,826
8,160
–
177,486

–
–
–
8,876
8,876

03.06.16 1,440,141
13.06.17 1,505,682
08.08.18 1,525,287
07.06.19
08.08.18
07.06.19
15.12.15
20.12.16

–
–
–
– 1,777,623
–
219,832
–
–
4,620,407 1,997,455

124,565
–
16,906
7,826

–
–
–
–
–
–
–
–

–
–
–
–
–

–
–
–
–
–
–
16,906
–
16,906

Option
price

–
–
–
–
34.50
30.00
29.20

42.50
40.50
41.20
34.00
–
–
–

– 648,063
–
–
–
–
–
–
–
–
–
–
–
–
–

–
677,557
772,538
900,341
7,826
8,160
8,876
648,063 2,375,298

–
–
–
–
–

161,500
7,826
8,160
8,876
186,362

-
34.50
30.00
29.20

40.50
–
–
–

– 1,440,141
–
– 391,478 1,114,204
–
991,437
533,850
– 1,635,414
142,209
–
–
124,565
–
–
219,832
–
–
–
–
7,826
–
– 4,466,296 2,134,660

–
–
–
–
–
–
31.94
34.50

42.50
40.50
41.20
34.00
41.20
34.00
–
–

–
–
–
–
–
–
–

–
–
–
–

–
–

–
–
–
33.50
–

03.06.19 02.06.23
13.06.20 12.06.24
08.08.21 07.08.25
07.06.22 06.06.26
01.02.20 31.07.20
01.02.22 31.07.22
01.02.23 31.07.23

13.06.20 12.06.24
01.02.20 31.07.20
01.02.22 31.07.22
01.02.23 31.07.23

03.06.19 02.06.23
13.06.20 12.06.24
08.08.21 07.08.25
07.06.22 06.06.26
08.08.21 02.02.22
07.06.22 07.12.22
01.02.19 31.07.19
01.02.20 31.07.20

1. Mr Whitehouse was appointed CEO on 30 August 2019, Mr Leggett was appointed CFO on 10 December 2019 and Mr Murray stepped down from the Board on

30 August 2019.

2. The Remuneration Committee has determined that the EPS element of the 2017 LTIP has vested in full (see page 72 for more information).
3. The shares shown as lapsed under the 2017, 2018 and 2019 LTIP awards illustrate the impact of time pro-rating, following Mr Murray’s cessation of employment on 30 August

2019.

4. Sharesave award lapsed on cessation of employment.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance75

Chief Executive’s single figure for total remuneration
The table below shows the single figure for total remuneration and
the annual bonus and LTIP vesting as a percentage of maximum
opportunity for the financial period and the previous 10 financial periods.
The figures for 2014/15 represent a 15-month period.

CEO

Year
2019/20 Alex Whitehouse1
2019/20 Alastair Murray1
2018/19 Alastair Murray
2018/19 Gavin Darby
2017/18 Gavin Darby
2016/17 Gavin Darby
2015/16 Gavin Darby
2014/15 Gavin Darby
Gavin Darby
2013
Michael Clarke
Michael Clarke
Michael Clarke
Robert Schofield
Robert Schofield
Robert Schofield

2010
2009

2012
2011

Single figure
for total
remuneration
£661,403
£550,294
£158,297
£1,241,708
£1,229,383
£862,455
£1,750,933
£1,736,749
£1,405,753
£1,122,795
£1,699,575
£2,277,070
£895,485
£715,052
£929,967

Annual
bonus
as a % of
maximum
81.5%
64.2%
53.0%
60.0%
35.0%
–
57.0%
23.4%
16.0%
–
66.0%
–
–
10.0%
29.0%

LTIP
vesting
as a % of
maximum
33.3%
33.3%
–
–
–
–
–
–
–
–
–
–
–
–
–

1. Mr Whitehouse was appointed as CEO on 30 August 2020 and Mr Murray
stepped down as Acting CEO and Chief Financial Officer. For Mr Murray the
figure was calculated as his pro rata CFO salary, bonus, LTIP, pension and
benefits plus his £20,000 monthly salary supplement for the period he was
Acting CEO. Full details of the single figure for total remuneration are set out on
page 68.

Relative importance of spend on pay
The following table sets out the amounts and percentage change in
total employee costs. The figure for 2018/19 included GMP equalisation
costs of £41.5m. The terms of our current banking facility contain
restrictions on the payment of dividends. Free cash flow and Net
debt have therefore been included as additional indicators. Cash flow
demonstrates the cash available to reinvest in the business and service
debt payments and Net debt highlights the importance of organically
de-leveraging the business to a point at which dividend payments can
be resumed under the Group’s banking arrangements (see KPIs on
page 28).

Total employee costs
Free cash flow
Net debt

2019/20
£168.9m
£65.1m
£408.1m

2018/19
£202.3m
£29.2m
£469.9m

Improvement/
Deterioration
-16.5%
+122.9%
+13.2%

Share ownership for the wider Group
The Committee recognises the importance of aligning colleagues’
interests with those of shareholders and encourages share ownership
in order to increase focus on the delivery of shareholder return.
All members of the ELT participate in the LTIP. Participation in the
Sharesave Plan currently represents approximately 24% of colleagues.

Total shareholder return
The market price of a share in the Company on 27 March 2020 (the last
trading day before the end of the financial period) was 24.5 pence; the
range during the financial period was 18.46 pence to 43.0 pence.

This graph shows the value, by 28 March 2020, of £100 invested in
Premier Foods plc on 31 December 2009, compared with the value of
£100 invested in the FTSE Food Producers Index and FTSE All Share
Index (excluding Investment Trusts) on the same date. The Committee
considers these to be the most appropriate comparator indices to
assess the performance of the Group. The other points plotted are the
values at intervening financial year-ends.

250

200

150

100

)

d
e
s
a
b
e
r
(

)

(

e
u
a
V

31/12/09 31/12/10 31/12/11 31/12/12 31/12/13 04/04/15 02/04/16 01/04/17 31/03/18

30/03/19 28/03/20

Premier Foods

FTSE All Share (excluding Investment Trusts)

FTSE Food Producers

Source: FactSet

Percentage change in CEO pay
For the purpose of this table, pay is defined as salary, benefits and
annual bonus. The figure for the CEO is a combination of seven months
pro rata salary for Mr Whitehouse and five months pro rata CFO salary
for Mr Murray plus the monthly salary supplement as Acting CEO. The
average pay of management grades (approximately 400 colleagues)
is used for the purposes of comparison as they are members of the
Group’s Annual Bonus plan.

CEO

Management grades

% Change
2019/20
-20.0%
+77.7%
-28.6%

% Change
2018/19
-1.1%
0%
+53.2%

% Change
2019/20
+2.5%
0%
+17.6%

% Change
2018/19
+2.0%
0%
+111.2%

Base salary
Benefits
Annual bonus

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Directors’ Remuneration report CONTINUED

Non-executive directors (audited)
Single figure for the total remuneration received by each non-executive
director for the financial periods ended 28 March 2020 and 30 March
2019.

Director
Colin Day1
Simon Bentley
Richard Hodgson2
Shinji Honda3
Orkun Kilic3
Pam Powell4
Daniel Wosner3
Former directors
Keith Hamill1

Basic
fee
126,231
57,000
57,000
–
–
57,000
–

Committee

Total
fees
2019/20
– 126,231
– 70,000

Total
fees
2018/19
N/A
4,988
8,406 65,406 57,000
–
–
57,000
–

–
–
–
–
– 65,826
–
–

Chair fee SID fee
–
13,000
–
–
–
8,826
–

69,819

–

– 69,819 235,000

1. Mr Day was appointed Chairman on 30 August 2019 and Mr Hamill retired as

Chairman on 17 July 2019.

2. Mr Hodgson was appointed Senior Independent Director on 30 May 2019 and

received an additional fee of £10,000 per annum from that date.

3. Messrs Honda, Kilic and Wosner are appointed pursuant to relationship

agreements with our three largest shareholders and do not receive a fee for their
roles as non-executive directors.

4. Ms Powell was appointed Chair of the Remuneration Committee on 30 May
2019 and received an additional fee of £10,500 per annum from that date.

Non-executive directors’ fees
The fees of our non-executive directors (NEDs) are set out below. Mr
Day was appointed as non-executive Chairman on 30 August with an
annual fee of £215,000. A review of non-executive directors’ fees was
last undertaken by the Board in March 2020 and no increase to fees
was recommended.

NED Fees
Chairman fee
Basic NED fee
Additional remuneration:
Audit Committee
Chairman fee
Remuneration Committee
Chairman fee
Senior Independent
Director fee

28 March
2020
£215,000
£57,000

Change
- 8.5%
–

30 March
2019
£235,000
£57,000

£13,000

£10,500

£10,000

–

£13,000

£10,500

£10,000

Non-executive directors’ terms of appointment
All non-executive directors have entered into letters of appointment/
amendment as detailed in the table below. The appointments
are subject to the provisions of the Companies Act 2006 and the
Company’s Articles. Terms of appointment are normally for three years
or the date of the AGM immediately preceding the third anniversary
of appointment. Non-executive directors’ continued appointments
are evaluated annually, based on their contributions and satisfactory
performance. Following the expiry of a term of appointment, non-
executives may be reappointed for a further three-year period. The
terms of appointment for Mr Honda, Mr Kilic and Mr Wosner are
governed by the terms of the relationship agreements between the
Company and Nissin, Paulson and Oasis, respectively.

NED
Colin Day
Simon Bentley
Richard Hodgson
Shinji Honda
Orkun Kilic
Pam Powell
Daniel Wosner

Date of original
appointment
30 August 2019
27 February 2019
6 January 2015
23 March 2018
27 February 2019
7 May 2013
27 February 2019

Expiry of
current
appointment/
amendment

letter Notice period
3 months
3 months
3 months
–
–
3 months
–

AGM 2022
AGM 2021
AGM 2023
–
–
AGM 2022
–

Non-executive directors’ interests in shares (audited)1
Ordinary shares
owned
as at 30 March
2019
N/A
–
–
–
–
160,366
72,850

Ordinary shares
owned
as at 28 March
2020
–
–
–
–
–
160,366
72,850

NED
Colin Day
Simon Bentley
Richard Hodgson
Shinji Honda2
Orkun Kilic2
Pam Powell
Daniel Wosner2
Former directors
Keith Hamill3

266,666

1. The Board believes it is important for independent non-executive directors to
hold shares in the Company in order to align with the interests of shareholder.
In February 2019 the Company announced it was conducting a review of its
strategic options to increase shareholder value and the Board determined that it
would be inappropriate for directors to deal in shares of the Company until the
outcome of the strategic review was concluded.

2. Messrs Honda, Kilic and Wosner are shareholder representative directors

appointed pursuant to relationship agreements with our three largest
shareholders who currently hold shares representing approximately 43% of the
Company’s issued share capital.

3. Mr Hamill retired as Chairman on 17 July 2019.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance
The Committee
Details of the Committee members and meeting attendance are set
out on pages 44 and 45. Pam Powell was appointed as Chair of the
Remuneration Committee on 30 May 2019, having served as a member
of the Remuneration Committee for six years, following the retirement
of Jennifer Laing in February 2019. Throughout the financial period all
members of the Committee have been independent. In addition, the
Chairman, CEO, HR Director and Aon plc (‘Aon’) attended by invitation.
In accordance with the Committee’s terms of reference, no one
attending a Committee meeting may participate in discussions relating
to his/her own terms and conditions of service or remuneration. Over
the course of the year the Committee held four meetings.

Advisers
The Executive Compensation practice of Aon has been appointed
as advisers to the Committee. During the year, Aon provided advice
in connection with executive remuneration arrangements. Aon is a
signatory of the Remuneration Consultants Company Code of Conduct.
The trustees of the Company’s pension schemes have appointed Aon
to act as Administrators and Actuary to the schemes and, in the case of
the RHM pension scheme, to act as Investment Advisers. The Executive
Compensation practice of Aon operates independently of the pension
teams and the Committee is satisfied there is no conflict of interest. Aon
received fees of £67,985 (2018/19: £40,255) in respect of their advice
to the Committee during the financial period.

Role of the Remuneration Committee
The Committee has been delegated authority by the Board to approve
the overall design of the Remuneration Policy for executive directors
and senior management, to agree the terms of employment including
recruitment and termination terms of executive directors, approve
the design of all share incentive plans and recommend appropriate
performance measures and targets for the variable element of
remuneration packages and determine the extent to which performance
targets have been achieved. The Committee’s remit has been extended
to review the remuneration arrangements for the wider workforce
and to ensure there is alignment between the Group’s remuneration
arrangements and culture. The Committee’s terms of reference are
available on the Group’s website.

• Reviewed the voting results for the 2019 Directors’ Remuneration

Report;

• Reviewed the 2019/20 annual bonus plan for management at below

Board level;

• Reviewed and recommended executive directors’ and senior

managers’ annual bonuses in respect of the financial period and
set the targets for the 2020/21 annual bonus, ensuring they were
aligned with the strategic objectives of the Group;

• Granted the 2019 awards under the Company’s all-employee plans

and monitored colleague participation; and

• Granted the 2019 awards under the Company’s executive share
plans to executive directors and senior managers and agreed the
targets for awards due to be made in 2020, ensuring they are
aligned with the strategic objectives of the Group.

Committee evaluation
As part of the external Board evaluation exercise conducted by
Lintstock during the year (see page 49 for more information) a review of
the Committees effectiveness was also undertaken and an action plan
for the coming year agreed.

External appointments
The Board is open to executive directors who wish to take on a non-
executive directorship with a publicly quoted company in order to
broaden their experience and they may be entitled to retain any fees
they receive. However, any such appointment would be reviewed by the
Board on a case-by-case basis. The current executive directors do not
hold any external appointments with publicly quoted companies.

Statement of voting at Annual General Meeting
The details of the voting on the resolutions at the AGM held on 17
July 2019 are set out below (full details of the voting results for each
resolution are available on the Group’s website www.premierfoods.
co.uk).

Approval of
Directors’
Remuneration
Report
2018/19
17 July 2019
492,116,412
66,861,208
558,977,620
76,155

% of
votes
cast

88.04%
11.96%
100%

Approval of
the current
Directors’
Remuneration
Policy
20 July 2017
540,647,973
6,432,867
547,080,840
3,797,166

% of
votes
cast

98.82%
1.18%
100%

The key activities of the Committee during the financial period were as
follows:

• Undertook an engagement exercise with shareholders to

understand their views on remuneration in advance of preparing a
new Remuneration Policy for approval by shareholders;

• Reviewed the potential impact of COVID-19 on remuneration

Date of AGM
Votes for
Votes against
Total votes cast
Votes withheld

matters;

• Reviewed and discussed the recommendations of the 2018

Governance Code and developments in best practice in order to
make appropriate changes to the Company’s Remuneration Policy;

• Reviewed and approved the termination payments for Alastair
Murray who stepped down as Acting CEO and Chief Financial
Officer during the financial period;

• Reviewed and approved the remuneration arrangements for the

new Chairman, CEO and CFO appointed during the financial period;

• Together with the Board, received regular updates on the
remuneration arrangements for the wider workforce;

• Reviewed and approved the rules for a new 10 year LTIP and

recommended it for approval at the 2020 AGM;

The Directors’ Remuneration Report was approved by the Board on
24 June 2020 and signed on its behalf by:

Pam Powell
Chair of the Remuneration Committee

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Other statutory information

Directors’ report
The directors’ report consists of pages 02 to 81 and has been drawn
up and presented in accordance with, and in reliance upon, applicable
English company law and the liabilities of directors in connection with
that report shall be subject to the limitations and restrictions provided by
such law. In the directors’ report references to the Company or Group
are references to Premier Foods plc and its subsidiaries.

Profit and dividends
The profit before tax for the financial year was £53.6m (2018/19: loss of
£(42.7)m). The directors do not recommend the payment of a dividend
for the period ended 28 March 2020 (2018/19: £nil). Under the terms
of our current financing arrangements dividends are only permitted
once the Group’s Net debt to EBITDA ratio (as defined in the relevant
agreements) falls below 3.0x. The Group is committed to deleveraging
the business and reducing the Net debt to EBITDA ratio (see our
Strategy on page 02).

Research and development
Applied research and development work continues to be directed
towards the introduction of new and improved products; the application
of new technology to reduce unit and operating costs; and to improve
service to customers. Total research and development spend (including
capitalised development costs) was £11.9m (2018/19: £9.9m).

Share capital information
The Company’s issued share capital as at 28 March 2020 comprised
848,209,480 ordinary shares of 10p each. During the period 3,280,793
ordinary shares were allotted to satisfy the vesting of awards made
to colleagues under the all-employee Sharesave Plan, details of the
movements can be found in note 22 on page 130. All of the ordinary
shares rank equally with respect to voting rights and the rights to receive
dividends and distributions on a winding up. In accordance with the
Articles, there are no restrictions on share transfers, limitations on the
holding of any class of shares or any requirement for prior approval of
any transfer with the exception of certain officers and employees of the
Company who are required to seek prior approval to deal in the shares
of the Company and are prohibited from any such dealing during certain
periods under the requirements of the EU Market Abuse Regulation.

Colleagues who hold shares under the Premier Foods plc Share
Incentive Plan may instruct the trustee to vote on their behalf in respect
of any general meeting.

The directors were granted authority at the 2019 AGM to allot
relevant securities under two separate resolutions (i) up to one-third
of the Company’s issued share capital; and (ii) up to two-thirds of the
Company’s issued share capital in connection with a rights issue. This
authority will apply until the conclusion of the 2020 AGM. A similar
authority will be sought from shareholders at the 2020 AGM. The
Company does not currently have authority to purchase its own shares
and no such authority is being sought at the 2020 AGM.

Significant contracts – change of control
The Company has various borrowing arrangements, including a
revolving credit facility and Senior Secured notes. These arrangements
include customary provisions that may require any outstanding
borrowings to be repaid and any outstanding notes to be repurchased
upon a change of control of the Company. In addition, the Cadbury
licensing agreement also includes a change of control provision,
which could result in the agreement being terminated or renegotiated
if the Company were to undergo a change of control in certain limited
circumstances.

The Company’s executive and all-employee share plans contain
provisions, as a result of which, options and awards may vest and
become exercisable on a change of control in accordance with the plan
rules. Details of directors’ service contracts and the provisions relating
to a change of control are set out on page 66.

Articles of association
The Company’s Articles (which are available on the Group’s website
www.premierfoods.co.uk) may only be amended by a special resolution
at a general meeting. Subject to the provisions of the statutes, the
Company’s articles and any directions given by special resolution, the
directors may exercise all the powers of the Company.

Substantial shareholdings
Information provided to the Company pursuant to the Financial Conduct
Authority’s (FCA) Disclosure and Transparency Rules (DTRs) is published
on a Regulatory Information Service and on the Company’s website.
As at 23 June 2020, the Company has been notified of the following
interests of 3% or more in the Company:

Shareholder
Nissin Foods Holdings Co., Ltd.
Oasis Management Company Ltd
Paulson & Co. Inc.3
Brandes Investment Partners, L.P.

Ordinary
shares1
164,486,846
101,312,591
101,199,294
42,252,415

% of share
capital2
19.39
11.94
11.93
4.98

1. Number of shares held at date of notification.
2. Per cent of share capital as at 28 March 2020.
3. Held in the form of shares and as total return swap.

Powers of directors
The powers of the directors are set out in the Company’s Articles of
Association and may be amended by way of a special resolution of the
Company.

Director appointments
The Board has the power to appoint one or more additional directors.
Under the Articles any such director holds office until the next AGM
when they are eligible for election. Shareholders may appoint,
reappoint or remove directors by an ordinary resolution. In addition,
the appointment of Messrs Honda, Kilic and Wosner are subject to the
terms of shareholder relationship agreements (see Conflicts of interest
on page 47).

Directors’ and officers’ liability insurance
This insurance covers the directors and officers against the costs of
defending themselves in civil proceedings taken against them in their
capacity as a director or officer of the Company and in respect of
damages resulting from the unsuccessful defence of any proceedings.

Access to external advice
Directors are allowed to take independent professional advice in the
course of their duties. In addition, all directors have access to the advice
and services of the Company Secretary. If any director were to have
a concern over any unresolved business issue following professional
advice, they are entitled to require the Company Secretary to minute
that concern. Should they later resign over a concern, non-executive
directors are asked to provide a written statement to the Chairman for
circulation to the Board.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance277,141,174

283,868,167

-2.37%

• Updates on key issues raised at Voice Forums, which are being

established at sites across the business;

• Site based pay negotiations;

40,277.57

40,938.85

-1.62%

• Results of periodic employee engagement exercises and action

Transport fuel is regarded as de-minimis and has not been included in
the data above, as it is less than 1.1% of total emissions.

All of our energy use is based in the UK, we have no manufacturing or
office facilities under our control outside of the UK.

Whilst the Group planted 16,000 trees in the UK during 2019/20, which
will remove approximately 4,000 tonnes of CO2 from the atmosphere
as they grow, the impact of this has not been included in the figures
reported opposite.

Colleague engagement
The Board and its committees receive regular updates on workforce
matters, and this has been enhanced with the introduction of a standing
item covering the workforce which is reported to the Board via the HR
report each meeting. This includes:

plans to address the issues raised; and

• All employee share schemes.

Additional feedback mechanisms via the Board’s Remuneration and
Audit Committees include:

• Understanding of remuneration arrangements for the workforce

across the business;

• Oversight of the Management bonus scheme and Management and

Admin colleagues annual pay reviews; and

• Periodic reporting of issues raised via the Company’s confidential
whistleblowing helpline and management's response to them.

Further information on how we have engaged with employees during
the financial period can be found in the following sections:

• Being a responsible business: pages 16 to 18.

• Workforce NED: page 46.

• Engaging with our stakeholders and Section 172(1) statement:

pages 50 to 52.

Colleague communication
We continue to place a high degree of importance on communicating
with colleagues at all levels of the organisation. In recent years we have
invested in this area, with large digital news screens at every site, our
mobile-enabled intranet, a weekly news round-up email and posters.

We also video stream our colleague briefing sessions direct to all
sites, in addition to cascading it through local briefings. We believe it is
important to hear views from our colleagues in order to understand how
the working environment can be improved. In our manufacturing sites,
we have constructive relationships with our Trade Union colleagues,
while in head office we run ‘Listening Groups’ and also host ‘Meet the
CEO’ sessions and ‘Lunch and Learn’ events.

Employment of people with disabilities
It is our policy to give full and fair consideration to applications for
employment received from people with disabilities, having regard to their
particular aptitudes and abilities. Wherever possible we will continue
the employment of, and arrange appropriate training for, employees
who have become disabled during the period of their employment. We
provide the same opportunities for training, career development and
promotion for people with disabilities as for other colleagues.

Political donations
The Company’s policy is not to make political donations and no such
donations were made in the financial period.

Greenhouse gas (GHG) emissions reporting
In the table below we have detailed our scope 1 & 2 GHG emissions for
the period 1 April 2018 to 31 March 2020 from a 2011 baseline year. In
previous years we have reported calendar year figures but, following the
introduction of the new SECR (streamlined energy and carbon reporting)
regulations in April 2019, we have moved to financial year reporting. In
comparison with 2018/19, we have reduced our overall GHG emissions
by 5.08% in 2019/20.

2019/20

2018/19

Percentage
change

GHG emissions
Total UK energy
use (kWh’s)

Scope 1 Direct
emissions from
sites (tCO2e)

Scope 2 Electricity
indirect emissions
(tCO2e)

Total annual
net emissions
(tCO2e)

Production
output (tonnes)

Overall Intensity
(kgCO2e per
tonne of product)

22,460.83

25,160.41

-10.73%

62,738.40

66,099.26

-5.08%

318,304.89

337,125.00

-5.58%

197.10

196.07

0.53%

Principal energy efficiency measures taken
in 2019/20
The main changes implemented in the last 12 months are at our Lifton
Devon Creamery, home of Ambrosia. In 2018 the site moved from
Heavy Fuel Oil and Kerosene to fuel the boilers, to using Natural Gas.
2019/20 was the first full year of Natural Gas use, which emits around
25% less CO2 per kWh than Heavy Fuel Oil. The site also benefited from
the installation of a new can retort system, replacing an old and less
efficient system.

All of our sites have a rolling plan of LED lighting upgrades, which will be
continuing for at least another two years. Between August and October
2019, we completed an ESOS (Energy Savings Opportunities Scheme)
audit of all Group sites, which has identified several opportunities for
improvement.

In addition, a Monitoring and Targeting meter system has been installed
at our Ashford factory. Through the increased measurement of energy
use the site was able to identify opportunities for improvement, resulting
in a reduction in over 1m kWh’s of energy over the financial year.

Methodology
Premier Foods’ GHG emissions were assessed and calculated
using internal data and emission factors from Defra’s Conversion
Factors for Company Reporting 2019 for converting energy usage to
carbon dioxide equivalent (CO2(e)) emissions. We have followed the
methodology in the GHG Protocol Corporate Accounting and Reporting
Standard (revised edition). The analysis has used an operational control
approach. The emissions data relates to all production sites within the
control of the Company during the period.

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Other statutory information CONTINUED

Going concern and viability statement
The directors have a reasonable expectation that the Company and
Group have adequate resources to continue in operational existence for
the next 12 months and therefore continue to adopt the going concern
basis in preparing the consolidated financial statements. Further
information on the basis of preparation is set out in note 2.1 on page
99. The Company’s viability statement is set out in the section on risk
management on page 43.

Related parties
Details on related parties can be found in note 25 on page 133.

Subsequent events
Details relating to subsequent events can be found in note 27 on
page 135.

Anti-corruption and anti-bribery
The Group has in place an Anti-Corruption Policy and a code of
conduct for third parties which provides guidance for complying with
anti-corruption laws. This is provided to graded managers and those
who operate in commercial roles, with formal training provided where
appropriate. This covers, amongst other things, guidance on dealings
with third parties, facilitation payments, gifts and hospitality and
charitable and political donations. We do not tolerate any form of bribery
or corruption and expect all colleagues, business partners, suppliers,
contractors, joint venture partners, customers, agents, distributors and
other representatives to act in accordance with all laws and applicable
Group policies.

Code of conduct and whistleblowing helpline
The Group is committed to ensuring that everyone that comes into
contact with the business is treated with respect, and their health, safety
and basic human rights are protected and promoted. The Board has
approved a code of conduct which sets out the standards of behaviour
all employees are expected to follow and provides a useful guidance to
help colleagues when it comes to making the right decision. The code
was introduced in 2012 and is updated and reissued on a periodic
basis. A copy of the code is included in the induction pack for new
joiners and is available on the Group’s intranet and corporate website.
The code is made up of 10 key elements, including: acting honestly
and complying with the law; competing fairly; food safety; and treating
people fairly.

We also have a confidential whistleblowing call line to enable anyone
who comes into contact with our business (whether colleagues,
contractors, agency workers, customers, suppliers or distributors) to
raise any concerns they have that cannot be dealt with through the
normal channels. Calls logged with the whistleblowing service are
followed up promptly by the appropriate person within the business
and the issues raised and management’s response are reviewed by the
Audit Committee. The Audit Committee also reviews the whistleblowing
service annually and arranges for it to be refreshed and communicated
to sites.

Financial risk management
Details relating to financial risk management in relation to the use of
financial instruments by the Group can be found in note 18 of the
financial statements.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Governance81

Statement of directors’ responsibilities

in respect of the annual report and the financial statements

The directors are responsible for preparing the annual report and the
Group and parent Company financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards as adopted
by the European Union (IFRSs as adopted by the EU) and applicable
law and have elected to prepare the parent Company financial
statements in accordance with UK accounting standards, including FRS
101 Reduced Disclosure Framework.

Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and parent Company and of their
profit or loss for that period. In preparing each of the Group and parent
Company financial statements, the directors are required to:

•

select suitable accounting policies and then apply them
consistently;

• make judgements and estimates that are reasonable, relevant and

reliable;

•

for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by
the EU;

for the parent Company financial statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the parent
Company financial statements;

• assess the Group and parent Company’s ability to continue as a

going concern, disclosing, as applicable, matters related to going
concern; and

• use the going concern basis of accounting unless they either

intend to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.

The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Group and to prevent and detect fraud and
other irregularities.

Under applicable law and regulations, the directors are also responsible
for preparing a Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that
complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of
the annual financial report
We confirm that to the best of our knowledge:

•

the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole; and

the directors’ report includes a fair review of the development and
performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.

We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Group’s position and performance,
business model and strategy.

Independent auditor
KPMG LLP (‘KPMG’) have indicated their willingness to be reappointed
as auditor of the Company. Upon recommendation of the Audit
Committee, the reappointment of KPMG and the setting of their
remuneration will be proposed at the 2020 AGM.

Auditor and the disclosure of information to
the auditor
The Companies Act requires directors to provide the Company’s auditor
with every opportunity to take whatever steps and undertake whatever
inspections they consider to be appropriate for the purpose of enabling
them to give their audit report. The directors, having made appropriate
enquiries, confirm that:

•

so far as the director is aware, there is no relevant audit information
of which the Company’s auditor are unaware; and

• he/she has taken all the steps that he/she ought to have taken as a
director in order to make himself/herself aware of any relevant audit
information and to establish that the Company’s auditor are aware
of that information.

The directors’ report was approved by the Board on 24 June 2020 and
signed on its behalf by:

Simon Rose
General Counsel & Company Secretary

companysecretary@premierfoods.co.uk

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Independent auditor’s report
to the members of Premier Foods plc

Overview

Materiality: Group
financial statements as
a whole

Coverage

£4.5m (2018/2019:£4.5m)

0.53% (2018/2019: 0.55%)
of Group revenue

96% (2018/2019:95%)
of Group revenue

Key audit matters

vs 2018/2019

Recurring risks (Group) Valuation of pension scheme assets



for which a quoted price is not
available*

Valuation of defined benefit pension
obligation*



Revenue recognition subject to
commercial arrangements

Carrying value of goodwill**

New risks (Group)

Going concern







Recurring risks
(Company only)

Recoverability of parent’s balances
with Group undertakings



* Prior year risk was presented as a combined risk

** Prior year risk related to both goodwill and the Sharwood’s brand

1. Our opinion is unmodified
We have audited the financial statements of Premier Foods plc (“the
Company”) together with its subsidiaries (“the Group”) for the 52 weeks
ended 28 March 2020 which comprise the consolidated statement
of profit or loss, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of cash flows,
consolidated statement of changes in equity, Company balance sheet,
Company statement of changes in equity and the related notes,
including the accounting policies in note 2 to the Group financial
statements and note 1 to the Company financial statements.

In our opinion:
•

the financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at 28 March 2020
and of the Group’s profit for the 52 weeks ended 28 March 2020;

•

the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union;

the parent Company financial statements have been properly
prepared in accordance with UK accounting standards, including
FRS 101 Reduced Disclosure Framework; and

the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.

Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the Audit Committee.

We were first appointed as auditor by the Directors on 4 September
2015. The period of total uninterrupted engagement is for the five
financial years ended 28 March 2020. We have fulfilled our ethical
responsibilities under, and we remain independent of the Group in
accordance with, UK ethical requirements including the FRC Ethical
Standard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements83

2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include
the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below
the key audit matters, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for
public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in
the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently
are incidental to that opinion, and we do not provide a separate opinion on these matters.

Valuation of pension scheme
assets for which a quoted price is
not available
Refer to page 55 (Audit Committee Report),
page 105 (accounting policy) and page 116
(financial disclosures).

The risk

Our response

Subjective valuation
The Group’s RHM pension scheme holds
assets for which quoted prices are not
available. The valuation of these assets can
have a significant impact on the surplus.
Valuations are prepared based on the most
recent information available and are adjusted
where appropriate.

Given the impact of the Covid-19 pandemic
upon financial markets, there is increased
estimation uncertainty in respect of harder to
value investments.

For certain assets, the latest asset valuations
preceded the negative impact of the Covid-19
pandemic on financial markets, and as such
the Directors obtained up to date valuations
as at March 2020 to reduce estimation
uncertainty.

The effect of these matters is that we
determined that the pension assumptions
have a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality for the
financial statements as a whole, and possibly
many times that amount.

Our procedures included:
• Assessing experts: Assessed the

competence and objectivity of the fund
managers and custodians who prepared
asset statements to support the Group’s
valuation of scheme assets;

• Assessing historical estimates:

Compared the Group’s fund managers’
historical estimated net asset values to
the latest audited financial statements of
those funds to assess the Group’s ability to
accurately estimate the fair value of assets;

• Asset confirmations: Obtained asset
statements as at March 2020 in respect
of the schemes’ investments directly
from fund managers and custodians; and
compared the asset values per the asset
statements to asset values recognised;

• Assessing disclosures: Considered

the adequacy of the Group’s disclosures
relating to the valuation of scheme assets
for which a quoted price is not available.

Our results
• The results of our testing were satisfactory

and we consider the valuation of scheme
assets for which a quoted price is not
available to be acceptable (2018/19:
acceptable).

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2.Key audit matters: including our assessment of risks of material misstatement (continued)

The risk

Our response

Valuation of defined benefit
pension obligation
Defined benefit pension obligation
(£(4,289.6m); 2018/19: £(4,667.6m))

Refer to page 55 (Audit Committee Report),
page 105 (accounting policy) and page 116
(financial disclosures).

Subjective valuation
Small changes in the assumptions used to
determine the liabilities of the RHM Pension
Scheme, Premier Foods Pensions Scheme
and Premier Grocery Products Pension
Scheme, in particular those relating to
inflation, mortality, and discount rates, can
have a significant impact on the valuation of
the liabilities.

Our procedures included:
• Controls testing: Tested the design,

implementation and effectiveness of the
management review control over the key
actuarial assumptions;

• Benchmarking assumptions:

Challenged, with the support of our own
actuarial specialists, the key assumptions
applied, being the inflation, mortality
and discount rate assumptions, against
externally derived data;

• Assessing experts: Assessed the

competence and objectivity of the Group’s
corporate actuaries; and

• Assessing disclosures: Considered

the adequacy of the Group’s disclosures
relating to the sensitivity of the obligation to
these assumptions.

Our results
• The results of our testing were satisfactory

and we consider the valuation of defined
benefit obligation to be acceptable
(2018/19: acceptable).

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements85

2.Key audit matters: including our assessment of risks of material misstatement (continued)

The risk

Our response

Revenue subject to commercial
arrangements
Commercial accruals (£(52.4m); 2018/19:
£(45.3m))

Refer to page 55 (Audit Committee Report),
page 105 (accounting policy) and page 123
(financial disclosures).

Estimation uncertainty impacting
revenue
The Group enters into commercial
arrangements with its customers on a
regular basis to offer product promotions
and discounts. The Group measures revenue
taking into consideration estimated rebates
and discounts.

Due to the nature of some arrangements
and the number of different arrangements in
place, there is a risk that these arrangements
are not appropriately accounted for and as a
result revenue is misstated.

The Group also focuses on revenue as a key
performance measure which could create
an incentive for revenue to be overstated or
understated through manipulation of rebates
and discounts, resulting from the pressure the
Directors may feel to achieve performance
targets in the current or subsequent year.

The most significant areas of estimation
uncertainty are:

• estimating the sales volumes attributable

to each arrangement; and

• determining the period which the

arrangements cover and hence the
appropriate period for recognition.

The effect of these matters is that we
determined that the valuation assumptions
used have a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements as a
whole.

Our procedures included:
• Accounting policies: Assessed the

appropriateness of the revenue recognition
accounting policies, in particular those
relating to rebates and discounts and
assessing compliance with the relevant
accounting standards;

Test of details:

Key aspects of testing involved:

• Compared a sample of promotions
recorded during the financial year to
supporting evidence such as customer
acceptance, electronic point of sale data
and customer debit notes to assess the
accuracy of the estimate;

• Examined credit notes issued after 28

March 2020 to assess the completeness of
the commercial accruals recorded;

• Examined changes to rebate and discount
accruals after 28 March 2020 to assess the
accuracy of accruals recorded at 28 March
2020;

• Obtained supporting documentation for
a sample of journals posted to revenue
accounts to assess the appropriateness of
the journals;

• Visited a selection of customer stores

before the period end, identifying product
promotions and assessing whether those
promotions were appropriately accrued
for; and

• Compared a sample of commercial

accruals and recorded at 28 March 2020
to supporting evidence such as customer
acceptance and electronic point of sale
data to confirm that the promotion was run
by the customer;

• Assessing disclosures: Considered

the adequacy of the Group’s disclosures
relating to the critical accounting policies,
estimates and judgments in respect of
volume rebates and discounts.

Our results
• The results of our testing were satisfactory

and we consider revenue relating to
commercial arrangements to be acceptable
(2018/19: acceptable).

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www.premierfoods.co.ukFinancial Statements86

2.Key audit matters: including our assessment of risks of material misstatement (continued)

Going concern
Refer to page 55 (Audit Committee Report)
and page 99 (accounting policy).

The risk

Our response

Disclosure quality
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern basis
of preparation for the Group.

Our procedures included:
• Assessing business model: Performed
an assessment of the risks resulting from
Covid-19 on the Group’s business model
and how these risks were mitigated;

That judgement is based on an evaluation
of the inherent risks to the Group’s business
model and how those risks might affect
the Group’s financial resources or ability to
continue operations over a period of at least a
year from the date of approval of the financial
statements.

• Assessing assumptions: Evaluated
whether the assumptions within the
model were realistic and achievable and
consistent with the external and/or internal
environment and other matters identified in
the audit;

• Sensitivity analysis: Considered

The risk most likely to adversely affect the
Group’s available financial resources over this
period is the impact of Covid-19 on sales,
profitability and cash flow in particular due to
the potential disruption to the supply chain,
the potential for the closure of manufacturing
sites and the potential impact of a weaker UK
economy.

The risk for our audit was whether or not
those risks were such that they amounted
to a material uncertainty that may have cast
significant doubt about the ability to continue
as a going concern. Had they been such,
then that fact would have been required to
have been disclosed.

sensitivities over the level of available
financial resources indicated by the
Group’s financial forecasts taking account
of reasonably possible (but not unrealistic)
adverse effects that could arise from these
risks individually and collectively;

• Test of details: Evaluated management’s
assessment of the entity’s compliance with
debt covenants;

• Assessing transparency: Assessing the
completeness and accuracy of the matters
covered in the going concern disclosure
by evaluating the adequacy of the
disclosure in the basis of preparation in
Note 2 to the financial statements.

Our results
• We found the going concern disclosure

without any material uncertainty to be
acceptable (2018/19: acceptable).

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements87

2.Key audit matters: including our assessment of risks of material misstatement (continued)

The risk

Our response

Carrying value of goodwill
Goodwill (£646.0m; 2018/19: £646.0m)

Refer to page 55 (Audit Committee Report),
page 105 (accounting policy) and page 114
(financial disclosures).

Forecast based valuation
The carrying value of goodwill is dependent
on the achievement of future business plans
which are inherently uncertain.

The business operates in an environment
of significant retailer pressure on price,
competitor activity and increasing commodity
prices. In light of these trading challenges and
the Group’s financial constraints on brand
investment, there is a risk that the Group's
goodwill, which is all attributed to the Grocery
cash generating unit, may not be recoverable.

Our procedures included:
• Controls testing: Tested the design and

implementation of the management review
control over the key assumptions in the
valuation models;

• Benchmarking assumptions: Evaluated

assumptions used in the valuation
models, in particular those relating to: i)
the short and long-term revenue growth
rates; ii) future changes in profitability; iii)
the discount rates used, by comparing
these with externally derived data such
as projected economic growth rates and
discount rate inputs;

• Sensitivity analysis: Performed sensitivity

analysis of key assumptions noted above;

• Assessing disclosure: Assessed

whether the Group’s disclosures relating
to the sensitivity of the outcome of the
impairment assessments to changes in key
assumptions reflect the risks inherent in the
valuation of goodwill.

Our results
• The results of our testing were satisfactory

and we found the carrying value of goodwill
at 28 March 2020 to be acceptable.
(2018/19: carrying value of goodwill at
30 March 2019 acceptable).

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2.Key audit matters: including our assessment of risks of material misstatement (continued)

The risk

Our response

Recoverability of parent’s
balances with Group undertakings
Company only

(£1,322.5m; 2018/19: £1,314.6m)

Refer to page 138 (accounting policy) and
page 139 (financial disclosures).

Low risk, high value
The carrying amount of the intra-group
receivables balance represents 98%
(2018/19: 99%) of the Company’s total
assets. Their recoverability is not at a high
risk of significant misstatement or subject to
significant judgement. However, due to their
materiality in the context of the company’s
financial statements, this is considered to be
the area that had the greatest effect on our
overall Company audit.

Our procedures included:

Test of details:

Key aspects of testing involved:

• Assessed the Directors’ assumptions over
the recoverability of the parent’s balances
with Group undertakings against our own
knowledge of the trading performance and
net assets of the relevant counterparty;

• Evaluated the Directors’ assessment of
the probability of default for the relevant
counterparty by comparing these with an
external study on corporate default and
rating transition.

Our results
• We found the Group’s assessment of the
recoverability of the parent’s balances
with Group undertakings to be acceptable
(2018/19: acceptable).

We continue to perform procedures over the accuracy of the amount for net deferred tax liabilities recognised and the impact of uncertainties
consequent upon the UK’s departure from the European Union on our audit. However, as there have not been significant changes in the judgements
taken in the current year with regard to each of these areas, we have not assessed these as one of the most significant risks in our current year audit
and, therefore, they are not separately identified in our report this year.

Following the completion of the outsourcing of warehousing and logistics during the prior year, we have not assessed this as one of the most
significant risks in our current year audit and, therefore, it is not separately identified in our report this year.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements3. Our application of materiality and an overview of
the scope of our audit
The materiality of the Group financial statements as a whole was set at
£4.5m (2018/19: £4.5m), determined with reference to a benchmark of
Group revenue of £847.1m (2018/19: £824.3m) of which it represents
0.53% (2018/19: 0.55%). We consider Group revenue to be the most
appropriate benchmark as it is a key performance indicator.

We do not consider the pre-tax result an appropriate benchmark as it
is not currently a key measure of the performance of the Group. We
have given consideration to other profit metrics such as trading profit in
determining materiality.

Materiality for the Company financial statements as a whole was set at
£1.2m (2018/19: £0.6m), determined with reference to a benchmark of
total assets of £1,344.4m, of which it represents 0.09% (2018/19: 3.9%
of profit before tax), and chosen to be lower than materiality for the
Group financial statements as a whole.

We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding £0.22m (2018/19:£0.22m), in
addition to other identified misstatements that warranted reporting on
qualitative grounds.

Of the Group’s 33 (2018/19: 33) reporting components, we subjected 5
(2018/19: 5) to full scope audits for Group purposes.

For the remaining components, we performed analysis at an aggregated
Group level to re-examine our assessment that there were no significant
risks of material misstatement within these.

The component materialities ranged from £1.2m to £4.2m (2018/19:
£0.6m to £4.25m), having regard to the mix of size and risk profile of the
Group across the components. All full scope components are managed
from the central locations in the UK and the work on all components
subject to audit was performed by the Group team.

Total profits and losses that made up
Group profit before tax

98%

(2018/2019: 99%)

Group revenue

96%

(2018/2019: 95%)

Group total assets

99%

(2018/2019: 99%)

n Full scope for group audit purposes 2019/20

n Full scope for group audit purposes 2018/19

n Residual components

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4.We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that the
Company’s and the Group’s financial position means that this is realistic.
They have also concluded that there are no material uncertainties that
could have cast significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of the financial
statements (“the going concern period”).

Our responsibility is to conclude on the appropriateness of the Directors’
conclusions and, had there been a material uncertainty related to going
concern, to make reference to that in this audit report. However, as we
cannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the absence of reference to a
material uncertainty in this auditor's report is not a guarantee that the
Group and the Company will continue in operation.

We identified going concern as a key audit matter (see section 2 of this
report). Based on the work described in our response to that key audit
matter, we are required to report to you if we have anything material to
add or draw attention to in relation to the directors’ statement in Note
1 to the financial statements on the use of the going concern basis of
accounting with no material uncertainties that may cast significant doubt
over the Group and Company’s use of that basis for a period of at least
twelve months from the date of approval of the financial tatements; or
if the same statement under the Listing Rules set out on page 99 is
materially inconsistent with our audit knowledge.

We have nothing to report in these respects.

5. We have nothing to report on the other information
in the Annual Report
The Directors are responsible for the other information presented in
the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except as explicitly
stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.

Strategic report and directors’ report
Based solely on our work on the other information:

• we have not identified material misstatements in the strategic report

and the directors’ report;

•

in our opinion the information given in those reports for the financial
year is consistent with the financial statements; and

in our opinion those reports have been prepared in accordance with
the Companies Act 2006.

Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the Companies
Act 2006.

Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial statements
audit, we have nothing material to add or draw attention to in relation to:

•

the Directors’ confirmation within the Viability statement on page
43 and the Risk Management section on page 38 that they have
carried out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model,
future performance, solvency and liquidity;

the Principal Risks disclosures describing these risks and explaining
how they are being managed and mitigated; and

the Directors’ explanation in the Viability statement of how they have
assessed the prospects of the Group, over what period they have
done so and why they considered that period to be appropriate,
and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.

Under the Listing Rules we are required to review the Viability statement.
We have nothing to report in this respect.

Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As we
cannot predict all future events or conditions and as subsequent events
may result in outcomes that are inconsistent with judgments that were
reasonable at the time they were made, the absence of anything to
report on these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.

Corporate governance disclosures
We are required to report to you if:

• we have identified material inconsistencies between the knowledge
we acquired during our financial statements audit and the directors’
statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s position and performance, business model and
strategy; or

•

the section of the annual report describing the work of the Audit
Committee does not appropriately address matters communicated
by us to the Audit Committee.

We are required to report to you if the Corporate Governance Statement
does not properly disclose a departure from the provisions of the UK
Corporate Governance Code specified by the Listing Rules for our
review.

We have nothing to report in these respects.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements91

6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:

• adequate accounting records have not been kept by the parent

Company, or returns adequate for our audit have not been received
from branches not visited by us; or

•

the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are

not made; or

• we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 81, the
Directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal
control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether
due to fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic alternative but to
do so.

Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud, other irregularities (see below), or error, and to
issue our opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud, other irregularities
or error and are considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.

Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience and through
discussion with the Directors and other management (as required by
auditing standards), and from inspection of the Group’s regulatory
and legal correspondence and discussed with the Directors and other
management the policies and procedures regarding compliance with
laws and regulations. We communicated identified laws and regulations
throughout our team and remained alert to any indications of non-
compliance throughout the audit.

The potential effect of these laws and regulations on the financial
statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect
the financial statements including financial reporting legislation (including
related companies legislation), taxation legislation, the listing rules
and the disclosure guidance and transparency rules (given its listed
status), and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement
items.

Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance
through the imposition of fines or litigation or the loss of the Group’s
licence to operate. We identified the following areas as those most likely
to have such an effect: health and safety (in relation to the factories it
uses to produce products), competition law, food safety (relating to
products they produce), labelling and environmental standards and
employment law. Auditing standards limit the required audit procedures
to identify non-compliance with these laws and regulations to enquiry of
the Directors and other management and inspection of regulatory and
legal correspondence, if any. Through these procedures, we became
aware of actual or suspected non-compliance and considered the
effect as part of our procedures on the related financial statement items.
The identified actual or suspected non-compliance was not sufficiently
significant to our audit to result in our response being identified as a key
audit matter. Our additional audit procedures included further enquiry of
the Directors and other management, inspection of regulatory and legal
correspondence and we obtained confirmation in respect of the non-
compliance directly from Group’s external legal counsel.

Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned
and performed our audit in accordance with auditing standards. For
example, the further removed non-compliance with laws and regulations
(irregularities) is from the events and transactions reflected in the
financial statements, the less likely the inherently limited procedures
required by auditing standards would identify it. In addition, as with
any audit, there remained a higher risk of non-detection of irregularities,
as these may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are not
responsible for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.

8. The purpose of our audit work and to whom we
owe our responsibilities
This report is made solely to the Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as a body, for
our audit work, for this report, or for the opinions we have formed.

Richard Pinckard (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square, London, E14 5GL
24 June 2020

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www.premierfoods.co.ukFinancial Statements92

Consolidated statement of profit or loss

Revenue
Cost of sales
Gross profit
Selling, marketing and distribution costs
Administrative costs
Operating profit
Finance cost
Finance income
Profit/(loss) before taxation
Taxation (charge)/credit
Profit/(loss) for the period attributable to owners of the parent

Basic earnings/(loss) per share
From profit/(loss) for the period (pence)

Diluted earnings/(loss) per share
From profit/(loss) for the period (pence)

Adjusted earnings per share1
From adjusted profit for the period (pence)

52 weeks
ended
28 Mar 2020
£m
847.1
(549.6)
297.5
(125.6)
(76.6)
95.3
(44.1)
2.4
53.6
(7.1)
46.5

52 weeks
ended
30 Mar 2020
£m
824.3
(542.6)
281.7
(119.8)
(157.4)
4.5
(56.7)
9.5
(42.7)
8.9
(33.8)

5.5

(4.0)

5.4

(4.0)

8.9

8.5

Note
4

4, 5
7
7

1 Adjusted earnings per share is defined as trading profit less net regular interest, less a notional tax charge at 19.0% (2018/19: 19.0%) divided by the weighted average

number of ordinary shares of the Company.

The notes on pages 97 to 135 form an integral part of the consolidated financial statements.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements93

Consolidated statement of comprehensive income

Profit/(loss) for the period

Other comprehensive income, net of tax
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit schemes
Deferred tax charge
Current tax credit
Items that are or may be reclassified subsequently to profit or loss
Exchange differences on translation
Other comprehensive income, net of tax
Total comprehensive income attributable to owners of the parent

The notes on pages 97 to 135 form an integral part of the consolidated financial statements.

Note

13
8
8

52 weeks
ended
28 Mar 2020
£m
46.5

52 weeks
ended
30 Mar 2019
£m
(33.8)

816.7
(167.0)
5.2

0.3
655.2
701.7

53.2
(9.1)
–

(0.2)
43.9
10.1

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www.premierfoods.co.ukFinancial Statements94

Consolidated balance sheet

ASSETS:
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Net retirement benefit assets

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments

Total assets
LIABILITIES:
Current liabilities
Trade and other payables
Financial liabilities
– short term borrowings
– derivative financial instruments
– IFRS 16 lease liability
Provisions for liabilities and charges

Non-current liabilities
Financial liabilities
– IFRS 16 lease liability
– long term borrowings
Net retirement benefit obligations
Provisions for liabilities and charges
Deferred tax liabilities
Other liabilities

Total liabilities
Net assets
EQUITY:
Capital and reserves
Share capital
Share premium
Merger reserve
Other reserves
Profit and loss reserve
Total equity

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

Note

10
11
12
13

14
15
16
18

19
18
19
20

19
19
13
20
8
21

22
22
22
22
22

194.0
646.0
341.3
1,512.6
2,693.9

68.0
89.1
177.9
0.9
335.9
3,029.8

186.0
646.0
366.4
837.8
2,036.2

77.8
89.2
27.8
–
194.8
2,231.0

(249.7)

(238.0)

(85.0)
(0.8)
(2.5)
(6.4)
(344.4)

(19.0)
(501.0)
(282.2)
(9.6)
(184.9)
(8.7)
(1,005.4)
(1,349.8)
1,680.0

84.8
1,409.4
351.7
(9.3)
(156.6)
1,680.0

–
(1.6)
–
(9.7)
(249.3)

–
(497.7)
(464.7)
(32.4)
(13.5)
(10.6)
(1,018.9)
(1,268.2)
962.8

84.5
1,408.6
351.7
(9.3)
(872.7)
962.8

The notes on pages 97 to 135 form an integral part of the consolidated financial statements.

The financial statements on pages 92 to 96 were approved by the Board of directors on 24 June 2020 and signed on its behalf by:

Alex Whitehouse
Chief Executive Officer

Duncan Leggett
Chief Financial Officer

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements
Consolidated statement of cash flows

Cash generated from operations
Interest paid
Interest received
Other finance income
Cash generated from operating activities

Purchases of property, plant and equipment
Purchases of intangible assets
Sale of property, plant and equipment
Cash used in investing activities

Repayment of borrowings
Proceeds from borrowings
Payment of lease liabilities
Financing fees
Proceeds from share issue
Cash generated from / (used in) financing activities

Net increase in cash and cash equivalents
Cash, cash equivalents and bank overdrafts at beginning of period
Cash, cash equivalents and bank overdrafts at end of period

The notes on pages 97 to 135 form an integral part of the consolidated financial statements.

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

121.5
(38.0)
2.4
–
85.9

(12.8)
(5.3)
0.1
(18.0)

–
85.0
(3.9)
–
1.1
82.2

150.1
27.8
177.9

80.2
(32.0)
1.9
7.6
57.7

(14.3)
(3.4)
–
(17.7)

(325.0)
300.0
–
(12.2)
1.4
(35.8)

4.2
23.6
27.8

Note

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www.premierfoods.co.ukFinancial Statements96

Consolidated statement of changes in equity

At 1 April 2018
Loss for the period
Remeasurements of defined benefit schemes
Deferred tax charge
Exchange differences on translation
Other comprehensive income
Total comprehensive income
Shares issued
Share-based payments
Deferred tax movements on share-based payments
At 30 March 2019

At 31 March 2019
Implementation of IFRS 16 (net of tax)
Adjusted balance at 31 March 2019
Profit for the period
Remeasurements of defined benefit schemes
Deferred tax charge
Current tax credit
Exchange differences on translation
Other comprehensive income
Total comprehensive income
Shares issued
Share-based payments
Deferred tax movements on share-based payments
Other deferred tax movements
At 28 March 2020

Note

Share
capital
£m
84.1

Share
premium
£m
1,407.6

Merger
reserve
£m
351.7

13
8

13
8
8

–
–
–
–
–
–
0.4
–
–

–
–
–
–
–
–
1.0
–
–

–
–
–
–
–
–
–
–
–

84.5

1,408.6

351.7

84.5

1,408.6

351.7

–

84.5

1,408.6

351.7

–
–
–
–
–
–
–
0.3
–
–
–

–
–
–
–
–
–
–
0.8
–
–
–

–
–
–
–
–
–
–
–
–
–
–

84.8

1,409.4

351.7

Other
reserves
£m
(9.3)
–
–
–
–
–
–
–
–
–
(9.3)

(9.3)
–
(9.3)
–
–
–
–
–
–
–
–
–
–
–
(9.3)

Profit and
loss reserve
£m
(884.8)
(33.8)
53.2
(9.1)
(0.2)
43.9
10.1

–

2.1
(0.1)
(872.7)

(872.7)
12.7
(860.0)
46.5
816.7
(167.0)
5.2
0.3
655.2
701.7

–

1.3
0.5
(0.1)
(156.6)

Total equity
£m
949.3
(33.8)
53.2
(9.1)
(0.2)
43.9
10.1
1.4
2.1
(0.1)
962.8

962.8
12.7
975.5
46.5
816.7
(167.0)
5.2
0.3
655.2
701.7
1.1
1.3
0.5
(0.1)
1,680.0

The notes on pages 97 to 135 form an integral part of the consolidated financial statements.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements97

Notes to the financial statements

1. General information
Premier Foods plc (the “Company”) is a public limited company incorporated and domiciled in England and Wales, registered number 5160050,
with its registered office at Premier House, Centrium Business Park, Griffiths Way, St Albans, Hertfordshire AL1 2RE. The principal activity of the
Company and its subsidiaries (the “Group”) is the manufacture and distribution of branded and own label food products. Copies of the annual report
and accounts are available on our website: http://www.premierfoods.co.uk/investors/results-centre.

These Group consolidated financial statements were authorised for issue by the Board of directors on 24 June 2020.

2. Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been
consistently applied to all the periods presented, unless otherwise stated.

2.1 Basis of preparation
The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (‘IFRS’)
as adopted by the European Union (EU) (‘adopted IFRS’) in response to IAS regulation (EC1606/2002), related interpretations and the Companies
Act 2006 applicable to companies reporting under IFRS, and on the historical cost basis, with the exception of items recorded at fair value. Amounts
are presented to the nearest £0.1m.

The statutory accounting period is the 52 weeks from 31 March 2019 to 28 March 2020 and comparative results are for the 52 weeks from 1 April
2018 to 30 March 2019. All references to the ‘period’, unless otherwise stated, are for the 52 weeks ended 28 March 2020 and the comparative
period, 52 weeks ended 30 March 2019.

The preparation of financial statements in conformity with adopted IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

The following accounting standards and interpretations, issued by the International Accounting Standards Board (“IASB”), effective for periods on or
after 1 January 2019, have been endorsed by the EU:

International Financial Reporting Standards

IFRS 16
IFRIC 23
Amendments to IFRS 9
Amendments to IAS 28
Amendments to IAS 19
Annual improvements to IFRS

Leases
Uncertainty over Income Tax Treatments
Prepayments Features with Negative Compensation
Long term interests in Associates and Joint Ventures
Plan Amendment, Curtailment or Settlement
2015-2017 cycle

The impact on adoption of the new or revised standards is explained in the following paragraphs.

The following standards and amendments to published standards, effective for periods on or after 1 January 2020, have been endorsed by the EU:

International Financial Reporting Standards

Amendments to references to Conceptual Framework
in IFRS Standards
Amendments to IAS 1 and IAS 8
Amendments to IFRS 3
Amendments to IFRS 9, IAS 39 and IFRS 7

Definition of Material
Definition of a Business
Interest Rate Benchmark Reform

The following standards and amendments to published standards, effective for periods on or after 1 January 2021, have not been endorsed by the EU:

International Financial Reporting Standards

IFRS 17

Insurance Contracts

IFRS 16 Leases
This is the first set of full year accounts in which IFRS 16 Leases has been applied. IFRS 16 introduced a single, on-balance sheet accounting model
for lessees and sets out the principles for the recognition, measurement, presentation and disclosure of leases. As a result, the Group, as a lessee,
has recognised right of use assets representing its rights to use the underlying assets and lease liabilities representing its obligation to make lease
payments. Lessor accounting remains similar to previous accounting policies.

The Group has applied IFRS 16 using the modified retrospective approach, discounted at the Group’s incremental borrowing rate at 31 March 2019.
Accordingly, the comparative information presented for 2019 has not been restated – i.e. it is presented as previously reported under IAS 17 and
related interpretations. The Group had previously provided for some of these costs under IAS 37 therefore the Group has reviewed these provisions
and made adjustments as necessary.

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www.premierfoods.co.ukFinancial Statements98

Notes to the financial statements CONTINUED

2. Accounting policies continued
Details of the changes in accounting policies arising from the implementation of IFRS 16 are as follows:

Lease recognition
Previously, the Group determined at the inception of a contract whether an arrangement was or contained a lease under IFRIC 4 Determining
Whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the new definition of a
lease. Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for a period of time in
exchange for consideration.

On transition to IFRS 16, the Group elected to apply the practical expedient allowing the standard to be applied only to contracts that were
previously identified as leases under IAS 17 and IFRIC 4. Therefore, the definition of a lease under IFRS 16 has been applied only to contracts
entered into or changed on or after 31 March 2019.

The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or
less and do not contain a purchase option, and lease contracts for which the underlying asset is of low value (‘low-value assets’).

For leases of properties in which the Group is a lessee, it has applied the practical expedient permitted by IFRS 16 and will account for each lease
component and any associated non-lease components as a single lease component.

Right of use assets
The Group recognises right of use assets at the commencement date of the lease. Right of use assets are measured at cost, less accumulated
depreciation and impairment losses and adjusted for any re-measurement of lease liabilities. The cost of right of use assets includes the amount of
lease liabilities recognised, adjusted for any lease payments made at or before the commencement date, less any lease incentives received. Right
of use assets are depreciated over the shorter of the asset’s useful life or the lease term on a straight-line basis. Right of use assets are subject to
and reviewed regularly for impairment, any impairment of a right of use asset would be considered a Non-trading item. Depreciation on right of use
assets is predominantly recognised in cost of sales and administration costs in the consolidated statement of profit and loss.

Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of the lease payments to be made
over the lease term. Lease payments include fixed and variable lease payments that depend on an index or rate less any lease incentives receivable.
Any variable lease payments that do not depend on an index or rate are recognised as an expense in the period in which the event or condition that
triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date if the interest
rate implicit in the lease is not readily determinable. Generally, the Group uses its incremental borrowing rate as the discount rate. The incremental
borrowing rate used for the purposes of calculating the present value of lease payments is 4.17%.

After the commencement date, the lease liability is increased to reflect the accretion of interest and reduced for lease payments made. In addition,
the carrying amount of lease liabilities is re-measured if there is a modification, a change in the lease term or a change in the fixed lease payments.
Interest charges are included in finance costs in the consolidated statement of profit and loss.

Short-term leases and leases of low-value items
The Group has elected not to recognise right of use assets and lease liabilities for short-term leases of machinery and equipment that have a lease
term of less than 12 months and leases of low-value assets. Lease payments relating to short-term leases and leases of low-value assets are
recognised as an expense on a straight-line basis over the lease term.

Impact of IFRS 16 on financial statements
The Group leases many assets including properties, vehicles and other equipment. As a lessee, the Group previously classified leases as operating
leases or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership.

Balance sheet
The table below shows a reconciliation from the total operating lease commitment as disclosed at 31 March 2019 to the total lease liabilities
recognised in the accounts immediately after transition:

Operating lease commitments as at 31 March 2019
Provisions for non-operational property lease costs
Discounted using incremental borrowing rate
Other adjustment relating to implementation of IFRS 16
Lease liabilities recognised at 31 March 2019

£m
18.3
8.9
(3.8)
0.1
23.5

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements99

The Group presents right of use assets separately in the consolidated balance sheet. The carrying amounts of right of use assets are as below:

Balance at 31 March 2019
Balance at 28 March 2020

The Group presents lease liabilities separately in the consolidated balance sheet.

Property
£m
10.1
9.0

Vehicle, Plant
& Equiipment
£m
3.9
2.8

Total
£m
14.0
11.8

Statement of profit and loss
The Group has recognised depreciation and interest costs in respect of leases that were previously classified as operating leases in the income
statement for the period, rather than rental charges. During the 52 weeks ended 28 March 2020, the Group recognised £2.6m of depreciation
charges and £1.1m of interest costs in respect of these leases.

Reserves
The Group has previously provided for property costs under IAS 37 Provisions, Contingent Liabilities and Contingent Assets. On transition to IFRS
16, the Group recognised right of use assets in respect of its non-operational leasehold properties which were immediately impaired through
reserves. Elements of the Group’s provisions for non-operational properties cannot be recognised as lease creditors under IFRS 16 and have
therefore been credited to reserves.

Cash flow statement
The implementation of IFRS 16 is an accounting change only and does not impact cash flows.

Basis for preparation of financial statements on a going concern basis
The Group’s revolving credit facility includes net debt/EBITDA and EBITDA/interest covenants, as detailed in note 19. In the event these covenants
are not met then the Group would be in breach of its financing agreement and, as would be the case in any covenant breach, the banking syndicate
could withdraw funding to the Group. The Group was compliant with its covenant tests as at 28 September 2019 and 28 March 2020.

Having undertaken a robust assessment of the Group’s forecasts with specific consideration to the trading performance of the Group in the context
of the current COVID-19 pandemic, and nothwithstanding the net current liabilities position of the Group, the directors have reasonable expectation
that the Group is able to operate within the level of its current facilities including covenant tests and has adequate resources to continue in
operational existence for the next 12 months. The Group therefore continues to adopt the going concern basis in preparing its consolidated financial
statements for the reasons set out below:

At 28 March 2020, the Group had total assets less current liabilities of £2,685.4m and net assets of £1,680.0m. Liquidity as at that date was
£269.5m, made up of cash and cash equivalents, and undrawn committed credit facilities of £91.6m.

To date the Group has experienced no net adverse impact of the COVID-19 pandemic with elevated levels of demand seen. During the outbreak
of COVID-19, the Group’s first priority is the health and wellbeing of its colleagues, customers and other stakeholders. Nevertheless, the full impact
of the COVID-19 outbreak is unknown at this time and the Group takes its responsibility as a major UK food manufacturer very seriously, working
closely with its customers to ensure maximum availability of its product ranges for consumers.

Accordingly, the Directors have rigorously reviewed the evolving situation relating to COVID-19 and have modelled a series of ‘downside case’
scenarios that cover the next 12 months. These downside cases represent increasingly severe but plausible scenarios and include assumptions
relating to estimation of the impact of the closure of all manufacturing sites for a period of 8 weeks.

Whilst these downside scenarios are severe but plausible, each is considered by the Directors to be extremely prudent, having an adverse impact on
Revenue, margin and cash flow. These scenarios are considered a stress test of the Group’s ability to adopt the going concern basis. The Directors,
in response, have identified mitigating actions that would reduce costs, optimising cashflow and liquidity. Amongst these are the following actions:
reducing capital expenditure, reducing marketing spend and delaying or cancelling discretionary spend.

The Group operates in the Food Manufacturing industry, considered an essential during the current pandemic, and whilst uncertainty exists in
respect of the potential impact of COVID-19, more meals are being eaten at home than usual due to recent measures set out by HM Government
and hence increased demand for the Group’s product ranges. If outcomes are unexpectedly significantly worse, the Directors would need to
consider what additional mitigating actions were needed. Consequently, the Directors have concluded that to stress test a level of increased severity
beyond these scenarios that may create circumstances that represent a material uncertainty and which may cast significant doubt about the Group’s
ability to continue as a going concern, is not currently reasonable.

The Directors, after reviewing financial forecasts and financing arrangements, consider that the Group has adequate resources at the date of
approval of this report. Accordingly, the Directors are satisfied that it is appropriate to adopt the going concern basis in preparing its consolidated
financial statements.

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Notes to the financial statements CONTINUED

2. Accounting policies continued
2.2 Basis of consolidation
(i) Subsidiaries
The consolidated financial statements include the financial statements of Premier Foods plc and entities controlled by the Company (its subsidiaries).
Control is achieved where the Company is exposed to or has rights to variable returns from involvement with an investee and has the ability to affect
those returns through its power over the investee.

All intra-Group transactions, balances, income and expenses are eliminated on consolidation.

(ii) Associates
Associates are entities over which the Group has significant influence but not control. Investments in associates are accounted for using the equity
method of accounting. Other financial instruments in associates are accounted for under IFRS 9 Financial Instruments. The Group’s only associate is
Hovis, the investment for which was previously impaired.

2.3 Revenue
Revenue comprises the invoiced value for the sale of goods net of sales rebates, discounts, value added tax and other taxes directly attributable
to revenue and after eliminating sales within the Group. Revenue is recognised when it transfers control of products over to the customer. The
recognition policy is applicable across all operating segments. Revenue is recognised on the following basis:

(i) Sale of goods
Sales of goods are recognised as revenue when a customer gains control of the goods, which typically coincides with the time when the
merchandise is delivered to customers and title passes. Revenue is recognised based on the transaction price specified in the contract, net of the
estimated sales rebates and discounts.

(ii) Sales rebates and discounts
Sales related discounts comprise:

• Long term discounts and rebates, which are sales incentives to customers to encourage them to purchase increased volumes and are related to

total volumes purchased and sales growth.

• Short term promotional discounts, which are directly related to promotions run by customers.

Sales rebates and discount accruals are established at the time of sale based on management’s best estimate of the amounts necessary to meet
claims by the Group’s customers in respect of these rebates and discounts. Accruals are made for each individual promotion or rebate arrangement
and are based on the type and length of promotion and nature of customer agreement. At the time an accrual is made the nature and timing of the
promotion is typically known. Accumulated experience used to estimate and provide for rebates and discounts is only recognised to the extent that it
is highly probable that a significant reversal will not occur.

(iii) Commercial income
Commercial income received from suppliers through rebates and discounts are recognised within cost of sales over the period(s) to which the
underlying contract or agreement relates. Accrued income is recognised for rebates on contracts covering the current period, for which no cash was
received at the balance sheet date. Deferred income is recognised for rebates that were received from suppliers at the balance sheet date but relate
to contracts covering future periods.

2.4 Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”). The
CODM is responsible for allocating resources and assessing performance of the operating segments. See note 4 for further details.

2.5 Share-based payments
The Group operates a number of equity-settled and share-based compensation plans. The fair value of the employee services received in exchange
for the grant of shares or options is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period
is determined by reference to the fair value of shares or options granted, excluding the impact of any non-market vesting conditions (for example,
EPS targets). Non-market vesting conditions are included in assumptions about the number of shares or options that are expected to vest. At each
balance sheet date, the Group revises its estimates of the number of shares or options that are expected to vest and recognises the impact of the
revision to original estimates, if any, in the statement of profit or loss, with a corresponding adjustment to equity.

2.6 Foreign currency translation
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated into the functional currency of the subsidiaries at rates of exchange ruling at the end of the financial period.

The results of overseas subsidiaries with functional currencies other than in sterling are translated into sterling at the average rate of exchange
ruling in the period. The balance sheets of overseas subsidiaries are translated into sterling at the closing rate. Exchange differences arising from
retranslation at the period end exchange rates of the net investment in foreign subsidiaries are recorded as a separate component of equity in
reserves.

All other exchange gains or losses are recorded in the statement of profit or loss.

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2.7 Property, plant and equipment (“PPE”)
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment.

PPE is initially recorded at cost. Cost includes the original purchase price of the asset and the costs attributable to bringing the asset to its working
condition for its intended use. Subsequent expenditure is added to the carrying value of the asset when it is probable that incremental future
economic benefits will transfer to the Group. All other subsequent expenditure is expensed in the period it is incurred.

Differences between the cost of each item of PPE and its estimated residual value are written off over the estimated useful life of the asset using
the straight-line method. Reviews of the estimated remaining useful lives and residual values of individual productive assets are performed annually,
taking account of commercial and technological obsolescence as well as normal wear and tear. Freehold land is not depreciated. The useful
economic lives of owned assets range from 15 to 50 years for buildings, 5 to 30 years for plant and equipment and 10 years for vehicles.

All items of PPE are reviewed for impairment when there are indications that the carrying value may not be fully recoverable.

Assets under construction represent the amount of expenditure recognised in the course of its construction. Directly attributable costs that are
capitalised as part of the PPE include the employee costs and an appropriate portion of relevant overheads. When the item of PPE is available for
use, it is depreciated.

The carrying value relating to disposed assets is written off to profit or loss on disposal of PPE.

2.8 Intangible assets
In addition to goodwill, the Group recognises the following intangible assets:

Acquired intangible assets
Acquired brands, trademarks and licences that are controlled through custody or legal rights and that could be sold separately from the rest of the
business are capitalised, where fair value can be reliably measured. All of these assets are considered to have finite lives and are amortised on a
straight-line basis over their estimated useful economic lives that range from 20 to 40 years for brands and trademarks and 10 years for licences.

Software
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are
recognised as intangible assets when the project or process is technically and commercially feasible. Directly attributable costs that are capitalised
as part of the software product include the software development employee costs and an appropriate portion of relevant overheads.

Software development costs are amortised over their estimated useful lives on a straight-line basis over a range of 3 to 10 years.

The useful economic lives of intangible assets are determined based on a review of a combination of factors including the asset ownership rights
acquired and the nature of the overall product life cycle. Reviews of the estimated remaining useful lives and residual values of individual intangible
assets are performed annually.

Research
Research expenditure is charged to the statement of profit or loss in the period in which it is incurred.

2.9 Impairment
The carrying values of non-financial assets, other than goodwill and inventories, are reviewed at least annually to determine whether there is an
indication of impairment. Assets that are subject to amortisation are assessed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Non-financial assets, other than goodwill, that have suffered an impairment loss are reviewed for
possible reversal of the impairment at each reporting date.

Where an indication of impairment exists, the recoverable amount is estimated based on the greater of its value in use and its fair value less costs to
sell. In assessing the fair value less costs to sell, the market approach is often used to derive market multiples from a set of comparative assets.

The Group reviews its identified CGUs for the purposes of testing goodwill on an annual basis, taking into consideration whether assets generate
independent cash inflows. The recoverable amounts of CGUs are determined based on the higher of fair value less costs of disposal and value in
use calculations. These calculations require the use of estimates.

Impairment losses are recognised in the statement of profit or loss in the period in which they occur.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use
that are largely independent of the cash flows of other assets.

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2. Accounting policies continued
2.10 Finance cost and income
Finance cost
Borrowing costs are accounted for on an accruals basis in the statement of profit or loss using the effective interest method.

Finance income
Finance income is recognised on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable,
taking into consideration the interest element of derivatives.

2.11 Leases
In the comparative period, assets held under finance leases, where substantially all the risks and rewards of ownership are transferred to the Group,
are capitalised and included in property, plant and equipment at the lower of the present value of future minimum lease payments or value in use,
as described in IAS 17 Leases. Each asset is depreciated over the shorter of the lease term or its estimated useful life on a straight-line basis.
Obligations relating to finance leases, net of finance charges in respect of future periods, are included under borrowings. The interest element of
the rental obligation is allocated to accounting periods during the lease term to reflect a constant rate of interest on the remaining balance of the
obligation for each accounting period.

Leases in which a significant portion of risks and rewards of ownership are retained by the lessor are classified as operating leases. Rental costs
under operating leases, net of any incentives received from the lessor, are charged to the statement of profit or loss on a straight-line basis over the
lease period.

Following the adoption of IFRS 16 in the current period, assets held under finance leases, where substantially all the risks and rewards of ownership
are transferred to the Group, are capitalised and included in property, plant and equipment at the lower of the present value of future minimum lease
payments or value in use. Each asset is depreciated over the shorter of the lease term or its estimated useful life on a straight-line basis. Obligations
relating to finance leases, net of finance charges in respect of future periods, are included under borrowings. The interest element of the rental
obligation is allocated to accounting periods during the lease term to reflect a constant rate of interest on the remaining balance of the obligation for
each accounting period.

2.12 Inventories
Inventory is valued at the lower of cost and net realisable value. Where appropriate, cost includes production and other attributable overhead
expenses as described in IAS 2 Inventories. Cost is calculated on a first-in, first-out basis by reference to the invoiced value of supplies and
attributable costs of bringing the inventory to its present location and condition. Net realisable value is the estimated selling price in the ordinary
course of business less estimated costs of completion and the estimated costs necessary to make the sale.

All inventories are reduced to net realisable value where the estimated selling price is lower than cost.

A provision is made for slow moving, obsolete and defective inventory where appropriate.

2.13 Taxation
Income tax on the profit or loss for the period comprises current and deferred tax.

Current tax
Income tax is recognised in the statement of profit or loss except to the extent that it relates to items recognised directly in other comprehensive
income (“OCI”) in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the period, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous period.

Deferred tax
Deferred tax is accounted for in respect of temporary differences between the carrying amount of assets and liabilities in the financial statements and
the corresponding tax bases used in computation of taxable profit. Deferred taxation is not provided on the initial recognition of an asset or liability in
a transaction, other than in a business combination, if at the time of the transaction there is no effect on either accounting or taxable profit or loss.

Deferred tax is measured at the tax rates that are expected to apply in the periods in which the asset or liability is settled based on tax rates (and tax
laws) that have been enacted or substantively enacted as at the balance sheet date.

The measurement of deferred tax assets and liabilities reflect the director’s intention regarding the manner of recovery of an asset or settlement
of a liability.

For the purpose of recognising deferred tax on the pension scheme surplus, withholding tax (at 35%) would apply for any surplus being refunded to
the Group at the end of the life of the scheme. Corporation tax (at 19%) would apply for any surplus expected to unwind over the life of the scheme.

The directors have concluded that the corporation tax rate should apply to the recognition of deferred tax on the pension scheme surplus.

Deferred tax is recognised in the statement of profit or loss except when it relates to items credited or charged directly to OCI, in which case the
deferred tax is also recognised in equity.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary difference
can be utilised. Their carrying amount is reviewed at each balance sheet date on the same basis.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and when the Group intends to
settle its current tax assets and liabilities on a net basis.

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When assessing whether the recognition of a deferred tax asset can be justified, and if so at what level, the directors take into account the following:

• Historic business performance

• Projected profits or losses and other relevant information that allow profits chargeable to corporation tax to be derived

• The total level of recognised and unrecognised losses that can be used to reduce future forecast taxable profits

• The period over which there is sufficient certainty that profits can be made that would support the recognition of an asset

Further disclosures of the amounts recognised (and unrecognised) are contained within note 8.

2.14 Employee benefits
Group companies provide a number of long-term employee benefit arrangements, primarily through pension schemes. The Group has both defined
benefit and defined contribution plans.

Defined benefit plans
A defined benefit plan is a pension plan that defines the amount of pension benefit that an employee will receive on retirement, usually dependent on
factors such as age, years of service and compensation.

The liability or surplus recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit
obligation at the balance sheet date less the fair value of plan assets, together with adjustments for remeasurement and past service costs. Defined
benefit obligations are calculated using assumptions determined by the Group with the assistance of independent actuaries using the projected unit
credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using yields of
high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related pension liability.

Remeasurement arising from experience adjustments and changes in actuarial assumptions are charged or credited to the statement of
comprehensive income in the period in which they arise.

Past service costs, administration costs, and the net interest on the net defined benefit liability or surplus are recognised immediately in the
statement of profit or loss.

Curtailments are recognised as a past service cost when the Group makes an significant reduction in the number of employees covered by a plan
or amends the terms of a defined benefit plan so that a significant element of future service by current employees no longer qualifies or qualify for
amended benefits.

Plan assets of the defined benefit schemes include a number of assets for which quoted prices are not available. At each reporting date, the group
determines the fair value of these assets with reference to most recently available information.

To the extent a surplus arises under IAS 19, the Group ensures that it can recognise the associated asset in line with IFRIC 14 with no restrictions.

Defined contribution plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity, which then invests the
contributions to buy annuities for the pension liabilities as they become due based on the value of the fund. The Group has no legal or constructive
obligations to pay further contributions.

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of profit or loss as they fall due.
Differences between contributions payable in the period and contributions actually paid are recognised as either accruals or prepayments in the
balance sheet.

2.15 Provisions
Provisions (for example property exit costs) are recognised when the Group has present legal or constructive obligations as a result of past events, it
is probable that an outflow of resources will be required to settle the obligations and a reliable estimate of the amount can be made. Where material,
the Group discounts its provisions using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to
the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance expense.

2.16 Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions
of the instrument.

Trade and other receivables
Trade and other receivables are initially measured at the transaction price and at the point of recognition an expected credit loss is recognised
to reflect the future risk of default. The Group considers a financial asset to be in default when the debtor is unlikely to pay its credit obligation in
full, without recourse by the Group. Trade receivables are subsequently measured at amortised cost less any additional, specific provisions for
impairment. A specific provision is made for impairment when there is objective evidence that the Group will not be able to collect all amounts due
according to the terms of the receivables. Trade and other receivables are discounted when the time value of money is considered material.

The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables.

To measure the expected credit losses, trade receivables are grouped based on shared credit risk characteristics and the days past due.

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2. Accounting policies continued

Cash and cash equivalents
Cash and cash equivalents, with original maturities at inception of less than 90 days, comprise cash in hand and demand deposits, and other short-
term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

For the purpose of the statement of cash flows, cash and cash equivalents also include bank overdrafts and any drawdown on the Group’s revolving
credit facility.

Bank borrowings
Interest-bearing bank loans and overdrafts are measured initially at fair value and subsequently at amortised cost, using the effective interest rate
method. Any difference between the proceeds (net of transaction costs and inclusive of debt issuance costs) and the settlement or redemption of
borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs.

Trade and other payables
Trade and other payables are initially measured at fair value and subsequently measured at amortised cost. Trade payables and other liabilities are
discounted when the time value of money is considered material.

Equity instruments
Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of directly attributable issue costs.

2.17 Deferred income
Deferred income is recognised and released over the period to which the relevant agreement relates.

3. Critical accounting policies, estimates and judgements
The following are areas of particular significance to the Group’s financial statements and may include the use of estimates, which is fundamental to
the compilation of a set of financial statements. Results may differ from actual amounts.

Critical accounting policies
The following are considered to be the critical accounting policies within the financial statements:

3.1 Deferred tax
Deferred tax arises due to certain temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
those for taxation purposes. The Group has a significant loss related to prior periods. The deferred tax assets and liabilities on a gross basis are
material to the financial statements.

The directors have concluded that the corporation tax rate should apply to the recognition of deferred tax on the pension scheme surplus, reflecting
the directors’ intention regarding the manner of recovery of the asset.

Deferred tax is recognised in the statement of profit or loss except when it relates to items credited or charged directly to OCI, in which case the
deferred tax is also recognised in equity.

When calculating the value of the deferred tax asset or liability, consideration is given to the size of gross deferred tax liabilities and deferred tax
assets available to offset this. To the extent that deferred tax assets exceed liabilities, estimation is required around the level of asset that can be
supported. The following factors are taken into consideration.

• Historic business performance

• Projected profits or losses and other relevant information that allow profits chargeable to corporation tax to be derived

• The total level of recognised and unrecognised losses that can be used to reduce future forecast taxable profits

• The period over which there is sufficient certainty that profits can be made that would support the recognition of an asset

Further disclosures are contained within note 8.

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Estimates
The following are considered to be the key estimates within the financial statements:

3.2 Employee benefits
The present value of the Group’s defined benefit pension obligations depends on a number of actuarial assumptions. The primary assumptions used
include the discount rate applicable to scheme liabilities, the long-term rate of inflation and estimates of the mortality applicable to scheme members.
Each of the underlying assumptions is set out in more detail in note 13.

At each reporting date, and on a continuous basis, the Group reviews the macro-economic, Company and scheme specific factors influencing each
of these assumptions, using professional advice, in order to record the Group’s ongoing commitment and obligation to defined benefit schemes in
accordance with IAS 19 (Revised).

Plan assets of the defined benefit schemes include a number of assets for which quoted prices are not available. At each reporting date, the Group
determines the fair value of these assets with reference to most recently available asset statements from fund managers.

Where statements are not available at the reporting date a roll forward of cash transactions between statement date and balance sheet date is
performed.

At the reporting date, the property asset class carried an uncertainty clause over the valuation performed by independent valuers of the property
funds. This reflects the difficulty in assigning a value to the underlying properties held by the respective funds due to the current economic
environment caused by COVID-19.

The inclusion of the ‘uncertainty’ clause does not invalidate the valuation, nor does it mean that the valuation cannot be relied upon. The declaration
has been included in the investment manager’s valuation report as a precaution to ensure transparency of the fact that less certainty can be attached
to the valuation than would otherwise be the case under normal market conditions.

Management has reviewed the asset values that make up the property asset class, to ensure the values appropriately reflect current market
conditions, recognising that there is short term volatility driven by the current market conditions.

3.3 Goodwill
Impairment reviews in respect of goodwill are performed annually unless an event indicates that an impairment review is necessary. Impairment
reviews in respect of intangible assets are performed when an event indicates that an impairment review is necessary. Examples of such triggering
events include a significant planned restructuring, a major change in market conditions or technology, expectations of future operating losses, or a
significant reduction in cash flows. In performing its impairment analysis, the Group takes into consideration these indicators including the difference
between its market capitalisation and net assets.

The Group has considered the impact of the assumptions used on the calculations and has conducted sensitivity analysis on the value in use
calculations of the CGUs carrying values for the purposes of testing goodwill. The assumptions impacted by any uncertainty are revenue and
divisional contribution growth, long term growth rates and discount rates. See note 11 for further details.

For further details see note 2.9 and note 12.

3.4 Commercial arrangements
Sales rebates and discounts are accrued on each relevant promotion or customer agreement and are charged to the statement of profit or loss at
the time of the relevant promotional buy-in as a deduction from revenue. Accruals for each individual promotion or rebate arrangement are based
on the type and length of promotion and nature of customer agreement. At the time an accrual is made the nature, funding level and timing of the
promotion is typically known. Areas of estimation are sales volume/activity, phasing and the amount of product sold on promotion.

For short term promotions, the Group performs a true up of estimates where necessary on a monthly basis, using real time customer sales
information where possible and finally on receipt of a customer claim which typically follows 1-2 months after the end of a promotion. For longer term
discounts and rebates the Group uses actual and forecast sales to estimate the level of rebate. These accruals are updated monthly based on latest
actual and forecast sales.

Judgements
The following are considered to be the key judgements within the financial statements:

3.5 Non-trading items
Non-trading items have been presented separately throughout the financial statements. These are items that management believes require separate
disclosure by virtue of their nature in order that the users of the financial statements obtain a clear and consistent view of the Group’s underlying
trading performance. In identifying non-trading items, management have applied judgement including whether i) the item is related to underlying
trading of the Group; and/or ii) how often the item is expected to occur.

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4. Segmental analysis
IFRS 8 requires operating segments to be determined based on the Group’s internal reporting to the Chief Operating Decision Maker (“CODM”). The
CODM has been determined to be the Executive Leadership Team as it is primarily responsible for the allocation of resources to segments and the
assessment of performance of the segments.

The Group’s operating segments are defined as “Grocery”, “Sweet Treats”, “International” and “Knighton”. The Grocery segment primarily sells
savoury ambient food products and the Sweet Treats segment sells sweet ambient food products. The International and Knighton segments have
been aggregated within the Grocery segment for reporting purposes as revenue is below 10 percent of the Group’s total revenue and the segments
are considered to have similar characteristics to that of Grocery. This is in accordance with the criteria set out in IFRS 8.

The CODM uses Divisional contribution as the key measure of the segments’ results. Divisional contribution is defined as gross profit after selling,
marketing and distribution costs. Divisional contribution is a consistent measure within the Group and reflects the segments’ underlying trading
performance for the period under evaluation.

The Group uses Trading profit to review overall Group profitability. Trading profit is defined as profit/loss before tax before net finance costs,
amortisation of intangible assets, non-trading items, fair value movements on foreign exchange and other derivative contracts and net interest on
pensions and administrative expenses, and past service costs.

The segment results for the period ended 28 March 2020 and for the period ended 30 March 2019 and the reconciliation of the segment measures
to the respective statutory items included in the consolidated financial statements are as follows:

52 weeks ended 30 March 2019
Sweet Treets
£m
227.3
23.6

Grocery
£m
597.0
138.3

Revenue
Divisional contribution
Group and corporate costs
Trading profit
Amortisation of intangible assets
Fair value movements on foreign exchange and
other derivative contracts
Net interest on pensions, administrative expenses
and past service costs
Non-trading items:1
- GMP equalisation charge
- Restructuring costs
- Impairment of intangible assets and goodwill
- Other non-trading items
Operating profit
Finance cost
Finance income2
Profit/(loss) before taxation

52 weeks ended 28 March 2020
Sweet Treets
£m
235.5
23.7

Grocery
£m
611.6
148.2

Total
£m
847.1
171.9
(39.3)
132.6
(29.4)

1.7

(4.6)

–
(4.1)
–
(0.9)
95.3
(44.1)
2.4
53.6

Depreciation3

(11.1)

(8.8)

(19.9)

(9.0)

(8.0)

Total
£m
824.3
161.9
(33.4)
128.5
(34.4)

(1.3)

(41.5)
(16.8)
(30.6)
1.9
4.5
(56.7)
9.5
(42.7)

(17.0)

1 Non-trading items include restructuring costs of £4.1m (2018/19: £16.8m) relating primarily to costs associated with the Strategic review and restructuring of the

International segment

² Finance income in the prior year includes reversal of the impairment of the Hovis loan note, driven by the receipt of £7.6m from Hovis.
3 Depreciation in the period ended 28 March 2020 includes £2.6m (2018/19: £nil) of depreciation of IFRS 16 right of use assets.

Revenues in the period ended 28 March 2020, from the Group’s four principal customers, which individually represent over 10% of total Group
revenue, are £190.6m, £125.9m, £95.2m and £84.8m (2018/2019: £184.8m, £119.6m, £90.2m and £86.2m). These revenues relate to both the
Grocery and Sweet Treats reportable segments.

The Group primarily supplies the UK market, although it also supplies certain products to other countries in Europe and the rest of the world. The
following table provides an analysis of the Group’s revenue, which is allocated on the basis of geographical market destination, and an analysis of the
Group’s non-current assets by geographical location.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial StatementsRevenue

United Kingdom
Other Europe
Rest of world
Total

Non-current assets

United Kingdom

5. Operating profit
5.1 Analysis of costs by nature

Employee benefits expense (note 6)

Depreciation of property, plant and equipment (note 10)

Amortisation of intangible assets (note 12)

Operating lease rental expenditure

Repairs and maintenance expenditure

Research and development costs

Non-trading items

– GMP equalisation charge

– Restucturing costs

– Other non-trading items

– Impairment of intangible assets (note 12)

Auditor remuneration (note 5.2)

5.2 Auditor’s remuneration

Fees payable to the Group’s auditor for the audit of the consolidated and parent company accounts of Premier
Foods plc
– The audit of the Group’s subsidiaries, pursuant to legislation
Fees payable to the Group’s auditor and its associates for other services:
– Audit related assurance services
– Services relating to corporate finance transactions
Total auditor remuneration

The total operating profit charge for auditor remuneration was £0.6m (2018/19: £0.8m).

107

52 weeks
ended
28 Mar 2020
£m
803.8
22.0
21.3
847.1

52 weeks
ended
30 Mar 2019
£m
770.8
26.1
27.4
824.3

52 weeks
ended
28 Mar 2020
£m
2,693.9

52 weeks
ended
30 Mar 2019
£m
2,036.2

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

(168.9)

(19.9)

(29.4)

–

(22.6)

(7.2)

–

(4.1)

(0.9)

–

(0.6)

(202.3)

(17.0)

(34.4)

(3.6)

(21.3)

(6.9)

(41.5)

(16.8)

1.9

(30.6)

(0.8)

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

(0.4)
(0.1)

(0.1)
–
(0.6)

(0.3)
(0.2)

(0.1)
(0.3)
(0.9)

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www.premierfoods.co.ukFinancial Statements108

Notes to the financial statements CONTINUED

6. Employees

Employee benefits expense
Wages, salaries and bonuses

GMP and past service cost related to defined benefit pension schemes

Social security costs

Termination benefits

Share options granted to directors and employees

Contributions to defined contribution schemes (note 13)

Total

Average monthly number of people employed (including executive and non-executive directors):

Average monthly number of people employed
Management
Administration
Production, distribution and other
Total

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

(145.5)

–

(12.6)

(2.2)

(1.3)

(7.3)

(142.4)

(37.6)

(12.3)

(1.2)

(2.1)

(6.7)

(168.9)

(202.3)

2019/20
Number

2018/19
Number

564
382
3,209
4,155

518
403
3,262
4,183

Directors’ remuneration is disclosed in the audited section of the Directors Remuneration Report on pages 56 to 77, which form part of these
consolidated financial statements.

7. Finance income and costs

Interest payable on bank loans and overdrafts

Interest payable on senior secured notes

Interest payable on revolving facility
Other interest payable1
Amortisation of debt issuance costs

Write off of financing costs2
Early redemption fee3

Total finance cost
Interest receivable on bank deposits
Other finance income4

Total finance income

Net finance cost

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

(7.2)

(31.0)

(0.2)

(2.4)

(3.3)

(44.1)

–

(44.1)
2.4
–

2.4

(41.7)

(6.2)

(31.7)

(0.8)

(3.0)

(3.7)

(45.4)

(5.7)

(5.6)

(56.7)

1.9
7.6

9.5

(47.2)

1 Included in other interest payable is £1.1m charge (2018/19: £nil) relating to non-cash interest costs arising following the adoption of IFRS 16 and £1.3m charge

(2018/19: £3.0m charge) relating to the unwind of the discount on certain of the Group’s long term provisions.

2 Relates to the refinancing of the senior secured fixed rate notes due 2021 and revolving credit facility in the prior period.
3 Relates to a non-recurring payment arising on the early redemption of the £325m senior secured fixed rate notes due 2021 as part of the refinancing of the Group’s debt

in the prior period.

4 Relates to partial reversal of the impairment of the Hovis loan note in the prior period, driven by the receipt of £7.6m from Hovis.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements8. Taxation
Current tax

Current tax
– Current period

Overseas current tax
– Current period

Deferred tax
– Current period

– Prior periods

– Changes in tax rate

Income tax (charge)/credit

109

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

(5.2)

–

(6.3)

(0.5)

4.9

(7.1)

–

1.1

6.1

1.7

–

8.9

The applicable rate of corporation tax for the period is 19%. The 2016 Finance Act had a provision to reduce the UK corporation tax rate to 17%
from 1 April 2020, however, this was repealed in the Spring budget of 2020. Therefore, the opening deferred tax balances have been restated at
19%, the rate at which they are expected to reverse.

Tax relating to items recorded in other comprehensive income included:

Corporation tax credit on pension movements
Deferred tax charge on reduction of corporate tax rate
Deferred tax credit on losses
Deferred tax charge on pension movements

52 weeks
ended
28 Mar 2020
£m
5.2
(6.4)
–
(160.6)
(161.8)

52 weeks
ended
30 Mar 2019
£m
–
–
1.1
(10.2)
(9.1)

The tax charge for the period differs from the standard rate of corporation tax in the United Kingdom of 19.0% (2018/19: 19.0%). The reasons for
this are explained below:

Profit/(loss) before taxation
Tax (charge)/credit at the domestic income tax rate of 19.0% (2018/19: 19.0%)
Tax effect of:

Non-deductible items
Other disallowable items
Adjustment due to current period deferred tax being provided at 19.0% (2018/19: 17.0%)
Overseas losses not recognised
Changes in tax rate
Adjustments to prior periods
Current tax relating to overseas business
Income tax (charge)/credit

52 weeks
ended
28 Mar 2020
£m
53.6
(10.2)

52 weeks
ended
30 Mar 2019
£m
(42.7)
8.2

(0.6) (1.3)
(0.4) –
(0.8)
–
–
1.7
1.1
8.9

–
(0.3)
4.9
(0.5)
–
(7.1)

The adjustments to prior periods of £(0.5)m (2018/19: £1.7m) relates mainly to the adjustment of prior period losses and capital allowances following
verifications in submitted returns.

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www.premierfoods.co.ukFinancial Statements110

Notes to the financial statements CONTINUED

8. Taxation continued
Deferred tax
Deferred tax is calculated in full on temporary differences using the tax rate appropriate to the jurisdiction in which the asset/(liability) arises and the
tax rates that are expected to apply in the periods in which the asset or liability is settled. In all cases this is 19.0% (2018/19: 17.0%).

At 31 March 2019 / 1 April 2018

Implementation of IFRS 16

Adjusted balance at 31 March 2019 / 1 April 2018

(Charged)/credited to the statement of profit or loss

Charged to other comprehensive income

Credited/(charged) to equity

At 28 March 2020 / 30 March 2019

2019/20
£m

2018/19
£m

(13.5)

(2.9)

(16.4)

(1.9)

(167.0)

0.4

(184.9)

(12.1)

–

(12.1)

7.8

(9.1)

(0.1)

(13.5)

The Group has not recognised 1.9m of deferred tax assets (2018/19: £3.0m not recognised) relating to UK corporation tax losses. In addition, the
Group has not recognised a tax asset of £38.8m (2018/19: £34.8m) relating to ACT and £47.5m (2018/19: £41.3m) relating to capital losses. Under
current legislation these can generally be carried forward indefinitely.

Deferred tax liabilities

At 1 April 2018
Current period credit

Charged to other comprehensive income

Prior period charge

– To statement of profit or loss

At 30 March 2019

At 31 March 2019
Implementation of IFRS 16

Adjusted balance at 31 March 2019
Prior period (charge)/credit

– To statement of profit or loss
– To other comprehensive income

Current period credit/(charge)

Charged to other comprehensive income

Prior period credit

– To other comprehensive income

At 28 March 2020

Retirement
benefit
obligation
£m
(53.8)

Intangibles
£m
(54.2)

IFRS 16
£m
–

6.7

–

(0.1)

(47.6)

–

(47.6)

(5.6)
–

1.2

–

(52.0)

1.5

(10.2)

–

(62.5)

–

(62.5)

0.6
(8.0)

(2.3)

(160.6)

0.1

(232.7)

–

(2.9)

–
–

–

(2.9)

Other
£m
(0.2)

–

(0.8)

(1.0)

–

(1.0)

1.0
–

–

Total
£m
(108.2)

8.2

(10.2)

(0.9)

(111.1)

(2.9)

(114.0)

(4.0)
(8.0)

(1.1)

(160.6)

0.1

(287.6)

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial StatementsAccelerated
tax
depreciation
£m

Share based
payments
£m

Losses
£m

48.3

1.3

–

3.1

52.7

6.2

–

(2.2)

–

56.7

1.0

–

(0.1)

–

0.9

0.2

–

(0.2)

0.7

–

(1.3)

(0.2)

0.1

42.6

(1.8)

1.1

–

(0.9)

41.0

3.2

1.6

–

(0.9)

–

1.0

–

45.9

Other
£m

4.2

(1.6)

–

0.4

3.0

(0.7)

–

(0.1)

(1.9)

–

(0.1)

(0.2)

–

Deferred tax assets

At 1 April 2018
Current period credit/(charge)

Credited to other comprehensive income

Charged to equity

Prior period credit/(charge)

– To statement of profit or loss

At 30 March 2019

At 31 March 2019
Prior period credit/(charge)

– To statement of profit or loss

– To other comprehensive income

– To equity

Current period (charge)/credit

Credited to equity

Charged to other comprehensive income

Prior period (charge)/credit:

– To statement of profit or loss

– To equity

At 28 March 2020

Net deferred tax liability

As at 28 March 2020
As at 30 March 2019

111

Total
£m

96.1

(2.1)

1.1

(0.1)

2.6

97.6

8.9

1.6

(0.1)

(5.2)

0.7

(0.1)

(0.5)

(0.2)

102.7

£m

(184.9)
(13.5)

Where there is a legal right of offset and an intention to settle as such, deferred tax assets and liabilities may be presented on a net basis. This is
the case for most of the Group’s deferred tax balances and therefore they have been offset in the tables above. Substantial elements of the Group’s
deferred tax assets and liabilities, primarily relating to the defined benefit pension obligation, are greater than one year in nature.

9. Earnings/(loss) per share
Basic earnings/(loss) per share has been calculated by dividing the profit attributable to owners of the parent of £46.5m (2018/19: £33.8m loss) by
the weighted average number of ordinary shares of the Company.

Weighted average shares

Weighted average number of ordinary shares for the purpose of basic earnings per share

Effect of dilutive potential ordinary shares:

– Share options

Weighted average number of ordinary shares for the purpose of diluted earnings per share

Earnings/(loss) per share calculation

2019/20
Number (m)

846.6

7.9

854.5

2018/19
Number (m)

841.5

–

841.5

Profit/(loss) after tax (£m)

Weighted average number of shares (m)

Earnings/(loss) per share (pence)

52 weeks ended 28 March 2020

52 weeks ended 30 March 2019

Dilutive effect
of share
options

7.9

(0.1)

Basic

46.5

846.6

5.5

Diluted

46.5

854.5

5.4

Basic

(33.8)

841.5

(4.0)

Dilutive effect
of share
options

–

Diluted

(33.8)

841.5

(4.0)

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www.premierfoods.co.ukFinancial Statements112

Notes to the financial statements CONTINUED

9. Earnings/(loss) per share continued
Dilutive effect of share options
The dilutive effect of share options is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of
all dilutive potential ordinary shares. The only dilutive potential ordinary shares of the Company are share options and share awards. A calculation is
performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of
the Company’s shares) based on the monetary value of the share awards and the subscription rights attached to the outstanding share options.

No adjustment is made to the profit or loss in calculating basic and diluted earnings per share.

There is no dilutive effect of share options calculated in the prior period as the Group made a loss.

Adjusted earnings per share (“Adjusted EPS”)
Adjusted earnings per share is defined as trading profit less net regular interest, less a notional tax charge at 19.0% (2018/19: 19.0%) divided by the
weighted average number of ordinary shares of the Company.

Net regular interest is defined as net finance costs after excluding write-off of financing costs, other finance income, early redemption fee, the fair
value movements on interest rate financial instruments and other interest payable.

Trading profit and Adjusted EPS have been reported as the directors believe these assist in providing additional useful information on the underlying
trends, performance and position of the Group.

Trading profit
Less net regular interest

Adjusted profit before tax
Notional tax at 19.0% (2018/19: 19%)

Adjusted profit after tax
Average shares in issue (m)

Adjusted EPS (pence)
Dilutive effect of share options

Dilutive adjusted EPS (pence)

Net regular interest
Net finance cost

Exclude other finance income

Exclude write-off of financing costs

Exclude early redemption fee

Exclude other interest payable

Net regular interest

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

132.6

(39.3)

93.3

(17.7)

75.6

846.6

8.9

(0.1)

8.8

(41.7)

–

2.4

(39.3)

128.5

(40.5)

88.0

(16.7)

71.3

841.5

8.5

–

8.5

(47.2)

(7.6)

5.7

5.6

3.0

(40.5)

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements10. Property, plant and equipment

Cost
At 31 March 2018

Additions

Disposals

Transferred into use

At 30 March 2019

Balance at 31 March 2019
Adjustment on transition to IFRS 16

Additions

Disposals

Reclassification of cost

Transferred into use

At 28 March 2020

Aggregate depreciation and impairment
At 31 March 2018

Depreciation charge

Disposals

At 30 March 2019
Depreciation charge

Disposals

Reclassification of depreciation

Impairment charge

At 28 March 2020

Net book value
At 30 March 2019

At 28 March 2020

Land and
buildings
£m

Vehicles,
plant and
equipment
£m

Assets under
construction
£m

Right of use
Assets
£m

105.0

0.2

(0.6)

0.3

104.9
104.9

–

0.1

(0.6)

(2.4)

–

291.8

9.3

(0.2)

8.8

309.7
309.7

–

7.5

(3.7)

2.4

7.1

102.0

323.0

(41.4)

(2.7)

0.3

(43.8)
(2.1)

0.5

1.0

–

(44.4)

61.1

57.6

(181.2)

(14.3)

0.2

(195.3)
(15.2)

3.4

(0.6)

–

(207.7)

114.4

115.3

11.0

8.6

–

(9.1)

10.5
10.5

–

5.9

–

(7.1)

9.3

–

–
–

–

10.5

9.3

–

–
–

14.0

0.6

(0.4)

–

–
(2.6)

0.4

–

(0.2)

(2.4)

–

11.8

14.2

448.5

The Group’s borrowings are secured on the assets of the Group including property, plant and equipment.

Included in the right of use asset recognised on transition to IFRS 16 on 31 March 2019 are the following:

Cost
At 30 March 2019

Adjustment on transition to IFRS 16

Additions

Disposals

At 28 March 2020

Aggregate depreciation and impairment
At 30 March 2019

Depreciation charge

Disposals

Impairment charge

At 28 March 2020
Net book value
At 30 March 2019

At 28 March 2020

Land and
buildings
£m

Vehicles,
plant and
equipment
£m

–

10.1

0.3

(0.1)

10.3

–

(1.2)

0.1

(0.2)

(1.3)

–

9.0

–

3.9

0.3

(0.3)

3.9

–

(1.4)

0.3

–

(1.1)

–

2.8

113

Total
£m

407.8

18.1

(0.8)

0.0

425.1
425.1

14.0

14.1

(4.7)

–

(222.6)

(17.0)

0.5

(239.1)
(19.9)

4.3

0.4

(0.2)

(254.5)

186.0

194.0

Total
£m

–

14.0

0.6

(0.4)

14.2

–

(2.6)

0.4

(0.2)

(2.4)

–

11.8

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www.premierfoods.co.ukFinancial Statements

114

Notes to the financial statements CONTINUED

11. Goodwill

Carrying value

Opening balance

Closing balance

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

646.0

Goodwill is attached to the Group’s Grocery CGU. Goodwill impairment testing is performed by CGU, which is the lowest level at which goodwill is
monitored for internal reporting purposes.

Key assumptions
The key assumptions for calculating value in use are cash flows, long term growth rate and discount rate.

Cash flow assumptions
The cash flows used in the value in use calculation are post-tax cash flows based on the latest Board approved budget for the first year and the
latest board approved forecasts in respect of the following two years. An estimate of capital expenditure required to maintain these cash flows is
also made.

The key assumptions when forecasting cash flows are revenue growth and divisional contribution margin.

Revenue growth is forecast based on known or forecast customer sales initiatives, including, to the extent agreed, customer business plans or
agreements for the next period, current and forecast new product development, promotional and marketing strategy, and specific category or
geographical growth. External factors, including the consumer environment, are also taken into account in the more short-term forecasts. The
compound annual growth rate over the three-year forecast period is 2.7% (2018/19: 2.2%).

Divisional contribution margin is forecast based on the projected mix of branded and non-branded sales, raw material input costs, purchasing
initiatives and marketing and distribution costs.

Long term growth rate assumptions
For the purposes of impairment testing, the cash flows are extrapolated into perpetuity using growth assumptions relevant for the business sector.
The growth rate applied of 1.1% (2018/19: 1.5%) is based on the long term growth in UK GDP as the directors expect food consumption to follow
GDP growth. This is not considered to be higher than the average long-term industry growth rate.

Discount rate assumptions
The discount rate applied to the cash flows is calculated using a post-tax rate based on the weighted average cost of capital (“WACC”) which would
be anticipated for a market participant investing in the Group.

The Group has considered the impact of the current economic climate in determining the appropriate discount rate to use in impairment testing. In
the current period, the post-tax rate used to discount the forecast cash flows has been determined to be 8.0% (2018/19: 8.5%).

Sensitivity analysis
An illustration of the sensitivity to reasonably possible changes in key assumptions in the impairment test for the Grocery CGU is as follows:

Revenue growth

Divisional contribution margin

Long term growth rate

Discount rate

Reasonably possible change in assumption
Increase/decrease by 2.0%

Impact on value in use
Increase/decrease by £105.0m/£101.1m

Increase/decrease by 2.0%

Increase/decrease by 1.0%

Increase/decrease by 0.5%

Increase/decrease by £132.7m/£132.7m

Increase/decrease by £202.8m/£151.6m

Decrease/increase by £89.4m/£103.3m

Under each of the above sensitivities no individual scenarios would trigger an impairment for the Grocery CGU. Under a combination of reasonably
possible scenarios, and taking into account mitigating actions, no impairment would be triggered.

Goodwill impairment charge
There has been no goodwill impairment charge recognised in 2019/20 (2018/19: £nil).

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements115

Total
£m

967.9

3.0

–

970.9

4.7

(0.2)

–

975.4

(539.5)

(34.4)

(30.6)

(604.5)

0.2

(29.4)

(0.4)

(634.1)

366.4

341.3

12. Other intangible assets

Cost
At 31 March 2018

Additions

Transferred into use

At 30 March 2019
Additions

Disposals

Transferred into use

At 28 March 2020

Accumulated amortisation and impairment
At 31 March 2018

Amortisation charge

Impairment charge

At 30 March 2019
Disposals

Amortisation charge

Reclassification of amortisation

At 28 March 2020

Net book value
At 30 March 2019

At 28 March 2020

Brands/
trademarks/
licences
£m

Software
£m

Customer
relationships
£m

Assets under
construction
£m

138.6

693.2

134.8

1.7

0.7

–

141.0

693.2

134.8

1.6

(0.2)

1.7

–

144.1

693.2

134.8

(108.6)

(11.4)

–

(120.0)

0.2

(8.6)

(0.4)

(296.1)

(23.0)

(30.6)

(349.7)

–

(20.8)

–

(134.8)

–

(134.8)

–

(128.8)

(370.5)

(134.8)

1.3

(0.7)

1.9

3.1

–

(1.7)

3.3

–

21.0

15.3

343.5

322.7

–

1.9

3.3

All amortisation is recognised within administrative costs.

Included in the assets under construction additions for the period are £1.1m (2018/19: £1.1m) in respect of internal costs.

The Group’s borrowings are secured on the assets of the Group including other intangible assets.

The material brands held on the balance sheet are as follows:

Bisto

Oxo

Batchelors

Mr Kipling

Sharwoods

Carrying
value at
28 March
2020
£m
101.8

Estimated
useful
life
remaining
Years
17

72.4

52.8

39.5

22.1

Intangible assets impairment charge
The intangible asset impairment in the prior period related to two brands, Sharwood’s: £27.5m, and Saxa: £3.1m. The impairments reflected
management’s latest assessment of brand value following a strategic review of the Group’s brands and a re-evaluation of the assumptions which
underpinned the valuation.

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www.premierfoods.co.ukFinancial Statements116

Notes to the financial statements CONTINUED

13. Retirement benefit schemes
Defined benefit schemes
The Group operates a number of defined benefit schemes under which current and former employees have built up an entitlement to pension
benefits on their retirement. These are as follows:

(a) The Premier schemes, which comprise:
Premier Foods Pension Scheme (“PFPS”)
Premier Grocery Products Pension Scheme (“PGPPS”)
Premier Grocery Products Ireland Pension Scheme (“PGPIPS”)
Chivers 1987 Pension Scheme
Chivers 1987 Supplementary Pension Scheme
Hillsdown Holdings Limited Pension Scheme 1

1 Hillsdown Holdings Limited Pension Scheme has transferred in during the year, this scheme has previously been excluded from the Group’s IAS 19 results on the basis
of materiality.

(b) The RHM schemes, which comprise:
RHM Pension Scheme
Premier Foods Ireland Pension Scheme

The triennial actuarial valuations of the PFPS, the PGPPS and the RHM pension scheme for 31 March 2019 / 5 April 2019 have been concluded
and the Group has signed all implementation documentation. Deficit recovery plans have been agreed with the Trustees of each of the PFPS and
PGPPS. The RHM Pension Scheme was in surplus and no deficit contributions are payable. Actuarial valuations for the schemes based in Ireland
were completed during the course of 2017 and 2019.

The exchange rates used to translate the overseas euro based schemes are £1.00 = €1.1444 for the average rate during the period, and £1.00 =
€1.1128 for the closing position at 28 March 2020.

All defined benefit plans are held separately from the Company under Trusts. Trustees are appointed to operate the schemes in accordance with
their respective governing documents and pensions law. The schemes meet the legal requirement for member nominated trustees representation
on the trustee boards and the UK schemes have appointed a professional independent Trustee as Chair of the boards. The members of the trustee
boards undertake regular training and development to ensure that they are equipped appropriately to fulfil their function as trustees. In addition,
each trustee board has appointed professional advisers to give them the specialist expertise they need to support them in the areas of investment,
funding, legal, covenant and administration.

The trustee boards of the UK schemes generally meet at least four times a year to conduct their business. To support these meetings the Trustees
have delegated certain aspects of the schemes’ operation to give specialist focus (e.g. investment, administration and compliance) to committees for
which further meetings are held as appropriate throughout the year. These committees regularly report to the full trustee boards.

The schemes invest through investment managers appointed by the trustees in a broad range of assets to support the security and funding of their
pension obligations. Asset classes used include government bonds, private equity, absolute return products, swaps and infrastructure.

The plan assets do not include any of the Group’s own financial instruments, nor any property occupied by, or other assets used by, the Group.
The RHM Pension Scheme holds a security over the assets of the Group which ranks pari passu with the banks and bondholders in the event of
insolvency, up to a cap.

The schemes incorporate a Liability Driven Investment (LDI) strategy to more closely match the assets with changes in value of liabilities. The
RHM Pension Scheme uses assets including interest rate and inflation swaps, index linked bonds and infrastructure in its LDI strategy, the smaller
schemes use a pooled fund approach for LDI.

The main risks to which the Group is exposed in relation to the funded pension schemes are as follows:

• Liquidity risk – the PFPS and PGPPS have significant technical funding deficits which could increase. The RHM Pension Scheme is currently in

surplus, but subsequent valuations could reveal a deficit. As such this could have an adverse impact on the financial condition of the Group. The
Group continues to monitor the pension risks closely working with the trustees to ensure a collaborative approach.

• Mortality risk – the assumptions adopted make allowance for future improvements in life expectancy. However, if life expectancy improves at a

faster rate than assumed, this would result in greater payments from the schemes and consequently increases in the schemes liabilities. The
trustees review the mortality assumption on a regular basis to minimise the risk of using an inappropriate assumption.

• Yield risk – a fall in government bond yields will increase the schemes liabilities and certain of the assets. However, the liabilities may grow by

more in monetary terms, thus increasing the deficit in the scheme.

•

Inflation risk – the majority of the schemes liabilities increase in line with inflation and so if inflation is greater than expected, the liabilities will
increase.

•

Investment risk – the risk that investments do not perform in line with expectations

The schemes can limit or hedge their exposure to the yield and inflation risks described above by investing in assets that move in the same direction
as the liabilities in the event of a fall in yields, or a rise in inflation. The RHM Pension Scheme has largely hedged its inflation and interest rate
exposure to the extent of its funding level. The PFPS and PGPPS have broadly hedged 60% of their respective liabilities.

The liabilities of the schemes are approximately 47% in respect of former active members who have yet to retire and approximately 53% in respect of

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements117

pensioner members already in receipt of benefits.

All pension schemes are closed to future accrual.

The disclosures in note 13 represent those schemes that are associated with Premier (“Premier schemes”) and those that are associated with ex-
RHM companies (“RHM schemes”). These differs to that disclosed on the balance sheet, in which the schemes have been split between those in an
asset position and those in a liability position.

At the balance sheet date, the combined principal accounting valuation assumptions were as follows:

Discount rate

Inflation – RPI

Inflation – CPI

Expected salary increases

Future pension increases

At 28 Mar 2020

At 30 Mar 2019

Premier
schemes

RHM
schemes

Premier
schemes

RHM
schemes

2.50%

2.65%

1.65%

n/a

1.90%

2.50%

2.65%

1.65%

n/a

1.90%

2.45%

3.25%

2.15%

n/a

2.10%

2.45%

3.25%

2.15%

n/a

2.10%

For the smaller overseas schemes, the discount rate used was 1.00% (2018/19: 1.50%) and future pension increases were 0.80% (2018/19: 1.30%).

At 28 March 2020 and 30 March 2019, the discount rate was derived based on a bond yield curve expanded to also include bonds rated AA by one
credit agency (and which might for example be rated A or AAA by other agencies).

The mortality assumptions are based on standard mortality tables and allow for future mortality improvements. The life expectancy assumptions are
as follows:

Male pensioner, currently aged 65

Female pensioner, currently aged 65

Male non-pensioner, currently aged 45

Female non-pensioner, currently aged 45

At 28 Mar 2020

At 30 Mar 2019

Premier
schemes

RHM
schemes

Premier
schemes

RHM
schemes

87.0

87.6

89.2

90.2

85.4

86.6

87.8

89.3

87.4

89.3

88.4

90.5

85.3

87.8

86.1

88.9

A sensitivity analysis on the principal assumptions used to measure the scheme liabilities at the period end is as follows:

Discount rate

Inflation

Change in assumption

Impact on scheme liabilities

Increase/decrease by 0.1%

Decrease/increase by £68.2m/£69.9m

Increase/decrease by 0.1%

Increase/decrease by £27.0m/£26.6m

Assumed life expectancy at age 60 (rate of mortality)

Increase/decrease by 1 year

Increase/decrease by £188.9m/£188.5m

The sensitivity information has been derived using projected cash flows for the Schemes valued using the relevant assumptions and membership
profile as at 28 March 2020. Extrapolation of these results beyond the sensitivity figures shown may not be appropriate.

At the reporting date, the property asset class carried an uncertainty clause over the valuation performed by independent valuers of the property
funds. This reflects the difficulty in assigning a value to the underlying properties held by the respective funds due to the current economic
environment caused by COVID-19.

The inclusion of the ‘uncertainty’ clause does not invalidate the valuation, nor does it mean that the valuation cannot be relied upon. The declaration
has been included in the investment manager’s valuation report as a precaution to ensure transparency of the fact that less certainty can be attached
to the valuation than would otherwise be the case under normal market conditions.

Management has reviewed the asset values that make up the property asset class, to ensure the values appropriately reflect current market
conditions, recognising that there is short term volatility driven by the current market conditions. Using total property fund value as the basis, a
sensitivity analysis has been performed as follows:

Property fund value

Increase/decrease by 1%

Increase/decrease by £4.5m/£4.5m

Change in assumption

Impact on scheme assets

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118

Notes to the financial statements CONTINUED

13. Retirement benefit schemes continued
The fair values of plan assets split by type of asset are as follows:

Assets with a quoted price in an active
market at 28 March 2020:

Government bonds

Cash
Assets without a quoted price in an active
market at 28 March 2020:

UK equities

Global equities

Government bonds

Corporate bonds

UK property

European property

Absolute return products

Infrastructure funds

Interest rate swaps

Inflation swaps

Private equity

LDI

Other
Fair value of scheme assets
as at 28 March 2020

Assets with a quoted price in an active
market at 30 March 2019 1:

Government bonds

Cash
Assets without a quoted price in an active
market at 30 March 2019 1:

UK equities

Global equities

Government bonds

Corporate bonds

UK property

European property

Absolute return products

Infrastructure funds

Interest rate swaps

Inflation swaps
Private equity
LDI

Other
Fair value of scheme assets
as at 30 March 2019

Premier
schemes
£m

% of total
%

RHM
schemes
£m

% of total
%

Total
£m

% of total

–

6.9

0.1

6.7

24.3

25.3

42.4

0.8

–

0.9

0.0

0.9

3.1

3.3

5.5

0.1

364.0

46.9

–

0.6

268.3

35.3

774.7

–

8.0

0.4

7.5

29.9

26.9

30.9

0.4

365.7

–

–
–
223.2

14.2

707.1

–

0.1

34.6

4.6

100

–

1.1

0.1

1.1

4.2

3.8

4.4

0.1

51.6

–

–
–
31.6

2.0

100

1,758.5

25.5

0.2

4.5

19.8

–

331.9

70.1

834.2

309.8

533.1

(46.0)

509.5

–

394.2

37.1

0.5

0.0

0.1

0.4

–

7.0

1.5

17.7

6.5

11.2

(1.0)

10.7

–

8.3

1,758.5

32.4

0.3

11.2

44.1

25.3

374.3

70.9

1,198.2

309.8

533.1

(46.0)

510.1

268.3

429.5

31.8

0.6

0.0

0.2

0.8

0.5

6.8

1.3

21.6

5.6

9.7

(0.8)

9.2

4.9

7.8

4,745.3

100

5,520.0 100

1,298.6

29.3

0.3

171.3

18.0

–

362.6

42.2

976.3

255.8

448.8

49.6
446.1
–

234.7

4,333.6

30.0

0.7

0.0

4.0

0.4

–

8.4

0.9

22.5

5.9

10.4

1.1
10.3
–

5.4

100

1,298.6

37.3

0.7

178.8

47.9

26.9

393.5

42.6

1,342.0

255.8

448.8

49.6
446.1
223.2

248.9

5,040.7

25.8

0.7

0.1

3.5

1.0

0.5

7.8

0.8

26.7

5.1

8.9

1.0
8.8
4.4

4.9

100

1 Restated following re-interpretation of the classifications, including the allocation between quoted and unquoted assets.

For assets without a quoted price in an active market fair value is determined with reference to net asset value statements provided by third parties.

The RHM scheme invests directly in interest rate and inflation swaps to protect from fluctuations in interest rates and inflation.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements119

The amounts recognised in the balance sheet arising from the Group’s obligations in respect of its defined benefit schemes are as follows:

Present value of funded obligations

Fair value of plan assets

(Deficit)/surplus in schemes

At 28 March 2020

At 30 March 2019

Premier
schemes
£m

(1,049.6)

774.7

(274.9)

RHM
schemes
£m

(3,240.0)

4,745.3

1,505.3

Total
£m

(4,289.6)

5,520.0

1,230.4

Premier
schemes
£m

(1,171.8)

707.1

(464.7)

RHM schemes
£m

(3,495.8)

4,333.6

837.8

Total
£m

(4,667.6)

5,040.7

373.1

The aggregate surplus of £373.1m has increased to a surplus of £1,230.4m in the current period. This increase of 857.3m (2018/19: £56.1m
increase) is primarily driven by return on plan assets and change in financial assumptions.

Changes in the present value of the defined benefit obligation were as follows:

Defined benefit obligation at 31 March 2018
Interest cost

Past service cost

Remeasurement losses

Exchange differences

Benefits paid

Defined benefit obligation at 30 March 2019
Recognition of HHL pension scheme

Interest cost

Settlement

Remeasurement gain

Exchange differences

Benefits paid

Defined benefit obligation at 28 March 2020

Changes in the fair value of plan assets were as follows:

Fair value of plan assets at 31 March 2018
Interest income on plan assets

Remeasurement gains

Administrative costs

Contributions by employer

Exchange differences

Benefits paid

Fair value of plan assets at 30 March 2019
Recognition of HHL pension scheme

Interest income on plan assets

Remeasurement gains

Administrative costs

Settlement

Contributions by employer

Exchange differences

Benefits paid

Fair value of plan assets at 28 March 2020

Premier
schemes
£m

(1,116.1)

RHM
schemes
£m

(3,430.5)

(29.1)

(11.1)

(53.9)

0.8

37.6

(90.3)

(26.5)

(94.6)

0.5

145.6

Total
£m

(4,546.6)

(119.4)

(37.6)

(148.5)

1.3

183.2

(1,171.8)

(3,495.8)

(4,667.6)

(0.5)

(27.8)

0.9

113.6

(2.0)

38.0

–

(83.3)

36.1

157.6

(1.3)

146.7

(0.5)

(111.1)

37.0

271.2

(3.3)

184.7

(1,049.6)

(3,240.0)

(4,289.6)

Premier
schemes
£m
679.1

RHM
schemes
£m
4,184.5

110.7

187.5

(3.8)

0.8

(0.5)

(145.6)

4,333.6

–

103.7

496.2

(4.6)

(39.7)

1.4

17.7

14.2

(6.5)

41.1

(0.9)

(37.6)

707.1

0.5

16.7

49.3

(5.6)

(1.0)

43.3

2.4

(38.0)

774.7

Total
£m
4,863.6

128.4

201.7

(10.3)

41.9

(1.4)

(183.2)

5,040.7

0.5

120.4

545.5

(10.2)

(40.7)

44.7

3.8

(146.7)

4,745.3

(184.7)

5,520.0

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120

Notes to the financial statements CONTINUED

13. Retirement benefit schemes continued
The reconciliation of the net defined benefit (deficit)/surplus over the period is as follows:

(Deficit)/surplus in schemes at 31 March 2018

Amount recognised in profit or loss

Remeasurements recognised in other comprehensive income

Contributions by employer

Exchange differences recognised in other comprehensive income

(Deficit)/surplus in schemes at 30 March 2019

Amount recognised in profit or loss

Remeasurements recognised in other comprehensive income

Contributions by employer

Exchange differences recognised in other comprehensive income

Premier
schemes
£m

(437.0)

RHM
schemes
£m

754.0

(29.0)

(39.7)

41.1

(0.1)

(464.7)

(16.8)

162.9

43.3

0.4

(9.9)

92.9

0.8

–

837.8

12.2

653.8

1.4

0.1

Total
£m

317.0

(38.9)

53.2

41.9

(0.1)

373.1

(4.6)

816.7

44.7

0.5

(Deficit)/surplus in schemes at 28 March 2020

(274.9)

1,505.3

1,230.4

Remeasurements recognised in the consolidated statement of comprehensive income are as follows:

Remeasurement gain/(loss) on plan liabilities

Remeasurement gain on plan assets

Net remeasurement gain/(loss) for the period

Premier
schemes
£m

113.6

49.3

162.9

2019/20

RHM
schemes
£m

157.6

496.2

653.8

Premier
schemes
£m

(53.9)

14.2

(39.7)

2018/19

RHM
schemes
£m

(94.6)

187.5

92.9

Total
£m

271.2

545.5

816.7

Total
£m

(148.5)

201.7

53.2

The actual return on plan assets was a £665.9m gain (2018/19: £330.1m gain), which is £545.5m more (2018/19: £201.7m more) than the interest
income on plan assets of £120.4m (2018/19: £128.4m).

The remeasurement gain on liabilities of £271.2m (2018/19: £148.5m loss) comprises a gain due to changes in financial assumptions of £184.5m
(2018/19: £226.7m loss), a gain due to member experience of £76.5m (2018/19: £9.1m loss) and a gain due to demographic assumptions of
£10.2m (2018/19: £87.3m gain).

The net remeasurement gain taken to the consolidated statement of comprehensive income was £816.7m (2018/19: £53.2m gain). This gain was
£661.4m (2018/19: £44.1m gain) net of taxation (with tax at 19% for UK schemes, and 12.5% for Irish schemes).

The RHM Pension Scheme Trustee began an enhanced transfer value (ETV) exercise in 2019 for deferred pensioner members who met the eligibility
criteria. The impact of ETV payments made before the end of the financial year on the accounting position is reflected in the notes above.

The Group expects to contribute between £4m and £6m annually to its defined benefit plans in relation to expenses and government levies and £35-
38m of additional annual contributions to fund the scheme deficits up to 31 March 2021.The RHM Pension Scheme and the PFPS have a combined
estimated duration of 17 years at the reporting date.

The Group has concluded that it has an unconditional right to a refund of any surplus in the RHM Pension Scheme once the liabilities have been
discharged and, that the trustees of the RHM pension scheme do not have the unilateral right to wind up the scheme, so the asset has not been
restricted and no additional liability has been recognised.

The International Accounting Standards Board under IFRIC 14, are currently reviewing the recognition of a pensions surplus in the financial
statements of an entity. Dependent upon the final published standard, there is potential that any future defined benefit surplus may not be recognised
in the financial statements of the Group and additionally, the deficit valuation methodology may also change.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements
The total amounts recognised in the consolidated statement of profit or loss are as follows:

Operating profit

GMP Equalisation

Settlement costs

Administrative costs

Net interest (cost)/credit

Total (cost)/credit

Premier
schemes
£m

2019/20

RHM
schemes
£m

–

(0.1)

(5.6)

(11.1)

(16.8)

–

(3.6)

(4.6)

20.4

12.2

2018/19

Premier
schemes
£m

RHM schemes
£m

(26.5)

–

(6.5)

(11.4)

(44.4)

(15.0)

3.9

(3.8)

20.4

5.5

Total
£m

–

(3.7)

(10.2)

9.3

(4.6)

121

Total
£m

(41.5)

3.9

(10.3)

9.0

(38.9)

Defined contribution schemes
A number of companies in the Group operate defined contribution schemes, including provisions to comply with auto enrolment requirements laid
down by law. In addition, a number of schemes providing life assurance benefits only are operated. The total expense recognised in the statement of
profit or loss of £7.3m (2018/19: £6.7m) represents contributions payable to the plans by the Group at rates specified in the rules of the plans.

14. Inventories

Raw materials

Work in progress

Finished goods and goods for resale

Total inventories

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

15.8

2.5

49.7

68.0

16.4

2.7

58.7

77.8

Inventory write-offs in the period amounted to £3.6m (2018/19: £7.7m). The decrease in the current period follows a high level of write-offs related to
the implementation issues during the Group’s warehousing and distribution consolidation in the prior period.

The borrowings of the Group are secured on the assets of the Group including inventories.

15. Trade and other receivables

Trade receivables

Trade receivables provided for

Net trade receivables

Prepayments

Other tax and social security receivable

Other receivables

Total trade and other receivables

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

67.2

(3.2)

64.0

14.2

10.6

0.3

89.1

71.2

(4.8)

66.4

11.8

10.3

0.7

89.2

The borrowings of the Group are secured on the assets of the Group including trade and other receivables.

During 2016, the Group entered into a Receivables Financing Agreement pursuant to which the Group assigns various receivables owed to it in
return for funding on a non-recourse basis. Receivables are only eligible for sale if they meet certain criteria. The facility limit is £30 million. As at
28 March 2020, £29 million was drawn (2018/19: £30 million).

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122

Notes to the financial statements CONTINUED

16. Notes to the cash flow statement
Reconciliation of profit/(loss) before tax to cash flows from operations

Profit/(loss) before taxation

Net finance cost

Operating profit
Depreciation of property, plant and equipment

Amortisation of intangible assets

Loss on disposal of non-current assets

Impairment of intangible assets

Fair value movements on foreign exchange and other derivative contracts

Equity settled employee incentive schemes
GMP equalisation and past service cost related to defined benefit pension schemes1
Decrease/(increase) in inventories

Decrease/(increase) in trade and other receivables

Increase in trade and other payables and provisions

Movement in retirement benefit obligations

Cash generated from operations

1 The prior year employee benefit past service costs include the GMP equalisation charge.

Reconciliation of cash and cash equivalents to net borrowings

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

53.6

41.7

95.3

19.9

29.4

0.4

–

(1.7)

1.3

–

9.8

0.1

9.5

(42.5)

121.5

(42.7)

47.2

4.5

17.0

34.4

0.3

30.6

1.3

2.1

37.6

(1.4)

(14.4)

8.8

(40.6)

80.2

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

150.1

(21.5)

(85.0)

(3.3)

40.3

(469.9)

(429.6)

4.2

–

25.0

(2.7)

26.5

(496.4)

(469.9)

Net inflow of cash and cash equivalents

Increase in IFRS 16 leases

(Increase)/decrease in borrowings

Other non-cash movements

Decrease in borrowings net of cash
Total net borrowings at beginning of period

Total net borrowings at end of period

Analysis of movement in borrowings

Cash and bank deposits

Net cash and cash equivalents
Borrowings – revolving credit facilities

Borrowings – senior secured notes

Finance lease obligations
Gross borrowings net of cash1
Debt issuance costs2
Total net borrowings1

As at
30 Mar 2019
£m

Cash flows
£m

Non-cash
interest
expense
£m

Other non-
cash
movements
£m

As at
28 Mar 2020
£m

27.8

–

(510.0)

–

(482.2)

12.3

(469.9)

150.1

(85.0)

–

(3.9)

61.2

–

61.2

–

1.1

–

1.1

–

(18.7)

(3.3)

(22.0)

177.9

(85.0)

(510.0)

(21.5)

(438.6)

9.0

(429.6)

1 Borrowings exclude derivative financial instruments.
2 The non-cash movement in debt issuance costs relates to the amortisation of capitalised borrowing costs only.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements123

The Group has the following cash pooling arrangements in sterling, euros and US dollars, where both the Group and the bank have a legal right
of offset.

Cash, cash equivalents and bank overdrafts

17. Trade and other payables

Trade payables

Commercial accruals

Tax and social security payables

Other payables and accruals

Total trade and other payables

As at 28 Mar 2020

As at 30 Mar 2019

Offset
asset

312.8

Offset
liability

(134.9)

Net offset
asset

177.9

Offset
asset

158.0

Offset
liability

(130.2)

Net offset
asset

27.8

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(154.0)

(52.4)

(4.9)

(38.4)

(249.7)

(149.1)

(45.3)

(4.9)

(38.7)

(238.0)

18. Financial instruments
The Group’s activities expose it to a variety of financial risks: market risk (arising from adverse movements in foreign currency, commodity prices
and interest rates), credit risk and liquidity risk. The Group uses a variety of derivative financial instruments to manage certain of these risks. The
management of these risks, along with the day-to-day management of treasury activities is performed by the Group Finance function. The policy
framework governing the management of these risks is defined by the Board. The framework for management of these risks is incorporated into a
policies and procedures manual.

The Group also enters into contracts with suppliers for its principal raw material requirements, some of which are considered commodities, diesel
and energy. These commodity and energy contracts are part of the Group’s normal purchasing activities. Some of the risk relating to diesel is
mitigated with the use of derivative financial instruments. The Treasury Risk Management Committee monitors and reviews the Group’s foreign
currency exchange, commodity price and energy price exposures and recommends appropriate hedging strategies for each.

(a) Market risk
i) Foreign exchange risk
The Group’s main operating entities’ functional currency and the Group’s presentational currency is sterling although some transactions are executed
in non-sterling currencies, principally the euro. The transactional amounts realised or settled are therefore subject to the effect of movements in these
currencies against sterling. Management of these exposures is centralised and managed by the Group Finance function. It is the Group’s policy to
manage the exposures arising using forward foreign currency exchange contracts and currency options. Hedge accounting is not sought for these
transactions.

The Group generates some of its profits in non-sterling currencies and has assets in non-sterling jurisdictions, principally the euro.

The principal foreign currency affecting the translation of subsidiary undertakings within the Group financial statements is the euro. The rates
applicable are as follows:

Principal rate of exchange: euro/sterling

Period ended

Average

52 weeks
ended
28 Mar 2020

52 weeks
ended
30 Mar 2019

1.1128

1.1444

1.1612

1.1334

The majority of the Group’s assets and liabilities are denominated in the functional currency of the relevant subsidiary.

The table below shows the Group’s currency exposures as at 28 March 2020 and 30 March 2019 that gave rise to net currency gains and losses
recognised in the consolidated statement of profit or loss as a result of monetary assets and liabilities that are not denominated in the functional
currency of the subsidiaries involved.

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Notes to the financial statements CONTINUED

18. Financial instruments continued

Net foreign currency monetary assets:

– Euro

– US dollar

– Other

Total

Functional currency of
subsidiaries - Sterling

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(3.2)

1.4

(0.0)

(1.8)

(3.2)

3.0

(0.2)

(0.4)

In addition, the Group also has forward foreign currency exchange contracts outstanding at the period end in order to manage the exposures above
but also to hedge future transactions in foreign currencies. The sterling nominal amounts outstanding are as follows:

Euro

Total

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(41.6)

(51.3)

Sensitivities are disclosed below using the following reasonably possible scenarios:

If the US dollar were to weaken against sterling by 20 US dollar cents, with all other variables held constant, profit after tax would decrease by £0.1m
(2018/19: £0.1m decrease).

If the US dollar were to strengthen against sterling by 20 US dollar cents, with all other variables held constant, profit after tax would increase by
£0.1m (2018/19: £0.1m increase).

If the euro were to weaken against sterling by 10 euro cents, with all other variables held constant, profit after tax would decrease by £2.9m
(2018/19: £3.2m decrease).

If the euro were to strengthen against sterling by 10 euro cents, with all other variables held constant, profit after tax would increase by £3.4m
(2018/19: £3.8m increase).

This is primarily driven by the effect on the mark to market valuation of the foreign exchange derivatives of the Group where the hedged rates differ
from the spot rate.

(ii) Commodity price risk
The Group purchases a variety of commodities for use in production and distribution which can experience significant price volatility, which include,
inter-alia, dairy, wheat, cocoa, edible oils and energy. The price risk on these commodities is managed by the Group through the Treasury Risk
Management Committee. It is the Group’s policy to minimise its exposure to this volatility by adopting an appropriate forward purchase strategy or
by the use of derivative instruments where they are available.

(iii) Interest rate risk
The Group’s borrowing facilities comprise senior secured notes and a revolving facility, in sterling. Interest is charged at floating rates plus a margin
on the amounts drawn down, and at 35% of the applicable margin for the non-utilised portion of the facility, hence the borrowings are sensitive to
changes in interest rates.

Cash and deposits earn interest at floating rates based on banks’ short-term treasury deposit rates. Short-term trade and other receivables are
interest-free.

The Group’s other financial assets and liabilities are not exposed to material interest rate risk.

(b) Credit risk
The Group’s principal financial assets are cash and cash equivalents and trade and other receivables.

Cash and cash equivalents are deposited with high-credit quality financial institutions and although a significant amount of sales are to a relatively
small number of customers these are generally the major grocery retailers whose credit risk is considered low.

At 28 March 2020, trade and other receivables of £7.4m (2018/19: £10.2m) were past due but not impaired. These relate to customers with whom
there is no history of default.

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125

The ageing of trade and other receivables was as follows:

Fully
performing
£m

56.9
56.9

1–30
days
£m

2.7
4.1

31–60
days
£m

1.2
1.3

Past due

61–90
days
£m

1.2
0.8

91-120
days
£m

0.7
1.0

120+
days
£m

1.6
3.0

Total
£m

64.3
67.1

Trade and other receivables

As at 28 March 2020
As at 30 March 2019

At 28 March 2020, trade and other receivables of £3.2m (2018/19: £4.8m) were determined to be specifically impaired and provided for. The total
includes receivables from customers which are considered to be experiencing difficult economic situations.

The Group does not hold any collateral as security against its financial assets.

Movements in the provision for impairment of trade receivables are as follows:

As at 31 March 2019 / 1 April 2018

Receivables written off during the period as uncollectable

Provision for receivables impairment raised

As at 28 March 2020 / 30 March 2019

2019/20
£m

2018/19
£m

4.8

(2.7)

1.1
3.2

4.4

(2.2)

2.6

4.8

(c) Liquidity risk
The Group manages liquidity risk through the Group Finance function. Cash flow forecasts are prepared and reviewed on a weekly basis, normally
covering a period of three months.

In addition, cash flow forecasts are prepared as part of the Group’s overall budgeting and forecasting processes and performance is monitored
against this each month. This is intended to give the Board sufficient forward visibility of debt levels.

The Group’s net debt level can vary from month to month and there is some volatility within months. This reflects seasonal trading patterns, timing
of receipts from customers and payments to suppliers, patterns of inventory holdings and the timing of the spend on major capital and restructuring
projects. For these reasons the debt levels at the period end date may not be indicative of debt levels at other points throughout the period.

The following table analyses the Group’s financial liabilities into relevant maturity groupings based on the contractual undiscounted cash flows.

At 28 March 2020
Trade and other payables

Senior secured notes - fixed

Senior secured notes - floating
Secured senior credit facility –
revolving

Finance lease obligations

At 30 March 2019
Trade and other payables

Senior secured notes - fixed

Senior secured notes - floating

Within
1 year
£m

(244.8)

–

(85.0)

(2.5)

(233.1)

–

1 and 2
years
£m

2 and 3
years
£m

3 and 4
years
£m

4 and 5
years
£m

Over
5 years
£m

–

(2.2)

–

(210.0)

–

(2.0)

–

(300.0)

–

(1.9)

(11.0)

–

(210.0)

–

(300.0)

–

Total
£m

(244.8)

(300.0)

(210.0)

(85.0)

(21.5)

(233.1)

(300.0)

(210.0)

The senior secured notes - floating and secured senior credit facility - revolving are re-priced quarterly to LIBOR, and other liabilities are not re-priced
before the maturity date.

At 28 March 2020 the Group had £76.6m (2018/19: £161.6m) of facilities not drawn, expiring between two to three years (2018/19: three to
four years). This excludes £15.0m of facilities carved out of the revolving credit facility.

The borrowings are secured by a fixed and floating charge over all the assets of the Group.

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126

Notes to the financial statements CONTINUED

18. Financial instruments continued
The following table analyses the contractual undiscounted cash flows of interest on the floating rate debt to maturity (based on the last fixed rate
reset of 0.6678% (2018/19: 0.9279%) plus applicable margin).

At 28 March 2020
At 30 March 2019

Within
1 year
£m

13.6
13.3

1 and 2
years
£m

12.0
13.3

2 and 3
years
£m

4.0
13.3

3 and 4
years
£m

0.0
4.8

4 and 5
years
£m

–
–

Over
5 years
£m

–
–

Total
£m

29.6
44.7

The following table analyses the Group’s derivative financial instruments into relevant maturity groupings based on the remaining period at the
balance sheet date to the contractual maturity date. The amounts disclosed are the undiscounted cash flows.

At 28 March 2020
Forward foreign exchange
contracts:
– Outflow

– Inflow

Commodities:
– Outflow
Total derivative financial
instruments

At 30 March 2019
Forward foreign exchange
contracts:
– Outflow

– Inflow

Commodities:
– Outflow
Total derivative financial
instruments

Within
1 year
£m

1 and 2
years
£m

2 and 3
years
£m

3 and 4
years
£m

4 and 5
years
£m

Over
5 years
£m

(41.6)

42.5

(1.5)

(0.6)

(51.2)

49.7

(1.9)

(3.4)

–

(1.6)

–

Total
£m

(41.6)

42.5

(3.1)

(2.2)

(51.2)

49.7

(1.9)

(3.4)

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements127

(d) Fair value
The following table shows the carrying amounts (which approximate to fair value except as noted below) of the Group’s financial assets and
financial liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Set out below is a summary of methods and assumptions used to value each category of financial instrument.

Financial assets not measured at fair value:
Cash and cash equivalents

Financial assets at amortised cost:
Trade and other receivables

Financial assets at fair value through profit or loss:
Trade and other receivables

Financial liabilities at fair value through profit or loss:
Derivative financial instruments

– Forward foreign currency exchange contracts

– Commodity and energy derivatives

Financial liabilities at amortised cost:
Trade and other payables

Senior secured notes

Senior secured credit facility – revolving

Finance lease obligations

As at 28 Mar 2020

As at 30 Mar 2019

Carrying
amount
£m

Fair
value
£m

Carrying
amount
£m

Fair
value
£m

177.9

27.8

61.4

2.9

0.9

(0.8)

(244.8)

(510.0)

(85.0)

(21.5)

61.4

2.8

0.9

(0.8)

(244.8)

(459.4)

(85.0)

(21.5)

62.5

4.6

4.5

(1.5)

(0.1)

(233.1)

(510.0)

–

(1.5)

(0.1)

(233.1)

(515.0)

–

The following table presents the Group’s assets and liabilities that are measured at fair value using the following fair value measurement hierarchy:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

•

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (level 2).

•

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

Financial liabilities at fair value through profit or loss:
Derivative financial instruments

– Forward foreign currency exchange contracts

– Commodity and energy derivatives

Other financial liabilities
Financial liabilities at amortised cost:

Senior secured notes

As at 28 Mar 2020

As at 30 Mar 2019

Level 1
£m

Level 2
£m

Level 1
£m

Level 2
£m

–

0.9

(0.8)

–

(1.5)

(0.1)

(459.4)

–

(515.0)

–

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128

Notes to the financial statements CONTINUED

18. Financial instruments continued
Fair value estimation
Derivatives
Forward exchange contracts are marked to market using prevailing market prices. Hedge accounting has not been applied to forward contracts and
as a result the movement in the fair value of £2.4m has been credited to the statement of profit or loss in the period (2018/19: £1.1m charge).

Commodity derivatives are marked to market using prevailing prices and are also not designated for hedge accounting. As a result, the fair value
movement of £0.7m has been charged to the statement of profit or loss (2018/19: £0.2m charge).

Short and long-term borrowings, loan notes and interest payable
Fair value is calculated based on discounted expected future principal and interest rate cash flows. The fair value of the floating rate debt
approximates the carrying value above.

Trade and other receivables/payables
The carrying value of receivables/payables with a remaining life of less than one year is deemed to reflect the fair value given their short maturity. The
fair values of non-current receivables/payables are also considered to be the same as the carrying value due to the size and nature of the balances
involved.

(e) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may return capital to shareholders, issue new shares, or sell assets to reduce debt.

The directors do not recommend the payment of a dividend for the period ended 28 March 2020 (2018/19: £nil).

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total
capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is calculated as equity plus net debt.

The gearing ratios at the balance sheet date were as follows:

Total borrowings

Less cash and bank deposits

Net debt

Total equity

Total capital

Gearing ratio

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(607.5)

177.9

(429.6)

(1,680.0)

(2,109.6)

20%

(497.7)

27.8

(469.9)

(962.8)

(1,432.7)

33%

Gearing is lower year on year due to a lower debt level and a higher pension surplus.

Under the Group’s financing arrangement, the Group is required to meet two covenant tests which are calculated and tested on a 12-month rolling
basis at the half year and full year, each year. The Group has complied with these tests at 28 September 2019 and 28 March 2020.

(f) Financial compliance risk
Risk
The Group continues to operate with a high level of net debt of £429.6m (2018/19: £469.9m) and is subject to operating within banking covenants
set out in its refinancing agreement agreed with its banking syndicate, which include net debt/EBITDA and EBITDA/interest covenant tests. In the
event these covenants are not met then the Group would be in breach of its financing agreement and, as would be the case in any covenant breach,
the banking syndicate could withdraw their funding to the Group. The banking covenants relate to the Group’s revolving credit facility, which was
drawn at 28 March 2020 by £85.0m (2018/19: undrawn).

In addition to covenant compliance the Group must ensure that it manages its liquidity such that it has sufficient funds to meet its obligations as they
fall due.

It also supports three defined benefit pension schemes in the UK; two of the three schemes have significant technical funding deficits which could
have an adverse impact on the financial condition of the Group.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements129

Mitigation
The Group has financing arrangements which provide funding until between 2022 and 2023.

The Group reviews its performance on an ongoing basis and formally tests and reports on covenant compliance to the Group’s banking syndicate at
each reporting date. In the event of a forecast covenant breach the Group would seek a covenant waiver or amendment from its banking syndicate.

The Group manages liquidity risk through the Group Finance function. Cash flow forecasts are prepared and reviewed on a weekly basis, normally
covering a period of three months. In addition, cash flow forecasts are prepared as part of the Group’s overall budgeting and forecasting processes
and performance is monitored against this each month.

The Group announced a transformational agreement with its pension schemes, which could lead to a vastly improved funding position of these
schemes. This is expected to be implemented by 30 June 2020. Please refer to note 27 for further information.

The Group continues to monitor the pension risks closely, working with the trustees to ensure a collaborative approach.

19. Bank and other borrowings

Current:
IFRS 16 lease liability

Secured senior credit facility – revolving

Total borrowings due within one year

Non-current:
IFRS 16 lease liability

Transaction costs

Senior secured notes

Transaction costs

Total borrowings due after more than one year

Total bank and other borrowings

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(2.5)

(85.0)
(87.5)

(19.0)

4.2

(510.0)

4.8

(505.2)

(520.0)

(607.5)

–

5.8

(510.0)

6.5

(503.5)

(497.7)

Secured senior credit facility - revolving
The revolving credit facility of £177m is due to mature in December 2022 and attracts a leverage-based margin of between 2.25% and 3.75% above
LIBOR. Banking covenants of net debt / EBITDA and EBITDA / interest are in place and are tested biannually.

The covenant package attached to the revolving credit facility is:

2020/21 FY

2021/22 FY

Net debt /
EBITDA1
4.25x

Net debt /
Interest1
2.85x

4.00x

2.90x

1 Net debt, EBITDA and Interest are as defined under the revolving credit facility.

Senior secured notes
The senior secured notes are listed on the Irish GEM Stock Exchange. The notes totalling £510m are split between fixed and floating tranches. The
fixed note of £300m matures in October 2023 and attracts an interest rate of 6.25%. The floating note of £210m matures in July 2022 and attracts
an interest rate of 5.00% above LIBOR.

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Notes to the financial statements CONTINUED

20. Provisions for liabilities and charges
Property provisions primarily relate to provisions for dilapidations against leasehold properties and environmental liabilities. Other provisions primarily
relate to insurance and legal matters and provisions for restructuring costs. These provisions have been discounted at rates between 0.12% and
0.77% (2018/19: 0.69% and 1.55%). The unwinding of the discount is charged or credited to the statement of profit or loss under finance cost.

At 31 March 2018
Utilised during the period

Additional charge in the period

Unwind of discount

Released during the period

At 30 March 2019
Utilised during the period

Additional charge in the period

Unwind of discount

Released during the period
Release under IFRS 161

At 28 March 2020

Property
£m
(32.1)

2.4

–

(3.0)

0.9

(31.8)

0.2

(0.2)

(1.4)

0.7
24.5

(8.0)

Other
£m
(11.5)

1.0

(2.6)

–

2.8

(10.3)

2.9

(1.5)

(0.0)

0.9
–

(8.0)

Total
£m
(43.6)

3.4

(2.6)

(3.0)

3.7

(42.1)

3.1

(1.7)

(1.4)

1.6
24.5

(16.0)

1 The adoption of IFRS 16 in the period involved the release to opening profit and loss reserve of the Group’s long term property provisions.

Ageing of total provisions:

Within one year

Between 2 and 5 years

After 5 years

Total

21. Other liabilities

Ageing of total provisions:

Deferred income

Other accruals

Other liabilities

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(6.4)

(1.8)

(7.8)

(16.0)

(9.7)

(5.0)

(27.4)

(42.1)

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

(7.4)

(1.3)

(8.7)

(8.4)

(2.2)

(10.6)

Deferred income relates to amounts received in relation to a previously disposed business.

22. Reserves and share capital
Share premium
The share premium reserve comprises the premium paid over the nominal value of shares for shares issued.

Merger reserve
The merger reserve comprises the non-statutory premium arising on shares issued as consideration for acquisition of subsidiaries where merger
relief applies, less subsequent realised losses relating to those acquisitions.

Other reserves
Other reserves comprise the hedging reserve, which represents the effective portion of the gains or losses on derivative financial instruments that
have historically been designated as hedges.

Profit and loss reserve
The profit and loss reserve represents the cumulative profit or loss and the own shares reserve which represents the cost of shares in Premier Foods
plc, purchased in the market and held by the Employee Benefit Trust on behalf of the Company in order to satisfy options and awards under the
Company’s incentive schemes. 81,714 shares in Premier Foods plc were held by the Employee Benefit Trust at 28 March 2020, with a market value
of £0.0m (2018/19: 381,850 shares with a market value of £0.1m).

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Share capital

At 31 March 2018

Shares issued under share schemes

At 30 March 2019
Shares issued under share schemes

At 28 March 2020

Share award schemes
The Company’s share award schemes are summarised as follows:

Ordinary
shares @
nominal value
(£0.10/share)
£m

84.1

0.4

84.5

0.3

Share
premium
£m

1,407.6

1.0

1,408.6

0.8

Total
£m

1,491.7

1.4

1,493.1

1.1

84.8

1,409.4

1,494.2

Number of
shares

840,622,217

4,306,470

844,928,687

3,280,793

848,209,480

1. A Long-Term Incentive Plan (“LTIP”) for executive directors and senior managers, approved by shareholders in 2011. The LTIP is comprised
of performance shares whereby participants have the right to subscribe for ordinary shares at nil cost. These awards are equity-settled and
have a maximum term of three years. The vesting of the 2016, 2017 and 2018 Performance Share awards are conditional on achievement of a
combination of absolute adjusted earnings per share targets and relative TSR targets.

2. A Restricted Stock Plan (“RSP”) which provides specific ad hoc share awards to managers. Awards are normally subject only to continued
employment and may be equity-settled or cash-settled and normally have a retention term of two to three years for senior management.

3. A Share Incentive Plan (“SIP”) for all employees. An award of free shares was made to all employees in 2014 by the Company under this HMRC
tax-advantaged plan. Free shares are held by a trustee for a minimum of three years. Subject to continuing employment, participants may elect
to remove shares from the trust after this three year holding period, however, there are tax and National Insurance advantages for the employee
should the shares be left in the trust for over five years. No further awards under this plan are currently anticipated.

4. A Deferred Bonus Plan (“DBP”). One third of any annual bonus payment awarded to executive directors is made in the form of shares. These
shares are awarded under the terms of the DBP which was approved by shareholders in July 2017. Awards will normally be made within six
weeks following the announcement of the Group’s full year results in the form of nil cost options. The awards will normally vest on the third
anniversary of grant and, if awarded in the form of nil cost options, will then be exercisable up until the tenth anniversary of grant.

Share option schemes
The Company’s share option schemes are summarised as follows:

1. A Savings Related Share Option Scheme (“Sharesave Plan”) for all employees. The employees involved in this HMRC tax advantaged save as
you earn scheme have the right to subscribe for up to 10.1 million ordinary shares. The number of shares subject to options, the periods in
which they were granted and the periods in which they may be exercised are given below. These options are equity-settled, have a maximum
term of 3.5 years and generally vest only if employees remain in employment to the vesting date.

Further details of the share award and share options schemes can be found in the Directors’ Remuneration report.

Details of share award and option schemes
Details of the share awards of the Premier Foods plc LTIP (Performance share award) are as follows:

Premier Foods plc LTIP (Performance share award)

Outstanding at the beginning of the period

Granted during the period

Forfeited during the period

Outstanding at the end of the period

Exercisable at the end of the period

2019/20
Awards

2018/19
Awards

24,510,476

29,699,520

5,167,304
(8,435,844)

7,640,497

(12,829,541)

21,241,936

24,510,476

–

5,141,727

The awards outstanding at 28 March 2020 had a weighted average remaining contractual life of 1.1 years (2018/19: 0.9 years). The weighted
average fair value of awards granted during the period was nil pence per award.

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Notes to the financial statements CONTINUED

22. Reserves and share capital continued
Details of the share awards of the Premier Foods plc Restricted Stock Plan are as follows:

Premier Foods plc Restricted Stock Plan

Outstanding at the beginning of the period

Exercised during the period

Outstanding at the end of the period

Exercisable at the end of the period

2019/20
Awards

373,705

(305,163)

68,542

2018/19
Awards

373,705

–

373,705

The awards outstanding at 28 March 2020 had a weighted average remaining contractual life of nil years (2018/19: nil years). The weighted average
fair value of awards granted during the period was nil pence per award.

Details of the share options of the Premier Foods plc Deferred Bonus Plan are as follows:

Premier Foods plc Deferred Bonus Plan

Outstanding at the beginning of the period

Granted during the period

Outstanding at the end of the period

Exercisable at the end of the period

2019/20
Awards

423,856

219,832

643,688

–

2018/19
Awards

–

423,856

–

The awards outstanding at 28 March 2020 had a weighted average remaining contractual life of 1.6 years (2018/19: 1.4 years). The weighted
average fair value of awards granted during the period was nil pence per award.

Details of the share options of the Premier Foods plc Share Incentive Plan are as follows:

Premier Foods plc Share Incentive Plan

Outstanding at the beginning of the period

Exercised during the period

Transferred out during the period

Forfeited during the period

Outstanding at the end of the period

Exercisable at the end of the period

2019/20
Awards

2018/19
Awards

1,169,732

1,266,500

(213,453)

(23,978)

500

(76,693)

(19,075)

(1,000)

932,801

1,169,732

–

The awards outstanding at 28 March 2019 had a weighted average remaining contractual life of nil years (2018/19: nil years). The weighted average
fair value of awards granted during the period was nil pence per award.

Details of the share options of the Premier Foods plc Sharesave Plan are as follows:

Premier Foods plc Sharesave Plan

Outstanding at the beginning of the period

Exercised during the period

Granted during the period

Forfeited/lapsed during the period

Outstanding at the end of the period

Exercisable at the end of the period

2019/20

2018/19

Weighted
average
exercise
price (p)

Weighted
average
exercise price
(p)

Options

17,835,628

(4,306,470)

5,022,240

(2,447,511)

16,103,887

2,673,154

Options

16,103,887

(3,280,793)

6,297,698

(2,733,295)

16,387,497

2,327,362

During the period 6.3 million (2018/19: 5.0 million) options were granted under the Sharesave Plan, with a weighted average exercise price at the
date of exercise of 29 pence per ordinary share (2018/19: 30 pence).

The options outstanding at 28 March 2020 had a weighted average exercise price of 31 pence (2018/19: 32 pence), and a weighted average
remaining contractual life of 1.7 years (2018/19: 1.6 years).

In 2019/20, the Group recognised an expense of £1.3m (2018/19: £2.1m), related to all equity-settled share-based payment transactions.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements133

A summary of the range of exercise price and weighted average remaining contractual life is shown below:

Weighted average remaining life and exercise prices

As at 28 Mar 2020

As at 30 Mar 2019

Weighted
average
remaining
contractual
life (years)

1.1

1.6

1.3

Weighted
average
exercise
price (p)

Weighted
average
remaining
contractual life
(years)

Weighted
average
exercise price
(p)

0.8

1.6

1.1

Number
outstanding

26,477,769

16,103,887

42,581,656

Number
outstanding

22,886,967

16,387,497

39,274,464

At 10 pence

£0.10 to £9.90

Total

Valuation method
The Group uses the Black-Scholes model to determine the fair value of share options at grant dates. Fair values determined from the model use
assumptions that are revised for each share-based payment arrangement.

The expected Premier Foods plc share price volatility was determined using an average for food producers as at the date of grant. The risk-free rate
has been determined from market yield curves for government gilts with outstanding terms equal to the average expected term to exercise for each
relevant grant.

23. Capital commitments
The Group has capital expenditure on property, plant and equipment contracted for at the end of the reporting period but not yet incurred at 28
March 2020 of £6.7m (2018/19: £5.4m).

24. Contingencies
There were no material contingent liabilities at 28 March 2020 (2018/19: none).

25. Related party transactions
The following transactions were carried out with related parties:

a) Key management compensation
Key management personnel of the Group are considered to be the executive and non-executive directors and the Executive Leadership Team.
Details of their remuneration are set out below in aggregate for each of the categories specified in IAS 24 “Related Party Disclosures”. Further
information about the remuneration of individual directors is provided in the audited section of the Directors’ Remuneration Report on pages
56 to 77.

Short term employee benefits

Termination benefits

Share-based payments

Total

(b) Other related parties
The Group’s associates are considered to be related parties.

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

3.8

1.2

1.0

6.0

4.2

0.9

1.3

6.4

As at 28 March 2020 the following are also considered to be related parties under the Listing Rules due to their shareholdings exceeding 10% of the
Group’s total issued share capital:

• Nissin Foods Holdings Co., Ltd. (“Nissin”) is considered to be a related party to the Group by virtue of its 19.39% (2018/19: 19.47%) equity

shareholding in Premier Foods plc and of its power to appoint a member to the Board of directors.

• Oasis Management Company Ltd (“Oasis”) is considered to be a related party to the Group by virtue of its 11.94% (2018/19: 11.99%) equity

shareholding in Premier Foods plc and of its power to appoint a member to the Board of directors.

• Paulson Investment Company LLC, (“Paulson”) is considered to be a related party to the Group by virtue of its 11.93% (2018/19: 11.98%) equity

shareholding in Premier Foods plc and of its power to appoint a member to the Board of directors.

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www.premierfoods.co.ukFinancial Statements134

Notes to the financial statements CONTINUED

25. Related party transactions continued

Sale of goods:

– Hovis

Sale of services:

– Hovis

Total sales
Purchase of goods:

– Hovis

– Nissin

Purchase of services:

– Nissin

Total purchases

52 weeks
ended
28 Mar 2020
£m

52 weeks
ended
30 Mar 2019
£m

–

0.7

0.0

12.2

0.2

12.4

0.3

0.7

1.0

6.3

10.3

0.2

16.8

As at 28 March 2020 the Group had outstanding balances with Hovis. Total trade receivables was £0.3m (2018/19: £0.9m) and total trade payables
was £0.2m (2018/19: £0.6m).

26. Investments
In accordance with Section 409 of the Companies Act 2006 and The Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008, as amended by The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015, a full list of subsidiary
undertakings, associate undertakings and joint operations (showing the country of incorporation, registered address and effective percentage of
equity shares held) as at 28 March 2020 is disclosed below.

Country Registered Address

England &
Wales

Premier House
Griffiths Way
St Albans
Hertfordshire
AL1 2RE

Company
Premier Foods Investments No.1 Limited

Premier Foods Investments Limited
Premier Foods Finance plc

RHM Limited*
RHM Group Holding Limited
RHM Group Two Limited*
RHM Group Three Limited*
Premier Foods Group Services Limited
Premier Foods Group Limited
Centura Foods Limited*
Premier Foods (Holdings) Limited*
H.L. Foods Limited
Hillsdown Europe Limited*
Premier Financing Limited
CH Old Co Limited
Hillsdown International Limited*
Premier International Foods UK Limited*
RH Oldco Limited*
Alpha Cereals Unlimited*
RHM Frozen Foods Limited*
RHM Overseas Limited*
Knighton Foods Investments Limited*
Knighton Foods Limited
Knighton Foods Properties Limited

% Held
by Parent
Company of
the Group
100%

% held
by Group
companies, if
different
N/A

0%
0%

0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

Share Class
£1.00 Ordinary shares

£1.00 Ordinary shares
£1.00 Ordinary shares

£0.001 Ordinary–a shares
£0.10 Ordinary shares
£0.01 Ordinary shares
£0.01 Ordinary shares
£0.01 Ordinary shares
£0.25 Ordinary shares
£1.20 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£2.90 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£0.05 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial StatementsCompany
Hovis Holdings Limited
Hovis Limited
00241018 Limited*
DFL Oldco Limited*
F.M.C. (Meat) Limited*
Haywards Foods Limited*
RLP Old Co Limited*
Vic Hallam Holdings Limited*
W & J B Eastwood Limited*
The Specialist Soup Company Limited*
Family Loaf Bakery Limited (The)*
James Robertson & Sons Limited*
Manor Bakeries Limited*
Tiffany Sharwood’s Frozen Foods Limited*
Winsford Bacon Company Limited*
Citadel Insurance Company Limited

% Held
by Parent
Company of
the Group
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%

% held
by Group
companies, if
different
49%
49%
100%
100%
100%
100%
100%
100%
100%
100%

Share Class
£0.01 Ordinary shares
£0.01 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£0.25 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£0.25 Ordinary shares
£1.00 Ordinary shares

100%

£1.00 Ordinary Shares

Daltonmoor Limited*
Arkway Limited*

100%

£1.00 Ordinary shares

135

Country Registered Address

Isle of Man Ioma House
Hope Street
Douglas
Isle of Man
IM1 1AP
2 Woolgate Court St
Benedicts Street
Norwich
Norfolk
NR2 4AP

England &
Wales

100%

€0.5113 Ordinary shares

Germany Cecilienallee 6

Dusseldorf 40474
Germany

100%

£1.00 Ordinary shares

Scotland Summit House

Diamond Foods Lebensmittelhandel GmbH

Premier Brands Limited*

Premier Foods, Inc.

100% USD$0.01 Common Stock
shares

4-5 Mitchell Street
Edinburgh
Scotland
EH6 7BD
United States The Corporation Trust

Company
Corporation Trust
Centre
1209 Orange Street
DE 19801, USA
Ireland 25-28 North Wall Quay

Dublin 1
Ireland

Premier Foods ROI Limited
Premier Foods Ireland Manufacturing
Limited

*Dormant entities

100%

€1.00 Ordinary shares
€1.26 Ordinary shares

27. Subsequent events
On 20 April 2020 the Group announced a transformational agreement with its pensions schemes and that it had concluded its strategic review
announced on 27 February 2019. The Group announced a segregated merger of the RHM, PF and PGP pension schemes, which will place them
under one Trust. The key benefit of this agreement is that once the RHM pension scheme executes a buyout, any surplus would then be able to
be passed to the remaining schemes in deficit, and so would result in an improved funding position of these schemes. As such, this agreement
represents a more secure future for the Group's pension scheme members and has the potential to significantly reduce future funding requirements
for the Group. The Group has signed all implementation documentation and the merger will take place on 30 June 2020.

On 17 June 2020, the Group redeemed £80m of its £210m floating rate senior secured note which is listed on the Irish GEM Stock Exchange. At the
time of reporting, the Group had also repaid the £85m drawn on the revolving credit facility at 28 March 2020.

As at the time of reporting, the developing and uncertain situation in respect of the COVID-19 pandemic continues to be closely monitored.

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www.premierfoods.co.ukFinancial Statements136

Balance sheet

The following statements reflect the financial position of the Company, Premier Foods plc as at 28 March 2020 and 30 March 2019. These financial
statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and the UK Companies
Act 2006. The directors have taken advantage of the exemption available under section 408 of the Companies Act 2006 and not presented a
Company profit and loss account.

Non-current assets
Investments in Group undertakings

Current assets
Receivables
Deferred tax assets
Cash at bank and in hand
Total assets
Payables: amounts falling due within one year
Net current assets
Total assets less current liabilities

Equity
Called up share capital
Share premium account
Profit and loss account
Total shareholders' funds

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

Note

4
6

15.0

14.2

1,322.5
0.1
4.6
1,342.2
(314.6)
1,012.6
1,027.6

84.8
1,409.4
(466.6)
1,027.6

1,314.6
2.2
3.5
1,334.5
(319.2)
1,001.1
1,015.3

84.5
1,408.6
(477.8)
1,015.3

The notes on pages 138 to 140 form an integral part of the financial statements.

The financial statements on pages 136 to 137 were approved by the Board of directors on 24 June 2020 and signed on its behalf by:

Alex Whitehouse
Chief Executive Officer

Duncan Leggett
Chief Financial Officer

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements

137

Statement of changes in equity

At 31 March 2018
Profit for the period
Share-based payments
Shares issued
At 30 March 2019
Profit for the period
Share-based payments
Shares issued
At 28 March 2020

Called up
share capital
£m
84.1
–
–
0.4
84.5
–
–
0.3
84.8

Share
premium
account
£m
1,407.6
–
–
1.0
1,408.6
–
–
0.8
1,409.4

Profit and
loss account
£m
(495.3)
15.4
2.1
–
(477.8)
9.9
1.3
–
(466.6)

Total
£m
996.4
15.4
2.1
1.4
1,015.3
9.9
1.3
1.1
1,027.6

The notes on pages 138 to 140 form an integral part of the financial statements.

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138

Notes to the Company financial statements

1. Accounting policies
Basis of preparation
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS 101”).

In preparing these financial statements, the Company applies the recognition, measurement and disclosure requirements of International Financial
Reporting Standards as adopted by the EU (“Adopted IFRSs”), but makes amendments where necessary in order to comply with Companies Act
2006 and where advantage of certain disclosure exemptions available under FRS 101 have been taken, as the Group financial statements contains
equivalent disclosures. Disclosure exemptions are as follows:

• Cash flow statements and related notes;

• Presentation of comparative period reconciliations;

• Share based payments;

• Financial instruments and capital management;

• Standards not yet effective; and

• Disclosures in respect of compensation of key management personnel.

The profit for the period of £9.9m (2018/19: £15.4m profit) is recorded in the accounts of Premier Foods plc.

The Company has ensured that its assets and liabilities are measured in compliance with FRS 101. The financial statements have been prepared
under the historical cost convention.

The preparation of the financial statements requires the directors to make estimates and assumptions that affect the reported amounts of assets
and liabilities, and the disclosure of contingent liabilities at the date of the financial statements. The key estimates and assumptions are set out in the
accounting policies below, together with the related notes to the accounts.

The directors consider that the accounting policies set out below are the most appropriate and have been consistently applied.

The Company is exempt as permitted under Financial Reporting Standard 101 from disclosing related party transactions with entities that are wholly
owned subsidiaries of the Premier Foods plc Group.

Investments
Investments are stated at cost less any provision for impairment in their value.

Taxation
Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the profit and loss account except to the extent
that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other
comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary
difference can be utilised.

Receivables
Receivables comprise intercompany loans. The Company uses the expected loss model to review the recoverability of receivables and measure
the loss allowance required. The Company measures loss allowances for receivables at an amount equal to lifetime expected credit losses. In
determining credit risk, the Company considers reasonable and supportable information that is relevant and available without undue cost or
effort. This includes both quantitative and qualitative information and analysis, based on the Company’s historical experience and forward looking
information.

Cash and cash equivalents
Short-term cash deposits, which can be called on demand without any material penalty, are included within cash balances in the balance sheet.

Share based payments
The Company operates a number of equity-settled share-based compensation plans. The fair value of employee share option plans is calculated
using an option valuation model, taking into account the terms and conditions upon which the awards were granted. In accordance with
International Financial Reporting Standard 2, Share-Based Payment (“IFRS 2”), the resulting expense is charged to the profit and loss account
over the vesting period of the options for employees employed by the Parent Company, or treated as an investment in subsidiaries in respect of
employees employed by the subsidiaries where the expense is recharged. The value of the charge is adjusted to reflect expected and actual levels of
options vesting.

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Premier Foods plc Annual Report for the 52 weeks ended 28 March 2020Financial Statements139

The total amount to be expensed over the vesting period is determined by reference to the fair value of the share awards/options granted, excluding
the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in
assumptions about the number of share awards/options that are expected to vest. At each balance sheet date, the Company revises its estimates
of the number of share awards/options that are expected to vest and recognises the impact of the revision to original estimates, if any, in profit and
loss, with a corresponding adjustment to equity.

Dividends
Dividend distributions to the Company shareholders are recognised as a liability in the Company’s financial statements in the period in which the
dividends are approved by the Company’s shareholders, and for interim dividends in the period in which they are paid.

Financial guarantees
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract as a
contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.

2. Operating profit
Audit fees in respect of the Company are £nil (2018/19: £nil). Note 5.2 of the Group consolidated financial statements provides details of the
remuneration of the Company’s auditors on a Group basis.

At 28 March 2020, the Company had two employees (2018/19: one). Directors’ emolument disclosures are provided in the Single Figure Table on
page 68 of this annual report.

3. Investments in Group undertakings

Cost
At 31 March 2019 / 1 April 2018

Additions

At 28 March 2020 / 30 March 2019

Accumulated impairment
At 31 March 2019 / 1 April 2018

At 28 March 2020 / 30 March 2019

NBV at 28 March 2020 / 30 March 2019

2019/20
£m

2018/19
£m

1,773.5

0.8

1,772.1

1.4

1,774.3

1,773.5

(1,759.3)

15.0

(1,759.3)

14.2

In 2019/20 a capital contribution of £0.8m (2018/19: £1.4m) was given in the form of share incentive awards to employees of subsidiary companies
which were reflected as an increase in investments. Refer to note 26 in the Group financial statements for a full list of the undertakings.

4. Receivables

Amounts owed by Group undertakings
Receivables provided for
Total receivables

As at
28 Mar 2020
£m
1,325.8
(3.3)
1,322.5

As at
30 Mar 2019
£m
1,314.6
-
1,314.6

Amounts owed by Group undertakings are unsecured, have no fixed date of repayment and are not subject to interest rate risk as they are interest
free, with the exception of £431.7m (2018/19: £414.5m) which attracted interest at a rate of LIBOR plus 3.5% (2018/19: LIBOR plus 4.0%). The
Group are performing a review and expect the receivable to be settled in the next 12 months. Carrying value approximates fair value.

5. Payables: amounts falling due within one year

Amounts owed to Group undertakings

As at
28 Mar 2020
£m
(314.6)

As at
30 Mar 2019
£m
(319.2)

With effect from 3 April 2016, the losses surrendered as Group Relief between UK members of the Group have been surrendered for no
consideration.

Amounts owed to Group undertakings are unsecured, have no fixed date of repayment, are repayable on demand and are not subject to interest
rate risk as they are interest free, with the exception of £33.8m (2018/19: £32.6m) which attracted interest at a rate of LIBOR plus 3.5% (2018/9:
LIBOR plus 4.0%). Carrying value approximates fair value.

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140

Notes to the Company financial statements CONTINUED

6. Deferred Tax

At 31 March 2019 / 1 April 2018
Charged to the statement of profit and loss
At 28 March 2020 / 30 March 2019

The deferred tax asset relates to share-based payments.

7. Called up share capital and other reserves
a) Called up share capital

Issued and fully paid
848,209,480 (2018/19: 844,928,687) ordinary shares of 10 pence each

2019/20
£m
2.2
(2.1)
0.1

2018/19
£m
2.2
–
2.2

As at
28 Mar 2020
£m

As at
30 Mar 2019
£m

84.8

84.5

b) Share-based payments
The costs reflect the Company’s share option schemes in operation. Further details are available in note 22 of the Group’s consolidated financial
statements.

The charge relating to employees of the Company amounted to £0.6m (2018/19: £0.8m). Further details of these schemes can be found in the
Directors Remuneration report on page 56 to 77.

8. Contingencies and guarantees
Premier Foods plc has provided guarantees to third parties in respect of borrowings of certain subsidiary undertakings. The maximum amount
guaranteed at 28 March 2020 is £0.7bn (2018/19: £0.7bn).

9. Subsequent events
On 20 April 2020 the Group announced a transformational agreement with its pensions schemes and that it had concluded its strategic review
announced on 27 February 2019. The Group announced a segregated merger of the RHM, PF and PGP pension schemes, which will place them
under one Trust. The key benefit of this agreement is that once the RHM pension scheme executes a buyout, any surplus would then be able to
be passed to the remaining schemes in deficit, and so would result in an improved funding position of these schemes. As such, this agreement
represents a more secure future for the Group's pension scheme members and has the potential to significantly reduce future funding requirements
for the Group. The Group has signed all implementation documentation and the merger will take place on 30 June 2020.

As at the time of reporting, the developing and uncertain situation in respect of the COVID-19 pandemic continues to be closely monitored.

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141

Additional information

Shareholder enquiries
The Company’s Register of Members is maintained by our registrar, Equiniti. Shareholders with queries relating to their shareholding
should contact Equiniti directly using the details given below:

Equiniti, Aspect House, Spencer Road, Lancing BN99 6DA.

Telephone – 0371 384 2030 (or +44 121 415 7047 if calling from outside the UK). Calls to this number are charged at a national rate.
Lines are open 8.30 am to 5.30 pm Monday to Friday, excluding UK public holidays.

Or visit Equiniti’s Shareview website: www.shareview.co.uk

Company advisers
Statutory Auditor
KPMG LLP
15 Canada Square
London E14 5GL

Joint corporate brokers
Jefferies International
100 Bishopsgate
London EC2N 4JL

Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET

Financial PR advisers
Headland
Cannon Green
27 Bush Lane
London EC4R 0AA

Trade marks
The Company’s trade marks are shown in italics throughout this annual report. The Company has an exclusive worldwide licence to
use the Loyd Grossman name on certain products. The Company has an exclusive licence to use the Cadbury trade mark in the UK
(and a non-exclusive licence for use in other specified territories) on a variety of ambient cake products. Cadbury is a trade mark of the
Mondelēz International Group.

Cautionary Statement
The purpose of this annual report is to provide information to shareholders of Premier Foods plc (‘the Company’). The Company, its
directors, employees and advisers do not accept or assume responsibility to any other person to whom this document is shown or into
whose hands it may come and any such responsibility or liability is expressly disclaimed. It contains certain forward-looking statements
with respect to the financial condition, results, operations and businesses of the Company. These statements and forecasts involve
risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of
factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking
statements and forecasts. Nothing in this annual report should be construed as a profit forecast.

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P
r
e
m
e
r
F
o
o
d
s
p
c
A
n
n
u
a

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e
p
o
r
t

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e

5
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2
8
M
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2
0
2
0

Premier Foods plc
Premier House
Centrium Business Park
Griffiths Way
St Albans
Hertfordshire
AL1 2RE
01727 815850

www.premierfoods.co.uk
Registered in England and Wales No. 5160050

27150-Premier-Foods-AR-2020.indd 3

27150

29 June 2020 5:13 pm

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29/06/2020 17:14:30