30415 26 May 2021 2:24 pm V6Getting Britain cooking againPremier Foods plc Annual Report for the 53 weeks ended 3 April 2021Premier Foods plc Annual Report for the 53 weeks ended 3 April 202130415 Premier foods AR2021 Strategic.indd 330415 Premier foods AR2021 Strategic.indd 326-May-21 2:35:02 PM26-May-21 2:35:02 PM 30415 26 May 2021 2:24 pm V6Contents2020/212019/202018/192017/182016/17£934.2m£847.1m£824.3m £819.2m£790.4m2020/212019/202018/192017/182016/17£314.1m£408.1m£469.9m £496.4m£523.2mRevenue (52 week basis)1 (£m)HighlightsNet debt1 (£m)2020/212019/202018/192017/182016/17£148.3m£132.6m£128.5m £123.0m£117.0m2020/212019/202018/192017/182016/171.92.73.2 3.63.9Trading profit1 (£m)Net debt to adjusted EBITDA ratio 12020/212019/202018/192017/182016/17£122.8m£53.6m£(42.7)m £20.9m£12.0m2020/212019/202018/1959,09262,73866,099 Profit/(loss) before tax (£m)Total CO2 emissions (tCO2e)2020/212019/202018/192017/182016/17£934.2m£847.1m£824.3m £819.2m£790.4mStrategic ReportOur strategy 03Our branded growth model04About Premier Foods08Our response to Covid-1909The year when Britain got cooking again10Chairman’s statement12Chief Executive’s Review14How we are a responsible business16Key performance indicators34Operating and financial review36Risk management46GovernanceGovernance framework54Board of directors56Governance overview58Nomination Committee report64Audit Committee report65Directors’ Remuneration Report68Other statutory information84Statement of directors’ responsibilities87Financial StatementsIndependent auditor’s report89Consolidated statement of profit or loss98Consolidated statement of comprehensive income99Consolidated balance sheet100Consolidated statement of cash flows101Consolidated statement of changes in equity102Notes to the financial statements103Company financial statements145Notes to the Company financial statements147Additional information151This represents a 43% reduction against our 2008 baseline of 103,102 (tCO2e) (when we first started to collect emissions data on a like-for like basis and adjusted for site disposals)30415 Premier foods AR2021 Strategic.indd 330415 Premier foods AR2021 Strategic.indd 326-May-21 2:35:07 PM26-May-21 2:35:07 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk01Despite the challenges of the last year, our branded growth model has continued to deliver, as consumers have turned to our market leading brands and innovative new products, to expand their culinary repertoires and get cooking again.1 Revenue and Trading profit are shown on a 52 week basis for comparison with prior years, Net debt is on a pre-IFRS 16 basis and EBITDA is on an adjusted basis. A definition and reconciliation of non-GAAP measures to reported measure is set out on page 45.2 Historical Net debt/adjusted EBITDA leverage since public listing in July 2004.+10.3%Revenue growth (52 week basis) 1Final dividend of 1.0pper share proposed; reinstated for the first time in 13 years+23.5%Adjusted profit before tax growth (52 week basis) 11.9xNet debt/adjusted EBITDA (on a Pre-IFRS 16 basis), the Group's lowest ever leverage 1, 230415 Premier foods AR2021 Strategic.indd 130415 Premier foods AR2021 Strategic.indd 126-May-21 2:35:10 PM26-May-21 2:35:10 PM 30415 26 May 2021 2:24 pm V6Strategic reportAah! The nation’s favourite.Our gravy granules help bring families together over home cooked meals and now, both Chicken and Beef flavours, are available with 25% less salt options.Our strategy 03Our branded growth model04About Premier Foods08Our response to Covid-1909The year when Britain got cooking again10Chairman’s statement12Chief Executive’s Review14How we are a responsible business16Key performance indicators34Operating and financial review36Risk management460230415 Premier foods AR2021 Strategic.indd 230415 Premier foods AR2021 Strategic.indd 226-May-21 2:35:37 PM26-May-21 2:35:37 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk03Sustainable and profitable growth• Leading brand positions.• Insight driven innovation.• Sustained growth in marketing investment.• Collaborative retail partnerships.• International markets expansion.Cost control and efficiency• Lean SG&A cost base.• Operational excellence.• Capital projects.• Agility, pace & energy.Cash generation• Disciplined working capital management.• Tight focus on Capex.• Options for cash deployment in short and medium term.Our strategyOur branded growth strategy continues to deliver and enables us to reduce Net debt consistently.Our branded growth modelLeading brand positionsWe have some of the nation’s favourite food brands, with leading positions in their respective categories.Innovation that meets consumers’ needsStrong innovation programme, underpinned by key consumer trends and strong consumer insights at the heart.Engaging marketingEmotionally engaging advertising, that is proven to deliver industry leading return on investment (ROI).Strong customer partnershipsWorking closely with our retail partners to deliver excellent in-store execution and category growth.30415 Premier foods AR2021 Strategic.indd 330415 Premier foods AR2021 Strategic.indd 326-May-21 2:35:42 PM26-May-21 2:35:42 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202104Quick Meals, Snacks & SoupsFlavourings & SeasoningsAmbient DessertsCooking Sauces & AccompanimentsAmbient CakesWe have leading brands...Our brands are leaders in their categories with high household penetration.OXO Meat-FreeOXO stock cubes are packed with big flavours to help transform your meals. Reflecting growing interest in vegetarian and vegan options, we have developed a new Meat-Free Beef stock cube – the first vegan beef stock. 1position44%share73%penetration1position33%share45%penetration1position37%share59%penetration1position16%share54%penetration1position25%share65%penetrationCategory position and market share: IRI 52 w/e 27 March 2021Penetration: Kantar Worldpanel 52 w/e 21 March 202130415 Premier foods AR2021 Strategic.indd 430415 Premier foods AR2021 Strategic.indd 426-May-21 2:35:53 PM26-May-21 2:35:53 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk05...that innovate to meet consumers’ needs...We launch new products based on consumer trends, with a major focus on health and nutrition.12345Health and nutritionConvenienceSnacking and on-the-goIndulgencePackaging sustainability30415 Premier foods AR2021 Strategic.indd 530415 Premier foods AR2021 Strategic.indd 526-May-21 2:35:56 PM26-May-21 2:35:56 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202106...which are supported by engaging marketing...Sustained growth in marketing with two new major campaigns launched in the year, creating emotional connections with consumers.‘Spare chair’ ‘Tasty’‘Adventures in flavour. Since 1889’‘Devon knows’‘Little Thief’‘Dad’s night in’30415 Premier foods AR2021 Strategic.indd 630415 Premier foods AR2021 Strategic.indd 626-May-21 2:36:02 PM26-May-21 2:36:02 PM STRATEGIC REPORT
...and strong
customer
partnerships.
Focused on driving mutual category
growth and delivering outstanding
in-store execution.
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Premier Foods plc
www.premierfoods.co.uk
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30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202108About Premier FoodsOur values and cultureWe’re committed to creating a truly great place to work. Our shared values give us a common framework for decisions and help guide us in the way we do things and we challenge each other to live them day-by-day. We’re determined to be the best, consistently delivering at the highest level.We’re creative in what we do and how we do it.We’re energetic and act with pace.We achieve more when we work together.We bring out the best in each other.As one of Britain’s biggest listed food companies we’re committed to the UK, employing over 4,000 dedicated colleagues at 16 manufacturing sites and offices up and down the country. We operate primarily in the ambient food sector, which is one of the largest sectors within the total UK grocery market. We operate in four key Grocery categories: Flavourings & Seasonings; Quick Meals, Snacks & Soups; Ambient Desserts and Cooking Sauces & Accompaniments. Within Sweet Treats we operate in the Ambient Cakes category. In addition, the Group has a portfolio of other branded food products and a non-branded food business which manufactures products, such as cakes and desserts, on behalf of many of the UK’s leading food retailers.Within International we have significant businesses in Ireland and Australia, with established relationships with the major food retailers. Our International business delivered a strong performance in the year and now accounts for nearly 6% of Group revenue. Strategic partnershipsNissinWe entered into a co-operation agreement with Nissin Foods Holdings Co., Limited (‘Nissin’) in 2016, and have launched Batchelors Super Noodles in a new pot format using Nissin’s leading noodle technology and manufacturing expertise. In addition, we have taken on distribution of Nissin’s Soba noodles and brought the Cup Noodle brand to the market. As a result, we have seen market share grow to 7.5% in the Pot Snacks category, with retail sales value up +48.4% in the financial year.Mondelēz InternationalIn 2017, we signed a new strategic global partnership with Mondelēz International to renew the Company’s long-standing licence to produce and market Cadbury branded cake, as well as home baking and ambient dessert products. The partnership covers multiple countries, and has the potential to use the full range of Cadbury brands in ambient cake.CustomersWe operate a multi-format, multi-channel approach to serving a broad range of customers, including major UK supermarkets, discounters, e-commerce channels, convenience stores, wholesalers and foodservice operators.30415 Premier foods AR2021 Strategic.indd 830415 Premier foods AR2021 Strategic.indd 826-May-21 2:36:10 PM26-May-21 2:36:10 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk09Our response to Covid-19The last year has been one of the most challenging in modern history. As a business, our key responsibility has been to ensure the health and well-being of our colleagues. At the same time, we have worked with suppliers to ensure our manufacturing sites remain operational to meet our customers’ needs and help keep the nation fed.Colleague health and safetyContinuity of supplyResilient business modelThe Group’s key priority has remained the health and well-being of our colleagues and other stakeholders. As a business, we acted quickly to introduce a wide range of additional health, safety and hygiene protocols at our factories, offices and across our supply chain. These have included enhanced hygiene controls, social distancing, working from home (where possible) and controlled access to manufacturing sites. We have carried out individual risk assessments for all colleagues classed as vulnerable or clinically extremely vulnerable and, should a colleague test positive or be required to self-isolate, we have provided full pay. We have introduced Social Distancing Marshals across our sites and liaised closely with The Department of Health and Social Care on mass testing. There has also been extensive two-way communication with colleagues across the business to provide assurance and to address any areas of concern. The Group believes the measures taken have been highly effective in minimising the number of infections experienced at our sites and enabled the Group’s manufacturing and logistics operations to remain fully operational throughout the year.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. The management team has worked hard and been highly successful in maintaining supply at significantly elevated levels of demand, keeping the business fully operational, while at the same time retaining strict social distancing measures to keep site-based colleagues safe. We have continued to work very closely with our suppliers to ensure continued supply of ingredients and, where necessary, identified alternative 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 Executive Leadership Team 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. Our branded growth model, which is based on leveraging the strength of our market leading brands, launching insightful new product innovation, supported with emotionally engaging advertising and building strategic retail partnerships – has successfully delivered revenue growth in the UK for the last 15 quarters.Over the course of the year our business model has demonstrated its resilience, as we sought to counteract the threats presented by the Covid-19 pandemic. Our portfolio of brands with strong category positions has been an important cornerstone, as consumers turned to brands they know and love. With a significant rise in the number of meals eaten at home this year due to government restrictions, households have looked to expand their repertoire of meals and this has resulted in more consumers purchasing the Group’s brands (refer to our consumer insight report, The Kitchen Cooking Index, on pages 10 and 11). This has been supported with the launch of strong innovation linked to consumer trends and increased marketing spend with six of our brands on TV during the year, including major new media campaigns for both Ambrosia and Sharwood’s. This has also been aided by the resilience of our manufacturing and logistics operations ensuring availability of our product ranges for our retail customers. A key growth area throughout this period has been the online channel with the major retailers who operate e-commerce platforms. The overall market grew significantly during this period, and the Group’s categories have all grown ahead of this, with sales increasing by +104%. The Group has been developing its online capabilities over the last three years, increasing resource in this area to ensure maximum benefits from the growth potential in this channel. We have also been making progress with our revised International strategy, which we launched last year. Led by a new Head of International, a switch of resource from the UK to the relevant market, and a focus on in-market execution. This has resulted in revenue, at constant currency, growing +23% (on a 52 week basis)1. In addition, we have signed a major new distribution agreement with Weston Foods to sell and market Mr Kipling in the US.As a consequence of these factors, we have seen a significant increase in market share across our categories, up 70 bps in the year and a +10.3% increase in revenue to £934.2m (52 week basis)1.1 A definition and reconciliation of non-GAAP measures to reported measure is set out on page 45.30415 Premier foods AR2021 Strategic.indd 930415 Premier foods AR2021 Strategic.indd 926-May-21 2:36:10 PM26-May-21 2:36:10 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202110The year when Britain got cooking againIn February 2021, we launched The Kitchen Cooking Index – a consumer report on how the nation has reconnected with cooking over the last year and how the pandemic has impacted how we feel about food and home cooking (the full report is available on our website, www.premierfoods.co.uk).The research from Kantar and YouGov1 showed that 73% of us have enjoyed our time spent in the kitchen and this enjoyment is likely to continue over the course of the next year with more than 91% of people saying they intend to do the same amount of cooking, or more, in the year ahead. A big driver of this is the health benefits of cooking at home. 81% of us want to eat more healthily over the coming year and there is a desire for food with big, bold flavour and taste. On average, one-third of UK households added a dish to their ‘go-to’ evening meals2 since the start of the pandemic, which is the biggest increase the industry has seen in five years, with veggie curries, fish and potatoes, and chicken and mash seeing some of the fastest growth. The additional meals at home that 28 million households prepared, didn’t turn us all into a nation of gourmet chefs all of a sudden, but we did spend more time enjoying and preparing meals to eat together each week. The kitchen cupboard has long been the heart of our kitchens, home to many of the staples of British cooking. But over the course of the pandemic, we have seen households reach to the kitchen cupboard even more when preparing their meals – and more so than both the fridge and the freezer3. Baking ingredients, herbs and spices, flour and noodles are amongst the most popular ingredients, with the kitchen cupboard firmly establishing itself as the starting point for much of our cooking. People have also used their freezer more than before, with many of us doing so to store batch cooked food and reduce food waste1.84% of our core ranges now include at least one better-for-you product and looking ahead to 2021/22, we will launch a number of new product ranges as part of our healthier choices strategy, including Loyd Grossman lasagne sauce with no added sugar.Our Sharwood’s sauces offer consumers the opportunity to explore a range of exciting Asian flavours. During the year we launched a new range of 30% less sugar stir fry sauce pouches.1. Healthy options2. Taste and flavours3. Hot lunches4. Treat dinnersPeople have increasingly sought to add lighter options such as fish and potatoes, as well as meat-free dishes such as vegetarian curry and vegetarian pasta which are amongst the dishes that have seen the fastest growth since the start of the pandemic4. Overall, the trend we have seen over the last few years towards vegan and vegetarian meals also continued to grow, with plant-based (vegan) meals up 46% compared to the previous year, and vegetarian up 25%5.Households have looked to try new things and incorporate different flavours, with taste the top consideration when choosing their evening meal. Chutneys and relishes, world ingredients (such as poppadom and curry pastes), and cooking sauces have all featured more frequently in our evening meals, up by 32%, 23% and 11% respectively6.With many people working from home, lunch habits changed. More people looked for something a little different and lunches featuring something hot have increased by 52% since before the pandemic, as people took advantage of being at home to use their hob, grill and oven during the working day7. So, as well as sandwiches, which remain the most popular choice, we looked for shop bought or pre-packaged soup, instant noodles or rice pots and cooking sauces. We are increasingly also opting for meat-free and plant-based meals to increase our vegetable intake at lunchtime. With restaurants closed for much of the last year, people increasingly sought to replicate the eating out experience in the home. Friday and Saturday ‘treat dinners’ have gone up 25% compared to before the pandemic and 54% have tried their hand at a ‘fakeaway’ – recreating their favourite takeaway at home. Nearly two-fifths (18%) made a ‘fakeaway’ on average at least once a month1.81%want to eat more healthily over the coming year1 in 3 households have added a dish to their repertoire52%Increase in hot lunches54%of people have tried their hand at a ‘fakeaway’1 YouGov survey of 2,084 adults, Feb 2021 2 Kantar, Usage data, Individual weekly repertoires at the evening meal, 36 w/e 29 Nov 2020 vs 52 w/e 22 Mar 2020 3 Kantar, Usage, servings per person per week, products based on typical location, 52 w/e 29 Nov 2020 4 Kantar, Usage, evening meals, 36 w/e 29 Nov 20 vs the same period in prior year 30415 Premier foods AR2021 Strategic.indd 1030415 Premier foods AR2021 Strategic.indd 1026-May-21 2:36:16 PM26-May-21 2:36:16 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk11Batchelors have launched a new range of American inspired flavours for both Super Noodles and Pasta ‘n’ Sauce to provide quick and easy meal solutions.Our range of Sharwood’s sides and accompaniments are perfect for consumers looking to create an authentic takeaway moment at home.1. Healthy options2. Taste and flavours3. Hot lunches4. Treat dinnersPeople have increasingly sought to add lighter options such as fish and potatoes, as well as meat-free dishes such as vegetarian curry and vegetarian pasta which are amongst the dishes that have seen the fastest growth since the start of the pandemic4. Overall, the trend we have seen over the last few years towards vegan and vegetarian meals also continued to grow, with plant-based (vegan) meals up 46% compared to the previous year, and vegetarian up 25%5.Households have looked to try new things and incorporate different flavours, with taste the top consideration when choosing their evening meal. Chutneys and relishes, world ingredients (such as poppadom and curry pastes), and cooking sauces have all featured more frequently in our evening meals, up by 32%, 23% and 11% respectively6.With many people working from home, lunch habits changed. More people looked for something a little different and lunches featuring something hot have increased by 52% since before the pandemic, as people took advantage of being at home to use their hob, grill and oven during the working day7. So, as well as sandwiches, which remain the most popular choice, we looked for shop bought or pre-packaged soup, instant noodles or rice pots and cooking sauces. We are increasingly also opting for meat-free and plant-based meals to increase our vegetable intake at lunchtime. With restaurants closed for much of the last year, people increasingly sought to replicate the eating out experience in the home. Friday and Saturday ‘treat dinners’ have gone up 25% compared to before the pandemic and 54% have tried their hand at a ‘fakeaway’ – recreating their favourite takeaway at home. Nearly two-fifths (18%) made a ‘fakeaway’ on average at least once a month1.81%want to eat more healthily over the coming year1 in 3 households have added a dish to their repertoire52%Increase in hot lunches54%of people have tried their hand at a ‘fakeaway’5 Kantar Usage panel, 36 w/e 29th Nov 2020 vs previous year, savoury foods at lunch/evening meal, in home & carried out6 Kantar Usage panel, 12 w/e 29 Nov 20 vs. 12 w/e 01 Dec 19 7 Kantar, Usage, Lunches prepared hot, 4/we 29 Nov 202030415 Premier foods AR2021 Strategic.indd 1130415 Premier foods AR2021 Strategic.indd 1126-May-21 2:36:22 PM26-May-21 2:36:22 PM Chairman’s statement
This has been an unprecedented year for the country as a whole and also for our
business. The Group’s performance is a testament to the strength of our people,
customer relationships and supply chain and positions us well for the future.”
Colin Day
Chairman
This report covers our 2020/21 financial year for the 53 week
period which ended on 3 April 2021.
It was a year of significant growth, in which the Company delivered
upon its key strategic objectives and transformed the financial
footing of the business, making this a very different investment
proposition today. It has been marked by the Company’s return into
the FTSE 250, after an eight-year absence, reflecting the greater
stability brought about by a sustained period of outperformance.
Revenue reached £934.2m, an increase of +10.3%, and adjusted
profit before tax increased to £115.3m (both on a 52 week basis).
Net debt for the Group reduced by £94.0m to £314.1m (pre-IFRS 16).
External climate
The Covid-19 pandemic has changed the landscape in which we all
operate. Our food system has been under its greatest stress test for
decades and the Group implemented additional safety measures
to keep colleagues safe. As the CEO reflects in his statement,
our ability to keep food flowing into retailers, demonstrates the
resilience of our business and is credit to the strength of our teams
across the country.
Managing the implications of a global pandemic, whilst
simultaneously exiting the EU, was a complex task not to be
underestimated. Through preparedness, attention to detail,
rehearsals and adaptability we have successfully minimised any
disruption, whilst the teams continue to work through very detailed
information to ensure ongoing compliance.
In July 2020, the Government launched its new obesity strategy
promoting healthy eating. Health has been a strategic priority for
the business for a number of years and we support the underlying
intent. I believe the business’s product innovation programme is
well placed to continue developing new healthier alternatives to
meet evolving consumer needs.
Board changes
In May 2020, we announced the appointment of Helen Jones
and Tim Elliott as Independent non-executive directors of the
Board and members of the Audit, Remuneration and Nomination
Committees. Helen has an extensive commercial and general
management background in the food, drink and hospitality sector,
whilst Tim brings a wealth of investment banking and corporate
finance experience. Their combined knowledge and passion for the
business has already proved invaluable on the Board.
In January 2021, following a reduction in shareholding by Paulson
& Co. Inc ('Paulson'), Orkun Kilic, non-executive director, resigned
from the Board and the relationship agreement between Paulson
and the Group came to an end. Paulson has been a long-term major
shareholder in the business and Orkun played an important role
in supporting the Company’s progress since joining the Board two
years ago. I wish him well for the future.
After three years as a non-executive director, Shinji Honda, stepped
down from the Board in March 2021, due to his planned retirement
from Nissin Foods Holdings Co., Limited ('Nissin'). I would like to
thank Mr Honda for his significant contribution to both the Board
and the relationship between Premier Foods and Nissin, which has
helped the continued success of our partnership and ongoing strong
performance. Yuichiro Kogo, who I had previously met on a number
of occasions, succeeded Mr Honda, as Nissin’s representative on
the Board, and was appointed non-executive director following Mr
Honda’s retirement. He brought with him a wealth of experience
from his role as Head of Business Development at Nissin and from
his nine years at Goldman Sachs in Japan.
Although the Company is committed to all forms of diversity,
I acknowledge that our recent entry into the FTSE 250 has meant
that we have not met the standard set for gender diversity on our
Board outlined in the Hampton-Alexander Review. It is a matter
of priority for me, and the Board, that we address this as soon
as practicable. Further details of the work being done to address
diversity across the business can be found on pages 24 and 64.
Financial position
The announced segregated merger of the Group’s legacy pension
schemes, which completed at the end of June 2020, was positive
news both for the Group’s pension scheme members and the
Company, creating better financial security for its members and the
potential for a reduction in future funding requirements for
the Group.
On 5 November 2020, the Board sold its 49% interest in Hovis
Holdings to Endless LLP for £37.3m. The transaction leaves Hovis
commercially well positioned to grow under new ownership and
further strengthened the cash position of the Group.
Throughout the year, the business has continued to pursue its
successful branded growth model strategy, focusing on the delivery
of consistent and solid operational performance, continued cash
generation and commensurate debt reduction. This has led to a
significant turnaround this year in the Group’s capital structure.
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30415 26 May 2021 2:24 pm V6Premier Foods plcwww.premierfoods.co.uk13STRATEGIC REPORT→ See page 16 for more information on our ESG Strategy→ See page 64 for more information on Diversity→ See page 42 for more information on FinancingA definition and reconciliation of non-GAAP measures to reported measures is set out on page 45.Over the course of 2020/21 the Group has announced four separate redemptions totalling £190m of its Senior Secured Floating Rate Notes, due July 2022. This leaves just £20m outstanding, generating total pro forma interest savings of nearly £10m per annum. Additionally, we received credit ratings upgrades from S&P and Moody’s during the year which reflects recognition of the progress we have made in improving our financial position.In February 2021, following shareholder and Court approval, we completed a restructuring of the Company’s reserves. This will provide greater flexibility in how the Company manages its capital resources going forward. In addition, the Group has extended its revolving credit facility with an updated bank group and announced the proposed issue of new £300m Senior Secured Fixed Rate Notes (see page 42 for more information).The strength of the Group’s cash generation underpinned our decision in November 2020 to set a new medium-term target for Net debt/adjusted EBITDA of approximately 1.5x. At the year end, our Net debt/adjusted EBITDA fell below 2.0x for the first time, with Net debt reduced to £314.1m (pre-IFRS 16).As a consequence of the sustained reduction in Net debt and the strong performance of the Company's business model, I am pleased to confirm that, subject to shareholder approval, the directors have proposed a final dividend of 1.0 pence for the 53 weeks ended 3 April 2021.Board priorities and shareholder feedbackThe Board and management team remain committed to growing a business which reflects evolving consumer trends, is driven by a focused health and sustainability agenda, and creates value for all stakeholders. Whilst the pandemic has meant I have not been able to meet as many of you in person this year as I would have liked, we have listened to your feedback and questions at every opportunity. I am pleased to have received and discussed perspectives with a number of shareholders who have recognised the strong progress we have made over the last year. The foundations on which we have delivered this progress will be crucial as we look forward to the next stage in the Group’s development.On behalf of the whole Board, I would like to conclude by thanking all colleagues, suppliers, partners, customers and consumers for their unwavering commitment and resilience during what I know has been a truly extraordinary and unprecedented year for our industry. As Chairman, I feel confident that we are now moving into a new phase of our development and can look forward to continued growth and new strategic opportunities in the year ahead.Colin Day Chairman19 May 202123.5%Increase in adjusted profit before tax to £115.3m (52 week basis)+11.9%Increase in Trading profit to £148.3m (52 week basis)30415 Premier foods AR2021 Strategic.indd 1330415 Premier foods AR2021 Strategic.indd 1326-May-21 2:36:22 PM26-May-21 2:36:22 PM Chief Executive’s review
The business is in a much stronger position than at any time in well over a decade and
I am delighted that, as a result of this transformation, we are now able to reinstate
dividend payments.”
Alex Whitehouse
Chief Executive Officer
An unprecedented year
For most of us, the last year will be remembered as the bleakest and
most worrying in our recent history; being separated from our friends
and family, learning to live our lives in a very different way, and for
many, coping with sickness and loss.
In the face of this crisis our business has proven incredibly resilient,
with our colleagues demonstrating great resolve in meeting the
unprecedented levels of consumer demand for our products, whilst at
the same time adopting strict new Covid-safe ways of working.
Throughout the year, we continued to execute our branded growth
model strategy which again delivered growth that was ahead of that
of our categories, and consequently increased our market share.
This strong performance helped generate accelerated free cash flow
and along with the sale of our minority share in the Hovis business,
facilitated a reduction in Net debt of £94.0m (on a pre-IFRS basis) to
1.9x adjusted EBITDA. As a result, we have set a new medium-term
goal of 1.5x Net debt to adjusted EBITDA.
Doing our bit to feed the nation
Nothing has been more important to us this year than people’s safety.
Throughout the pandemic, we followed three guiding principles; firstly,
to protect our colleagues’ health and well-being, secondly, to play
our part in providing food to the nation during a time of difficulty and
finally, to protect our business for the medium term.
The resilience of our business has in part been due to the speed with
which we acted to protect our people, operations and supply chain.
Access to our factories has been strictly controlled since the start of the
pandemic and we have continuously applied a series of strict Covid-
safe principles for both site and office working.
At the same time, the attitude of our team members has been
remarkable. Colleagues have made mammoth efforts to keep up with
the elevated levels of demand. Our ability to continue supplying food
to keep the shelves stocked has been enormously aided by our strong
supply chain partnerships at one side, and close strategic relationships
with our customers at the other.
The pandemic touched so many different parts of our business and our
colleagues went to extraordinary lengths to play their part in getting
food to the nation’s tables. I want to thank each and every one of them
for their commitment and dedication.
Importantly, as well as keeping our sites and factories fully operational,
we also supported the local communities where we work. Throughout
the year, we donated stock to community food banks in partnership
with FareShare and provided easy-to-prepare meals and snacks for our
incredible NHS workers in 28 hospitals local to our sites.
There have also been countless examples of individuals and teams
going above and beyond to support those most in need; from creating
PPE for local NHS sites, to donating products to key workers, sourcing
specific products for highly vulnerable consumers and even hand
sewing tote bags for local nurses.
Driving our branded growth model
As most of us turned our hands to cooking at home rather more
often that we are used to, this often meant turning to Premier
Foods’ well known and well-loved grocery brands to help create
those meals. It was encouraging to see people pushing their
culinary boundaries, trying new dishes, and learning new recipes.
In fact, during the year we saw millions of new households buying
our brands as they created those new dishes. As our consumer
insight report the ‘Kitchen Cooking Index’ shows (see pages 10 and
11), people really enjoyed cooking and eating together at home,
with 91% claiming to want to continue to do so, at least as much
again this year.
The nation’s consumption of cake fell during the year as those
moments of small celebration with friends and family were few and
far between, so in this context I am really pleased with the positive
performance of Mr Kipling, with sales growing by +9% in a category
that declined by 2%.
We came into the year with strong plans behind our brands and
despite the challenging macro environment we continued to execute
those plans, bringing a number of new products to market and
further upweighting marketing investment as the year progressed.
Supporting our brands with emotionally engaging advertising is a
key driver of our model and this year we increased that support to
cover six of our major brands on TV. This included new advertising
for Ambrosia, which returned to its roots of ‘Devon knows how they
make it so creamy’ and also for Sharwood’s, with an advert that
takes a contemporary view of Indian cooking.
Innovation is core to our growth model and we continued to
develop, and bring to market, new consumer focused products.
For a number of years health has been a key strategic priority within
our new product development programme and this year was no
exception, with a significant number of our new products being
healthier options. This included a new range of stir fry sauces from
Sharwood’s, all with lower sugar levels to help in the creation of a
healthy meal, and from Mr Kipling we launched 30% reduced sugar
Viennese Whirls, a consumer favourite now made better for you.
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30415 26 May 2021 2:24 pm V6Premier Foods plcwww.premierfoods.co.uk15STRATEGIC REPORT→ See page 10 for more information on our consumer insights report, the 'Kitchen Cooking Index'→ See pages 36 to 45 for more information on our operating and financial reviewA definition and reconciliation of non-GAAP measures to reported measures is set out on page 45.1 Historical Net debt/adjusted EBITDA leverage since public listing in July 2004.Our International business performed very strongly with revenue growth at constant currency of 23% as we implemented the revised strategy focused on delivering excellent in-store execution of our brands in our focus markets; this being delivered by local teams on the ground. This year we also started to roll out our brand success models into overseas markets, this included a series of new product launches and advertising our brands on TV outside the UK, with Mr Kipling and Bisto both supported in Ireland and Mr Kipling in Australia. During the year we also entered into an agreement with Weston Foods to distribute Mr Kipling in the US, as we look to replicate the success we have seen with the brand in Australia. A transformed business in a strong financial positionThe financial position of the business has continued to strengthen, strong cash generation along with the sale of our 49% share in Hovis, reducing Net debt by £94.0m (on a pre-IFRS basis) taking it to 1.9x adjusted EBITDA, the lowest ever1. As a result, we were able to repay at par £190m of our Floating Rate Notes (Libor +5%) leading to an annualised saving in interest payments of nearly £10m. In addition, at the start of the year we entered into a landmark agreement with the trustees of our legacy pension schemes, this provides a more secure funding future for our pensioners as well as the prospect of significantly reduced funding requirements from the Group. As a consequence, the business is in a much stronger position than at any time in well over a decade and is now a very different business. I am delighted that, as a result of this transformation, and with Net debt now down at 1.9x adjusted EBITDA, we are now able to reinstate dividend payments which, subject to shareholder approval, will commence from 30 July 2021.In summaryThis has been an unprecedented year and I want to reiterate my enormous thanks to our incredible team. Together we have kept each other safe, we have played an important part in feeding the nation and we have repositioned our business for what I believe is going to be a very exciting future. Premier Foods is entering a new chapter, one where the focus is on expanding the business; using our skills in building and growing brands to enter new categories in the UK and to scale up our overseas businesses, whilst exploring opportunities for appropriate bolt-on acquisitions. Alex Whitehouse Chief Executive Officer19 May 2021-23%Reduction in Net debt to £314.1m (pre-IFRS 16 basis) +23%Increase in International revenue (at constant currency)30415 Premier foods AR2021 Strategic.indd 1530415 Premier foods AR2021 Strategic.indd 1526-May-21 2:36:22 PM26-May-21 2:36:22 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202116We are passionate about creating great tasting and affordable food that consumers love to eat, and we are committed to doing this in a way that is both environmentally sustainable and socially responsible. As one of the UK’s biggest listed food companies, how we operate matters and we want to make a positive difference to our people, our communities and our planet.Our Environmental, Social and Governance (ESG) strategy is shaped by the issues most relevant to our business and our stakeholders, with our efforts particularly focused around where we can have a positive impact.When being a responsible business, we want to work in partnership with all our stakeholders. 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. We hold ourselves accountable against national ESG targets and commitments. For example, as a founding member of the UK Plastics Pact, as a signatory of Courtauld 2025, and in our commitment to delivering against relevant UN SDGs, we strive to push ourselves to deliver on our ESG strategy and contribute to wider, global change. Checking-in with our stakeholdersThe ESG landscape is rapidly evolving, and it is important our strategy enables us to effectively tackle emerging issues, address trends and meet evolving stakeholder interests. This year, with the support of an independent consultant, we conducted a materiality assessment to identify and rank the ESG issues relevant to our business, industry and stakeholders. This included conducting interviews with our customers, members of our investor community, NGOs, policy experts, and our colleagues, to hear and understand their views on the issues which matter most to them. We will use the results to reflect on our current strategy and ensure we are delivering maximum impact for the business, our stakeholders, our wider community and the planet. → Information in this section highlights our approach to the matters set out in section 172(1) of the Companies Act. See pages 61 to 63 for further information on how we are connecting with our stakeholders in the Governance section. Strengthening our Governance structureThis year, to further embed our ESG strategy across the business and respond to the growing expectations of our stakeholders, we established an ESG Governance Committee. Chaired by our CEO and bringing together members of our Executive Leadership Team (ELT) and subject matter experts within the business, the Committee has full oversight of our ESG strategy and is responsible for setting its direction, and monitoring progress against our key programmes and KPIs. The Committee ensures that ESG is embedded across the organisation and forms an integral part of the overall business strategy. Our cross-functional ESG steering groups (e.g. our Plastics, Ethical Sourcing and Nutrition groups) report into the Committee and are responsible for implementing the strategy and meeting KPIs. Further reflecting the increasing importance of sustainability in its fullest sense across the business and all of its brands, in May 2021, Hannah Collyer was promoted to the newly created role of Director of Corporate Affairs and ESG, sitting on our ELT. Day-to-day, we have a range of cross-functional colleague networks that are critical to delivering positive change across the business and enabling us to meet our KPIs. For instance, our Green Matters Champions who focus on reducing our use of resources at our factories, our Charity Champions who coordinate fundraising and local community engagement, and our Inclusion and Diversity Ambassadors who promote a culture of inclusivity throughout the business. We passionately believe that everyone in the business has a part to play in delivering success against our ESG strategy. The next pages (see pages 18 to 33) will cover the work our teams delivered this year in each of our five pillars: Encourage Healthier Choices, Realise People’s Potential, Support our Communities, Drive Ethical Sourcing and Reduce our Environmental Footprint. We’re proud of the progress we’ve made since launching our five-pillar ESG strategy five years ago: How we are a responsible business94% of our total packaging recyclable Over 30 innovative better-for-you products30415 Premier foods AR2021 Strategic.indd 1630415 Premier foods AR2021 Strategic.indd 1626-May-21 2:36:23 PM26-May-21 2:36:23 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk17→ See pages 00-00 to read more about our governanceMore than £800,000raised for our charity partners42.7% decrease in CO2 emissions (against our 2008 baseline) 100% cage-free eggs100% RSPO certified palm oil211 apprentices and 81 graduates trained59% reduction in water usage (compared to our 2007 baseline)30415 Premier foods AR2021 Strategic.indd 1730415 Premier foods AR2021 Strategic.indd 1726-May-21 2:36:24 PM26-May-21 2:36:24 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202118 For more information, please visit: sustainabledevelopment.un.orgHow we are a responsible businessOur 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).• Use Sedex risk assessment tools to identify suppliers operating in high-risk environments.• Drive even higher levels of Health and Safety standards across co-manufacturers, logistics sites and 'onsite' suppliers.• Maintain high food safety levels and compliance at all of our sites.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 monitor, report and reduce our food waste as part of our commitment to Courtauld 2025.• Increase food waste redistribution to over 750 tonnes per annum by 2020.PackagingBuilding on our UK Plastics Pact commitments, we aim to embed environmentally sustainable packaging across our portfolio, engage with our supply chain to explore more sustainable solutions for our packaging innovation and educate consumers and customers by providing clarity on disposal options to foster a circular economy for plastics:• 100% of our plastic packaging to be recyclable, reusable or compostable by 2025 and continue eliminating problematic plastic.• Increase the use of recycled plastic content and help create a market-pull for recycled polymers.• Clearly and transparently label our products, in compliance with OPRL (On Pack Recycling Labelling) guidelines.Support ourcommunitiessourcingenvironmental footprintEncourageDrive ethicalReduce ourhealthier choicesWorking towards the UN SDGsAdopted 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.Our ESG strategy identifies which of the UN Sustainable Development Goals (UN SDGs) we can have an impact on: 30415 Premier foods AR2021 Strategic.indd 1830415 Premier foods AR2021 Strategic.indd 1826-May-21 2:36:25 PM26-May-21 2:36:25 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk19Our KPIs:Extend our range of healthier choices:• 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.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.Inclusion & Diversity (I&D):• Monitor and report on I&D to understand and remove potential blocks.• Deliver face-to-face training and ongoing support to all leaders within our business.• Provide awareness training to all colleagues by the end of 2023.Caring for our people:• Embed a culture of risk prevention at all sites with our ‘Be Safe’ and Total Observation Process (TOP) health and safety programmes.• Deliver annual Health and Well-being 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 the end of 2022.Our KPIs:• Support and raise £200,000 over two years for our charity partner Together For Short Lives.• Maintain gold level supporter status with GroceryAid.• Encourage and support our network of Charity Champions.Support ourcommunitiessourcingEncouragepotentialDrive ethicalhealthier choicesRealise people’sEnhance 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). 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 2021.30415 Premier foods AR2021 Strategic.indd 1930415 Premier foods AR2021 Strategic.indd 1926-May-21 2:36:26 PM26-May-21 2:36:26 PM 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.
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, and we believe
it is important to empower them with
knowledge and a variety of healthier options.
Extend our range of
healthier choices
We innovate to offer alternative better-
for-you and healthier options to our
consumers' cupboard favourites.
Over the past year, we have launched two
new products in two core ranges which
did not already have a better-for-you (BFY)
option. This means that 84% of our core
ranges offer at least one better-for-you
alternative to our consumers, which puts
us well on track to achieve our 2025 target
of 100%.
In total, we have launched 17 new BFY
options this year, including 15 across ranges
which already offered a better-for-you
alternative, such as Mr Kipling 30% sugar
reduced Viennese Whirls, Bisto Cheese
Sauce 25% salt reduced, Sharwood’s Butter
Chicken 30% fat reduced and three variants
of Sharwood’s stir fry sauces 30% sugar
reduced. We have therefore increased our
number of BFY options by 29% this year.
Did you know? 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.
These nutrition claims are carefully
regulated: consumers can therefore be
confident that by choosing better-for-
you options, the products are not only
healthier than the original variant, but
also healthier than similar alternatives
available on the market.
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. This year, we have introduced the
Batchelors “Filled with Goodness” protein
soup range, and Sharwood’s vegetable side
dishes delivering 1 of your 5 a Day.
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
products across all our categories, including
by reducing the sugar or salt content.
We continue to reformulate many of our
products to lower their sugar content
and have removed 1,102 tonnes of sugar
(compared to our 2015 baseline). For
example, in the last four years, we have
carried out stealth sugar reduction of
between four and 10%, across 14 of our
most popular products across our Sweet
Treats business without compromising on
quality and taste.
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
which are all meeting PHE’s 2017 salt
targets for their respective categories.
Following the publication of the new 2024
salt targets last September, we have now
assessed all our categories and products
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30415 26 May 2021 2:24 pm V6to understand what further salt reduction is required. We have updated our internal Nutrition Guidelines according to the new targets, which will be reflected in our innovation pipelines as we continue to take salt out of our recipes.Educate our customers and colleagues on their nutrition choicesWe champion transparent nutrition labelling so that consumers can make informed choices about the products they buy. 95% of our UK portfolio carries all five key pieces of nutrition data of the voluntary front-of-pack traffic light labelling – 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). We continue to work with other stakeholders on collaborative action to drive healthier diets and partner with our customers to promote and highlight our healthier alternatives to nudge our consumers towards those options and encourage behaviour change. This year, we have joined the Consumer Goods Forum’s 100% of our portfolio carries Front-of-Pack traffic light labelling, with 5% only displaying energy symbol17 new better-for-you options this year84% of our core ranges have a better-for-you option1,102 tonnesof sugar removed (against 2015 baseline)A healthier version of your favourite takeawayLast year, 54% of UK consumers surveyed for our Kitchen Cooking Index (see pages 10 and 11) have tried their hand at a ‘fakeaway’, recreating the eating out dining experience from their own kitchens. With our Sharwood’s curry sauces, our consumers can enjoy the taste of Indian flavours with a healthier recipe than those from restaurants. Indeed, our research has found that a home-made curry using our reduced fat Sharwood’s curry sauce has a significantly better nutritional profile than an equivalent takeaway curry. The saturated fat content in a takeaway option is on average three times higher than our Sharwood’s better-for-you 30% reduced fat Korma sauce, and it contains on average 60% more calories. This year, we have added the 30% reduced fat butter chicken cooking sauce to our portfolio of better-for-you Sharwood’s sauces – helping our consumers in search of flavour, variety and healthier options! Collaboration for Healthier Lives UK and look forward to playing a meaningful role within this forum which brings together manufacturers and retailers alongside key local stakeholders (including public health authorities, academics, local actors and government figures) to drive change and positively impact consumer health. Collectively, the forum aims to develop a series of structural and behavioural interventions – both in-store and through digital channels – to help our consumers and employees understand, find and choose healthier options. To encourage our colleagues to make healthier choices, we continue to work with IGD on the Eat Wise, Work Wise programme which we joined in 2019. This programme aims to enhance healthy eating in the workplace by inspiring changes in personal diets. Last year, we had assessed all our sites and planned for the roll-out of healthier menus across all our sites with on-site canteens. This unfortunately had to be postponed due to the pandemic, but we will endeavour to do so by end of 2021. STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk2130415 Premier foods AR2021 Strategic.indd 2130415 Premier foods AR2021 Strategic.indd 2126-May-21 2:36:30 PM26-May-21 2:36:30 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202122Our mission is to create a winning organisation where our colleagues can thrive. We do this through nurturing and developing talent, promoting an inclusive workplace and supporting physical and mental well-being. Realise people's potential Developing skillsWhen 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.To support our colleagues working from home during the pandemic, we intensified our digital learning opportunities and continued to invest in self-led learning tools, including LinkedIn Learning for all IT-enabled colleagues. Our colleagues have watched over 42,000 training videos to date, the equivalent of 2,109 hours of learning or 281 working days.We are proud to work with the Institute for Grocery and Distribution (IGD) to promote our industry at a national level and the breadth of career opportunities available. This year we’ve supported their Virtual Work Experience Week programmes with more than 20 colleagues participating – reaching more than 1,000 students. Attracting talents and developing skillsApprentices and graduatesOur long-running apprentice and graduate programmes provide fantastic career development and simultaneously help us attract new talent and upskill existing colleagues. These programmes also play a critically important role in addressing the skills gap faced by our industry both now and in the future, particularly in Science, Technology, Engineering and Mathematics (STEM) based roles. In a year that has brought unprecedented disruption to our ways of working, we are proud to have not only continued to support colleagues on existing apprentice and graduate programmes, but also to have welcomed many more into the business whilst expanding our programme offering. At any given time, around 90 colleagues are on our apprenticeship programmes, of which around 25% will be new recruits. This year has been no exception, with an additional 37 colleagues embarking on an apprenticeship with us, of whom 25 were new joiners, and 12 were existing colleagues looking to develop their career.As well as continuing to offer apprenticeships across a wide range of business functions and roles - including in Food Operations, Laboratory Science, Packaging Technology, L&D, HR, Sales and Business Administration – in January of this year we launched programmes within R&D and IT for the first time.Reflecting the positive experience of our apprentices, in 2020 we retained our position within Rate My Apprenticeship’s top 100 apprentice employers list for a fourth consecutive year.We are proud to have maintained our graduate programme this year and re-created the atmosphere of our graduate selection centre in a digital environment. We then welcomed 15 new graduates who have successfully started their first rotation remotely in September.30415 Premier foods AR2021 Strategic.indd 2230415 Premier foods AR2021 Strategic.indd 2226-May-21 2:36:31 PM26-May-21 2:36:31 PM 30415 26 May 2021 2:24 pm V6Premier Foods plcwww.premierfoods.co.ukLearning at Work WeekThis year, we actively supported Learning at Work Week, a national campaign that celebrates lifelong learning at work and promotes the development of learning cultures. Using the word ‘Learn’ as a mnemonic device, we developed a programme for our colleagues focused around five key areas – LinkedIn learning, Educational, Aspiration, Resilience and New techniques – and dedicated a day of the working week to each. Throughout the week we saw a notable uplift of 61% in traffic to our e-learning platforms. Our efforts were recognised by the Open University Business School, who awarded us a Commended status.550 leaders and managers trained on unconscious bias and inclusive leadership as part of our I&D programme15 new graduates joined in September 4th year running in top 100 apprenticeship employer0.02 RIDDOR rate, 26 times better than the industry average93colleagues certified Mental Health First Aiders23STRATEGIC REPORTJoining a company through mainly virtual means was certainly daunting, however, all those involved in the onboarding process ensured that everything ran really smoothly, and we were still able to gain great exposure to multiple areas of the business during our induction process. I am currently working within the Corporate Services Procurement team and have felt extremely welcomed by everyone from the start. Being part of the Graduate scheme has allowed me to have a great balance of learning and development alongside the opportunity and responsibility to progress within my own role, whilst showcasing these new skills. I am really enjoying the scheme so far and I can't wait to see what my future career at Premier Foods will entail." Lydia McCarthyProcurement Associate30415 Premier foods AR2021 Strategic.indd 2330415 Premier foods AR2021 Strategic.indd 2326-May-21 2:36:32 PM26-May-21 2:36:32 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202124Inclusion and Diversity (I&D):We are committed to creating an inclusive culture across our whole organisation, where everyone is welcome and able to thrive. We aim to ensure all existing and potential colleagues are provided with equal opportunity and are respected, valued and encouraged to bring their true authentic selves to work. This year we’ve taken significant strides to fulfil our commitment to Inclusion and Diversity (I&D), focusing on four key areas: leadership, education, recruitment and talent management, and data:Gender pay gap (hourly) Gender pay gap (bonus) MeanMean8%38%2019: 6%2019: 25%Leadership: Our ELT is a passionate sponsor of our I&D agenda, and this year we appointed a Director of Talent and Culture, as well as a Culture and Engagement Business Partner to provide increased focus and accelerate our progress. We have delivered a programme focused on Unconscious Bias and Inclusive Leadership to over 550 leaders and managers, a first key step to creating the right environment for all colleagues. Next, we plan to roll the training out to all site-based colleagues by 2023. We have also introduced a Reverse Mentoring Programme where senior managers are paired up with a more junior colleague of the opposite sex who fulfils the role of mentor. The programme encourages sponsorship and helps to address the gender imbalance within senior roles across the business.Education: We launched #oktobeme, a programme dedicated to encouraging colleagues to bring their true, authentic selves to work, supported by a network of I&D Ambassadors from across the business who will help to embed a culture of inclusivity. Colleagues celebrated International Men’s Day, International Women’s Week, Black History Month, Pride and TransDay of Visibility with inspiring guest speakers.Recruitment: After identifying, through data analysis, that the attraction and recruitment stages are key to driving improvements in organisational diversity, we introduced a new software, 'Job Analyser' which assesses our use of language within job adverts and ensures language is not gender biased. Data: To drive our I&D agenda forward, and understand the gaps which need acting on, we ran our first voluntary Diversity Data Capture Survey. With a pleasing 52% response rate, the survey will help us understand our diversity landscape enabling us to build bespoke programmes and make better-informed decisions. Evolution of gender split 2020/21%2019/20%2019/18%Total4,4744,1514,110Female1,64336.721,50436.231,49136.28Male2,83163.282,64763.772,61963.72Graded 559564532Female24343.4723241.1321340.04Male31656.5333258.8731959.9630415 Premier foods AR2021 Strategic.indd 2430415 Premier foods AR2021 Strategic.indd 2426-May-21 2:36:33 PM26-May-21 2:36:33 PM STRATEGIC REPORT
Providing extra
support to our
colleagues during
Covid-19
Considering the pandemic and
its impact on societal well-being,
this year we took the decision
to provide additional resources
to help our colleagues look after
their mental health. As well as
benefitting from continued free
access to our Employee Assistance
Programme (Lifeworks), and from
industry charity GroceryAid, we
created dedicated pages on our
intranet and employee benefits
platform to signpost colleagues to
mental health support tools. We
also made GP appointments easier
to access by enabling colleagues
to book virtual check-ins via the
Aviva GP and Well-being apps.
During Mental Health Week,
we organised several events,
including a lunch session entitled
‘It’s ok not to be ok’, designed to
encourage colleagues to ask for
help and speak to their family,
friends or colleagues if they felt
overwhelmed. The week also
included a virtual session with
professional rugby players Danny
Sculthorpe and Phil Vievers,
encouraging everyone to lift the
taboo on men’s mental health and
seek help if needed, with around
300 colleagues attending this
virtual event.
Caring for our People
In a year that has brought unprecedented
challenges to everyone, the safety and
well-being of our colleagues has never
been more important (see our response to
Covid-19, page 9).
Health & Safety (H&S)
The health and safety of our colleagues,
contractors and visitors is of paramount
importance to us, and was taken extremely
seriously with the challenges faced in 2020.
Our Be Safe programme, which encourages
colleagues to identify and discuss both safe
and unsafe actions within their workplace,
has progressed along with Social Distancing
audits, ensuring our high standards
are maintained. In the last 12 months,
colleagues have identified a total of 6,747
Safe Acts and 3,522 Unsafe Acts (4,487 Safe
Acts and 2,824 Unsafe Acts last year). 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
any incident occurs. In the last 12 months,
3,031 potential risks (4,236 last year) were
identified, and actions taken to address
these across the business.
Our sites also progressed towards achieving
ISO 45001 certification (except two sites
where audits were delayed to later in
2021).
The Board reviews health and safety
performance at every scheduled Board
meeting, which includes 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. The
latter covers accidents resulting in serious
injury, over seven days absence from work
and dangerous occurrences. The average
RIDDOR rate for the UK food manufacturing
industry is 0.52 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 0.02, approx. 26 times
better than the industry average.
LTA
2020/21
2019/20
2018/19
2017/18
2016/17
2015/16
* LTA rates include our Knighton site from 2019/20
RIDDOR
Premier Foods
All UK
Manufacture
UK Manufacture
of food
0.1
0.19
0.1
0.13
0.11
0.16
0.02
0.22
0.52
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. Building on the results of our
2019 Health Needs Assessment, and the
areas our colleagues told us they would
welcome support with, this year we’ve
focused our Health and Well-being plans on
health checks, healthy eating and weight
management, and mental health.
As signatories of the Time to Change Pledge
since 2019, we’ve taken significant steps to
improve how we support our colleagues’
mental health. This year, all colleagues
have been given access to one of our 93
colleagues who are certified Mental Health
First Aiders (MHFAs), and over two thirds of
our Line Managers have completed Mental
Health Awareness Training (350 out of 495).
We had aimed for all Line Managers to
have undergone this training, but Covid-19
restrictions at our factories meant delays
have been inevitable. We are now working
to complete the roll-out and will extend
training to all colleagues by April 2022.
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25
30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202126Supporting 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. This year, we have provided additional support to those who need it most in our communities. Support our communitiesOur network of charity champions Our charity champions are the driving force behind our charity partnerships and community engagement. Each partnered with one of our graduates for the year, they receive additional support to coordinate fundraising activities. We host virtual meetings each month to bring our champions and graduates together in collaborative forums to share updates, hear best practice and debate creative ideas. Once a year we host a full day of immersive training, inspiration and thanks for this group. Our Charity Champions Day was this year hosted virtually for the first time with key representatives from Together for Short Lives. Hearing directly from a partner Children’s Hospice, the team learnt about the impact of the pandemic on hospice fundraising but also the positive difference our support makes. £70,000 for Together for Short LivesOur Corporate Charity partner: Together for Short LivesWith so many traditional approaches to fundraising unavailable to us this year due to the pandemic, our charity champions have had to work especially hard to support this new partnership and motivate colleagues to fundraise in innovative ways. That’s why we’re incredibly proud to have raised a fantastic £70,000 to support Together for Short Lives during these uncertain times, which can fund over 800 community care sessions for children, giving families precious moments together and allowing parents the rare opportunity to just be mum and dad.Our dedicated charity champions achieved this through a myriad of new fundraising initiatives including virtual quizzes, step challenges, online raffles and plant growing competitions. In addition, the business took the decision to donate £1,000 to each of the 15 Children’s Hospices our sites are partnered with, committed to match-fund key fundraising drives, and donated £1 to the partnership for every colleague survey completed.Supporting our industry with GroceryAidOur longstanding partnership with industry charity GroceryAid has proved more important than ever this year: with a 12% increase in colleagues helped, the charity is working hard to provide additional emotional, practical and financial support to industry colleagues in light of the pandemic. We continue to have colleague representation on both its President and Southern Network Committees, providing a great platform from which we can effectively drive awareness of the charity and support services it offers among our own colleagues, and fundraise on its behalf. For example, this year our charity champions organised several virtual fundraising events focused around health and well-being, including Yoga, Pilates and HIIT classes, plus a 5K running challenge. In recognition of our continued momentum in supporting GroceryAid, we are proud to have been awarded top, gold level supporter status for the third year running.30415 Premier foods AR2021 Strategic.indd 2630415 Premier foods AR2021 Strategic.indd 2626-May-21 2:36:34 PM26-May-21 2:36:34 PM 30415 26 May 2021 2:24 pm V6Premier Foods plcwww.premierfoods.co.uk We have been blown away by the energy and enthusiasm shown by all Premier Foods staff to get behind our partnership and make a difference to the lives of seriously ill children and their families across the UK. We are so grateful for every employee that has contributed to the extraordinary fundraising that has taken place across this challenging year, as well as the kind delivery of vital food packages during the pandemic to our hospices. Thank you so much. Your support means that we can be there for seriously ill children and their families, so that they can make the most of every moment together.” Lucy Crisp Head of Corporate Partnerships, Together for Short LivesGoing the extra mile to support our communities in the pandemicOne of our three guiding principles during the pandemic (see our response to Covid-19, page 9) was to play our part in providing food to the nation, including those most vulnerable, during this time of difficulty.• We participated in the Government’s vulnerable food parcels scheme.• We supported 28 hospitals local to our sites by providing more than 200,000 easy to prepare meals and snacks for our incredible NHS workers, with our colleagues at Nissin kindly offering 30,000 pots of noodles. • We’ve strengthened our partnership with FareShare, donating the equivalent of 550,000 meals to their network of food banks around the country.In addition, our amazing colleagues up and down the country came up with great ideas to support their local communities including creating PPE and visors for their local NHS, sourcing out of stock items to make sure those relying on them would not go without, or hand sewing protective masks and tote bags for local nurses. Well done all!2735 Charity Champions550,000 meals donated to FareShare UK3rd year running Gold level supporter GroceryAidSTRATEGIC REPORT30415 Premier foods AR2021 Strategic.indd 2730415 Premier foods AR2021 Strategic.indd 2726-May-21 2:36:35 PM26-May-21 2:36:35 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202128We 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 with a range of ingredients and finished goods. We therefore have processes and policies in place to embed and promote ethical and sustainable sourcing.Drive ethical sourcingThis work was recognised with our BBFAW score improving this year and retaining our Tier 2 ranking providing all our stakeholders with the independent verification and confidence in our commitments and practices.Drive high ethical and compliance standards across the supply chainWe 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. We use the Sedex platform and assessment tools to help us analyse and manage risk in our supply chains and to develop a supplier risk-based compliance audit programme, Drive sustainable raw materialWe work with around 1,280 active suppliers and our aim is to develop long-term, sustainable partnerships which deliver mutual benefits. 85% of our total third party spend is with UK-based suppliers. Our top 500 suppliers account for 98% of our total spend on the goods and services that we purchase.Responsible soyWe continue to support and promote the production of sustainable soy through our Round Table on Responsible Soy (RTRS) membership, through which we play our role in promoting zero deforestation and respecting the rights, customs, and culture of different communities and indigenous populations around the globe. Our goal is to ensure that 100% of the soya we buy, both directly and indirectly, meets RTRS standards by 2025. This year, as a first step, we have ensured that 100% of the small amount of soya we buy directly as an ingredient meets RTRS standards. We have also used the Soy Footprint calculator to help drive greater understanding and transparency of soy embedded in our indirect purchases and found that the vast majority is being used within animal feed.Animal welfareWe continuously advocate for greater awareness of animal welfare issues across our supply chain, and regularly engage with our suppliers to understand their practices and challenges. We seek to improve the lives of farm animals by increasing the visibility and extending the development of good animal welfare practices across our whole supply chain, including within our primary producers and indirect users of animal-derived ingredients. Whilst we were delighted to see this work recognised through a Tier 2 ranking by BBFAW in 2019, we continually seek to improve and so have set ourselves stretching intermediary goals to reach in 2023, and have included animal welfare goals in our Joint Business Plans with suppliers. We have also extended our work to reach the most difficult parts of our supply chain and rolled out our annual animal welfare survey to both our indirect and embedded animal product suppliers, to understand their practices and challenges. 30415 Premier foods AR2021 Strategic.indd 2830415 Premier foods AR2021 Strategic.indd 2826-May-21 2:36:37 PM26-May-21 2:36:37 PM 30415 26 May 2021 2:24 pm V6Responsible palm oilDid you know? Palm oil is an extremely versatile oil that has many different properties and functions. It is also an incredibly efficient crop, producing more oil per land area than any other equivalent vegetable oil crop. To get the same amount of alternative oils like soybean or coconut oil would require anything between four and 10 times more land, which would shift the deforestation problem to other parts of the world and threaten other habitats and species1. This is why we are committed to sourcing only sustainable, Roundtable on Sustainable Palm Oil (RSPO) certified palm oil which protects the environment and the local communities who depend on it for their livelihoods, so that palm oil can continue to play a key role in food security. 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. We are delighted to have maintained 100% RSPO (Roundtable on Sustainable Palm Oil) certified palm oil throughout the year. License number: 4-0019-06-100-00. Check our progress at https://rspo.org/members/103/Premier-Foods- Group-Limited1 Source '8 things to know about palm oil', WWF, available at: https://www.wwf.org.uk/updates/8-things-know-about-palm-oil.STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk29which drives greater transparency across our supply chains. By the end of the financial year, 88% of our direct suppliers were registered with Sedex, which represents 98% of all annual spend with direct suppliers.All supplier food safety audits include ethical standards and labour practices, and where concerns are identified, we will carry out a SMETA audit, one of the tools of SEDEX. The SMETA audits enable us to assess the suppliers based on their organisation’s standards of labour, health and safety, environment, and business ethics. 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. Due to the unprecedented current situation caused by Covid-19, our auditing plans have been disrupted and we were not able to travel to audit supplier premises. Whilst many of our standard food safety audits have now been completed remotely, we have only been able to complete two out of the four planned SMETA social audits across high-risk suppliers and are hoping to complete the remaining two in the 2021/22 financial year, once restrictions are lifted.Modern Day slaveryWe are committed to tackling all forms of hidden labour exploitation, including slavery and human trafficking and we have ensured that all new members of the Procurement team receive specific training on Modern Day slavery and trafficking as part of their induction. The training utilises both internal and external training resource materials and is tailored to raise awareness of the issues around Modern Day slavery in supply chains and to empower team members to recognise and respond to indicators of human rights abuse within the supply chain. 100% RSPO certified palm oil100% RTRS certified soya (direct purchase)Tier 2 rank in Business Benchmark on Farm Animal Welfare 30415 Premier foods AR2021 Strategic.indd 2930415 Premier foods AR2021 Strategic.indd 2926-May-21 2:36:37 PM26-May-21 2:36:37 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202130Health and Safety (H&S) standardsWe take a risk-based approach to assessing and managing health and safety and work closely with our co-manufacturers in order to drive greater standards across our supply chain. This year, we had set a target to conduct eight detailed H&S compliance audits across co-manufacturers and onsite suppliers and to put in place targeted improvement plans if required. Unfortunately, due to Covid-19 restrictions, we have not been able to gain access to relevant vendors, so were unable to complete this task. We will continue to review restrictions linked to Covid-19 and understand when the audits can be rescheduled. Food safety excellenceThe safety and quality of our products is of paramount importance to us. Our internal technical quality compliance team focuses on controls across all of our manufacturing sites to ensure standards are maintained, supporting a range of initiatives, and driving continuous improvement and quality programmes. We operate a Food Safety and Quality Management System based around the British Retail Consortium (BRC) Global Food Standard version 8, with all sites (excluding Charnwood Foods) audited by an independent accreditation body to this standard. This year, adapting to the Covid-19 restrictions, BRC allowed greater flexibility in the audit processes – previously always unannounced, the audits were either unannounced, announced, or the sites saw their certification extended. Our current audit BRC status is rated at B or above, with 88% achieving A, AA, A+ or AA+ ratings.88% of all direct suppliers were registered with ethical database Sedex which represents 98% of total spend88% of our sites achieve a A, AA, A+ or AA+ on BRC global food standard 30415 Premier foods AR2021 Strategic.indd 3030415 Premier foods AR2021 Strategic.indd 3026-May-21 2:36:40 PM26-May-21 2:36:40 PM STRATEGIC REPORT
Reduce our
environmental
footprint
We are signatories and active members of the FDF 2025
Ambition, the Courtauld 2025 Commitment, Champions
12.3 and WRAP’s UK Plastics Pact. Through our industry
commitments, which go beyond legislation, we strive
to limit our impact on the planet by reducing our CO2
emissions and water usage, by tackling food waste in our
operations and by fostering a circular economy for plastic
packaging. We partner with community groups and
NGOs, such as The Westcountry Rivers Trust, Company
Shop Group and FareShare UK, to deliver a programme
of forward-thinking initiatives that deliver meaningful
results. With unprecedented levels of production in the
last year, we continued to improve our environmental
performance across several key metrics.
Climate action
Energy efficiency and
CO2 emissions
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 by 18.8% to 677.5 kWh per tonne
of product, down from 832 kWh the year
before. All of our manufacturing sites are
accredited to ISO 14001 Environmental
Management Systems, except Knighton
Foods which is working towards the
accreditation for next year.
We have continued to reduce our CO2
emissions, which this year decreased by a
further 5.8%. This equates to a collective
42.7% reduction against our baseline
figure of 103,102 tonnes of CO2 (taken as
year ended 31 December 2008, when we
first started to collect emissions data on
a like-for-like basis, and adjusted for site
disposals). Furthermore, we have ensured
that all our sites (but Knighton Foods)
are powered by green energy and have
purchased Renewable Energy Guarantees of
Origin (REGO) certificates to provide us with
the transparency and certainty of the origin
of the electricity supply reaching our sites.
This means that our CO2 emissions have
in effect decreased by 61.5% against our
2008 baseline, surpassing our 55% absolute
reduction by 2025 target four years early!
(see our GHG disclosure on page 85).
Water stress and biodiversity
Having exceeded the 25% industry-wide
water reduction target in 2020, we continue
to work towards further reductions across
our operations and have now achieved an
impressive 59% reduction compared to our
2007 baseline.
Alongside this, we actively support the
Courtauld 2025 Water Ambition and
continue to play our part to improve the
quality and availability of water in key
areas of the UK where our ingredients
are sourced. We work in partnership with
the Tamar Water Stewardship Business
Board, joining forces with other local
organisations and 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. This
collaborative project was recognised by the
Institute of Environmental Management
and Assessment (IEMA), the largest
professional body for environmental
practitioners, and shortlisted in the
‘Consultancy and Collaboration’ and
‘Biodiversity Net Gain’ categories of the
2020 IEMA Sustainability Impact Awards.
Food waste
We are committed to further monitoring,
reporting and reducing our food surplus,
moving it higher up the food waste
hierarchy, towards elimination and
redistribution. We are an active member
of WRAP, and founder signatories of the
IGD Target, Measure, Act and Champions
12.3 initiatives, both of which mandate
transparent disclosure of food waste.
We are proud of our eight-year record of
sending zero food waste to landfill.
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In the 2020 calendar year, we produced
nearly 400,000 tonnes of food, an increase
of around 63,000 tonnes compared
with 2019 on account of unprecedented
levels of consumer demand during the
Covid-19 pandemic. Our food waste for
2020 was 7,778 tonnes, equating to 1.99%
of the total food we produced, an 11.2%
reduction from last year. We continued
in our efforts to redistribute our surplus
stock back up the human food chain, and
by strengthening our partnerships with
Company Shop Group and FareShare UK to
support their mission of tackling food waste
and food poverty, we redistributed 1,380
tonnes of products. This is three times
more than the previous year, far exceeding
our 750 tonnes redistribution target.
We have also been actively
involved in shaping the
behaviours needed to tackle
food waste across the supply
chain. Firstly, we became part of
the first cohort of the Luminary Programme
established by Company Shop Group.
Our Group Environmental Manager has
volunteered to become one of the mentors
to this DEFRA-funded programme which
combines a mixture of toolkits, activities
and support to equip participants with the
skills, network and confidence they need to
be the driving force for change within their
own organisation and throughout the supply
chain.
Secondly, we were delighted to become
a strategic partner of WRAP’s first ever
Food Waste Action Week, aimed at raising
awareness of the contribution of food
waste within homes to climate change.
With 70% of food waste happening at
home, we used the power of our brands
to help consumers reduce food waste
and shared a range of easy ‘no brainer’
leftover recipes using products from our
wide portfolio. Our regulatory teams also
worked collaboratively with WRAP to
develop guidance for other businesses on
redistributing surplus stock past their Best
Before Dates.
Furthermore, last
March, we decided
to increase our
support to FareShare
in order to reach more communities
throughout the country, via their network
of 25 depots liaising with over 12,000
charities (including food banks and
community centres). Since then, we have
redistributed more than 240 tonnes of
products, which make up the equivalent
of more than 550,000 meals. As part
of our support to Food Waste Action
Week in March, we also encouraged our
manufacturing sites colleagues to donate
products to support FareShare. In just a few
days, our colleagues managed to collect
26 pallets of food (over 10 tonnes) and
donated a mix of ambient surplus products
and products that our colleagues had
provided from their own cupboards.
As more than two million tonnes of
good-to-eat surplus food goes to waste
each year whilst more than eight million
people nationwide struggle to afford
to eat, FareShare continues to work
tirelessly to tackle both issues and
connect this food with the communities
who need it most.
We thank Premier Foods for their
commitment in helping us to make this
happen through surplus ambient food
provision and especially their recent
support during Food Waste Action Week.
The Covid-19 pandemic means there
is more pressure than ever to do the
right thing with surplus food and ensure
it feeds people first. With the brilliant
and continued support of partners such
as Premier Foods we are closer to our
mission of ensuring no good food goes to
waste.”
Lindsay Boswell,
CEO, FareShare UK
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. For example, 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
32
Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
(PEFC) certified sources. In total, 94% of
our packaging, by weight, is recyclable
(On Pack Recycling Label (OPRL) scheme
guidelines).
Packaging split by material
Paper
Glass
Metal
Plas�c
34%
92%
44%
100%
10%
100%
12%
70%
% total weight
Recyclable
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 by weight. We support
a vision for a circular plastics economy,
where plastic is valued and kept in the
economy, but out of the environment. As
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30415 26 May 2021 2:24 pm V6 Net CO2 reduction of 61.5% against our 2008 baseline after purchasing REGO certificates5.8% reduction this year in CO2 emissions - a 42.7% reduction against our 2008 baseline 1,380 tonnesof products redistributed, three times more than last yearPremier Foods plcwww.premierfoods.co.uk33STRATEGIC REPORT94% of our packaging is recyclable 70% of our plastics packaging is recyclable Our flat pack slices, a true example of a circular economy for plasticsAs we work towards our UK Plastics Pact targets, we aim to simultaneously increase recyclability and recycled polymer content in our packaging to foster a circular economy for plastics. This year, we have moved our Mr Kipling, Cadbury and Plantastic flat pack slices from non-recyclable plastic (HIPS) to a recyclable plastic (RPET) which represents 250 tonnes of plastics. At the same time, we ensured that the new material was made of recycled polymer, with a minimum of 50% recycled content. Our flat pack slices are a real example of a circular economy – containing both recycled and recyclable plastics!such, we are a founding member of the UK Plastics Pact and are working with industry, retailers, packaging suppliers, NGOs, Government, local authorities, and waste management organisations to help transform the UK plastics packaging sector by 2025. This collaboration is key to create much-needed alignment across the value chain, and in turn ensure that any change we make to our packaging will be sustainable. As we progress on our journey to 100% recyclability, we have many projects looking at removing materials which are hard to recycle, such as black plastics, or materials which are not yet accepted by local authorities for recycling. We’re making good progress and have this year achieved 70% recyclability for our plastics packaging, up from 63% last year and 48% the previous year (based on sales data, figures adjusted to reflect the new OPRL scheme). We have for instance successfully removed 400 tonnes of problematic plastics by switching our Bisto Best caps and Soba pot noodles to a detectible plastic, which means they can now be collected, sorted and recycled by most local authorities in the UK. We have also eliminated PVC from our portfolio. For the most challenging materials, such as polystyrene or films and flexibles, we continue engaging with our partners and suppliers to find the right technical solutions which will balance the need to ensure food safety, preserve freshness and taste, prevent food waste, as well as be accepted by the existing UK recycling infrastructure. We also recognise that key to a circular economy is creating a market for more recycled content and helping consumers to physically recycle material which is recyclable. Overall, 18% of our plastic packaging across our portfolio now has recycled content to help create a market-pull for recycled polymers, whilst remaining in compliance with food safety standards. 100% of our UK packaging is compliant with OPRL guidelines to ensure that our consumers can easily understand how to dispose of our packaging, with 46% currently carrying the updated, simplified guidelines of ‘Recycle’ and ‘Don’t Recycle’.59% reduction in water usage compared to our 2007 baseline 11.2% decrease in food waste per tonne of product30415 Premier foods AR2021 Strategic.indd 3330415 Premier foods AR2021 Strategic.indd 3326-May-21 2:36:50 PM26-May-21 2:36:50 PM Key performance indicators (KPIs)
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.
Revenue (52 week basis)1
Trading profit1
Net debt to adjusted
EBITDA ratio1
Free cash flow
Branded market share2
SG&A as a %
of Group revenue
% of products testing
superior or at par
with competitors
By 2025, every core
range to include at least one
better-for-you option3
Year-on-year growth in revenue
Trading profit is defined in the
Operating and financial review
on page 45.
The ratio measures the Group’s
overall level of debt. Net debt
(on a pre-IFRS 16 basis) and
adjusted EBITDA are defined
in the Operating and financial
review on page 45.
Free cash flow is defined in the
Operating and financial review
on page 45.
This is our branded retail sales
SG&A represents the selling,
Consumer panel blind testing
A better-for-you option is a
expressed as a percentage of
general and administration
of our major branded products
claimable nutritional benefit
the retail sales of the categories
costs of the central functions
against their main competitor,
such as reduced/no added
across the business.
whether branded or non-
sugar, reduced/no added salt or
branded.
wholegrain alternative.
+10.3%
+11.9%
0.8× Reduction +50.8%
2020/21
2019/20
2018/19
2017/18
2016/17
£934.2m
2020/21
£847.1m
2019/20
£824.3m
2018/19
£819.2m
2017/18
£790.4m
2016/17
£148.3m
2020/21
£132.6m
2019/20
£128.5m
2018/19
£123.0m
2017/18
£117.0m
2016/17
1.9
2.7
2020/21
2019/20
3.2
2018/19
3.6
3.9
2017/18
2016/17
£98.2m
£65.1m
£29.2m
£28.8m
£15.1m
+10.5%
in which we operate (based
on IRI data for the 52 weeks
ending 27 March 2021 and 52
weeks ending 28 March 2020).
+32bps
bps Grocery
-5.1%
2020/21
2019/20
2020/21
2019/20
+113bps
bps Sweet Treats
27.9%
27.6%
24.5%
23.4%
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 11.9% 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 £94.0m
from £408.1m in 2019/20 to
£314.1m in 2020/21 (on a
pre-IFRS 16 basis). As a result of
this deleveraging and adjusted
EBITDA growth, the ratio of
Net debt to adjusted EBITDA
reduced from 2.7x to 1.9x.
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
50.8% in 2020/21 to £98.2m.
Cash flow benefitted from the
increase in Trading profit, and
sale of the Group’s investment
in Hovis.
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
Revenue (on a 52 week basis)
increased by 10.3% in the
year to £934.2m. This growth
was driven by our branded
growth model of delivering
new product innovation
based on current consumer
trends, together with engaging
advertising and strategic
relationships with our retail
partners. The Group also
benefitted from increased
demand due to restrictions on
out of home eating during the
year.
Why is this important?
Why is this important?
Why is this important?
Why is this important?
Increasing market share
As part of our cost and
This is an important measure
As a business, we believe we
indicates consumer preference
efficiency strategy we intend to
of the quality of our product
have a responsibility to offer
for our products.
Progress we’ve made
Grocery market share
increased by +32 basis
maintain a lean organisational
portfolio. It drives recipe
structure, ensuring complexity
improvements and ensures
is kept to a minimum.
focus on consistent product
points, as a result of product
SG&A as a % of revenue has
Progress we’ve made
quality.
Progress we’ve made
innovation and increased
reduced slightly year-on-year
Our overall performance
marketing investment, as well
and reflects revenue growth
remains stable over the
and 21.
as an increase in at home
ahead of the cost base.
consumers better-for-you
options and this also aligns
with a key consumer trend
for healthier eating. Further
information on health and
nutrition is set out on pages 20
consumption during the period.
Sweet Treats also grew market
share in the year, benefitting
from increased sales of Mr
Kipling reduced sugar slices and
the expansion of its premium
Signature collection.
2.
The prior year comparatives have
been updated to reflect adjustments
made by IRI following the end of the
previous financial year.
financial period, reflecting
the consistent quality of
Progress we’ve made
Over the course of the period,
our branded products, with
we have launched 17 better-
continued focus in the year on
for-you products across our
the Group’s top-selling Grocery
portfolio, including Bisto, Mr
and Sweet Treat products to
Kipling and Sharwood's.
ensure that all test superior to
our competitors.
The review covered 61% of our
branded portfolio (by retail
sales value) as part of a four-
year rolling programme.
3.
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.
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STRATEGIC REPORT
Environmental and Health and Safety performance is reported in more detail in the section on 'How we are a responsible business' on
pages 16 to 33.
1.
Revenue and Trading profit are shown on a 52 week basis and Net debt is shown on a pre-IFRS 16 basis, to aid comparison with prior years. A definition and reconciliation of
non-GAAP measures to reported measures is set out on page 45.
Revenue (52 week basis)1
Trading profit1
Free cash flow
Branded market share2
Net debt to adjusted
EBITDA ratio1
Year-on-year growth in revenue
Trading profit is defined in the
The ratio measures the Group’s
Free cash flow is defined in the
Operating and financial review
overall level of debt. Net debt
Operating and financial review
on page 45.
(on a pre-IFRS 16 basis) and
on page 45.
adjusted EBITDA are defined
in the Operating and financial
review on page 45.
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 27 March 2021 and 52
weeks ending 28 March 2020).
SG&A as a %
of Group revenue
% of products testing
superior or at par
with competitors
By 2025, every core
range to include at least one
better-for-you option3
SG&A represents the selling,
general and administration
costs of the central functions
across the business.
Consumer panel blind testing
of our major branded products
against their main competitor,
whether branded or non-
branded.
A better-for-you option is a
claimable nutritional benefit
such as reduced/no added
sugar, reduced/no added salt or
wholegrain alternative.
+10.3%
+11.9%
0.8× Reduction +50.8%
Why is this important?
Why is this important?
Why is this important?
Why is this important?
Delivering revenue growth is
This measure reflects the
This ratio is the key metric used
Free cash flow is a measure
one of our strategic priorities.
revenues and costs associated
by the Group in measuring its
of the cash generated by the
This captures both branded
with the operational
debt level relative to the overall
Group to pay down debt. It is
and non-branded performance
performance of the business
performance of the business.
also a good indicator of the
across all channels we operate
and is also a good proxy for the
in.
Progress we’ve made
cash generative capacity of the
business.
Revenue (on a 52 week basis)
Progress we’ve made
Progress we’ve made
Net debt reduced by £94.0m
from £408.1m in 2019/20 to
£314.1m in 2020/21 (on a
underlying quality of earnings
and the overall health of the
business.
Progress we’ve made
increased by 10.3% in the
Trading profit increased
pre-IFRS 16 basis). As a result of
Free cash flow increased by
year to £934.2m. This growth
by 11.9% in the year. This
this deleveraging and adjusted
50.8% in 2020/21 to £98.2m.
improvement was driven by our
EBITDA growth, the ratio of
Cash flow benefitted from the
strong branded revenue growth
Net debt to adjusted EBITDA
increase in Trading profit, and
in both business segments.
reduced from 2.7x to 1.9x.
sale of the Group’s investment
in Hovis.
was driven by our branded
growth model of delivering
new product innovation
based on current consumer
trends, together with engaging
advertising and strategic
relationships with our retail
partners. The Group also
benefitted from increased
demand due to restrictions on
out of home eating during the
year.
+32bps
bps Grocery
-5.1%
2020/21
2019/20
+113bps
bps Sweet Treats
2020/21
2019/20
27.9%
2020/21
27.6%
2019/20
2018/19
2017/18
2016/17
24.5%
23.4%
7.5%
2020/21
7.9%
2019/20
8.2%
2018/19
7.9%
2017/18
8.8%
2016/17
+10.5%
96%
2020/21
96%
2019/20
95%
2018/19
86%
93 %
84%
74%
(Baseline)
58%
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 revenue growth
ahead of the cost base.
Why is this important?
Increasing market share
indicates consumer preference
for our products.
Progress we’ve made
Grocery market share
increased by +32 basis
points, as a result of product
innovation and increased
marketing investment, as well
as an increase in at home
consumption during the period.
Sweet Treats also grew market
share in the year, benefitting
from increased sales of Mr
Kipling reduced sugar slices and
the expansion of its premium
Signature collection.
2.
The prior year comparatives have
been updated to reflect adjustments
made by IRI following the end of the
previous financial year.
Why is this important?
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
remains stable over the
financial period, reflecting
the consistent 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 61% of our
branded portfolio (by retail
sales value) as part of a four-
year rolling programme.
As a business, we believe we
have a responsibility to offer
consumers better-for-you
options and this also aligns
with a key consumer trend
for healthier eating. Further
information on health and
nutrition is set out on pages 20
and 21.
Progress we’ve made
Over the course of the period,
we have launched 17 better-
for-you products across our
portfolio, including Bisto, Mr
Kipling and Sharwood's.
3.
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.
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35
Operating and financial review
Over the course of the financial year we have reduced our leverage to 1.9x adjusted
EBITDA, repaid £190m of our Floating Rate Notes, saving approximately £10m in
interest costs, and entered into a transformational new pensions agreement.”
Duncan Leggett
Chief Financial Officer
Revenue
£m
Grocery
- Branded
- Non-branded
Sweet Treats
- Branded
- Non-branded
Group
- Branded
- Non-branded
2020/21
53 week basis
702.6
609.3
93.3
244.4
203.2
41.2
947.0
812.5
134.5
Exclude:
Week 53
(9.2)
(7.6)
(1.6)
(3.6)
(3.3)
(0.3)
(12.8)
(10.9)
(1.9)
2020/21
52 week basis
693.4
601.7
91.7
240.8
199.9
40.9
934.2
801.6
132.6
2020/21 vs
2019/20
(52 week %
change)
+13.4%
+16.9%
(5.3%)
+2.2%
+4.7%
(8.4%)
+10.3%
+13.6%
(6.3%)
2019/20
611.6
514.7
96.9
235.5
190.9
44.6
847.1
705.6
141.5
Group revenue for the 53 weeks to 3 April 2021 was £947.0m, an
increase of £99.9m compared to the 52 weeks ended 28 March 2020.
On a 52 week basis, Group revenue increased by +10.3% to £934.2m;
Branded revenue grew by +13.6% while Non-branded revenue was
(6.3%) lower. In the fourth quarter, on a 13 week comparative basis,
Group revenue increase by +4.0% to £226.9m and branded revenues
increased by +7.0%. In the year, the Group’s branded mix advanced
by 250 basis points to 85.8% on a 52 week basis.
The Group saw a prolonged period of elevated demand for its
product ranges, as consumers were restricted to eating all meals at
home due to the closure of hospitality outlets for long periods. The
supply chain demonstrated its robustness through meeting these
volumes and in doing so, kept product availability high. This, together
with continued new product launches and brand investment,
resulted in 70 basis points of market share gain in the year. Overall,
the Group’s consumer base expanded this year, as a result of more
people cooking from home, experimenting with new recipes and
expanding their repertoire of meals.
Grocery
Grocery revenue for the 53 week financial year was £702.6m, of
which £609.3m was branded revenue and £93.3m Non-branded.
On a 52 week basis, Grocery revenue increased by 13.4% to
£693.4m, led by its branded portfolio which grew by 16.9% to
£601.7m. The fourth quarter saw revenues grow by 3.6% to
£172.4m with brands up by 6.8%. The grocery portfolio gained 32
basis points of value share in the year, growing faster than a market
which increased by 12.3%.
In 2020/21, the Group’s Grocery brands benefitted from the
Group’s innovation strategy and increasing consumer marketing
investment behind emotionally engaging advertising. A significant
driver of increased volumes in the year was due to consumers
eating more meals at home due to pandemic related restrictions
on eating out of home; consequently many of the major Grocery
brands grew in strong double-digit terms, with Bisto, Oxo,
Ambrosia, Sharwood’s, Homepride, Paxo and Nissin all stand out
performers. Additionally, the increase in cooking at home, with
consumers expanding their repertoire of meals has resulted in a
significant increase in household penetration of brands such as
Bisto, Oxo, Sharwood’s and Paxo, which all attracted approximately
a million or more new households buying their product ranges.
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STRATEGIC REPORT
New product development in the year was led by better for your
options such as Sharwood’s 30% less sugar cooking sauce pouches,
30% less fat Butter Chicken sauces and low-fat Naan breads. Oxo
launched meat free Beef flavoured stock cubes, suitable for a
vegan diet. The Group became the UK’s sole distributor for the high
quality Cape Herb and Spice range, which highlights the extension
of the Group into a new sub-category. Other new products brought
to market this year include Bisto Southern style gravy, which
provides consumers with the opportunity to replicate takeaways at
home following the fakeaway trend.
The Group’s five largest Grocery brands; Ambrosia, Batchelors,
Bisto, Sharwood’s and Oxo received an aggregate 58 weeks of
advertising on television during the year. Ambrosia and Sharwood’s
both benefitted from advertising for the first time in four and five
years respectively, each with new production copy designed to
build an emotional engagement with consumers.
The online market grew rapidly in H1 and broadly maintained this
elevated level through the second half of the year. The Group’s
categories have grown ahead of this, with sales increasing by
+104%, equating to a market share gain of 128 basis points. The
Group has been developing its online capabilities over the last three
years, increasing resource in this area to ensure maximum benefits
from the growth potential in this channel. This includes ensuring
the Group’s brands are promoted and displayed using pertinent
techniques for the online channel.
Looking ahead to 2021/22, the Grocery business will continue to
launch a number of new product ranges as part of its healthier
choices strategy. For example, it will be launching a Deliciously
Vegan range of Sharwood’s Indian cooking sauces and 30% less fat
Loyd Grossman lasagne sauces. Other new product ranges include
Oxo marinades and rubs, Bisto Creamy pepper sauce and Bird’s
convenient custard pots. The new Cape Herb and Spice range of
rubs, chilli tins and seasonings, as described above, will expand to
further distribution.
Additionally, the Group is planning to advertise all five of its largest
Grocery brands during the course of the next financial year.
Sweet Treats
Sweet Treats revenue was £244.4m in the 53 weeks to 3 April 2021;
branded revenue was £203.2m and Non-branded revenues £41.2m.
On a 52 week basis, Sweet Treats revenue increased by 2.2% to
£240.8m. Branded revenue saw growth of 4.7% in a declining
cake market, which reflected fewer celebration occasions, while
Non-branded revenue was 8.4% lower. The fourth quarter saw an
acceleration in revenue growth, as total revenue in Sweet Treats
increased by 5.4% on a 13 week comparable basis. Branded revenue
was the driver of this growth, as revenue grew by 7.7%; well ahead of
the wider cake market.
Market share of the Group’s cake brands grew by 113 basis points
in a market which declined by 2.3%, while Household penetration
increased by a very strong 193 basis points.
After a muted start to the year, when consumers and customers
focused heavily on staple items, both Mr Kipling and Cadbury cake
enjoyed a strong year of revenue growth. Mr Kipling, the Group’s
largest brand, reached revenue of £150m for the first time in its
history, benefitting from 25 weeks of TV advertising in the year,
increased sales of its reduced sugar slices ranges and expansion of its
premium Signature collection. Cadbury cake sales were supported by
the launch of Crunchie and Fudge cake bars, while the core Mini Rolls
delivered robust volumes through the year. The Group maintains
its longstanding relationship with Cadbury owner, Mondelēz
International; its licence for cake and ambient desserts is due to run
until 2025.
In the coming months, the Group will be investing in further TV
advertising for Mr Kipling, while 2021/22 sees the launch of Mr
Kipling Choc Tarts. Sweet Treats will also benefit from the full year
effect of new products launched in the prior year, such as the new
Cadbury Crunchie and Fudge cake bars and expanded Mr Kipling
Signature collection.
International
The International business enjoyed a strong year, as it began to
reap the benefits of its revised strategy, with revenue at constant
currency up 23%8 compared to the prior year on a 52 week
basis. This revamped approach is designed to deliver sustainable
profitable growth as evidenced in the UK and is led by a new Head
of International. The business has moved to a new organisational
structure where locally based market heads have replaced function
heads; a switch of resources from the UK to relevant markets.
There is now a change of emphasis underpinned by strong focus
on in-market execution, which involves ensuring the right products
are presented to the shopper at the right price, combined with an
optimum promotional strategy. Route to market solutions include
using carefully chosen local partners with appropriate capabilities.
Revenue in 2020/21 grew in double digit percentage terms
compared to the prior year in each four quarters of the year. In
Ireland, all major brands displayed growth, some of which reflected
increased at home consumption during the pandemic, in a similar
way to the UK. In the second half of the year, Ireland saw the launch
of new products such as the Mr Kipling Signature range and Soba
Noodle pots and TV advertising for Bisto and Mr Kipling. These
activities are the first examples of how the International business is
applying the established and proven branded growth model from
the UK to its overseas markets. Australia saw a similar approach; Mr
Kipling aired on Australian TV in the fourth quarter and new product
launches included Sharwood’s low fat cooking sauces and Mr Kipling
Chocolate & Cherry slices. A new head of market for Australia, now
country and not UK based, was appointed in the year alongside a
new team with strong local market consumer sector backgrounds.
The USA saw very strong revenue growth in the year which
reflected significantly improved in-market execution for
Sharwood’s, achieving 3,000 new distribution points. In the fourth
quarter, the Group signed a new agreement with Weston Foods to
sell and market Mr Kipling cakes in the USA. The first shipments of
cake are expected to commence in the first half of 2021/22, which
will follow the confirmation of a preferred lead customer.
Non-branded
On a 52 week basis, Grocery Non-branded revenue declined (5.3%)
in the year while Sweet Treats revenue fell by (8.4%). Grocery saw
an increase in volume and revenue for its retailer brand contracts,
but this was more than offset by a fall in revenue for business
to business units such as Knighton Foods and Charnwood Foods
due to reduced eating out of home throughout the year. In Sweet
Treats, the sales decline reflected contract exits for retailer brand
cake and lower volumes in the discounter channel; these effects are
expected to unwind in the second half of 2021/22.
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37
Operating and financial review continued
Trading profit
£m
Divisional contribution
- Grocery
- Sweet Treats
Group & corporate costs
Trading profit
2020/21
53 week basis
197.9
174.7
23.2
(46.6)
151.3
Exclude:
Week 53
(3.0)
(2.2)
(0.8)
–
(3.0)
2020/21
52 week basis
194.9
172.5
22.4
(46.6)
148.3
2019/20
171.9
148.2
23.7
(39.3)
132.6
2020/21 vs
2019/20
(52 week %
change)
+13.4%
+16.4%
(5.5%)
(18.6%)
+11.9%
The Group delivered Trading profit of £151.3m in 2020/21.
This comprised Divisional contribution of £197.9m less costs of
Group & corporate related activity of £46.6m. On a 52 week basis,
Trading profit in 2020/21 was £148.3m, an 11.9% increase on the
prior year. Divisional contribution grew by +13.4% on the same
basis, reflecting strong growth in the Grocery business of +16.4%,
partly offset by a reduction in Sweet Treats Divisional contribution
of £22.4m which was 5.5% lower.
Grocery benefitted from strong performances across its branded
portfolio, as the substantial increase in volumes saw benefits
of operational leverage feed through to Divisional contribution.
This effect more than offset incremental supply chain costs
incurred during the year associated with enhanced hygiene and
social distancing measures and temporary labour as a result of
the Covid-19 pandemic. Additionally, the Group increased its
consumer marketing expenditure with Ambrosia, Batchelors,
Bisto, Sharwood’s and Oxo all recipients of television advertising
in the year. This reflects one of the key pillars of the Group’s
branded growth model strategy of delivering emotionally engaging
advertising. In the first half of the year, the Group also benefitted
from generally lower market rates for media slots and accordingly
was able to purchase more television advertising time than
expected, however these lower market rates dissipated in the
second half.
In Sweet Treats, Divisional contribution was £1.3m lower than the
prior year. Divisional contribution was impacted by incremental
Covid-19 related costs in a similar way to the Grocery business,
although the requirements for additional social distancing
measures and increased temporary labour due to higher absence
was more evident in Sweet Treats than Grocery. Additionally,
with less pronounced volume uplifts in Sweet Treats compared
to Grocery, limited operational leverage benefits were offset by
these incremental pandemic related costs. Marketing investment
for Mr Kipling was higher in the year, as the Group’s largest brands
benefitted from 25 weeks on air of the popular ‘Little Thief’
television advert.
Group & corporate costs increased by £7.3m in the period
to £46.6m. This was largely as a result of higher Group wide
management incentive schemes costs, covering a large section
of the Group’s workforce.
The Group will continue to invest strongly behind its brands in
2021/22 as it did in 2020/21, with six of the Group’s largest brands
in line to benefit from media advertising. Mr Kipling and Bisto are
planned to benefit from new advertising creative.
As the Group enters this year, it has been closely monitoring
movements in commodity markets. The recent increase in some
input costs are not unexpected and follow a period of relatively
benign input cost inflation. The business has planned for these
changes, and will use a range of measures to ensure any impacts
are offset.
Operating profit
£m 53 week basis
Adjusted EBITDA3
Depreciation
Trading profit
Amortisation of intangible assets
Net interest on pensions and
administrative expenses
Fair value movements on
foreign exchange & derivatives
Non-trading items:
Restructuring costs
GMP equalisation
Other non-trading
Operating profit before
gain on sale of Hovis
Reversal of impairment loss on
financial assets
Profit on disposal of investment
in associate
Operating profit
2020/21
170.4
(19.1)
151.3
(30.4)
2019/20
152.5
(19.9)
132.6
(29.4)
Change
17.9
0.8
18.7
(1.0)
9.7
(4.6)
14.3
(2.3)
1.7
(4.0)
(4.9)
(2.9)
(0.5)
(4.1)
–
(0.9)
120.0
95.3
15.7
16.9
152.6
–
–
95.3
(0.8)
(2.9)
0.4
24.7
15.7
16.9
57.3
Operating profit increased by £57.3m, to £152.6m in the year.
This growth reflected the Trading profit performance as described
above, a positive movement in the net interest on pensions
and administrative expenses and the sale of the Group’s Hovis
investment in the second half of the year.
Amortisation of intangible assets was £30.4m in the year compared
to £29.4m in 2019/20. Fair valuation of foreign exchange and
derivatives resulted in an adverse movement of £2.3m. Non-trading
restructuring costs increased by £0.8m to £4.9m in 2020/21. This
increase was due to costs associated with advisory work on the
segregated merger pensions agreement announced on 20 April
2020, and the integration of the Knighton Foods business.
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The November 2020 Guaranteed Minimum Pensions (GMP) high court judgement ruled that pension scheme trustees are also legally
responsible for equalising the GMP for the employees who transferred out of UK defined benefit pension schemes. Accordingly, there is a
requirement to revisit historic cash equivalent transfer values that were previously not equalised and make adjustments where necessary
and a non-cash charge of £2.9m in the year reflects past service costs associated with this equalisation.
Net interest on pensions and administrative expenses was £9.7m, which includes expenses for operating the Group’s pension schemes of
£10.7m, offset by a net interest credit of £14.4m. Also included is a credit of £9.3m related to a Wind Up Lumpsum exercise as part of the
scheme merger and a charge of £3.3m which reflects settlement costs associated with enhanced transfer value payments made to certain
RHM scheme deferred members.
An impairment reversal of £15.7m was recognised in the period in respect of the Hovis loan note previously written off, reflecting the
reassessment of the loan note’s recoverability. A profit on disposal of £16.9m was recognised as a result of the sale of the Hovis investment.
Finance costs
£m
Senior secured notes interest
Bank debt interest – net
Amortisation of debt issuance costs
Net regular interest5
Write-off of financing costs
Discount unwind
Other finance cost
Other finance income
Net finance cost
2020/21
53 week
basis
25.9
4.6
30.5
2.9
33.4
1.3
(1.1)
0.9
(4.7)
29.8
Exclude:
53 week
(0.4)
(0.0)
(0.4)
–
(0.4)
–
–
–
–
–
2020/21
52 week
basis
25.5
4.6
30.1
2.9
33.0
–
–
–
–
–
2019/20
31.0
5.0
36.0
3.3
39.3
–
1.3
1.1
–
41.7
[Note: 52 week basis not applied for Write off of financing costs, Discount unwind, Other finance cost and Other finance income]
Net finance cost was £29.8m in the year to the 53 weeks ended
3 April 2021, a decrease of £11.9m compared to 2019/20. Net
regular interest was £33.4m in the year and £33.0m on a 52 week
basis. This compares to £39.3m in the comparative period. The
reduction in net regular interest in the year was primarily due to
lower Senior secured notes interest charges, principally due to four
partial redemptions of the Group’s Floating Rate Notes (FRN) which
completed at different points during the year, and are outlined in
the table below.
£m
FRN outstanding at 28 March 2020
Part redemptions in 2020/21:
17 June 2020
1 December 2020
16 February 2021
31 March 2021
FRN outstanding at 3 April 2021
£m
210.0
(80.0)
(40.0)
(40.0)
(30.0)
20.0
Bank debt interest decreased by £0.4m to £4.6m in the year and
amortisation of debt issuance costs were also £0.4m lower. The
Revolving Credit Facility (RCF) was undrawn at the year end.
Following the partial redemptions of the FRN during the year, write
off of financing fees amounting to £1.3m were incurred in the year.
A credit of £1.1m in the year related to a discount unwind associated
with properties held by the Group. Other finance income of £4.7m
relates to the reversal of the impairment of the interest on the Hovis
loan note.
Taxation
£m
Profit/before tax
- Tax charge at rate of 19.0%
Tax effect of:
- Changes in tax rate
- Capital gain on disposal of
business
- Other items
Income tax (charge)
Deferred tax asset
Deferred tax liability
2020/21
122.8
(23.3)
2019/20
53.6
(10.2)
–
6.6
(0.1)
(16.8)
28.4
85.8
4.9
–
(1.8)
(7.1)
–
184.9
A tax charge in the year of £16.8m compared to £7.1m in the prior
year. The current year reflects a charge of £23.3m on profit before
tax at the rate of 19% and a capital gain of £6.6m relating to the
disposal of the Hovis investment.
At 3 April, deferred tax assets were £28.4m (28 March 2020: nil)
while a deferred tax liability of £85.8m is a decrease of £99.1m
compared to the prior year position and reflects a reduction in the
combined pensions surplus.
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, the Group expects to
recommence paying cash tax in low single digit £millions in the
medium-term.
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Premier Foods plc
www.premierfoods.co.uk
39
Operating and financial review continued
Earnings per share
Statutory earnings
per share (£m)
53 week basis
Operating profit
Net finance cost
Profit before taxation
Taxation
Profit after taxation
Average shares in
issue (millions)
Basic Earnings per
share (pence)
2020/21
152.6
(29.8)
122.8
(16.8)
106.0
2019/20
95.3
(41.7)
53.6
(7.1)
46.5
851.4
846.6
12.5
5.5
Change
+57.3
+11.9
+69.2
(9.7)
+59.5
+4.8
+7.0
The Group reported a profit before tax of £122.8m in the year, an
increase of £69.2m compared to 2019/20. Profit after tax in the
year grew by £59.5m from £46.5m to £106.0m. Basic earnings per
share in 2020/21 increased by 7.0p to 12.5p.
Adjusted earnings
per share (£m)
52 week comparable
basis
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)
2020/21
148.3
2019/20
132.6
Change (%)
+11.9%
(33.0)
(39.3)
+15.9%
115.3
93.3
+23.5%
(21.9)
(17.7)
(23.5%)
93.4
851.3
11.0
75.6
+23.5%
846.6
0.6%
8.9
+22.8%
Adjusted profit before tax on a 52 week comparable basis increased
by 23.5% in the year to £115.3m, reflecting both Trading profit
growth in the period and lower net regular interest costs as
described above. Adjusted profit after tax also increased, by 23.5%,
to £93.4m in the year after deducting a notional 19.0% tax charge
of £21.9m. Based on average shares in issue of 851.3 million shares,
adjusted earnings per share for the 52 week comparable basis grew
+22.8% to 11.0p.
Hovis
In April 2014, the Group entered into a partnership with The Gores
Group LLC in respect of Hovis Holdings Limited ('Hovis'). This
partnership, of which the Group held a 49% equity interest, was
subsequently written off in 2015/16. On 5 November 2020, the
Group completed the sale of its interest in Hovis to Endless LLP.
As part of the sale, the group has received a total consideration
of £37.3m, of which £16.9m was in respect of equity and £20.4m
reflected the settlement of the outstanding loan to associate.
Dividend
The Company last paid a dividend to shareholders in 2008. Over
recent years, the Company has made significant progress in
delivering against its branded growth model strategy and so in
turn, reducing Net debt to a level that would enable the payment
of a dividend under the Group’s financing arrangements. In
February 2021, the Company completed a capital reduction which
will provide greater flexibility in how the Company manages its
capital resources going forward. Subject to shareholder approval,
the directors have proposed a final dividend of 1.0 pence for the
53 weeks ended 3 April 2021 (2019/20: nil), payable on 30 July
2021 to shareholders on the register at the close of business on
2 July 2021. The shares will go ex-dividend on 1 July 2021. Under
the dividend matching agreement with the Company’s pension
schemes, for up to £5 million paid to shareholders as a dividend, a
payment of 50 pence for every £1 paid to shareholders is payable
to the pension schemes. For any dividend paid between £5m and
£10m, there is no matching payment made to the pension schemes
and, for any dividend paid above £10m, the 50 pence: £1 matching
arrangement, as described above, recommences.
Free cash flow
£m
53 week basis
Statutory cash flow statement
Cash generated from operating
activities
Cash generated from (used in)
investing activities
Cash (used in)/generated from
financing activities
Net (decrease)/increase in cash &
cash equivalents
Cash, cash equivalents and bank
overdrafts at beginning of period
Cash, cash equivalents and bank
overdrafts at end of period
2020/21
2019/20
85.6
13.8
(276.2)
85.9
(18.0)
82.2
(176.8)
150.1
177.9
1.1
27.8
177.9
On a statutory basis, cash generated from operations was £118.2m
compared to £121.5m in the comparative period. Cash generated
from operating activities was £85.6m after deducting net interest
paid of £32.6m. Cash generated from investing activities was
£13.8m compared to £18.0m used in the prior year. This reflected
proceeds received from the Group’s Hovis investment, partly offset
by the purchase of tangible and intangible assets of £23.6m. Cash
used in financing activities was (£276.2m) in the year versus £82.2m
cash generated in the prior year; the difference was due to two
main actions. Firstly, the Group repaid a drawdown of £85.0m on
its committed revolving credit facility in the first quarter of the year.
This followed an earlier prudent decision by the Group at the end of
the previous financial year to draw this £85.0m sum, reflecting early
stage wider uncertainties associated with the Covid-19 pandemic.
Secondly, the Group repaid £190.0m part redemptions of its
Senior Secured Floating Rate Notes during the year. Cash and cash
equivalents of £1.1m at the year end comprised a bank overdraft of
£3.1m and cash and bank deposits of £4.2m
40
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30415 26 May 2021 2:24 pm V6STRATEGIC REPORT£m2020/212019/2053 week basisTrading profit151.3132.6Depreciation19.119.9Other non-cash items3.41.7Interest(32.6)(35.6)Pension contributions(47.0)(44.7)Capital expenditure(23.6)(18.0)Working capital & other0.614.6Non-trading items(5.1)(6.6)Proceeds from share issue1.71.1Sale of property, plant & equipment0.10.1Net proceeds from sale of Hovis investment30.3–Free cash flow1098.265.1The Group reported an inflow of Free cash in the year of £98.2m compared to £65.1m in the previous year. Trading profit of £151.3m on a 53 week basis was £18.7m ahead of the prior year for the reasons outlined above, while depreciation was slightly lower at £19.1m (2019/20: £19.9m). Other non-cash items of £3.4m was due primarily to share based payments.Net interest paid of £32.6m was £3.0m lower than the prior year, due to part redemptions of the Group’s Senior Secured Floating Rate Notes during the year which attract a coupon of 5.0% above LIBOR. The Group expects interest paid to continue to reduce in 2021/22 as the full year impact of these part redemptions take effect. Additionally, the Group is planning to issue new Senior Secured Fixed Rate Notes which are expected to replace its existing Fixed Rate Notes which currently attract a 6.25% interest rate. Total pension contributions in the period were £47.0m (2019/20: £44.7m), due to previously agreed planned increases in deficit contribution payments to the Premier Foods pension scheme. Of this, pension deficit contribution payments were £39.1m and administration costs including pension levy costs were £7.9m.Capital expenditure in the year was £23.6m, in line with expectations and higher than 2019/20. The Group expects to continue investing at least £25m per annum in capital expenditure as it funds growth projects supporting the Group’s innovation strategy and cost release projects to deliver efficiency savings. Both these areas of capital investment offer attractive payback returns and accordingly are a key factor in the Group’s assessment of capital allocation.STRATEGIC REPORTPremier Foods plcwww.premierfoods.co.uk41Nissin Soba noodles and Cup NoodleNissin’s Soba noodles and Cup Noodle brands delivered retail sales value growth of +48.4% in the financial year, as consumers looked to explore authentic new flavours such as Cup Noodle Katsu curry.30415 Premier foods AR2021 Strategic.indd 4130415 Premier foods AR2021 Strategic.indd 4126-May-21 2:36:58 PM26-May-21 2:36:58 PM 30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 202142Operating and financial review continuedFollowing the completion of the sale of the Group’s Hovis investment to Endless LLP, as described above, cash proceeds of £37.3m were received on 5 November 2020. This was partly offset by a £7.0m share of proceeds made to the Group’s pension schemes.A working capital inflow of £0.6m compared to an inflow of £14.6m in the prior year. The prior year position was due to unusually low stock holding levels 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 £5.1m were paid in the year and comprise the final tranche of advisory costs associated with the Group’s strategic review and costs relating to restructuring of both the International and Knighton businessesNet debt and sources of finance£mPre-IFRS 16Post-IFRS 16Net debt at 28 March 2020408.1429.6Free cash inflow in period(98.2)(98.2)Movement in debt issuance costs4.24.2Movement in lease creditor–(2.9)Net debt at 3 April 2021314.1332.7Net debt at 3 April 2021 was £332.7m, a reduction of £96.9m compared to the prior year while on a pre-IFRS 16 basis, Net debt was £314.1m, £94.0m lower than the comparative period. Free cash inflow in the period was £98.2m and the movement in debt issuance costs was £4.2m. On a pre-IFRS 16 Leases basis, Net debt / adjusted EBITDA was 1.9x; while on a reported basis, Net debt / adjusted EBITDA was 2.0x. There were no changes to the Group’s committed bank lending facilities in the year. As at 3 April 2021, the Group held cash and bank deposits of £1.1m. At the start of the financial year the Group held in issue £300m Senior Secured Fixed Rate Notes maturing October 2023 and £210m Senior Secured Floating Rate Notes ('FRN') maturing July 2022. With the Group’s strong progress in cash generation and debt reduction during the last two years, it redeemed £190m of the original £210m outstanding FRN during 2020/21 at par.The Group has announced the proposed issue of new five year £300m Senior Secured fixed rate notes due 2026, to refinance its £300m existing Senior Secured fixed rate notes, due to mature October 2023. Pricing of the new £300m Senior Secured fixed rate notes is to be confirmed and the notes are expected to be callable after two years. The Group has entered into a new revolving credit facility (RCF) with an updated lending group for a period of three years from May 2021 with the option of extending for up to two additional years. This new senior secured RCF is a committed facility of £175m with an interest margin grid in line with the previous RCF. The prevailing coupon on the RCF at the year end was 2.75% plus three month LIBOR, although the facility was undrawn. Undrawn elements of the RCF will continue to attract interest equivalent to 35% of the applicable margin.It is expected that the Group’s outstanding £20m Senior Secured Floating Rate Notes due July 2022 will be repaid as part of this refinancing.Pensions Pensions agreement overviewFollowing an extensive strategic review which 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 agreed and signed legal documentation with the scheme trustees for the merger, which was implemented as planned on 30 June 2020.A winding up lump sum (WULS) exercise was completed in February 2021. Following the segregated merger, the Group chose to effect a winding up of the Premier Foods Pension Scheme Trustees Limited and the Premier Grocery Products Pension Schemes Trustee Limited which will be completed in 2021.IAS 19 results and commentary3 April 202128 March 2020IAS 19 Accounting Valuation (£m)RHMPremier FoodsCombinedRHMPremier FoodsCombinedAssets4,459.4792.55,251.94,745.3774.75,520.0Liabilities(3,536.9)(1,175.1)(4,712.0)(3,240.0)(1,049.6)(4,289.6)Surplus/(Deficit)922.5(382.6) 539.91,505.3(274.9)1,230.4Net of deferred tax (19.0%)747.2(309.9)437.31,219.3(222.7)996.6The IAS 19 pension schemes valuation reported a surplus for the combined RHM and Premier Foods’ pension schemes at 3 April 2021 of £539.9m, £690.5m lower than 28 March 2020. Net of deferred tax, the combined surplus at 3 April 2021 was £437.3m. 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. Assets in the combined schemes at 3 April 2021 were £268.1m lower at £5,251.9m. RHM scheme assets decreased by £285.9m to £4,459.4m while the Premier Foods’ schemes assets increased by £17.8m to £792.5m. The reduction in the RHM scheme assets was due to a drop in the value of government bonds held by the schemes. At the previous year end, UK 30 year Government gilts were at c.0.6%, however during the year, UK government Gilt yields increased. The pension schemes use hedges to reduce the impact of movements in Gilts on the actuarial valuation, so when gilt yields rise, the asset values of these hedges fall.Liabilities in the combined schemes increased by £422.4m to £4,712.0m as at 3 April 2021 compared to 28 March 2020. The RHM scheme liabilities increased by £296.9m to £3,536.9m in the year and the Premier Foods scheme liabilities increased by £125.5m to £1,175.1m. 30415 Premier foods AR2021 Strategic.indd 4230415 Premier foods AR2021 Strategic.indd 4226-May-21 2:36:58 PM26-May-21 2:36:58 PM 30415 26 May 2021 2:24 pm V6STRATEGIC REPORTThe main driver of the movement in liabilities was due to a decrease in the discount rate used at 28 March 2020 of 2.5%.Combined pensions schemes (£m)3 April 202128 March 2020Assets Equities14.911.5 Government bonds1,625.41,802.6 Corporate bonds1.025.3 Property467.9445.2 Absolute return products1,112.11,198.2 Cash79.832.4 Infrastructure funds321.5309.8 Swaps485.4487.1 Private equity240.6510.1 LDI191.2268.3 Other712.1429.5Total Assets5,251.95,520.0Liabilities Discount rate2.00%2.50% Inflation rate (RPI/CPI)3.25%/2.80%2.65%/1.65%The net present value of future deficit payments, to the end of the respective recovery periods remains at c.£300-320m. OutlookThe Group goes into 2021/22 in a strong position, having gained a significantly larger consumer base during the past year. The business will continue to employ its successful branded growth model, with further new product launches planned and six of its largest brands due to benefit from TV advertising in 2021/22. It expects to deliver further progress overseas as it applies these strategies in its key international markets.Initial trading this year is in line with the Group’s expectations, reflecting the ongoing strength of its growth strategy, set against a period of strong comparatives. The Board is confident in the delivery of its full year profit expectations, and is set to benefit from substantially lower financing costs. As the Group transitions to the next phase of its evolution, it will look to expand through accessing new categories in the UK and also in selected overseas markets, while exploring bolt-on acquisition opportunities. It continues to target 1.5x Net debt/adjusted EBITDA in the medium term.Duncan LeggettChief Financial Officer19 May 2021STRATEGIC REPORTNew Ambrosia CampaignAmbrosia was back on air in 2020, for the first time in four years, with a new TV campaign ‘Devon knows how they make it so creamy’, as part of our strategy of increasing investment behind emotionally engaging marketing.Premier Foods plcwww.premierfoods.co.uk4330415 Premier foods AR2021 Strategic.indd 4330415 Premier foods AR2021 Strategic.indd 4326-May-21 2:37:07 PM26-May-21 2:37:07 PM Operating and financial review continued
Appendices
The Company’s results are presented for the 53 weeks ended 3 April 2021 and the comparative period, 52 weeks ended 28 March 2020.
All references to the ‘quarter’, unless otherwise stated, are for the 13 weeks ended 27 March 2021 and the comparative period, 13 weeks
ended 28 March 2020.
To aid comparability of results, headline results are provided on a 52 week basis and reconciliations provided to a 53 week basis.
Headline group results for 53 weeks ended
3 April 2021
£m
Revenue
Grocery
- Branded
- Non-branded
Sweet Treats
- Branded
- Non-branded
Group
- Branded
- Non-branded
Divisional contribution
Grocery
Sweet Treats
Total
Trading profit
Adjusted EBITDA
Adjusted EBITDA (excl IFRS 16)
Net regular interest
Adjusted profit before tax
Adjusted eps
Net debt
Net debt (excl IFRS 16)
Net debt/adjusted EBITDA
Net debt/adjusted EBITDA (excl IFRS 16)
Quarter 4 Sales – 52 week comparable basis
Q4 Sales (£m)
Branded
Non-branded
Total
% change
Branded
Non-branded
Total
2020/21
53 week basis
Exclude:
Week 53
2020/21
52 week basis
2019/20
2020/21 vs
2019/20
(52 week %
change)
702.6
609.3
93.3
244.4
203.2
41.2
947.0
812.5
134.5
174.7
23.2
197.9
151.3
170.4
168.2
(33.4)
117.9
11.2
332.7
314.1
2.0x
1.9x
(9.2)
(7.6)
(1.6)
(3.6)
(3.3)
(0.3)
(12.8)
(10.9)
(1.9)
(2.2)
(0.8)
(3.0)
(3.0)
(3.3)
(3.3)
0.4
(2.6)
(0.2)
N/A
N/A
N/A
N/A
693.4
601.7
91.7
240.8
199.9
40.9
934.2
801.6
132.6
172.5
22.4
194.9
148.3
167.1
164.9
(33.0)
115.3
11.0
N/A
N/A
N/A
N/A
611.6
514.7
96.9
235.5
190.9
44.6
847.1
705.6
141.5
148.2
23.7
171.9
132.6
152.5
149.9
(39.3)
93.3
8.9
429.6
408.1
2.8x
2.7x
Grocery
152.1
20.3
172.4
Sweet Treats
50.7
3.8
54.5
+6.8%
(15.3%)
+3.6%
+7.7%
(18.4%)
+5.4%
+13.4%
+16.9%
(5.3%)
+2.2%
+4.7%
(8.4%)
+10.3%
+13.6%
(6.3%)
+16.4%
(5.5%)
+13.4%
+11.9%
+9.6%
+10.0%
+15.9%
+23.5%
+22.8%
+22.6%
+23.1%
–
–
Group
202.8
24.1
226.9
+7.0%
(15.8%)
+4.0%
44
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Annual Report for the 53 weeks ended 3 April 2021
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STRATEGIC REPORT
Notes and definitions of non-GAAP measures
The Company 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, reversal of impairment loss on financial assets, profit on disposal of investment in associate,
non-trading items (items requiring separate disclosure by virtue of their nature in order that users of the financial statements obtain
a clear and consistent view of the Group's underlying trading performance), fair value movements on foreign exchange and other
derivative contracts, net interest on pensions and administration expenses and past service costs.
2. Divisional contribution refers to Gross Profit less selling, distribution and marketing expenses directly attributable to the relevant
business unit.
3. EBITDA means EBITDA on an adjusted basis and 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 interest payable and other finance
income.
6. Adjusted profit after tax is Adjusted profit before tax as defined in (4) above less a notional tax charge of 19.0% (2019/20: 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 851.4 million (52 weeks ended 28 March 2020: 846.6 million). On a 52 week basis for the 52 weeks to 27 March 2021, weighted
average number of shares was 851.3 million.
8.
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, which excludes lease liabilities.
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.
13. EBITDA on a rolling 12 month basis.
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 business unit, the results of which are aggregated within the Grocery business unit, are
not required to be separately disclosed for reporting purposes.
• Net debt is presented pre-IFRS 16, as targets the Group have previously communicated are on a pre-IFRS 16 basis and this allows for
comparability to these targets.
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Premier Foods plc
www.premierfoods.co.uk
45
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 53 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
t
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 efficiently
risks are being managed
Strategic reviews with ELT
•
• Group principal risks reviewed and
agreed with ELT and the Board
T
R
O
NITOR AN D R E P
O
M
R
E
S
P
O
N
D
RISK MANAGEMENT
PROCESS
ID
E
N
T
I
F
Y
M E A SURE
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 have 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 Covid-19 which impacts
a number of our principal risks. The ‘Changes since 2019/20’
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/reward
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 risk 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 risks 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:
46
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h
g
H
i
Covid-19
The pandemic and its wider impact
dominate the long-term picture, as the
risk of a deep recession, customer failures,
permanent changes to retailer landscape
with online growth escalating, changes
to the way (and where) we work, are all
set to pose a risk to our performance and
success in the next few years.
Exceeding risk appetite
3
1
d
o
o
h
i
l
e
k
i
L
Climate-related risks
We recognise that climate change poses
a number of physical risks (i.e. caused
by the increased frequency and severity
of extreme weather events) and other
related risks (i.e. economic, technological
or regulatory challenges related to moving
to a greener economy) for our business. We
are currently aligning our internal processes
with the recommendations of the Taskforce
on Climate-related Financial Disclosures
(‘TCFD’) and aim to be fully aligned by
2022.
i
m
u
d
e
M
10
9
5
6
4
8
2
7
Within risk appetite
w
o
L
Low
Medium
Impact
High
STRATEGIC REPORT
1 Impact of
Government
legislation
2 Macroeconomic
and geopolitical
instability
3 Market & retailer
actions
4 Operational integrity
5 Legal compliance
6 Technology
7 Product portfolio
8 HR & employee risk
9 Strategy delivery
10 International
expansion
Risk management enables our strategy
Sustainable & profitable revenue growth
Cost control & efficiency
Cash generation
Risk trend
Increased
Decreased
Stable/unchanged
New risk
Arrows indicate the change
in risk since the prior year
1 Impact of Government legislation
Link to strategy
Risk trend N
Risk and potential impact
The continued focus on health and obesity
may result in a decline in demand for cakes
and desserts and/or our share of it, along
with the risk of additional complexity and
cost as a result of any reformulation efforts.
There is a high and ever increasing level of
media and government scrutiny on health
and obesity, as highlighted in the UK by the
proposed introduction of regulation over
High Fat Sugar & Sodium (HFSS) products.
It is important that we continue to take a
leadership position on health issues. The
UK Government has also introduced a new
tax on non-recyclable plastic packaging as
part of the reformed Packaging Producer
Responsibility Regulations. The introduction
of an escalating tax on plastic packaging and
any further legislation may adversely impact
the products that the Group manufactures.
Changes since 2019/20
• UK Government Obesity Strategy
(announced July 2020) which comes
into effect in April 2022; the Group has
adapted its strategy in order to address
the implications of the strategy.
The UK Government introduced primary
legislation (November 2020) to bring in
an escalating tax on plastic material which
will come into force in April 2022.
How we manage it
• We have a wide range of product offerings,
including our ‘better-for-you’ range, which
means we are well placed to take advantage of
the consumer’s increased demand for healthier
products.
• Ongoing evaluation and development of the
•
brand portfolio and innovation pipeline towards
healthier options (as previously described in the
‘How we are a responsible business’ section).
• We work closely with non-government
organisations and trade associations in our
market to fully participate in the debate and help
shape solutions.
• Our Environmental Social Governance (‘ESG’)
Committee is headed by our Group CEO. We
have a range of cross-functional steering groups
which are responsible for the delivery of our ESG
strategy, including our Plastics steering group.
• We continue our efforts 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. 94% of our
packaging, by weight, is recyclable.
• We have developed KPIs to drive our progress
on ESG forward, including (amongst others)
embedding environmentally sustainable
packaging across our product portfolio (see our
‘How we are a responsible business’ section for
details).
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Premier Foods plc
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47
Risk management continued
2 Macroeconomic and geopolitical instability
Link to strategy
Risk trend
Risk and potential impact
Our business has been subject to a period
of prolonged uncertainty owing to political
and ongoing economic developments related
to the UK’s withdrawal from the EU which
presents a material 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 also 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 4. A more detailed assessment of
the impact of the UK’s withdrawal from
the EU and Covid-19 on our business can
be found in the ‘How we are a responsible
business’ section.
3 Market and retailer actions
Risk and potential impact
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. Maintaining
strong relationships with our existing
customers and building relationships with
new customers and technology-enabled
channels is critical for our brands to be
readily available and well presented to our
consumers. A failure to do this may impact
our ability to obtain competitive pricing
and trade terms and/or the availability and
presentation of our brands. 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.
How we manage it
• We manage the impact of commodity price
inflation and foreign exchange volatility through
hedging activity and ongoing supplier risk
management.
• A cross-functional committee headed by the
Group CFO and Group Procurement Director is
in place to manage the Group’s preparedness for
the new trading relationship with the EU.
• We continue to engage with the Department for
Environment, Food & Rural Affairs (DEFRA) and
the Food & Drink Federation (FDF) on all matters
related to Covid-19 and the UK’s withdrawal from
the EU.
•
•
•
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.
Changes since 2019/20
•
In advance of the end of the EU exit
transition period, we developed a
comprehensive set of mitigation plans and
made preparations to ensure continuity of
supply of our products. With a free trade
agreement between the UK and EU now
in place, we have not seen any material
impact from tariff changes. To date, these
new arrangements have not resulted in
any major disruption to our supply chain.
See Risk 4 for additional changes.
The UK Government’s vaccine programme
rollout continues at pace and reduces the
overall risk outlook.
• As a food manufacturing business
our factories remained open and
modifications were made to enable social
distancing while non-factory employees
continue to work from home.
Link to strategy
Risk trend
How we manage it
• We have strong relationships with the major
Changes since 2019/20
• Covid-19 impacted the timing of our
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.
• We are investing to build our online presence and
capabilities.
customers’ range reviews. We continued
to work with all our customers, including
through category partnerships and range
reviews, to match our product offering to
consumer needs particularly with more
meals eaten at home.
• We recorded significant growth in branded
sales as a result of our close customer
partnerships and innovation pipeline.
•
Sales through our online channel
increased significantly during the year
ahead of the broader channel.
• Our reliable supply performance
through the pandemic has, in general,
strengthened our relationship with
retailers and their confidence in our
supply chain resilience.
•
The revised strategy for the International
business has resulted in improved
performance and is on track to deliver
sustainable growth, see Risk 10.
Link to our strategy
Sustainable & profitable
revenue growth
Cost control & efficiency
Cash generation
Change in gross risk
level from prior year
Increased
Decreased
Stable/unchanged
N New Risk
48
Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
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4 Operational integrity
Risk and potential impact
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. Supplier failure, market
shortage or an adverse event in our supply
chain impacts sourcing of our products
and the cost of our products is significantly
affected by commodity price movements.
How we manage it
• We have a crisis management process in place
and business continuity plans are reviewed and
refreshed on an ongoing basis.
•
Insurance coverage is in place to mitigate 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.
STRATEGIC REPORT
Link to strategy
Risk trend
Changes since 2019/20
•
The Covid-19 pandemic 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 for key ingredients
where there were potential interruptions
to supply.
• We have seen sustained high levels
of demand from consumers and our
customers. Our factories have had
to increase production levels whilst
putting modifications in place to
ensure compliance with WHO and UK
Government guidelines to keep employees
safe.
• We improved our business resilience
through various initiatives, including
maintaining factory site accessibility,
and reviewing the effectiveness of our
business continuity plans.
• We maintained high levels of customer
service despite the disruptions caused by
Covid-19.
• We have an ongoing 3-year programme
(in conjunction with our insurers) to move
our sites into a ‘Highly Protected Risk’
status.
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49
Risk management continued
5 Legal compliance
Risk and potential impact
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.
We are also expected to comply with the
recommendations of the Financial Stability
Board Taskforce on Climate-Related Financial
Disclosures (‘TCFD’). Considerations for the
effects of climate change (e.g. floods and
heatwaves) may restrict investment decisions
but may also create new opportunities
to invest in assets that may be more
sustainable; and develop a portfolio of
products that use sustainable packaging.
A more detailed overview of the impact of
climate change on our business can be found
in the ‘How we are a responsible business’
section.
6 Technology
Risk and potential impact
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.
Link to strategy
Risk trend
Changes since 2019/20
•
The UK Government announced
(November 2020) that climate risk
reporting will become mandatory for large
companies and financial institutions and
comes into full effect in April 2022.
• Our risk management framework is being
developed to accommodate and report on
climate risks and appropriate disclosures
in line with TCFD recommendations.
• New compliance processes for logging
conflicts of interest, gifts and hospitality
and customer on-boarding.
How we manage it
• As previously described in Risk 1, our ESG
Committee oversees various initiatives, including
compliance with TCFD recommendations.
• We have leading food industry processes in place
to manage Health & Safety and food safety issues
(including an ongoing programme of internal and
external audits).
• We have dedicated Legal and Regulatory teams in
place to monitor laws and regulations to ensure
compliance, protect intellectual property and
defend against litigation where necessary.
• We work closely with our external advisors
and the regulators, government bodies and
trade associations regarding current and future
legislation which would impact the Group.
• Whistleblowing processes are in place.
Link to strategy
Risk trend
Changes since 2019/20
• We continue to update our processes
and controls as the external environment
evolves; this is informed by periodic third
party reviews.
• 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 continue work to enhance the security
of our factory operational technology
environment.
How we manage it
•
To reduce the impact of external cyber-attacks
impacting our business we have firewalls and
threat detection & response systems in place.
• Disaster recovery plans across the Group are
reviewed every year with annual penetration
testing also performed.
•
•
Information and IT policies are in place and are
regularly reviewed. Internal phishing campaigns
are run and followed up with training and
guidance.
Incident response plans are in place, recognising
that while this risk can be managed it cannot be
eliminated.
• Our cyber-security strategy and actions are
regularly monitored by the Audit Committee and
the Board
• Cyber insurance policy is in place to insure the
Group against potential losses arising from a
cyber-security breach.
Link to our strategy
Sustainable & profitable
revenue growth
Cost control & efficiency
Cash generation
Change in gross risk
level from prior year
Increased
Decreased
Stable/unchanged
N New Risk
50
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7 Product portfolio
Risk and potential impact
Consumer preferences, tastes and
behaviours change over time. As part of
this, the consumer’s desire for healthier
choices and premiumisation are significant
trends. Our ability to anticipate these trends,
innovate and ensure the relevance of our
brands is critical to our competitiveness
in the market place and our performance.
Furthermore, sales of many of the
Company’s products can be adversely
affected by warm seasonal weather
conditions. We may fail to successfully evolve
our portfolio to take advantage of growth
categories and/or re-invent our core brands
to meet consumer needs.
8 HR and employee risk
Risk and potential impact
The inability to attract and / or retain
capabilities, or develop the skills, critical
for business success may hinder our ability
to deliver our strategy, business plan and
projects. Whilst Covid-19 has actually
resulted in a lower level of colleague
turnover and a more buoyant labour market,
we need to be mindful of the risk that
working in sustained periods of extreme
business pressure may bring in terms of well-
being, productivity and retention.
How we manage it
• 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.
How we manage it
• 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 and where
appropriate make changes to our offering.
STRATEGIC REPORT
Link to strategy
Risk trend
Changes since 2019/20
•
The impact of the proposed introduction
of HFSS and other regulations is discussed
in Risks 1 and 5.
•
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 has resulted in a delay to the
launch of some of our new product ranges
but this is balanced against increased
demand for our core product ranges.
Link to strategy
Risk trend
Changes since 2019/20
• Covid-19 has dramatically changed how
we work with even tighter health, safety
and well-being measures across all
manufacturing sites and remote working
being introduced for all colleagues
based at main office locations, and the
introduction of technology to support this.
•
Significant increase in the amount and
variety of internal communications to
reflect the need to keep colleagues
up to date with the changing Covid-19
landscape, and provide line managers with
support and advice, including guidance on
managing colleague mental health.
• Payment of additional ad-hoc bonuses for
certain groups of employees recognising
their extraordinary contributions in
maintaining high levels of business
performance.
• Acceleration of Inclusion and Diversity
activity, including the #oktobeme
programme.
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51
Risk management continued
9 Strategy delivery
Risk and potential impact
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.
How we manage it
• Given the seasonal nature of many of our brands,
media investment is targeted in the periods of
peak consumer demand and through the most
cost effective channels.
• Our new and existing product 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.
Link to strategy
Risk trend
Changes since 2019/20
• Our branded growth strategy for
delivering new product innovation based
on consumer trends, together with high
quality advertising behind our major
brands, continues to work very well.
• Our strategy continues to deliver
trading profit at the top end of market
expectations on the back of consistent
growth with Net debt/adjusted EBITDA
falling to below 2.0x.
• We are developing a new strategy
building on the branded growth model
and reflecting the growth investment
opportunities that a lower debt level will
potentially unlock.
Link to strategy
Risk trend
10 International expansion
Risk and potential impact
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 on our
future profitability and rate of growth.
How we manage it
• We carry out careful due diligence prior to
entering a new market.
Changes since 2019/20
•
The International business returned to
growth during the year.
• We closely monitor current and forecast
•
performance of our business and where required
adapt our marketing approach.
Execution of the revised strategy has
continued at pace, as we roll out our
proven branded growth model strategy to
other markets.
• We recently signed an agreement with
Weston Foods to sell and market
Mr Kipling cakes in the US. The first
shipments of cake commenced in the first
quarter of 2021/22.
Link to our strategy
Sustainable & profitable
revenue growth
Cost control & efficiency
Cash generation
Change in gross risk
level from prior year
Increased
Decreased
Stable/unchanged
N New Risk
52
Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
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STRATEGIC REPORT
Task Force on Climate Related Financial Disclosures
Climate-related disclosures
Climate change is the defining issue of our time and the greatest
challenge to sustainable development, affecting every country,
business and person on the planet. We recognise that future
climate change represents physical risk which includes impacts
resulting from acute weather events, or chronic risk stemming from
longer-term shifts in climate like higher temperatures, prolonged
heat waves, floods and droughts. We also acknowledge that the
transition risk (regulatory, technology, market, reputation) to move
our business to a net zero one, will become greater as the world
economy moves to a more sustainable future. We are committed
to working towards incorporating the recommendations laid out by
the Task Force on Climate-Related Financial Disclosures (TCFD) in
full and are aiming to be fully aligned by April 2022.
Governance
Our Executive Leadership Team (ELT) has overall responsibility
for climate-related risks and opportunities. Our ESG Governance
Committee, which is chaired by the CEO, is accountable for
managing the progress of our key sustainability and climate change
targets as well as understanding and responding to climate-related
risks and opportunities identified through our ongoing climate risk
assessment. Updates on our sustainability and climate-related KPIs
are provided to the Board on a biannual basis.
Risk management
As a food manufacturer, our business’s direct operations and
supply chain is exposed to the physical and transition risks and
opportunities stemming from climate change. This year we will
begin the initial stages of understanding our climate-related risks
more thoroughly to financially quantify all the material impacts of
climate change to our business. The results of this assessment will
be presented to the ESG Governance Committee and reported on in
next year’s annual report.
Metrics and targets
Further information about our environmental performance can
be found in the 'How we are a responsible business' section on
pages 31 to 33 and our full GHG emissions data is set out within
'Other statutory information' on page 85. We are in the process of
reviewing our carbon reduction targets in line with what the latest
climate science says is necessary to meet the goals of the Paris
Agreement and limit global warming to well below 2°C.
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 way the Board views the development of the business over the
medium term, a period of three years is considered appropriate
for business planning and measuring performance. The Board also
considered the nature of the Group’s activities and the degree to
which the business changes and evolves 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 46 to 53 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 3 April 2021, £173m 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 climate change, Covid-19 and future regulatory changes in
the food industry.
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
simultaneously 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 30 March 2024.
The strategic report on pages 02 to 53 was approved
by the Board on 19 May 2021 and signed on its behalf by:
Alex Whitehouse
Chief Executive Officer
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Premier Foods plc
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53
30415 26 May 2021 10:04 am V6GovernanceGovernance frameworkNomination CommitteeResponsible for Board appointments, succession planning and reviewing the structure, size and composition of the Board, ensuring that there is a healthy balance of skills, knowledge, experience and diversity on the Board.→ Further information can be found on page 64ChairmanThe 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.Senior Independent DirectorThe 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.Shareholders and other stakeholdersThe 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 on a weekly basis and members regularly present to the Board. BoardCommitteesCompany Secretary and Internal AuditExecutive Leadership Team (ELT)ShareholdersCompany SecretaryThe 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. Governance framework54Board of directors56Governance overview58Nomination Committee report64Audit Committee report65Directors’ Remuneration report68Other statutory information84Statement of directors’ responsibilities87How our Governance framework supports the delivery of the Group’s strategic objectivesESG Governance Committee→ Further information can be found on page 165430415 Premier foods AR2021 Governance.indd 5430415 Premier foods AR2021 Governance.indd 5426-May-21 2:36:39 PM26-May-21 2:36:39 PM Shareholders and other stakeholders
GOVERNANCE
Our governance framework facilitates 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, consumers, 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.
Non-executive Directors
(‘NEDs’)
The 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.
Workforce Engagement
NED
The Workforce Engagement
NED role is to engage with
colleagues across the business
to ensure their views and
concerns are brought to the
Board and taken into account
by the directors, particularly
when they are making
decisions that could affect the
workforce.
Chief Executive Officer
(’CEO’)
The CEO is responsible for the
day-to-day management of
the Group, working with the
Executive Leadership Team to
ensure the implementation of
the agreed strategy.
Chief Financial Officer
(’CFO’)
The CFO has responsibility for
developing and implementing
financial and operational
strategies, financial risk,
treasury management,
investor relations and
pensions.
Audit Committee
Monitors the integrity of the Group’s external reporting and
provides oversight and governance of the Group’s internal
controls, risk management and the relationship with external
auditors.
→ Further information can be found on page 65
Remuneration Committee
Responsible for setting the remuneration policy and individual
compensation for the Chairman, executive directors and
senior management to ensure that it is aligned with the
Group’s strategic objectives and culture and also reviews the
remuneration of the wider workforce.
→ Further information can be found on page 68
Internal Audit
Internal Audit is responsible for providing the Audit Committee
and Board with independent assurance on the Group’s control
framework and risk management.
→ Further information can be found on page 66
Inclusion and Diversity Steering Group
→ Further information can be found on page 24
Health & Safety Committee
→ Further information can be found on page 25
Premier Foods plc
www.premierfoods.co.uk
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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 in 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 leadership 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.
Tim Elliott
Non-executive Director
Appointed to the Board:
May 2020.
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 Senior
Adviser at Alvarez & Marsal LLP and
a non-executive director and Audit
Committee chair of CPP Group plc.
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.
Simon Bentley
Non-executive Director
Appointed to the Board:
February 2019 (appointed Chair
of Audit Committee in
March 2019).
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 Chairman of
Gingerbread, the leading national
charity working with single parent
families, and Senior Independent
Director of SimiGon, a global leader
in modelling, simulation and training
solutions. He is a qualified Chartered
Accountant.
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Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
Skills and experience: 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. Duncan’s responsibilities
include operational and corporate
finance, corporate development,
investor relations and pensions. 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.
Helen Jones
Non-executive Director
Appointed to the Board:
May 2020 (appointed Workforce
Engagement NED in September
2020).
Skills and experience: Helen Jones
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. Helen is currently
non-executive director and Senior
Independent Director of Halfords
plc and non-executive director and
Remuneration Committee Chair of
Fuller, Smith & Turner plc and Virgin
Wines UK PLC. In addition, Helen is
also a member of the Supervisory
Board of Directors at Ben & Jerry’s.
Yuichiro Kogo
Non-executive Director
Appointed to the Board:
March 2021.
Skills and experience: Yuichiro is
Head of Business Development,
Deputy General Manager (Corporate
Planning Division) of Nissin
Foods Holdings Company Limited
(“Nissin”) and is responsible for
devising Nissin’s M&A strategy, as
well as originating and executing
business alliance and investment
transactions. Prior to joining
Nissin in September 2016, he was
Vice President at the Investment
Banking Division of Goldman Sachs
Japan Co., Ltd. During his 9 years
at the firm his key responsibilities
included execution of global
equity / debt financing, as well as
coverage of corporate clients across
multiple industry sectors, including
technology, steel, and natural
resources. Yuichiro received a BA
in Economics from Keio University
in 2001 and an MBA from the
University of Chicago in 2007.
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GOVERNANCE
Pam Powell
Non-executive Director
Appointed to the Board:
May 2013 (appointed Chair of the
Remuneration Committee in May
2019).
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: 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: 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.
Committee membership:
Audit committee
Remuneration committee
Nomination committee
Committee chair
Independent
Board attendance
During the year there were 11 scheduled meetings of the Board,
and five meetings of the Audit Committee, four meetings of the
Remuneration Committee and two 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 below.
As shareholders will be aware, as a result of the UK Government’s
guidance on public gatherings at the time due to the Covid-19
pandemic, and the new regulations set out in Schedule 14 of the
Corporate Insolvency and Governance Act, only the Chairman and
two shareholders, (the minimum necessary quorum), attended the
AGM in 2020, which was held by electronic means.
Pam Powell was unable to attend one Audit Committee conference
call, due to another business commitment which could not be
rescheduled. Tim Elliott and Helen Jones were both appointed as
non-executive directors on 15 May 2020 and Yuichiro Kogo was
appointed on 25 March 2021.
Board
Audit Committee
Remuneration Committee
Nomination Committee
Executive directors
Alex Whitehouse
Duncan Leggett
Non-executive directors
Colin Day
Richard Hodgson
Simon Bentley
Tim Elliott1
Helen Jones1
Yuichiro Kogo2
Pam Powell
Daniel Wosner
Former directors
Orkun Kilic3
Shinji Honda4
11/11
11/11
11/11
11/11
11/11
9/9
9/9
1/1
11/11
11/11
8/8
10/10
–
–
–
5/5
5/5
3/3
3/3
–
4/5
–
–
–
–
–
–
4/4
4/4
3/3
3/3
–
4/4
–
–
–
–
–
2/2
2/2
2/2
1/1
1/1
–
2/2
–
–
–
1.
2.
Appointed to the Board on 15 May 2020.
Appointed to the Board on 25 March 2021.
3.
4.
Resigned as a director on 5 January 2021.
Resigned as a director on 25 March 2021.
Premier Foods plc
www.premierfoods.co.uk
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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 2020/21.
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 Inclusion and Diversity.
Progress is monitored via Group-wide colleague surveys, site
visits by the Board, issues raised in whistleblowing helpline calls,
colleague retention levels and with the appointment of Helen Jones
as our Workforce Engagement 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 five-year strategic plan in April 2021. Updates are also
provided on periodic engagement surveys, regular HR updates and
through the work of the Workforce Engagement NED. The Board’s
effectiveness in monitoring the culture and behaviours throughout
the organisation was also considered as part of this year’s internal
Board evaluation and rated positively.
Workforce Engagement NED
During the year, Helen Jones took over from Pam Powell as the
Board’s Workforce Engagement NED. The purpose of this role is
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 has established joint
consultative committees at each site, known as the Voice Forum.
These forums consist of management and representatives from
across the site and meet on a regular basis. The Workforce
Engagement 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. During the financial year, Helen Jones has attended
meetings at a number or sites and the results of these meetings
fed back to the Board. This ensured the challenges raised by the
additional pressures brought about by the Covid-19 pandemic and
the need to adapt to new ways of working were noted. Despite
these challenges, morale was good, with colleagues being very
positive about Premier Foods, feeling valued, safe and supported.
Recent investment in factory infrastructure was recognised. In
addition, there was pride expressed in the charity and community
work and support undertaken by the Company. The value of the
regular briefings through Town Hall meetings was noted.
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).
Following the appointment of Tim Elliott and Helen Jones at the
beginning of the financial year, the level of Board independence
has been brought into compliance with the Governance Code (see
Board independence opposite).
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 Directors’
Remuneration report on page 78).
The Company undertakes extensive engagement with colleagues
(see page 86) and has a clear and transparent approach to
executive director remuneration (see the Directors’ Remuneration
report on pages 68 to 83). However, over the course of the year,
the Company has not formally consulted with the wider workforce
on executive remuneration. The Company is reviewing its policy on
engagement in this area.
The Board considers it has been in compliance with the
requirements of the Governance Code during the financial year,
with the exception of the matters highlighted above.
Annual General Meeting (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 and, therefore, it was not possible
for shareholders to attend our AGM in 2020, as a consequence
of Government guidelines on public gatherings. On the basis of
current Government guidelines, we are anticipating that all social
distancing rules will have ended by the time of our AGM this year.
It is our intention, therefore, to hold our AGM at the offices of
Gowling WLG (UK) LLP, 4 More London Riverside, London, SE1 2AU
on Friday 23 July 2021 at 11.00 am and I look forward to meeting
with shareholders then.
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 2021 AGM, we will inform shareholders
as soon as we can via our website (www.premierfoods.co.uk).
Shareholders should check our website to ensure they have the
most up to date information available regarding the AGM.
We would like to thank all shareholders for their co-operation and
understanding in these challenging times.
Colin Day
Non-executive Chairman
19 May 2021
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Board tenure
The average length of appointment of our NEDs was 2.8 years, as
at year end. The breakdown for the full Board can be seen in the
following chart.
0-1 years:
1-3 years:
3-6 years:
6-9 years:
9+ years:
3
5
0
2
0
(As at 3 April 2021)
Board independence
The Governance Code recommends that at least half the Board,
excluding the Chairman, should comprise non-executive directors
determined by the Board to be independent. 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 as shown in the chart below.
Chairman:
Independent
directors:
Non-independent
directors:
(As at 3 April 2021)
1
5
4
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. Yuichiro Kogo
and Daniel Wosner, who represent our two 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 (who held 19.2%
of issued share capital as at 3 April 2021) and Oasis (who held
8.9% of issued share capital as at 3 April 2021), each is entitled
to nominate an individual for appointment to the Board. For
GOVERNANCE
Nissin this is conditional upon them retaining an interest in shares
in the Company (representing 15% of issued share capital). A
new relationship agreement was signed with Oasis in January
2021. There is no longer a shareholding requirement and the
appointment can be terminated by either party giving five business
days’ notice. A summary of the principal terms of both relationship
agreements can be found on the Company’s website. During the
period to 3 April 2021, 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 on directors’ duties, key
elements of the Listing Rules, DTRs and Market Abuse Regulation
and a governance pack.
Board information
The main source of information is via the Board papers which are
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 report; 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 – completed the review of options to
accelerate shareholder return with the approval of a segregated
merger of the Group’s defined benefit pension schemes.
• Review and approval of the sale of the Group’s minority interest
in the Hovis business.
•
International strategy – monitored the implementation of the
revised strategy to return the International business to long-
term sustainable growth.
• Review of e-commerce trends within ambient grocery and the
Group’s online strategy and performance.
• Review of NPD strategy and initiatives.
• Five Year Strategic Plan – detailed review of business plans for
the medium-term.
• Knighton – monitored re-integration of the Knighton business
into the rest of the Group.
• Ongoing updates from management on implementation of
strategy throughout the year.
Premier Foods plc
www.premierfoods.co.uk
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Governance overview continued
Operational performance
• Trading updates from the UK and International businesses.
• Received regular updates on the impact of the Covid-19
pandemic on the business and key stakeholders and the
detailed plans in place to protect colleagues.
• Monthly management accounts.
• Review of the implications of UK exit from the EU and the
Group’s plans and mitigation.
Financial performance & risk
• Approval of budget, re-forecasts and monthly management
accounts.
• Review of medium-term financing and approval of the
repayment of £190m of the Group’s Floating Rate Notes.
• Review of key risks facing the business.
• Detailed review of cyber security and the Group’s strategy to
enhance processes and procedures.
• 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.
• Update from the Workforce Engagement NED.
• Review of governance best practice and the Governance Code.
Responsibility & sustainability
• The Board reviewed the Group’s approach to Health and Safety,
product safety and trends and issues relating to nutrition,
modern day slavery, gender pay, Inclusion and Diversity and
plastic packaging.
Board allocation of time over the year
Strategic
development
& implementation: 21%
Operational
performance:
Financial
performance &
risk:
24%
31%
Environmental, Social and
Governance (including
employees and H&S): 24%
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.
2020/21 evaluation
An externally facilitated evaluation was undertaken last year by
Lintstock (who have no other connection with the Company). This
is the second year of the three-year rolling evaluation process.
Questionnaires, were prepared by the Company Secretary, in
conjunction with the Chairman, covering a wide range of areas,
building on the previous year’s external review. The review
covered the Board, its Committees and the Chairman, CEO and
CFO. The responses were compiled and presented to the Board
and Committees for review, and action plans to address areas
highlighted by the evaluation for focus over the forthcoming year
were approved.
Outcomes
Overall, the responses to the Board and Committee questions
were very positive and demonstrated that the Board had strong
foundations and is well placed to deal with future challenges.
Board composition and Board dynamics, the oversight of culture
and understanding of stakeholders were all rated highly. The
performance of the Chairman 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 executive management team had performed well
over the year and continued to maintain positive relationships with
the rest of the Board.
The following areas to enhance the effectiveness of the Board were
identified:
(As at 3 April 2021)
• Strategy – approval and implementation of the new five-year
strategic plan for the Group;
• Emerging Trends – additional focus to be given to discussing
and reviewing potential and emerging trends and ensuring that
sufficient resources are applied;
• Diversity – it noted that many initiatives were being taken
within the Group to address issues of diversity but there was a
recognition that further work was needed to ensure progress
was delivered; and
• Wider Workforce (knowledge and understanding) – it was noted
that progress had already been made in this area, with the
activities led by the Workforce Engagement NED, but this was
considered to be another important area for continued focus.
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GOVERNANCE
these measures have been highly effective in minimising the
number of infections experienced at our sites. There has also
been extensive two-way communication with colleagues across
the business to provide assurance and to address any areas of
concern. This includes 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.
Continuity of supply
The Group takes its responsibilities as a major UK food
manufacturer seriously and the Board recognised the
importance of supplying food to the nation at a time of need.
The management team has worked incredibly hard and been
highly successful in maintaining supply at significantly elevated
level of demand, keeping the business fully operational while,
at the same time, retaining strict distancing measures to
keep site-based colleagues safe. We have continued to work
very closely with our suppliers to ensure continued supply of
ingredients and, where necessary, identify alternative 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.
Protecting the business
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. Management have also worked
hard to ensure that the business is well positioned once the
impact of the pandemic ends, with continued focus on the
Group’s core branded growth model strategy, with the launch
of a series of new products with increased marketing support.
The Group chose not to furlough any colleagues or make any
redundancies and did not take financial support from the
Government in respect of the pandemic.
Supporting our communities
At the same time as keeping our sites and factories running,
the business has also supported the local communities where
we operate. Throughout the pandemic, we have strengthened
our partnership with FareShare, the UK’s national network
of charitable food redistributors, donating the equivalent of
550,000 meals to their network of foodbanks and, our partners
at Nissin, have donated 30,000 pots of noodles. In addition, we
have also provided 200,000 easy to prepare meals and snacks
for NHS workers in 28 hospitals local to our sites.
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. It was also noted that the
Chairman had no other significant external commitments and was
able to dedicate sufficient time to the role.
Connecting with our stakeholders
We believe that how we work with our stakeholders has
an important role to play in delivering our branded growth
strategy, helping us to be a responsible business and
generating long-term sustainable growth.
Further details on how the Board has considered the interests
of stakeholders, when making key decisions over the course of
the financial period, can be seen in the Group’s response to the
Covid-19 pandemic.
The Group’s response to the Covid-19 pandemic
Robust measures were put in place to deal with the threats
posed by Covid-19 and the Board has regularly monitored
the impact on the Company and its key stakeholders. At the
start of the pandemic the Group established a Covid-19 Crisis
Management Team, headed by the CEO, and frequent updates
have been provided to the Board.
Health and well-being
The Group’s key priority has remained the health and well-
being of our colleagues and other stakeholders. A wide range
of stringent health, safety and hygiene protocols have been
adopted in our factories, offices and across our supply chain.
These were initiated in early March 2020, with an emphasis
on enhanced hygiene controls, social distancing, working from
home (where possible) and controlled access to manufacturing
sites. We have carried out individual risk assessments for
all colleagues classed as vulnerable or clinically extremely
vulnerable to ensure the most appropriate Covid-19 control
measures for those colleagues. Should a colleague test positive
or be required to self-isolate we have provided full pay. We
introduced Social Distancing Marshals across sites in the
Autumn, have liaised closely with The Department of Health
and Social Care on mass testing, taken part in a mass testing
pilot scheme at one of our sites plus internal pilots at two other
sites. In total, we carried out over 8,500 lateral flow tests or PCR
tests on colleagues over an eight week period in Q4 to inform
our approach to mass testing going forward. The Group believes
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Premier Foods plc
www.premierfoods.co.uk
61
Governance overview continued
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 Group’s response
to Covid-19 is set out on page 61.
Customers
and consumers
Colleagues
Suppliers
Communities and
environment
Government
and society
Bond holders, banks
and pension schemes
Shareholders, investors
and analysts
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.
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,
85% of our total third party spend was with
UK based suppliers.
Issues and factors which are most important to these stakeholders
As a responsible food
The Board believes in the
The Group’s banks, bond holders
An important role of the Board
manufacturer, we consider the
importance of acting responsibly
and lending group provide essential
is to represent and promote the
impact we have in the areas we
and operating with high standards
financing that supports the long-term
interests of its shareholders, as well
operate, including local businesses,
of business conduct. The Group
viability of the Group. The Group
as being accountable to them for
residents and charities. We also
also takes an active role in seeking
also has a large segregated pension
the performance and activities of
have an important role to play in
to shape and influence debates
scheme, with approximately 45,000
the Group.
ensuring we reduce our impact on
around key issues in society
pensioners and deferred pensioners,
the environment.
relating to food safety, nutrition
who depend on the Group’s long-
and health & well-being issues.
term ability to fund the schemes.
• 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
Engagement and outcomes
We seek to develop sustainable partnerships
with our customers focused on driving mutual
category growth. 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.
Further information
• Understanding our purpose, strategy and values
• Reward and recognition
•
Safe and pleasant working conditions
•
Learning and development opportunities
• Health and well-being
•
Inclusion and Diversity
• Brexit implications for EU citizens
• Understanding the Group’s strategy and
growth plans
•
•
•
Forming long-term collaborative
partnerships
Transparent terms of business
Fair payment terms
• How our factories impact on
•
Food safety
• Being kept up to date with
•
Shareholder return over the
local communities
• Volunteering and supporting
charities
• Reducing carbon emissions
•
Environmental commitments
• Plastic packaging
• Nutrition
• Brexit preparations
•
Tax
way
• Conducting business in a fair
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
covenant
• Ongoing schedule of
contributions
its brands
• Delivery of financial
performance
• Deleveraging the business
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.
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 Engagement NED and we have introduced
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.
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 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.
Updates are provided to the Board
The Board receives regular
Management engages regularly with
The Board believes it is very
on ESG (Environmental Social and
updates from the Corporate
the Group’s lenders, bond holders
important to engage with its
Governance) matters affecting the
Affairs Director on key regulatory
and banking group via conference
shareholders and does this in a
business, so that the longer-term
issues affecting the Group and the
calls, conferences and face-to-face
number of ways.
prospects of the Group can be
food industry, such as nutritional
meetings.
considered in its decision-making.
guidelines, advertising and
The Board receives updates on
KPIs relating to our economic
promotions.
During the year the Group has
presentations and conference calls
continued to reduce Net debt and,
for shareholders and analysts, face-
This includes the financial results
contribution and environmental
Secretary provides updates on
its revolving credit facility to 2024
shows and anonymous shareholder
impact, as well as our contributions
governance, legal, regulatory and
with a refreshed banking group and
feedback via brokers. The Chairman
to the community, both at a local
compliance matters.
launched an offer of new Senior
and CEO meet regularly with
The General Counsel & Company
in May 2021, the Group extended
to-face meetings, investor road
site level and via the work we do
with our corporate charity partners.
We seek to take an active
Secured Fixed Rate Notes.
role through membership of
The CFO maintains a regular dialogue
During the year, the Board
organisations such as the Institute
via attendance at Trustee and
reviewed the Group’s new ESG
for Grocery Distribution and the
Investment Committee meetings
governance structure and the
Food and Drink Federation.
and regularly reports on the Group’s
performance of the five pillars of
the ESG strategy.
trading performance.
As part of the Group’s strategic
review, over the course of the year,
a segregated merger has been put
in place with the Group’s three main
pension schemes.
shareholders to discuss strategic
and governance matters. The Chair
of the Remuneration Committee
also engages with shareholders
in connection with remuneration
matters.
Board members also have the
opportunity to meet with private
shareholders at the Company’s
AGM.
→ Encourage healthier choices – page 20.
→ Realise people’s potential – page 22.
→ Drive ethical sourcing – page 28.
→ Support our communities –
→ How we are a responsible
→ Net debt and free cash flow KPIs
→ Engagement with shareholders –
→ Workforce Engagement NED – page 58.
page 26.
business – page 16.
- page 34.
page 70.
→ Reduce our environmental
footprint – page 31.
→ Further details of the refinancing
– page 42.
62
Premier Foods plc
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Customers
and consumers
Colleagues
Suppliers
Communities and
environment
Government
and society
Bond holders, banks
and pension schemes
Shareholders, investors
and analysts
GOVERNANCE
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.
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 & well-being issues.
The Group’s banks, bond holders
and lending group provide essential
financing that supports the long-term
viability of the Group. The Group
also has a large segregated pension
scheme, 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.
• How our factories impact on
•
Food safety
local communities
• Volunteering and supporting
charities
• Reducing carbon emissions
•
Environmental commitments
• Plastic packaging
• Nutrition
• Brexit preparations
•
Tax
• Conducting business in a fair
way
• Being kept up to date with
current trading and performance
•
Shareholder return over the
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
• Deleveraging the business
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 ESG
governance structure and the
performance of the five pillars of
the ESG strategy.
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.
We seek to take an active
role through membership of
organisations such as the Institute
for Grocery Distribution and the
Food and Drink Federation.
Management engages regularly with
the Group’s lenders, bond holders
and banking group via conference
calls, conferences and face-to-face
meetings.
During the year the Group has
continued to reduce Net debt and,
in May 2021, the Group extended
its revolving credit facility to 2024
with a refreshed banking group and
launched an offer of new Senior
Secured Fixed Rate Notes.
The CFO maintains a regular dialogue
via attendance at Trustee and
Investment Committee meetings
and regularly reports on the Group’s
trading performance.
As part of the Group’s strategic
review, over the course of the year,
a segregated merger has been put
in place 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. The Chairman
and CEO meet regularly with
shareholders to discuss strategic
and governance matters. The Chair
of the Remuneration Committee
also engages with shareholders
in connection with remuneration
matters.
Board members also have the
opportunity to meet with private
shareholders at the Company’s
AGM.
→ Encourage healthier choices – page 20.
→ Realise people’s potential – page 22.
→ Drive ethical sourcing – page 28.
→ Support our communities –
→ How we are a responsible
→ Net debt and free cash flow KPIs
page 26.
business – page 16.
- page 34.
→ Reduce our environmental
footprint – page 31.
→ Further details of the refinancing
– page 42.
→ Engagement with shareholders –
page 70.
Premier Foods plc
www.premierfoods.co.uk
63
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Why these stakeholders are important to our business
Customers and consumers buy and eat
We have an experienced and dedicated workforce of
We are one of Britain’s largest food
our products – they are at the heart of the
over 4,000 colleagues at 16 sites across the UK. We
manufacturers and we are proud to work
Group’s business model.
have a responsibility to ensure all colleagues work in a
with many British suppliers. Over the year,
safe environment and have opportunities to learn and
85% of our total third party spend was with
develop in their careers.
UK based suppliers.
Issues and factors which are most important to these stakeholders
• Category leadership
• Understanding our purpose, strategy and values
• Understanding the Group’s strategy and
•
•
Excellent customer service levels
• Reward and recognition
Innovative, relevant products which meet
Safe and pleasant working conditions
•
•
•
Learning and development opportunities
• Health and well-being
Inclusion and Diversity
• Brexit implications for EU citizens
growth plans
partnerships
Forming long-term collaborative
Transparent terms of business
Fair payment terms
•
•
•
consumers’ needs
• Great tasting products
• Convenient and responsible packaging
formats
•
Environmental, nutritional and
sustainability issues
Engagement and outcomes
We seek to develop sustainable partnerships
We communicate and engage with colleagues in many
It is crucial that we develop strong
with our customers focused on driving mutual
ways to ensure they understand our business priorities
relationships with our suppliers, based upon
category growth. Regular meetings take place
and performance. This ensures that, in turn, we can
mutual trust and respect, to ensure that we
at many levels, through the sales team, senior
listen to their issues and concerns.
can source high quality ingredients at the
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.
We have regular Company briefings led by the CEO
right price.
and shared by video feed to all sites across the Group.
We have open, constructive and effective
There are regular site briefings from management
relationships with suppliers through regular
to give presentations and listen to feedback,
meetings which provide both parties the
supplemented by ELT and Board visits.
ability to feed back on successes, challenges
Feedback is received via Group employee surveys,
and our ongoing strategy.
line management and HR teams, resulting in targeted
Regular audits of suppliers are undertaken
action plans to address key areas for improvement.
to ensure compliance with ethical sourcing
The Board receives regular updates on key employee
standards. Feedback from suppliers is
issues and internal communications.
Additionally, during the year, the Board appointed a
Workforce Engagement NED and we have introduced
employee forums at all sites to increase the focus on
two-way communication.
A formal whistleblowing procedure is in place to allow
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.
employees to raise any concerns or issues they have
Payment policies, practice and performance
confidentially and details of all cases raised are fed
are reported through the Government’s
back to the Board via the Audit Committee.
Payment Practices Reporting portal.
Further information
→ Workforce Engagement NED – page 58.
Nomination Committee report
Dear shareholder
On behalf of your Board, I would like to present the Nomination
Committee report for the period ended 3 April 2021. 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 56 and 57.
Succession management
The Board reviews the Group’s Talent and Succession process on
an annual basis. This covers all management colleagues to identify,
monitor and develop talent within the Group. Senior leadership
was reviewed in detail including members of the ELT and their
direct reports. It was noted 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, including the current CEO and CFO, the majority of ELT
positions and all Factory General Managers. Colleagues see this
as positive, helping not only in attracting talent externally, but
also with internal retention. We are rolling out a new Leadership
programme in 2021, for our most senior leaders in the business
(circa 80 colleagues), to make sure they are equipped for the
changing future in which leaders will need to operate, which
will include how to lead and manage diverse teams. 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.
However, following our entry into the FTSE 250 in September 2020,
we have not yet met the standard set for gender diversity on our
Board outlined in the Hampton-Alexander Review. It is a matter
of priority for me, and the Board, that we address this as soon as
practicable. Whilst there were no female members of the executive
team at year end, Hannah Collyer was appointed to the ELT in May
2021, as Corporate Affairs and ESG Director. In addition, within the
wider management population (circa 550 colleagues) the gender
split is more balanced at 43:57 (female to male) as at year-end. We
are, therefore, focusing attention on ensuring appropriate retention
and development opportunities are in place to ensure that we have
a more diverse pipeline when it comes to succession planning for
the most senior roles.
The Board and Nomination Committee have reviewed the Group’s
approach to diversity (including both gender and ethnicity) within
senior management and across the whole business on a number
of occasions, and we are pleased to note that this has become an
area of significant focus over the last couple of years. The Group
is committed to creating an inclusive culture across the whole
organisation and to create a safe work environment that promotes
inclusion, dignity and respect for all. Over the course of the year,
a number of significant steps have been taken to deliver this with
a newly appointed Director of Talent and Culture and a Culture
and Engagement Business Partner to accelerate the rollout of the
diversity agenda. We have developed and launched a Reverse
Mentoring Programme to address the gender imbalance within
senior roles across the business. In addition, we regularly look
at how we attract colleagues to the business to make sure our
practices attract as diverse a talent pool as possible, and in 2021 we
are implementing a line manager ‘diversity in recruitment’ training
module.
The Group also undertook its first diversity data capture exercise
in August 2020 (covering a wide range of areas including gender,
ethnicity, sexual orientation, religion and disability), to aid in
understanding the make-up of our business and establish a base
point for monitoring progress. This was a voluntary survey and we
were pleased to receive a 52% response rate.
Further information on our approach to inclusion and diversity
across the business is set out in the section on ‘How we are a
responsible business’ on page 24.
Gender diversity
2021
2021
2021
20%
0%
28%
Board – (2 of 10 directors)
Senior management – (0 of 8 ELT members)
Direct reports – (15 of 54 ELT direct reports)
(Female:male, as at 3 April 2021)
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 2021 AGM.
Colin Day
Nomination Committee Chair
19 May 2021
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Audit Committee report
Dear shareholder
On behalf of your Board, I am pleased to present the Audit
Committee report for the period ended 3 April 2021. 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 56 and 57. In addition to the Committee members,
the CEO, CFO, Chairman, Director of Financial Control, Head of
Internal Audit & Risk 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 preparation for the UK exit from the EU,
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;
• Received updates on changes to governance and financial
reporting, including TCFD;
• Conducted a bi-annual review of key risks facing the business
and assessed the Group’s mitigation plans;
• Reviewed and the Group’s policy on Auditor Independence and
Non-Audit Services;
• Reviewed the processes and procedure in place for Anti-Bribery
and Corruption and approved the Group’s policy;
• Reviewed the Group’s IT systems and controls, cyber security
and business continuity management;
• Reviewed calls received from the whistleblowing helpline and
management’s response to them; and
• Reviewed a proposal to restructure the distributable reserves
of the Group, in order to provide greater flexibility in how the
Group manages its capital resources going forward.
GOVERNANCE
Committee evaluation
As part of the internal Board evaluation exercise conducted during
the year (see page 60 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.
The Group’s policy on Auditor Independence and Non-Audit
Services 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. Non-audit fees for the period
amounted to £64,500 (2019/20: £84,000) representing 9% of
the audit fee. Following the year end, KPMG were engaged to
perform assurance work relating to the proposed issue of new 5
year Senior Secured Fixed Rate Notes in May 2021. The fees for
this work will be approximately £130,000 and will be reported in
non-audit fees for 2021/22. The Committee is mindful of guidelines
in respect of non-audit services and the potential threat to auditor
independence. The Committee assessed that, in each case, the
nature of the 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 2021 (the Board’s
recommendation is set out on page 87).
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Premier Foods plc
www.premierfoods.co.uk
65
Audit Committee report continued
Risk management
Details of our risk management process are set out in the risk
management section on pages 46 to 53.
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, the preparation of the Group’s
consolidated financial statements, 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
The internal audit function carries out work across the Group,
providing independent assurance and advice to help the Group
identify and mitigate any potential control weaknesses. Both
the internal audit and risk management functions have a role in
identifying emerging risks that may threaten achievement of the
Group’s strategic priorities.
Prior to the start of the new financial year, the Committee reviewed
and agreed the internal audit plan for the upcoming year. The
Committee also reviewed those plans again during the year in
light of Covid-19. The internal audit plan is risk based and takes
an independent view of what internal audit considers to be the
highest known and emerging risks and strategic priorities facing
the business. The planned audits will assess the adequacy and
effectiveness of the internal control environment, identifying
weaknesses and ensuring these are addressed within agreed
timelines.
The internal audit function provides internal audit reports detailing
significant audit findings, progress of and any changes to the
internal audit plan and updates on agreed management actions
to rectify control weaknesses. Where appropriate, additional
information is provided where either the Committee has requested
it, or the Head of Internal Audit & Risk feels it pertinent. Annually,
the Head of Internal Audit & Risk will give an assessment of the
overall control environment.
The internal audit function had to change direction and focus in
light of the Covid-19 pandemic and imposed working restrictions.
As national lockdowns were imposed, the team took a risk-based
approach to the rest of the year, redeploying some of the internal
audit resource into the business to provide operational support
while the rest of the team established new ways of working. A
number of high risk audits were conducted remotely and others
were deferred to 2021/22, where appropriate. The 2021/22 audit
plan has considered all existing and emerging risks and what
was deferred from 2020/21, incorporating both elements where
appropriate. The ability to execute the 2021/22 internal audit
plan, in the context of continued lockdown and social distancing
restrictions, has also been considered.
Audit work over the year focused on the following five core areas:
Governance and oversight – Corporate Governance framework and
anti-bribery and corruption procedures.
Business and operations – Procurement vendor management and
controls over material suppliers, and transport and warehousing
cost control.
Finance, HR & admin – General ledger, Accounts receivable and
Account payable controls, Treasury management and Group
property.
Information Technology – User access profile controls.
Assurance and Advisory – Financial authority limits and UK-EU Exit
readiness of Data Centre cloud migration.
In addition, the Chair of the Audit Committee held a number of
meetings with the Head of Internal Audit & Risk. 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 87.
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.
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GOVERNANCE
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 110.
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. Further information is set out in notes 11 and 12 on
pages 120 and 121.
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. With effect from 30th June 2020, the Premier
Foods Pension Scheme (PFPS) and Premier Grocery Products
Pension Scheme (PGPPS) were merged on a segregated basis with
the RHM Pension Scheme. The transfer of assets and liabilities to
new sections of the RHM Pension Scheme for both the PFPS and
PGPPS has been completed. 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 3 April 2021 the RHM Pension
Scheme reported a surplus of £922.5m and the Premier Schemes
reported a deficit of £382.6m (2019/20: RHM Pension Scheme
surplus of £1,505.3m; Premier Schemes deficit of £274.9m), the
year on year reduction 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 and also
the methodologies for calculating the net settlement credit. The
financial assumptions were based on the same methodology as last
year, with the exception of the inflation assumptions which were
updated in line with market practice. Further information is set out
in note 13 on pages 122 to 127.
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 and upcoming UK regulations
impacting the food industry. 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 53) and the going concern statement (set out on page 104)
could be supported.
Simon Bentley
Audit Committee Chair
19 May 2021
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Premier Foods plc
www.premierfoods.co.uk
67
Directors’ Remuneration report
Annual Statement
Dear shareholder
On behalf of the Board I am pleased to present the Directors’
Remuneration report for the 53 week period ended 3 April 2021.
Covid-19
2020/21 has created both opportunities and challenges for Premier
Foods. The health and well-being of our colleagues has remained
the top priority for the business, whilst meeting the elevated level
of demand from customers. I would like to thank management for
their strong leadership throughout the period, in meeting this dual
challenge.
Throughout the period management has ensured colleague safety
remained a priority. Robust measures were put in place and these
have been closely monitored and adapted over the year in response
to developments (further details can be found on page 61). There
has been a strong engagement and communication plan and close
collaboration with colleagues across the business.
A bonus and additional holiday entitlement were awarded to
all site-based colleagues, in recognition of the significant work
required to adapt to new operating measures and to respond to
increased levels of customer and consumer demand. An additional
one-off bonus was also paid to all colleagues who are not members
of the management bonus scheme, in April 2021, to recognise the
extraordinary efforts of colleagues over the last 12 months.
Furthermore, the Group chose not to furlough any colleagues or
make any redundancies and did not take financial support from the
Government in respect of the pandemic.
Overview of performance
The Group delivered a very strong set of results for the year, with
Revenue up +10.3% (52 week basis), Trading profit up +11.9% (52 week
basis) and Net debt reduced to £314.1m (on a pre-IFRS 16 basis).
It was noted that the management team has worked incredibly hard,
and been highly successful in maintaining supply at a significantly
elevated level of demand, keeping the business fully operational while
implementing a raft of new and additional measures, including social
distancing, enhanced PPE, changes to working practices, and remote
working where practical, across our sites, to ensure the safety and well-
being of our colleagues was given the highest priority. Further progress
was made in executing the Group’s branded growth strategy, with the
launch of a series of new products with increased marketing support.
The Group has also worked closely with major customers to meet the
elevated levels of consumer demand and this, together with excellent
execution both in-store and online, resulted in market share growth in
both volume and value terms across many of the Group’s categories.
The revised strategy for the International business made good
progress in the year with revenue up by +23% (at constant currency)
and cost saving initiatives and margin enhancement programmes
delivered substantial savings. Over the period, the Group has reduced
Net debt by £94.0m (on a pre-IFRS 16 basis) and also repaid £190m
of its Floating Rate Notes which has reduced interest payments by
approximately £10m per annum.
This performance has led to improved sentiment towards the Group
and its prospects which has resulted in the share price rising from
24.0 pence to 94.6 pence in the period. In addition, a significant re-
structuring of reserves has taken place within the Group, including
a capital reduction of the Company, in order to provide greater
flexibility in how the Group manages its capital resources. The
directors have proposed a final dividend of 1.0pence per share for
the financial period, subject to shareholder approval, representing
the first dividend proposed by the Company since 2008.
Annual Bonus performance outcome for 2020/21
As a result of the strong trading performance and reduction in Net
debt, both of the stretching financial targets were exceeded. The
Committee also assessed the non-financial targets, which were
based on strategic, operational and ESG objectives, and following
strong performance against the stretching objectives set, it was
determined that these had been substantially achieved.
In assessing the annual bonus outcome, the Committee undertook
a review of each director’s individual performance, the overall
performance of the business and also the experiences of key
stakeholders including shareholders, employees, suppliers and
customers. This resulted in the Committee awarding a maximum
bonus award to Alex Whitehouse (£625,000, representing 125%
of salary) and a bonus of 96.25% of maximum to Duncan Leggett
(£298,375, representing 96.25% of salary). Full details of the targets
and performance over the period are provided on pages 73 and 74.
One-third of the annual bonus payment 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 74.
LTIP
The Committee assessed the performance conditions for the 2018
LTIP award. The maximum targets relating to relative TSR and
adjusted EPS were both exceeded, meaning that both elements of
the award will vest in full on 8 August 2021. Full details of the targets
and performance over the period are provided on page 75.
In assessing the annual bonus and LTIP outcomes, the Committee
undertook an assessment ‘in the round’, to ensure that the
outcomes are a fair reflection of overall Company performance
and aligned with the experience of other stakeholders. As part of
this, the Committee was pleased to note that the Group chose
not to furlough any colleagues or make any redundancies and did
not take financial support from the government in respect of the
pandemic. The success of the business over the last year has been
shared with colleagues, as set out earlier, and has resulted in a
significant increase in the share price and creation of shareholder
value. Taking all of the above into account, alongside the wider
performance context detailed elsewhere in the annual report, the
Committee considered that the annual bonus and LTIP outcomes
are a fair reflection of Company and individual performance in the
year. As such, the Committee has not exercised its discretion to
adjust awards.
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GOVERNANCE
Relationship between ESG matters
and remuneration arrangements
The Committee is aware of the increasing importance of ESG
matters for both the Group and its stakeholders. An element of
ESG was included in the executive directors’ annual bonus goals
for 2020/21, and the weighting of this element has been increased
in the CEO’s annual bonus goals for 2021/22. During the year a
new ESG Committee was established with the CEO appointed as its
Chair. In addition, as part of the Committee’s overall review of the
Group’s remuneration strategy, it ensures that arrangements do
not encourage behaviour which is not aligned with the Group’s ESG
strategy. Further information regarding the Group’s approach to
ESG is set out in the section ‘How we are a responsible business’ on
pages 16 to 33.
Wider workforce
During the year Helen Jones was appointed as our Workforce
Engagement NED. The Company has established employee forums
at all sites across the Group and Helen has joined a number of
meetings at both manufacturing and office sites, to listen to the
views and concerns of colleagues. These have been reported to,
and discussed by, the Board and the Committee.
During the year, the Committee also reviewed information on
broader workforce pay policies and practices which provided
important context for the decisions on executive pay taken during
the year. The pension levels for the executive directors are aligned
with that available to the majority of the workforce. The operation
of the annual bonus scheme is consistent for all participants, and
any financial measures are aligned with the overall Group targets.
The executive directors have other additional constraints on their
remuneration package which are not applicable to the wider
management population, such as bonus deferral and the LTIP
holding period.
As well as the two bonus payments and additional holiday
entitlement that was awarded to the wider workforce, we also
operate an all-employee Sharesave Plan which allows all colleagues
to share in the success of the Group. The colleague participation
rate in this scheme is currently 27%.
I look forward to receiving your support for the Annual Report on
Remuneration at the 2021 AGM.
On behalf of the Board
19 May 2021
Pam Powell
Remuneration Committee Chair
Executive Directors’ Salary
Both Alex Whitehouse (CEO) and Duncan Leggett (CFO) were
appointed in 2019. As set out in last year’s Directors’ Remuneration
report, they were both appointed on salaries significantly below
their predecessors and the Committee aims to increase their
salaries over the two years from their appointment to a level at,
or near, the FTSE 250 lower quartile, which the Committee feels is
appropriate given the Company’s market capitalisation and also its
level of turnover, enterprise value and complexity.
The Committee agreed to increase Mr Whitehouse’s salary to
£500,000 with effect from 30 August 2020 and to increase Mr
Leggett’s salary to £310,000 with effect from 10 December
2020 (reflecting the anniversary of their appointments). When
considering the salary increases the Committee assessed the
performance of the directors (as highlighted in the performance
outcome for 2020/21 above) and agreed that both had performed
strongly in their roles and that the increases were therefore
appropriate. The Committee also took into consideration the overall
performance of the business during the year and the experiences of
other stakeholders. The CEO’s salary is now positioned around the
FTSE 250 lower quartile. However, the CFO’s salary remains below
the FTSE 250 lower quartile and, therefore, a second above average
increase in salary is anticipated in 2021/22, subject to performance.
It should also be noted that both salaries are currently at levels well
below those of their predecessors (CEO: c. -29% and CFO: c. -27%).
Executive director
Alex Whitehouse
Duncan Leggett
Salary as at
3 April 2021
£500,000
£310,000
Change
+5.3%
+12.7%
Salary as at
28 March 2020
£475,000
£275,000
Arrangements for 2021/22
A new remuneration policy was approved by shareholders in August
2020, with over 96% of votes received in favour, and we would like
to thank shareholders for their strong support. The Committee
considers that the new Remuneration Policy operated as
anticipated over the financial period and no changes are proposed
to the policy for 2021/22.
During the year, a tender exercise was undertaken and Deloitte
were appointed to advise the Committee. As part of their induction
they carried out a review of arrangements with stakeholders and
this concluded that the overall remuneration strategy worked well,
drove the right behaviours and supported the implementation of
the Group’s strategy.
For 2021/22, no changes are proposed to the performance
measures. The Committee has reviewed the targets for the annual
bonus and LTIP. It was noted that there were challenges in setting
targets due to the continued uncertainty of the impact of Covid-19
and the potential for demand for the Group’s products to reduce
with the resumption of out of home eating. The Committee
believes that the targets agreed are challenging and set at levels
that will reward very good performance. They are also considered
to be aligned with the Group’s strategic priorities and further details
of the measures for 2021/22 are provided on page 82.
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Premier Foods plc
www.premierfoods.co.uk
69
Directors’ Remuneration report continued
Overall approach to remuneration
At Premier Foods, the remuneration policy is designed to attract,
retain and motivate a high calibre management team. Focus
is placed on driving exceptional performance and creating
shareholder value in a sustainable way, as well as aligning the
interests of the executive directors with key stakeholders.
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 Corporate 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 interests of both shareholders and key stakeholders,
including employees. The Committee is committed to being
transparent in respect of 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. Recent engagement has included
discussion to understand shareholder views on the continued
strategic focus on Net debt and whether it remained an appropriate
bonus goal following the continued deleveraging of the business.
The Committee concluded that it was appropriate to use Net debt
as a measure for 2021/22, but consideration would be given to
introducing an alternative financial measure for subsequent years.
Simplicity – remuneration structures should avoid
complexity and their rationale and operation should be
easy to understand
The Committee believes the current arrangements 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
between fixed and variable remuneration.
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 annual bonus and LTIP. The Committee updated the
malus and clawback provisions in line with current best practice
expectations in the 2019/20 financial year. This included introducing
additional trigger events in the event of corporate failure and/or
material damage to the Company’s business or reputation. The LTIP
rules have also 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.
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 in the
Remuneration Policy approved by shareholders at the 2020 AGM. 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
The Committee seeks to ensure that targets for the 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.
When assessing performance against the annual bonus and LTIP,
the Committee also considers:
•
•
•
the overall performance of the business;
the experience of key stakeholders including shareholders,
employees, suppliers and customers;
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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GOVERNANCE
Summary of the Directors’ Remuneration Policy
The current Directors’ Remuneration Policy was approved by shareholders at the AGM on 12 August 2020 (with 96.65% of shares voted
being in favour). The following table presents a summary of the key elements of the current Directors’ Remuneration Policy and how it will
be implemented in 2021/22. The full policy is available in the 2019/2020 annual report which can be found on the Group’s website.
Current elements of remuneration and Operation
How we plan to implement the Policy in 2021/22
Base salary
Set at levels to attract and retain talented individuals with 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.
As of 3 April 2021, salaries are as follows:
• CEO – £500,000
• CFO – £310,000
Normally reviewed annually (currently with effect from 1 July) in
conjunction with those of the wider workforce.
As set out in last year’s Remuneration Report, both CEO and CFO were
appointed on salaries significantly below their predecessors and the
Committee aims to increase their salaries over the two years from their
appointment to a level at, or near, the FTSE 250 lower quartile. Following
an increase during the year, the CEO’s salary is now positioned at around
the lower quartile of the FTSE 250. The CFO’s salary remains below the FTSE
250 lower quartile and therefore an above-average increase is anticipated in
2021/22, subject to performance.
Benefits
Benefits include: cash allowance in lieu of company car; fully expensed
fuel; private health insurance; life insurance; permanent incapacity
benefit; professional memberships; and other ancillary benefits,
including relocation expenses (as required).
No change.
Pension
Pension contributions or a salary supplement of 7.5% of base pay
up to an earnings cap, in line with that offered to the majority of the
workforce.
No change.
Annual bonus
Designed to incentivise delivery of annual financial and operational goals
and directly linked to delivery of the Group’s strategy.
Maximum opportunity:
• CEO – 125% of salary
• CFO – 100% of salary
One-third of earned bonus is deferred into shares for three years.
Awards are subject to malus and clawback provisions.
Long-Term Incentive Plan
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.
Maximum opportunity of 150% of salary.
Awards are subject to a three-year performance period, followed by a
two-year holding period.
The proportion of awards which will vest for threshold performance is 20%.
Awards are subject to malus and clawback provisions.
Shareholding guidelines
Shareholding guideline of 200% of salary.
Executive directors are expected to retain 50% of shares from vested
awards under the DBP and LTIP until they reach the guideline.
Maximum opportunity (no change):
• CEO – 125% of salary
• CFO – 100% of salary
Awards will be subject to the following performance measures:
•
Trading profit (50% weighting);
• Net debt (20% weighting);
•
Strategic objectives (20% weighting for the CEO and 15% for the CFO);
• Operational objectives (10% weighting for the CFO only); and
•
ESG objectives (10% weighting for the CEO; 5% weighting for the CFO).
Awards will also be subject to a Trading profit underpin.
2021/22 LTIP award levels (no change):
• CEO – 150% of salary
• CFO – 100% of salary
Awards will continue to be subject to the following performance measures:
• Relative TSR (two-thirds weighting); and
• Adjusted EPS (one-third weighting).
The current shareholdings reflect the fact that both the CEO and CFO are
relatively new to their roles:
• CEO – 61% of salary
• CFO – 22% of salary
Premier Foods plc
www.premierfoods.co.uk
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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 2021 AGM. The Committee believes that the
Remuneration Policy operated as intended in the year.
Single figure table for total remuneration (audited)
Single figure for the total remuneration received by each executive director for the 53 weeks ended 3 April 2021 (2020/21) and the 52
weeks ended 28 March 2020 (2019/20).
Salary
Taxable benefits2
Pension
Total fixed remuneration
Annual Bonus3
Share based awards4
Total variable remuneration
Single figure for total remuneration
Alex Whitehouse
Duncan Leggett
2020/21
£’000
492
31
13
536
625
745
1,370
1,906
2019/201
£’000
277
19
7
303
284
155
439
742
2020/21
£’000
289
21
13
323
298
–
298
621
2019/201
£’000
85
6
4
95
70
37
107
202
1
2
3
4
Alex Whitehouse was appointed CEO on 30 August 2019 and Duncan Leggett was appointed CFO on 10 December 2019.
Benefits for Alex Whitehouse and Duncan Leggett in the year included provision of car allowance, private fuel, private medical insurance and professional membership. Both
directors were granted an award over 7,351 shares under the all employee Sharesave plan on 15 December 2020. An amount of £1,755 has been included within benefits,
which represents the 20% discount to the share price immediately prior to the offer (see the executive share awards table on page 77 for more information).
One-third of the Annual Bonus will be deferred into shares for three years which are awarded under the terms of the DBP.
The figures for share based payments for 2020/21 represent an estimate of the value of the 2018 LTIP award, which will vest in full in August 2021, based on the three-month
average price to 3 April 2021 of 96.42p. The share price at the date of grant was 41.2p. 57% of the award is attributable to share price appreciation and no discretion has been
exercised in relation to this. The figures for 2019/20 have been adjusted, in line with statutory reporting requirements, following last year’s report to show the actual value
upon vesting of the award on 24 June 2020, based on a share price of 68.5p.
Base salary and fees (audited)
The Committee sets base salary by reference to the size and
complexity of the business based on factors such as market
capitalisation, revenue, market share, and total enterprise value.
Alex Whitehouse was appointed CEO on 30 August 2019 with a
salary of £475,000 and Duncan Leggett was appointed CFO on
10 December 2019 with a salary of £275,000. As advised at the
time of their appointments, 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 is appropriate given
the Company’s market capitalisation and also its level of turnover,
market value and complexity.
On 1 July 2020, Mr Whitehouse and Mr Leggett received salary
increases of 2.5 % in line with all colleagues not involved in collective
bargaining. Following a review of performance for the CEO and
CFO since taking on their roles (see the Committee Chair’s Annual
Statement), the Committee agreed to increase Mr Whitehouse’s
salary to £500,000 with effect from 30 August 2020 and to increase
Mr Leggett’s salary to £310,000 with effect from 10 December
2020. The CEO’s salary is now positioned around the FTSE 250 lower
quartile. However, the CFO’s salary remains below the FTSE 250
lower quartile and therefore a second above average increase in
salary is anticipated in 2021/22, subject to performance. It should
also be noted that both salaries are currently at levels well below
those of their predecessors (CEO: circa -29% and CFO: circa -27%).
Executive director
Alex Whitehouse
Duncan Leggett
Salary as at
3 April
2021
£500,000
£310,000
Salary as at
28 March
2020
£475,000
£275,000
Change
+5.3%
+12.7%
Benefits
Benefits provided for the period related to the provision of car
allowance, private fuel, private medical insurance and professional
membership.
Pension
Under the Company’s Remuneration Policy, pension entitlements
for executive directors are 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 (£170,400
for the 2020/21 tax year). Executive directors have the right to
participate in the Group’s defined contribution (‘DC’) pension plan,
with any contribution above their annual allowance paid as cash.
During the year, Mr Whitehouse and Mr Leggett both participated
in the Group’s DC pension plan.
The table below provides details of the executive directors’ pension
benefits:
Company
contributions to
Group’s DC
pension plan
£’000
4
4
Cash in lieu of
contributions to
DC-type
pension plan
£’000
9
9
Alex Whitehouse
Duncan Leggett
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GOVERNANCE
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 2020/21
In line with the Remuneration Policy, for 2020/21, the CEO and
CFO had maximum bonus opportunities of 125% of salary and
100% of salary, respectively. Performance was measured against
targets relating to trading profit (50% weighting), Net debt (25%
weighting), strategic leadership (15% weighting), operational
leadership (5% weighting) and ESG (5% weighting).
The Committee undertook a full and detailed review of the
performance of each executive director against their financial
and non-financial targets, including a ‘performance in the round’
assessment which is set out below and in the Committee Chair’s
Annual Statement.
As stated earlier in this annual report, the Group delivered a very
strong set of results in 2020/21. Trading profit grew to £148.3m
(52 week basis), representing like-for-like growth of +11.9%, driven
by market share growth in both volume and value terms. Net debt
decreased to £314.1m, as a result of increased Trading profit and
cash flow, cost saving initiatives and the repayment of £190m of
Floating Rate Notes.
The tables below set out performance compared to the financial and non-financial targets set at the start of the year.
Alex Whitehouse (audited)
Performance measure
Financial targets (subject to a Trading profit underpin of £132.0m)
Trading profit
Net debt
£136.0m
£392.1m
£140.0m
£382.1m
Stretch
Target
Annual bonus 2020/21
Performance outcome
Weighting
Performance
(% of max bonus)
£148.3m¹
£314.1m
50.0%
25.0%
75.0%
50.0%
25.0%
75.0%
Performance measure
Non-financial targets (subject to a Trading profit underpin of £132.0m)
Strategic leadership
Performance outcome
Operational leadership
Environment, Social
and Governance (ESG)
Implementation of revised International strategy and structure resulting
in significant improvement in International performance (with revenue at
constant currency up +23% in the year) and signing of new US distribution
agreement with Weston Foods. Integration of Knighton business into the
Group completed with cost savings ahead of budget.
Continued focus on the Health & Safety agenda with a further
improvement in LTA scores. Sponsorship of Group Risk Management
programme to improve the processes for management review and
implementation of recommendations. Introduction of Group-wide
Covid-19 colleague surveys and completion of actions identified.
Appointed chair of new ESG Committee, approved governance structure
and conducted materiality assessment with stakeholders to identify
strategic priorities. Over the course of the year the Group has also
enhanced the nutritional profile of its existing core range and 84% of core
ranges now include a ‘better-for-you’ option.
1
Trading profit performance for the annual bonus has been assessed on a 52 week basis.
Final outcome
Weighting
Performance
(% of max bonus)
15.0%
15.0%
5.0%
5.0%
5.0%
5.0%
25.0%
100.0%
25.0%
100.0%
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Directors’ Remuneration report continued
Duncan Leggett (audited)
Performance measure
Financial targets (subject to a Trading profit underpin of £132.0m)
Trading profit
Net debt
£136.0m
£392.1m
£140.0m
£382.1m
Stretch
Target
Annual bonus 2020/21
Performance outcome
Weighting
Performance (%
of max bonus)
£148.3m¹
£314.1m
50.0%
25.0%
75.0%
50.0%
25.0%
75.0%
Performance measure
Non-financial targets (subject to a Trading profit underpin of £132.0m)
Strategic leadership
Performance outcome
Integration of Knighton business into the Group completed with cost
savings ahead of budget. Completion of segregated pension merger in
line with agreed timescales and financial parameters. Implementation
of bond repayment initiative delivering approximately £10m in annual
interest payments.
Implementation of cost savings project with savings ahead of plan.
Implementation of project to improve cash collection within accounts
receivable and enhance working capital in line with budget.
Improved governance around financial controls to enhance the risk
management process and reduce control observations from the Group
audit report.
Operational leadership
Environment, Social
and Governance (ESG)
1
Trading profit performance for the annual bonus has been assessed on a 52 week basis.
Final outcome
Weighting
Performance (%
of max bonus)
15.0%
11.25%
5.0%
5.0%
5.0%
5.0%
25.0%
100.0%
21.25%
96.25%
The Committee considered the formulaic outcomes of the annual bonus assessment in the context of the current external environment,
wider company and individual performance, the shareholder experience, the customer experience and the treatment of colleagues
throughout the rest of the Group.
In addition to the operational highlights set out above, in 2020/21, Premier Foods has created over £600m of shareholder value, and
delivered a shareholder return of over 285% during the period, outperforming the FTSE All Share index (circa 30% return). Furthermore,
management worked incredibly hard throughout the year to ensure that colleague safety and well-being remained a priority. The Group
chose not to furlough any colleagues or make any redundancies and no money was taken from the government in respect of the pandemic.
The Committee believes that the executive directors responded both decisively and effectively to the challenges of the pandemic, enabling
the Group to perform successfully during 2020/21. In light of the Group’s excellent financial performance, the strategic progress, and focus
on the well-being of employees, the Committee concluded that the formulaic outcomes of the annual bonus assessment were justified, and
no discretion was required to be applied.
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 25 June 2020 based on a share price of 68.5p are set out below:
Alex Whitehouse
Duncan Leggett
2019/20 Annual
bonus
£284,112
£70,464
Bonus deferral
(one-third)
£94,704
£23,488
Shares awarded
138,254
34,289
Deferral period
25.06.20 – 25.06.23
25.06.20 – 25.06.23
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GOVERNANCE
Long-Term Incentive Plan (LTIP)
Performance assessment for the 2018 LTIP award
The performance conditions for the 2018 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 2021 and
concluded that both the relative TSR target and the adjusted EPS target had been fully achieved, which will result in full vesting of the LTIP
award in August 2021. The TSR of Premier Foods over the three-year performance period was 151%, representing significant shareholder
value creation and was significantly above the upper quartile TSR in the comparator group of circa 39%. The Committee considered that the
vesting reflected the underlying performance of the business and was appropriate.
Performance measure
Weighting
Targets
Below
threshold
Threshold
Relative TSR¹
Adjusted EPS2
% of relevant portion of award
vesting3
2/3
1/3
< Median
< 8.4p
Median
8.4p
0%
20%
100%
Outcome
Stretch
Upper
quartile
9.8p
Actual
performance
Upper
quartile
9.8p
Payout
100%
100%
No. of shares
to vest
Alex
Whitehouse
772,538
1 Measured against the constituents of the FTSE All Share Index (excluding investment trusts) at the start of the period.
2
3
2017/18 base year adjusted EPS was 7.6p.
Straight-line vesting between threshold and stretch.
Scheme interests awarded during the financial year (audited)
LTIP award for 2020/21
Details of the LTIP award granted on 25 June 2020 are set out below.
Alex Whitehouse
Duncan Leggett
* Determined based on the closing middle market quotation (MMQ) on 24 June 2020 of 68.5p.
Basis of
award
150%
100%
Face value
on award date*
£712,500
£275,000
Performance
period
01.04.20 – 31.03.23
01.04.20 – 31.03.23
Performance measure
Relative TSR1
Adjusted EPS2
% of relevant portion of award vesting3
Weighting
2/3
1/3
Below
threshold
< Median
< 11.4p
0%
Targets
Threshold
Median
11.4p
20%
Target
Stretch
N/A Upper quartile
12.4p
100%
12.0p
50%
1. Measured against the constituents of the FTSE All Share Index (excluding investment trusts) around the start of the period.
2.
3.
2019/20 base year adjusted EPS was 8.9p.
Target EPS of 12.0p (at which 50% vests) with straight-line vesting between threshold and target and between target and stretch.
When the Committee initially set the 2020/21 EPS targets, the corporation tax rate was expected to be reduced from 19% to 17% for
the 2023 financial year and the EPS targets were set based on this lower tax rate. Since then, the planned reduction in tax rate has been
repealed and the 19% corporation tax rate will now remain in place. The Group currently retains brought forward losses which it can utilise
to offset against future tax liabilities and therefore tax is currently a non-cash item at Premier Foods. Given that that our tax charge is
notional for the purposes of calculating EPS, the Committee has restated the EPS targets to reflect this tax rate change. The impact of this is
0.29p at target and the revised targets are set out in the table above. Given there is no additional tax cost for shareholders, the Committee
believes that this is the right decision to continue to ensure that our executive directors make decisions which are aligned with our strategic
objectives and are in the best long-term interest of our shareholders.
The Committee considers that these targets are very stretching and represent significant value creation for shareholders. The Committee
retains discretion to override the formulaic outcomes 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.
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75
Directors’ Remuneration report continued
Pro rata LTIP awards in respect of 2019/20
As set out in last year’s report, on the appointment of Alex Whitehouse as CEO and Duncan Leggett as acting CFO, the two executive
directors were each entitled to receive a pro rata award under the LTIP in respect of the 2019/20 financial period. This would ordinarily
have been made immediately following appointment, however, members of the Board were in a prohibited dealing period, so the actual
granting of the awards was significantly delayed. The additional awards reflect their entitlement to shares as if the award had been made as
originally intended. To ensure consistency with the original 2019/20 LTIP award, the same performance conditions, performance period and
share price will apply. The vesting date will be three years from the date of grant and a two-year post vesting holding period will apply.
Alex Whitehouse
Duncan Leggett
* Determined based on average MMQ for the five days ending on 6 June 2019 of 35.12p.
Basis of award
Pro rata 150%
Pro rata 100%
Max value on
award date*
£157,777
£152,849
Performance period
01.04.19 – 31.03.22
01.04.19 – 31.03.22
Performance measure
Relative TSR1
Adjusted EPS2
% of relevant portion of award vesting3
Weighting
2/3
1/3
Below threshold
< Median
< 10.1p
0%
Threshold
Median
10.1p
20%
Stretch
Upper quartile
11.1p
100%
1. Measured against the constituents of the FTSE All Share Index (excluding investment trusts) around the start of the period.
Targets
2. 2018/19 base year adjusted EPS was 8.5p.
3.
Straight-line vesting between threshold and stretch.
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 1,230,629 shares as at 3 April 2021). 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 4.0%.
Statement of directors’ shareholding and share interests (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) 2020/21
Shares
owned as
at 3 April
2021
444,518
98,771
Shares
owned as
at 28 March
2020
336,692
60,407
Extent to
which share
ownership
guidelines
met1
61%
22%
Alex Whitehouse
Duncan Leggett
DBP
Awards
138,254
34,289
LTIP
Awards
(vested)
225,852
53,833
LTIP
Awards
(unvested)
3,162,274
836,679
Sharesave
Awards
24,567
24,567
Total
3,995,465
1,048,139
1.
The Shareholding guidelines require executive directors to hold 200% of their salary in shares, the percentage stated includes the post-tax value of awards held under the
Deferred Bonus plans and vested LTIP awards. Mr Whitehouse was appointed CEO on 30 August 2019 and Mr Leggett was appointed CFO on 10 December 2019.
76
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GOVERNANCE
Executive share awards (audited)
Balance
as at
28 March
2020
Date of
grant
Awarded
in the year
Exercised
in the
year
Vested
in year
Lapsed
in the
year
Balance
as at
3 April
2021
Option
price
Share
price
on date
of grant
Share
price
on date of
exercise
Date of
vesting/
becomes
exercisable
Maximum
Expiry date
Alex
Whitehouse
LTIP1
13.06.17 677,557
08.08.18 772,538
07.06.19 900,341
25.06.20
24.09.20
–
–
–
– 1,040,145
449,250
–
– 225,852 451,705
225,852
–
–
–
772,538
–
–
–
900,341
– 1,040,145
–
–
–
–
–
449,250
–
–
–
–
–
40.50
41.20
34.00
65.00
89.00
–
–
–
–
–
13.06.20 12.06.24
08.08.21 07.08.25
07.06.22 06.06.26
25.06.23 24.06.27
24.09.23 23.09.27
DBP
25.06.20
–
138,254
–
Sharesave Plan2 20.12.16
17.12.18
16.12.19
15.12.20
7,826
8,160
8,876
–
–
–
–
7,531
7,826
–
–
–
–
–
–
–
–
–
138,254
–
89.00
–
25.06.23 25.06.30
–
–
–
–
– 34.50
8,160 30.00
8,876 29.20
7,531 71.70
44.00
33.00
37.20
95.00
68.50
–
–
–
01.02.20 31.07.20
01.02.22 31.07.22
01.02.23 31.07.23
01.02.24 31.07.24
1,635,180
7,826 225,852 451,705 3,550,947
Duncan
Leggett
LTIP1
13.06.17 161,500
–
25.06.20
–
24.09.20
–
401,459
435,220
DBP
25.06.20
–
34,289
–
–
–
–
Sharesave Plan2 20.12.16
17.12.18
16.12.19
15.12.20
7,826
8,160
8,876
–
–
–
–
7,531
7,826
–
–
–
53,833 107,667
–
–
–
–
53,833
401,459
435,220
–
–
–
40.50
65.00
89.00
–
–
–
13.06.20 12.06.24
25.06.23 24.06.27
24.09.23 23.09.27
–
–
–
–
–
–
–
–
–
–
34,289
–
89.00
–
25.06.23 25.06.30
– 34.50
8,160 30.00
8,876 29.20
7,531 71.70
44.00
33.00
37.20
95.00
68.50
–
–
–
01.02.20 31.07.20
01.02.22 31.07.22
01.02.23 31.07.23
01.02.24 31.07.24
878,499
7,826
53,833 107,667
949,368
1.
2.
The Remuneration Committee has determined that the TSR and EPS elements of the 2018 LTIP will vest in full in August 2021 (see page 75 for more information).
Executive directors are eligible to participate in the Group’s Sharesave Plan on the same basis as all other eligible employees. Mr Whitehouse and Mr Leggett were granted an
award over 7,351 shares under the all employee Sharesave plan on 15 December 2020. An amount of £1,755 has been included within taxable benefits which represents the
20% discount to the share price immediately prior to the offer.
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77
Directors’ Remuneration report continued
Share ownership guidelines, vesting and
retention periods
To align executive directors’ interests with those of shareholders,
the 2020 Remuneration Policy increased the multiple of salary that
the executives must hold in shares from 100% of salary to 200%
of salary (valued at year end). The Committee will review progress
against the requirements, noting that 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 the target is reached. 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 LTIP. 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.
Y1
Y2
Y3
Y4
Y5
Annual bonus (DBP)
LTIP
Performance period
Retention period
Post-employment shareholding guideline
As set out in last year’s Directors’ Remuneration Report, 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,
in the case of a ‘good leaver’ 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, 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 the last year
of employment, this means the executive director would 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
shareholding guideline. 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 fast-changing FMCG environment. This will be
reviewed by the Committee as part of its next Remuneration Policy
review.
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 27% of
colleagues.
Total shareholder return
The market price of a share in the Company on 1 April 2021 (the
last trading day before the end of the financial period) was 94.6
pence; the range during the financial period was 23.55 pence to
110.8 pence.
This graph shows the value, by 3 April 2021, of £100 invested in
Premier Foods plc on 31 December 2010, 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, given the Group’s
position as a FTSE 250 Food Producer. The other points plotted are
the values at intervening financial year-ends.
250
200
150
100
)
d
e
s
a
b
e
r
(
)
£
(
l
e
u
a
V
50
0
31/12/10
30/12/11
31/12/12
31/12/13
04/04/15
02/04/16
01/04/17
31/03/18
30/03/19
28/03/20
03/04/2021
Premier Foods
FTSE All Share (excluding Investment Trusts)
FTSE Food Producers
Source: FactSet
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GOVERNANCE
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 previous 10 financial periods.
Year
2020/21
2019/20
2019/20
2018/19
2018/19
2017/18
2016/17
2015/16
2014/15
2013
2013
2012
2011
2011
CEO
Alex Whitehouse
Alex Whitehouse1
Alastair Murray1
Alastair Murray
Gavin Darby
Gavin Darby
Gavin Darby
Gavin Darby
Gavin Darby
Gavin Darby
Michael Clarke
Michael Clarke
Michael Clarke
Robert Schofield
Single figure
for total
remuneration
£1,904,893
£742,575
£683,776
£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
Annual bonus
as a % of
maximum
100%
81.5%
64.2%
53.0%
60.0%
35.0%
–
57.0%
23.4%
16.0%
–
66.0%
–
–
LTIP
vesting as a % of
maximum
100%
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. The figures for 2019/20 has been adjusted,
in line with statutory reporting requirements, to show the actual value upon vesting of the LTIP award on 24 June 2020. Full details of the single figure for total remuneration
are set out on page 72.
Percentage change in remuneration of
directors and employees
For the purpose of this table, remuneration is defined as salary,
benefits and annual bonus. Where directors have been appointed
part way through the last financial year, a comparative figure has
been calculated using an annualised figure for 2019/20. Tim Elliott
and Helen Jones were appointed directors in May 2020 and Yuichiro
Kogo and Daniel Wosner do not receive a fee. The directors are the
only employees of the Company, so the average pay of the wider
Group has also been included for the purposes of comparison.
Base salary
% Change
2020/21
Benefits
% Change
2020/21
Annual
bonus
% Change
2020/21
Executive directors
Alex Whitehouse
Duncan Leggett
Non-executive directors
Colin Day
Richard Hodgson
Simon Bentley
Tim Elliott
Helen Jones
Yuichiro Kogo
Pam Powell
Daniel Wosner
All Group employees
+5.3%
+12.7%
-5.7%
+4.5%
0%
0%
0%
–
–
–
0%
–
+5.6%
–
–
–
–
–
–
–
–
–
+61.4%
+33.1%
–
–
–
–
–
–
–
–
+49.3%
Senior management and the wider workforce
The remit of the Committee includes the oversight of remuneration
for senior management (who are defined as the Group’s Executive
Leadership Team) as well as reviewing workforce remuneration
and related policies, and the alignment of incentives and rewards
with culture. Remuneration for executive directors is set within
the 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 size 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, which 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 the annual
bonus plan for the general management population. Financial
objectives for executive directors and the management population
are aligned and strategic objectives are cascaded down the
management structure. In 2018/19, the Committee approved
changes to the management scheme to make it more competitive
and to help 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.
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Premier Foods plc
www.premierfoods.co.uk
79
Directors’ Remuneration report continued
The workforce comparison is based on:
1. Payroll data as at 5 April 2020 for all colleagues, including
part time colleagues and the CEO but excluding non-executive
directors.
2. Total pay comprises salary and taxable benefits (including shift
allowance, overtime, car allowance and performance related
pay). Employers’ pension contributions are not included in the
data under the requirements of the gender pay gap reporting
but have been included in the total pay and benefits figures for
the three colleagues listed in the table above for comparative
purposes.
Gender pay gap reporting
Details of gender pay gap reporting is provided on page 24.
Payments for loss of office and payments to former
directors (audited)
There were no payments for loss of office in the year (2019/20:
£989,112) and no other payments were made to former directors.
Relative importance of spend on pay
The following table sets out the amounts and percentage change
in total employee costs. The figure for 2020/21 includes a GMP
equalisation charge of £2.9m. The Company has recommended
the payment of final dividend for the financial period. This is the
first dividend to be proposed since 2008, so free cash flow and
Net debt (on a pre-IFRS 16 basis) have 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 34).
Total employee costs
Free cash flow
Net debt
2020/21
£182.5m
£98.2m
£314.1m
2019/20
£168.9m
£65.1m
£408.1m
Increase /
Decrease
+8.1%
+50.8%
-23.1%
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.
No change has been made to the basic NED fee since 2009.
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.
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 relevant 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
overall accountability, responsibilities, skill and experience required
for the role.
The CEO’s pay 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
2020/21
2019/20
Method
B
A
25th
percentile
77:1
60:1
Median
57:1
49:1
Pay ratio
75th
percentile
46:1
35:1
2020/21
2020/21
Base salary
Total pay and
benefits
£24,600
£24,126
£40,000
£24,600
£33,309
£41,535
The CEO single figure for total remuneration was £1,904,893
(2019/20: £1,426,350), as set out on page 72 of this report. The
single figure (and associated percentile ratios) for 2019/20 have
been adjusted, in line with statutory reporting requirements, to
show the actual value upon vesting of the LTIP award on 24 June
2020. The main reason for the change in ratios from last year
is the increase in variable pay received by the CEO in terms of
annual bonus and share-based payments. The Committee confirms
that the ratio is consistent with the Company’s wider policies on
employee pay, reward and progression.
For 2020/21 (and for future years) we have calculated the ratio
in line with the reporting regulations using method B, which uses
the most recent hourly rate gender pay gap information for all UK
employees of the Company to identify three UK employees as the
best equivalents. This uses data which is already reported externally
as part of the Group’s gender pay gap reporting. Due to the fact
that we have a significant number of part-time employees and a
range of different weekly working hours and shift allowances at
various sites, the calculation of comparable full-time equivalents
under method A was considered particularly complex. Last year’s
data was compared against the results that would have been
achieved if method B had been selected, to confirm the outcomes
would not have been materially different. The results for this year
were also checked against colleagues pay at either side of the data
points selected, to ensure the results were representative and
the figures provided are considered to be reflective of pay at the
relevant sites where the colleagues are based.
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GOVERNANCE
Non-executive directors (audited)
Single figure for the total remuneration received by each non-executive director for the financial periods ended 3 April 2021 and
28 March 2020.
Director
Colin Day1
Richard Hodgson
Simon Bentley
Tim Elliott1
Helen Jones1
Yuichiro Kogo1,2
Pam Powell
Daniel Wosner2
Former directors
Shinji Honda1,2
Orkun Kilic1,2
Basic fee
215,000
57,000
57,000
49,988
49,988
–
57,000
–
Committee
Chair fee
–
–
13,000
–
–
–
10,500
–
–
–
–
–
SID fee
–
10,000
–
–
–
–
–
–
–
–
Total fees
2020/21
215,000
67,000
70,000
49,988
49,988
–
67,500
–
Total fees
2019/20
126,231
65,406
70,000
–
–
–
65,826
–
–
–
–
–
1. Mrs Jones and Mr Elliott were appointed as directors on 15 May 2020, Mr Kogo was appointed as a director in place of Mr Honda, who retired as a director on 25 March 2021.
Mr Kilic retired as a director on 5 January 2021.
2. Messrs Kogo, Honda, Wosner and Kilic were all appointed pursuant to relationship agreements with our major shareholders and did not receive a fee for their roles as non-
executive directors.
Non-executive directors’ fees
The fees of our non-executive directors (NEDs) are set out below.
A review of non-executive directors’ fees was last undertaken by the
Board in March 2020 and no increase to fees was recommended.
3 April
2021
£215,000
£57,000
Chairman fee
Basic NED fee
Additional remuneration:
Audit Committee
Chair fee
Remuneration Committee Chair
fee
£10,500
Senior Independent Director fee £10,000
£13,000
Change
28 March
2020
– £215,000
£57,000
–
–
–
–
£13,000
£10,500
£10,000
NED
Colin Day
Richard Hodgson
Simon Bentley
Tim Elliott
Helen Jones
Yuichiro Kogo
Pam Powell
Daniel Wosner
Date of original
appointment
30 August 2019
6 January 2015
27 February 2019
15 May 2020
15 May 2020
25 March 2021
7 May 2013
27 February 2019
Expiry of
current
appointment/
amendment
letter
AGM 2022
AGM 2023
AGM 2021
AGM 2023
AGM 2023
–
AGM 2022
–
Notice
period
3 months
3 months
3 months
3 months
3 months
–
3 months
–
Non-executive directors’ interests in shares (audited)
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 Kogo and Mr Wosner are governed by the
terms of the relationship agreements between the Company and
Nissin and Oasis, respectively.
NED
Colin Day
Richard Hodgson
Simon Bentley
Tim Elliott
Helen Jones
Yuichiro Kogo1
Pam Powell
Daniel Wosner1
Former directors
Shinji Honda1,2
Orkun Kilic1,2
Ordinary shares
owned as at
3 April 2021
200,000
–
–
10,000
–
–
160,366
72,850
Ordinary shares
owned as at
28 March 2020
–
–
–
N/A
N/A
–
160,366
72,850
–
–
–
–
1. Messrs Kogo, Honda, Kilic and Wosner are shareholder representative directors
appointed pursuant to relationship agreements with three of our largest
shareholders.
2. Mr Kilic retired as a director on 5 January 2021 and Mr Honda retired as a director
on 25 March 2021.
Premier Foods plc
www.premierfoods.co.uk
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Directors’ Remuneration report continued
Statement of implementation of remuneration policy
in 2021/22
Base salary and fees
The table below shows the base salaries of the executive directors
as of 3 April 2021. As noted previously, the CEO’s salary is now
positioned around the lower quartile of the FTSE 250. However,
the CFO’s salary remains below the FTSE 250 lower quartile
and therefore a second above average increase is anticipated in
2021/22, subject to performance.
Executive director
Alex Whitehouse
Duncan Leggett
Salary as at
3 April 2021
£500,000
£310,000
Benefits
Benefits for 2021/22 will be in line with the approved
Remuneration Policy.
Pension
Pension entitlements for 2021/22 will be in line with the approved
Remuneration Policy and on the same basis as all other UK
employees. Executive directors will receive a contribution of 7.5% of
basic pay up to an earnings cap (£172,800 for the 2021/22 tax year).
Annual bonus measures for 2021/22
The Committee agreed that, for 2021/22, the financial targets
would represent 70% of the total bonus opportunity. The
performance measures will be 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 34). The Committee agreed that it
was appropriate to maintain focus on Net debt reduction during
the next financial year but will consider replacing this with an
alternative financial goal for future years. Non-financial objectives
will be focused on strategic and operational opportunities to drive
sales, generate cost savings and improve free cash flow. In addition,
the weighting of ESG measures for the CEO has been increased,
reflecting management’s increased focus in this area. The Board
considers the financial targets and 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.
One-third of any annual bonus awarded in respect of the 2021/22
financial year will be deferred in shares for three years under the
Deferred Bonus Plan.
Alex
Whitehouse
Duncan
Leggett
Maximum opportunity as a % of
salary
Performance measure
Financial objectives (subject to a Trading profit underpin)
Trading profit
Net debt
125%
Weighting
100%
Weighting
Non-financial objectives (subject to a Trading profit underpin)
Strategic
Operational
Environmental, Social and
Governance
20%
–
50%
20%
70%
10%
100%
50%
20%
70%
20%
5%
5%
100%
LTIP award for 2021/22
For the 2021/22 award, the Committee proposes to use the same
measures as the 2020/21 LTIP award, i.e. relative TSR (2/3rds) and
adjusted EPS (1/3rd), 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.
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), which is
considered an appropriate index to use as it includes a wide range
of companies, including the members of the FTSE 250 Index.
The adjusted EPS target is 11.1p, with a range of 10.6p at threshold
to 11.6p at maximum. In setting these targets, the Committee took
into account the financial plan and potential longer-term impact
of Covid-19, the change in corporation tax rate to 25% and analyst
consensus forecasts. The Committee has set stretching targets for
the three-year performance period, with targets set to ensure that
participants are motivated to deliver shareholder value without
excessive risk-taking. In line with its usual approach, the Committee will
review performance in the round to ensure that final vesting outcomes
reflect the broader business and individual context in the period.
Alex Whitehouse
Duncan Leggett
Basis of
award
150%
100%
Face value on
award date
Performance
period
£750,000 01.04.21 – 31.03.24
£310,000 01.04.21 – 31.03.24
Performance measure
Relative TSR1
Adjusted EPS
% of relevant portion
of award vesting2
Weighting
2/3
1/3
Below threshold
< Median
< 10.6p
Targets
Threshold
Median
10.6p
0%
20%
Target
N/A
11.1p
50%
Stretch
Upper quartile
11.6p
100%
1. Measured against the constituents of the FTSE All Share Index (excluding investment trusts) around the start of the period.
2.
Target EPS of 11.1p (at which 50% vests) with straight-line vesting between threshold and target and between target and stretch.
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GOVERNANCE
The Committee
Details of the Committee members and meeting attendance are
set out on pages 56 and 57. 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. Throughout
the financial period, all members of the Committee have been
independent. In addition, the Chairman, CEO, HR Director and the
remuneration advisers attended Committee meetings 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
During the year, Aon plc notified the Committee that it would no
longer be providing remuneration advice outside of the financial
services industry and, as a result, Alvarez & Marsal LLP (‘A&M’)
was engaged to provide advice to the Committee whilst a tender
exercise was undertaken. Following a comprehensive tender
exercise, it was decided to appoint Deloitte LLP (‘Deloitte’) as
advisers to the Committee with effect from January 2021. Neither
A&M or Deloitte have any other connection with the Group or its
Directors which are considered to impair their independence. Tim
Elliott is an adviser to A&M, and whilst the Committee did not
consider that this impacted his independence, he elected to recuse
himself from the tender selection process. Deloitte is a founding
member of the Remuneration Consultants Group and, as such,
adheres to its Code of Conduct. The Committee is satisfied that
the advice received from Deloitte is objective and independent.
During the financial period, Deloitte received fees of £27,100
(2019/20: £Nil), A&M received fees of £18,102 (2019/20: £Nil) and
Aon received fees of £29,878 (2019/20: £67,985) in respect of their
advice to the Committee.
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,
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 also 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.
The key activities of the Committee during the financial period were
as follows:
• Undertook a tender exercise and appointed a new firm of
advisers to the Committee;
• Reviewed the impact of Covid-19 on performance and
remuneration outcomes;
• Reviewed and discussed developments in best practice in order
to keep the Committee up to date with current market practice;
• Together with the Board, received regular updates on the
remuneration arrangements for the wider workforce;
• Reviewed the voting results for the 2020 Directors’
Remuneration Report and 2020 Remuneration Policy;
• Reviewed the 2020/21 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 2021/22 annual bonus, ensuring they
were aligned with the strategic objectives of the Group;
• Granted the 2020 awards under the Company’s all-employee
plans and monitored colleague participation; and
• Granted the 2020 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 2021, ensuring they
are aligned with the strategic objectives of the Group.
Committee evaluation
As part of the internal Board evaluation exercise conducted during
the year (see page 60 for more information), a review of the
Committee’s 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. Executives 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
12 August 2020 are set out below (full details of the voting results
for each resolution are available on the Group’s website www.
premierfoods.co.uk).
Date of AGM
Votes for
Votes against
Total votes cast
Votes withheld
Approval of
Directors’
Remuneration
Report 2019/20
12 August 2020
587,453,313
2,137,099
589,590,412
59,815
% of votes
cast
99.64%
0.36%
100%
Approval of the
current Directors’
Remuneration
Policy
12 August 2020
569,672,002
19,748,413
589,420,415
229,811
% of votes
cast
96.65%
3.35%
100%
The Directors’ Remuneration Report was approved by the Board on 19 May 2021 and signed on its behalf by:
Pam Powell
Remuneration Committee Chair
Premier Foods plc
www.premierfoods.co.uk
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Other statutory information
Directors’ report
The directors’ report consists of pages 02 to 87 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 £122.8m
(2019/20: profit of £53.6m). The Company has not paid a dividend
since 2008. Over the last few years, the Company has made
significant progress in deleveraging the business and reducing
Net debt to a level that would enable the payment of a dividend
to be permitted under the Group’s financing arrangements (see
our Strategy on page 03). In February 2021, the Company also
completed a capital reduction which will provide greater flexibility
in how the Company manages its capital resources going forward.
Subject to shareholder approval, the directors have proposed a
final dividend of 1.0 pence for the financial period ended 3 April
2021 (2019/20: nil), payable on 30 July 2021 to shareholders on the
register at the close of business on 2 July 2021.
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
£13.2m (2019/20: £11.9m).
Share capital information
The Company’s issued share capital as at 3 April 2021 comprised
855,126,805 ordinary shares of 10p each. During the period
4,417,325 ordinary shares were allotted to satisfy the vesting of
awards made under the all-employee Sharesave Plan and 2,500,000
were allotted to satisfy the vesting of awards made under the LTIP,
details of the movements can be found in note 22 on page 140. 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 2020 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 2021
AGM. A similar authority will be sought from shareholders at the
2021 AGM. The Company does not currently have authority to
purchase its own shares and no such authority is being sought at
the 2021 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.
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 18 May 2021, 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 Ltd3
JPMorgan Chase & Co.3
Kempen Capital Management N.V.
Ordinary
shares1
164,486,846
76,379,841
44,559,230
42,810,000
% of share
capital2
19.24
8.93
5.21
5.01
1. Number of shares held at date of notification.
2.
3.
Per cent of share capital as at 3 April 2021.
Held in the form of shares and as a total return swap.
Branches
Certain of the Group’s activities are operated through overseas
branches which are established in a number of countries and
subject to the laws and regulations of those jurisdictions.
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 Kogo and Wosner are subject
to the terms of shareholder relationship agreements (see Conflicts
of interest on page 59).
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GOVERNANCE
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.
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 2019 to 31 March 2021.
With effect from 1 April 2020 we moved eight of our nine manufacturing sites onto a zero carbon electricity tariff, enabled by the
purchasing of REGO’s (Renewable Energy Guarantees of Origin, see https://www.ofgem.gov.uk/environmental-programmes/rego/about-
rego-scheme). Following a detailed selection process we chose Scottish Power as our provider, as they have divested all of their fossil fuel
generation and only generate electricity from zero carbon wind and solar sources, meaning profits are only invested into more renewables.
For clarity we have declared the gross location based (not including REGO’s) and net market based (zero carbon electricity) emissions below.
Because of this change to a zero carbon tariff, in comparison with 2019/20, we have reduced our overall GHG market based emissions by
46.98% in 2020/21.
GHG emissions
Total UK energy use (kWh’s)
Scope 1 Direct emissions from sites (tCO2e)
Scope 2 Electricity indirect emissions (tCO2e) gross location based
Scope 2 Electricity indirect emissions (tCO2e) net market based (zero carbon electricity tariff via REGO’s)
Total annual emissions (tCO2e) gross location based
Total annual net emissions (tCO2e) net market based (zero carbon electricity tariff via REGO’s)
Production output (tonnes)
Overall Intensity (kgCO2e per tonne of product) gross location based
Overall Intensity (kgCO2e per tonne of product) net market based (zero carbon electricity tariff via
REGO’s)
2020/21
2019/20
255,902,606 277,141,174
40,277.57
22,460.83
22,460.83
62,738.40
62,738.40
38,435.59
20,656.61
1,217.26
59,092.20
39,652.85
Percentage
change
-7.66%
-4.57%
-8.03%
-94.58%
-5.81%
-36.80%
379,451.00
155.73
318,304.89
197.10
+19.21%
-20.99%
104.50
197.10
-46.98%
Principal energy efficiency measures taken in 2020/21
The main changes implemented in the last 12 months are building upon the findings of the Energy Savings Opportunities Scheme report
from 2019. LED lighting continues to be rolled out across our sites, with our largest site Carlton nearing completion of the replacement of
all production hall lighting. The offices at Carlton have also been consolidated into one floor, meaning that less heating is needed as the top
two floors are now unoccupied. An investment grade energy audit has been carried out at the Carlton site and the findings will begin to be
implemented in the coming year.
Methodology
Premier Foods’ GHG emissions were assessed and calculated using internal data and emission factors from Defra’s Conversion Factors for
Company Reporting 2020 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.
Transport fuel is regarded as de-minimis and has not been included in the data above, as it is less than 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.
In addition, the Group planted 14,000 trees in the UK during 2020/21, whilst this will remove approximately 3,500 tonnes of CO2 from the
atmosphere as they grow, the impact of this has not been included in the figures reported.
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Premier Foods plc
www.premierfoods.co.uk
85
Other statutory information continued
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. The
current Anti-Corruption and Bribery Policy was approved by the
Audit Committee in March 2021 and a summary is available on the
Group’s website.
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.
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 103. The Company’s viability statement,
where the directors confirm that 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 three-year period to
30 March 2024, is set out on page 53.
Related parties
Details on related parties can be found in note 25 on page 141.
Subsequent events
Details relating to subsequent events can be found in note 27 on
page 144.
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:
• Updates on key issues raised at Voice Forums, which have been
established at sites across the business;
• Site based pay negotiations;
• Results of periodic employee engagement exercises and action
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;
• Updates on the Management bonus scheme and pay
arrangements for colleagues across the business; 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:
• How we are a responsible business: pages 16 to 33.
• Workforce Engagement NED: page 58.
• Engaging with our stakeholders and Section 172(1) statement:
pages 61 to 63.
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 ‘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.
Anti-corruption and anti-bribery
The Group has in place an Anti-Corruption and Bribery 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, together
with formal training. This covers, amongst other things, guidance
on dealings with third parties, facilitation payments, gifts and
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Statement of directors’ responsibilities
in respect of the annual report and the financial statements
GOVERNANCE
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 accounting standards in conformity
with the requirements of the Companies Act 2006 and applicable
law and have elected to prepare the parent Company financial
statements in accordance with UK accounting standards and
applicable law, including FRS 101 Reduced Disclosure Framework.
In addition, the Group financial statements are required under the
UK Disclosure Guidance and Transparency Rules to be prepared
in accordance with International Financial Reporting Standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union (“IFRSs as adopted by the EU”).
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
the Group’s 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,
reliable and prudent;
•
•
for the Group financial statements, state whether they have
been prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union (“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 strategic and 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 2021 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 19 May 2021
and signed on its behalf by:
Simon Rose
General Counsel & Company Secretary
companysecretary@premierfoods.co.uk
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30415 26 May 2021 2:04 pm V6Financial statementsIndependent auditor’s report89Consolidated statement of profit or loss98Consolidated statement of comprehensive income99Consolidated balance sheet100Consolidated statement of cash flows101Consolidated statement of changes in equity102Notes to the financial statements103Company financial statements145Notes to the Company financial statements147Additional information151Mr Kipling 30% reduced sugar Viennese WhirlsAs part of our commitment to provide consumers with healthier food choices, we’ve launched a range of better-for-you options, including our new Mr Kipling 30% reduced sugar Viennese Whirls. 8830415 Premier foods AR2021 Financials.indd 8830415 Premier foods AR2021 Financials.indd 8826-May-21 2:38:10 PM26-May-21 2:38:10 PM 30415 26 May 2021 2:04 pm V6Premier Foods plcwww.premierfoods.co.uk89FINANCIAL STATEMENTSIndependent auditor’s reportto the members of Premier Foods plc 1 Our opinion is unmodified We have audited the financial statements of Premier Foods plc (“the Company”) for the 53 week period ended 3 April 2021 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 3 April 2021 and of the Group’s profit for the period then ended; • the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in 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 to the extent applicable. 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 6 financial years ended 3 April 2021. 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.OverviewMateriality: Group financial statements as a whole£4.5m (2019/2020: £4.5m)0.48% (2019/2020: 0.53%) of Group revenueCoverage96% (2019/2020: 96%) of Group revenueKey audit mattersvs 2019/2020Recurring risks (Group)Valuation of pension scheme assets for which a quoted price is not availableValuation of defined benefit pension obligationRevenue recognition subject to commercial arrangementsNew risks (Company only)Recoverability of parent company’s investment in subsidiaries30415 Premier foods AR2021 Financials.indd 8930415 Premier foods AR2021 Financials.indd 8926-May-21 2:38:12 PM26-May-21 2:38:12 PM Independent auditor’s report continued
to the members of Premier Foods plc
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, 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 decreasing order of audit significance, 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 pages 65 to 67
(Audit Committee Report),
page 110
(accounting policy)
and page 122 to 127
(financial disclosures).
The risk
Response
Subjective valuation
Our procedures included:
The Group’s RHM Pension Scheme
holds material assets for which quoted
prices are not available.
The valuation of these assets can have
a significant impact on the surplus in
the scheme. Valuations are prepared
based on the most recent information
available and are adjusted where
appropriate.
There is increased estimation
uncertainty associated with the
valuation of these assets as the
valuations may precede the year-end,
and significant judgement is required
to evaluate market indices used by
directors to estimate the adjustments
needed to these asset valuations.
As a result, we determined that the
valuation of these assets is subject to 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.
• Assessing credentials of external fund
managers and custodians: 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: Compared the
asset values recognised by the Group to
confirmations obtained directly from fund
managers and custodians.
• Benchmarking assumptions: performed an
independent assessment of the movement in
market indices used by directors to estimate if
adjustments were required to be made to asset
valuations that had a valuation date preceding
the year-end;
• Assessing transparency: Considered the
adequacy of the Group’s disclosures relating
to the valuation of scheme assets for which a
quoted price is not available.
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described above.
Our results
The results of our testing were satisfactory, and
we found the valuation of scheme assets for which
a quoted price is not available to be acceptable
(2019/2020: acceptable).
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Valuation of defined benefit
pension obligation
Defined benefit pension
obligation
(£4,712m; 2019/2020:
£(4,289.6m))
Refer to pages 65 to 67
(Audit Committee Report),
page 110
(accounting policy) and
pages 122 to 127
(financial disclosures).
FINANCIAL STATEMENTS
The risk
Subjective valuation
Small changes in the assumptions
used to value 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.
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.
The financial statements (note 13 (b))
disclose the sensitivities estimated
by the Group in respect of these
assumptions.
Response
Our procedures included:
• Assessing external actuary’s credentials:
critically assessing the qualifications,
objectivity and competence of the Group’s
external actuaries to determine if they have
the knowledge and experience required to
perform the valuation of the defined benefit
pension schemes;
• Our actuarial expertise: using our own
actuarial specialists in evaluating and
challenging the assumptions on mortality rates,
forecast future inflation rates, and discount
rates applied to estimate the present value of
the future obligations of the defined benefit
pension schemes;
• Benchmarking assumptions: benchmarking
the assumptions applied in the valuation of
the defined benefit pension obligations against
market data and peers;
• Assessing transparency: Considered the
adequacy of the Group’s disclosures relating
to the sensitivity of the obligation to these
assumptions.
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described above.
Our results
The results of our testing were satisfactory,
and we found the valuation of defined
benefit obligation to be acceptable
(2019/2020: acceptable).
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Premier Foods plc
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91
Independent auditor’s report continued
to the members of Premier Foods plc
Revenue recognition subject to
commercial arrangements
Commercial accruals (£(75.5m);
2019/2020: £(52.4m))
Refer to pages 65 to 67
(Audit Committee Report),
page 110
(accounting policy) and
page 129
(financial disclosures).
The risk
Subjective estimate
The Group regularly enters into
commercial arrangements with
its customers to offer product
promotions and discounts. Revenue is
measured net of outflows in relation
to these arrangements.
Due to the variability in the nature 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.
Certain arrangements are subject
to a higher degree of estimation
uncertainty as they span the year-
end and require the directors to
estimate the liability related to in year
promotional activity which remains
unsettled at year-end. The most
significant source of uncertainty arises
from estimating the sales volumes
attributable to each arrangement,
or estimating the final expected
settlement, which could vary based on
subsequent commercial negotiations.
The impact of COVID-19 on the
Group has increased the risk of fraud
and management bias. Higher than
average revenue growth has meant
that that the Group has exceeded
its targets and this could create an
incentive to defer revenues into the
next financial year by overstating
commercial accruals.
Response
Our procedures included:
Accounting policies: we critically assessed the
appropriateness of the Group’s accounting policies
relating to commercial arrangements against the
relevant accounting standards.
Historical comparisons: We evaluated the accuracy
of the Group’s more judgemental commercial
accruals by comparing those recognised in the
prior year to the actual amount invoiced and
settled with customers.
Test of detail: We focused our detailed testing on
commercial accruals we considered to be more
judgemental or potentially subject to management
bias and fraud.
For a sample of these commercial accruals we:
• Recalculated selected accruals based on the
terms of the arrangement, including relevant
incentive or promotion rates and sales subject
to the commercial arrangement in order to
assess the accuracy of the accrual;
• Agreed key inputs and assumptions to
relevant documentation, such as post year-
end settlements, customer agreements and
customer sales data; and
• Assessed whether the key assumptions were
consistent with external and internal data
points and the Group’s historical experience for
these promotions.
In addition to the procedures above we:
• Visited a selection of customer stores before
the period end, identifying product promotions
and assessing whether those promotions were
appropriately accrued for at year-end;
•
inspected credit notes issued after 3 April
2021 to assess the completeness of accruals
recorded at year-end; and
• Obtained supporting documentation for
manual journals recorded to revenue to assess
the appropriateness of the journals.
Assessing transparency: Considered the adequacy
of the Group’s disclosures relating to the significant
accounting policies, estimates and judgments in
respect of volume rebates and discounts.
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described above.
Our results
The results of our testing were satisfactory,
and we found revenue relating to
commercial arrangements to be acceptable
(2019/2020: acceptable).
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Recoverability of parent
company’s investment in
subsidiaries
(£1,112.5m 2019/20: £15m)
Refer to page 147
(accounting policy) and
pages 148 to 149
(financial disclosures).
FINANCIAL STATEMENTS
The risk
Response
Forecast-based valuation
The carrying value of the parent
company’s investment in its subsidiary
increased significantly in the period,
following a Group reorganisation in
the year, and it now represents 97%
(2019/2020: 0%) of the Company’s
total assets.
The carrying amounts of the
company’s investment is significant
and at risk of irrecoverability as it is
dependent on the Group’s ability to
achieve increases in profitability in line
with its strategic plans.
The estimated recoverable amount
of this investment is subjective due
to the inherent uncertainty involved
in forecasting and discounting these
future cash flows.
The effect of these matters is that,
as part of our risk assessment, we
determined that the recoverable
amount of the cost of investment
in subsidiaries has 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:
• Benchmarking assumptions: Challenged, with
the assistance of our valuation specialists,
the assumptions used in the valuation model,
in particular those relating to i) revenue and
profit, ii) long term growth rates; and iii) the
discount rates used, by comparing these with
externally derived data and our understanding
of the Group and sector performance;
• Sensitivity analysis: Performed sensitivities on
the key assumptions noted above;
• Historical comparisons: Assessed the
reasonableness of the forecasts by considering
the historical accuracy of the previous
forecasts; and
• Assessing transparency: Assessed the
adequacy of the parent company’s disclosures
in respect of the investment in subsidiaries.
We performed the tests above rather than seeking
to rely on any of the Group’s controls because the
nature of the balance is such that we would expect
to obtain audit evidence primarily through the
detailed procedures described.
Our results:
We found the company’s conclusion that there is
no impairment of its investments in subsidiaries to
be acceptable.
In the prior year, we reported key audit matters in respect of Group’s going concern and recoverability of goodwill, given the unprecedented
levels of uncertainty at the early stages of the COVID-19 pandemic, and its potential impact on the group’s future liquidity and financial
performance. Following Group’s strong financial performance and resilience to the effects of COVID-19, we have not assessed these areas
as the most significant risks in our current year audit. We continue to perform procedures over key assumptions supporting the Group’s
conclusions over going concern and the recoverability of goodwill, however, these areas have not been separately identified in our report
this year.
In the prior year, we also reported a key audit matter in respect of recoverability of the parent company’s receivables with group
undertakings. Following a group reorganisation in the year, these balances have been extinguished and therefore this matter is not
separately identified in our report this year. Instead, we now include a key audit matter in respect of recoverability of the parent company’s
investment in subsidiaries.
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Independent auditor’s report continued
to the members of Premier Foods plc
3 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 (2019/2020: £4.5m), determined with reference to a
benchmark of Group revenue of £947m (2019/2020: £847.1m) of
which it represents 0.48% (2019/2020: 0.53%).
Scoping
Of the Group’s 33 (2019/2020: 33) reporting components, we
subjected 3 (2019/2020: 5) to full scope audits for group purposes
and 2 (2019/2020: 0) to audits of specified account balances and
specific risk focused audit procedures focused on borrowings and
cash.
We used a benchmark of Group revenue which we consider to be
appropriate as it is a key measure of the performance of the Group
and appropriately reflects the size of the business. We have also
given consideration to profit metrics such as trading profit and
normalised profit before tax and our materiality is reasonable by
reference to those metrics.
In line with our audit methodology, our procedures on individual
account balances and disclosures were performed to a lower
threshold of performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial misstatements
in individual account balances add up to a material amount across
the financial statements as a whole.
Materiality for the parent company financial statements as a whole
was set at £1.2m (2019/2020: £1.2m), determined with reference
to a benchmark of company total assets, of which it represents
0.1% (2019/2020: 0.09%).
Performance materiality for the Group and the parent company
was set at 75% (2019/2020: 75%) of materiality for the financial
statements, which equates to £3.3m (2019/2020: £3.3m) for the
Group and £0.9m (2019/2020: £0.9m) for the parent company.
We applied this percentage in our determination of performance
materiality because we did not identify any factors indicating an
elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected
misstatements exceeding £0.22m (2019/2020: £0.22m) and any
other identified misstatements that warranted reporting on
qualitative grounds.
The latter were not individually financially significant enough
to require a full scope audit for group purposes but did present
specific individual risks that needed to be addressed.
The components within the scope of our work accounted for the
percentages illustrated below.
The remaining 4% (2019/2020: 4%) of total group revenue, 1%
(2019/2020: 2%) of group profit before tax and 2% (2019/2020:
1%) of total group assets is represented by 28 (2019/2020: 28) of
reporting components, none of which individually represented
more than 2% (2019/2020: 2%) of any of total group revenue,
group profit before tax or total group assets. For these 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
(2019/2020: £1.2m to £4.2m), having regard to the mix of size
and risk profile of the Group across the components. All full scope
and audit of account balance components are managed from
the central locations in the UK and the work on all components,
including the audit of the parent company, was performed by the
Group team.
Group total assets
Total profits and losses that
made up Group profit before tax
Group revenue
4
13
98%(2019/2020: 99%)
99
94
99%(2019/2020: 98%)
98
86
96%(2019/2020: 96%)
96
96
Full scope for Group audit purposes 2020/2021
Audit of specific account balances 2019/2020
Audit of specific account balances 2020/2021
Residual components
Full scope for Group audit purposes 2019/2020
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FINANCIAL STATEMENTS
4 Going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Group or the
Company or to cease their operations, and as they have concluded
that the Group’s and the Company’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”).
We used our knowledge of the Group, its industry, and the general
economic environment to identify the inherent risks to its business
model and analysed how those risks might affect the Group’s and
Company’s financial resources or ability to continue operations over
the going concern period.
The risks that we considered most likely to adversely affect the
Group’s and Company’s available financial resources and metrics
relevant to debt covenants over this period were the impact of a
temporary loss of production capability due to Covid-19 outbreaks
in the manufacturing facilities or related labour shortages, as
well as the effect of upcoming UK regulations impacting the food
industry and consumer preferences that may have an adverse
impact on the demand for certain product groups.
We also considered less predictable but realistic second order
impacts, such as impact of climate change on the demand for
certain Group’s products, as well as a large scale cyber breach
leading to service interruption, which could result in a rapid
reduction of available financial resources.
We considered whether these risks could plausibly affect the
liquidity or debt covenant compliance in the going concern period
by comparing severe, but plausible downside scenarios that could
arise from these risks individually and collectively against the level
of available financial resources and covenants indicated by the
Group’s financial forecasts.
Our procedures also included:
• Critically assessing assumptions in the Directors’ base and
downside scenarios, particularly in relation to forecasted
revenues and costs including the impact of manufacturing
interruptions and other factors described above, and their
impact on forecast liquidity and covenant compliance, by
reference to our understanding of the entity’s plans based on
approved budgets, as well as our knowledge of the entity and
the sector in which it operates; and
• Considering whether the going concern disclosure in note 2 to
the financial statements gives a full and accurate description
of the Directors’ assessment of going concern, including the
identified risks, and related sensitivities.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company's ability to
continue as a going concern for the going concern period;
• we have nothing material to add or draw attention to in relation
to the directors’ statement in Note 2 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 the going concern
period, and we found the going concern disclosure in note 2 to
be acceptable; and
•
the related statement under the Listing Rules set out on page
104 is materially consistent with the financial statements and
our audit knowledge.
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 above conclusions are not a guarantee that the Group or the
Company will continue in operation.
5 Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate an
incentive or pressure to commit fraud or provide an opportunity to
commit fraud. Our risk assessment procedures included:
• Enquiring of the Directors, Audit Committee, internal audit,
legal counsel and inspection of policy documentation as to
the Group’s high-level policies and procedures to prevent and
detect fraud and the Group’s channel for “whistleblowing”, as
well as whether they have knowledge of any actual, suspected
or alleged fraud;
• Reading Board and all relevant committee meeting minutes;
• Considering remuneration incentive schemes and performance
targets for management and directors, including the including
the annual performance bonus and LTIP for the executive
directors, which is dependent on a number of key metrics,
some of which are non-GAAP measures such as trading profit
and adjusted EPS; and
• Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the audit.
As required by auditing standards, and taking into account
the nature of certain commercial arrangements, we perform
procedures to address the risk of management override of
controls and the risk of fraudulent revenue recognition relating
to estimates and judgements management apply in estimating
commercial accruals outstanding at period end, as well as the risk
that management may be in a position to make inappropriate
accounting entries.
Further detail in respect of revenue commercial arrangements is set
out in the key audit matter disclosures in section 2 of this report
We did not identify any additional fraud risks.
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Independent auditor’s report continued
to the members of Premier Foods plc
We also performed procedures including:
•
Identifying journal entries and other adjustments to test for all
full scope components based on risk criteria and comparing the
identified entries to supporting documentation. These included
those posted by senior finance management, those posted
to unusual accounts, manual journals posted to revenue, and
those with missing user identification; and
• Assessing significant accounting estimates for bias.
Identifying and responding to risks of material
misstatement due to non-compliance with laws
and regulations
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, through
discussion with the Directors and other management (as
required by auditing standards), and from inspection of the
Group’s legal correspondence and discussed with the Directors
and other management the policies and procedures regarding
compliance with laws and regulations. As the Group is regulated,
our assessment of risks involved gaining an understanding of
the control environment including the entity’s procedures for
complying with regulatory requirements.
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), distributable
profits legislation, and taxation legislation 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 license 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
manufacture products), competition law, food safety (relating to
manufactured products), 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.
Therefore, if a breach of operational regulations is not disclosed
to us or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
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 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 fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect non-
compliance with all laws and regulations.
6 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 emerging and principal risks and
longer-term viability
We are required to perform procedures to identify whether there
is a material inconsistency between the directors’ disclosures in
respect of emerging and principal risks and the viability statement,
and the financial statements and our audit knowledge.
Based on those procedures, we have nothing material to add or
draw attention to in relation to:
•
•
the directors’ confirmation within the viability statement on
page 53 is that they have carried out a robust assessment of the
emerging and 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 how
emerging risks are identified, and explaining how they are being
managed and mitigated; and
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FINANCIAL STATEMENTS
•
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.
We are also required to review the Viability statement set out on
page 53 under the Listing Rules. Based on the above procedures,
we have concluded that the above disclosures are materially
consistent with the financial statements and our audit knowledge.
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 judgements 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 perform procedures to identify whether there
is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our audit
knowledge.
Based on those procedures, we have concluded that each of the
following is materially consistent with the financial statements and
our audit knowledge:
•
•
•
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;
the section of the annual report describing the work of the
Audit Committee, including the significant issues that the audit
committee considered in relation to the financial statements,
and how these issues were addressed; and
the section of the annual report that describes the review of
the effectiveness of the Group’s risk management and internal
control systems.
We are required to review the part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions
of the UK Corporate Governance Code specified by the Listing Rules
for our review. We have nothing to report in this respect
7 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.
8 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 87,
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 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
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.
9 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
and the terms of our engagement by the Company. 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 the further matters we are required to state
to them in accordance with the terms agreed with the Company,
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.
Zulfikar Walji (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
19 May 2021
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97
Consolidated statement
of profit or loss
Revenue
Cost of sales
Gross profit
Selling, marketing and distribution costs
Administrative costs
Reversal of impairment losses on financial assets
Profit on disposal of investment in associate
Operating profit
Finance cost
Finance income
Profit before taxation
Taxation charge
Profit for the period attributable to owners of the parent
Basic earnings per share
From profit for the period (pence)
Diluted earnings per share
From profit for the period (pence)
Adjusted earnings per share1
From adjusted profit for the period (pence)
53 weeks
ended
3 April 2021
£m
947.0
(611.7)
52 weeks
ended
28 Mar 2020
£m
847.1
(549.6)
Note
4
335.3
(137.4)
(77.9)
15.7
16.9
152.6
(36.2)
6.4
122.8
(16.8)
106.0
297.5
(125.6)
(76.6)
–
–
95.3
(44.1)
2.4
53.6
(7.1)
46.5
12.5
5.5
12.2
5.4
11.2
8.9
4, 5
7
7
8
9
9
9
1 Adjusted earnings per share is defined as trading profit less net regular interest, less a notional tax charge at 19.0% (2019/20: 19.0%) divided by the weighted average number of
ordinary shares of the Company.
The notes on pages 103 to 144 form an integral part of the consolidated financial statements.
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Consolidated statement
of comprehensive income
Profit 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 credit/(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 103 to 144 form an integral part of the consolidated financial statements.
FINANCIAL STATEMENTS
Note
13
8
8
53 weeks
ended
3 April 2021
£m
106.0
52 weeks
ended
28 Mar 2020
£m
46.5
(750.3)
132.9
9.2
(1.0)
(609.2)
(503.2)
816.7
(167.0)
5.2
0.3
655.2
701.7
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Premier Foods plc
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99
Consolidated balance sheet
ASSETS:
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Deferred tax assets
Net retirement benefit assets
Current assets
Stocks
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
Lease liabilities
Provisions for liabilities and charges
Non-current liabilities
Long term borrowings
Lease liabilities
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
3 April 2021
£m
As at
28 Mar 2020
£m
Note
10
11
12
8
13
14
15
16
18
17
19
18
19
20
19
19
13
20
8
21
22
22
22
22
22
192.1
646.0
317.2
28.4
934.7
2,118.4
68.8
83.4
4.2
0.1
156.5
2,274.9
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
(249.8)
(249.7)
(3.1)
(2.3)
(2.3)
(6.2)
(263.7)
(315.2)
(16.3)
(394.8)
(8.4)
(85.8)
(7.1)
(827.6)
(1,091.3)
1,183.6
85.5
0.6
351.7
(9.3)
755.1
1,183.6
(85.0)
(0.8)
(2.5)
(6.4)
(344.4)
(501.0)
(19.0)
(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
The notes on pages 103 to 144 form an integral part of the consolidated financial statements.
The financial statements on pages 98 to 144 were approved by the Board of directors on 19 May 2021 and signed on its behalf by:
Alex Whitehouse
Chief Executive Officer
Duncan Leggett
Chief Financial Officer
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Consolidated statement of cash flows
FINANCIAL STATEMENTS
Cash generated from operations
Interest paid
Interest received
Cash generated from operating activities
Proceeds from repayment of loan notes to associate
Net proceeds from sale of investment in associate
Interest received on loan notes to associate
Purchases of property, plant and equipment
Purchases of intangible assets
Sale of property, plant and equipment
Cash generated from/(used in) investing activities
Repayment of borrowings
Proceeds from borrowings
Payment of lease liabilities
Purchase of shares to satisfy share awards
Proceeds from share issue
Cash (used in)/generated from financing activities
Net (decrease)/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 period1
53 weeks
ended
3 April 2021
£m
52 weeks
ended
28 Mar 2020
£m
118.2
(34.1)
1.5
85.6
15.7
16.9
4.7
(18.0)
(5.6)
0.1
13.8
(275.0)
–
(2.7)
(0.2)
1.7
(276.2)
(176.8)
177.9
1.1
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
Note
16
16
1 Cash and cash equivalents of £1.1m includes bank overdraft of £3.1m and cash and bank deposits of £4.2m. See note 16 and 18 for more details.
The notes on pages 103 to 144 form an integral part of the consolidated financial statements.
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101
Note
Share
capital
£m
84.5
–
–
Share
premium
£m
1,408.6
–
–
Merger
reserve
£m
351.7
–
–
Other
reserves
£m
(9.3)
–
–
Profit and
loss reserve
£m
(872.7)
12.7
46.5
Consolidated statement
of changes in equity
At 31 March 2019
Implementation of IFRS 16 (net of tax)
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
At 29 March 2020
Profit for the period
Remeasurements of defined benefit
schemes
Deferred tax credit
Current tax credit
Exchange differences on translation
Other comprehensive income
Total comprehensive income
Shares issued
Capital reduction1
Share-based payments
Purchase of shares to satisfy share
awards
Deferred tax movements on share-
based payments
At 3 April 2021
13
8
8
22
8
8
13
8
8
22
22
8
–
–
–
–
–
0.3
–
–
–
84.8
84.8
–
–
–
–
–
–
0.7
–
–
–
85.5
–
–
–
–
–
0.8
–
–
–
1,409.4
1,409.4
–
–
–
–
–
–
1.0
(1,409.8)
–
–
–
0.6
Total
equity
£m
962.8
12.7
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
1,680.0
106.0
(750.3)
132.9
9.2
(1.0)
(609.2)
(503.2)
1.7
–
3.1
–
–
–
–
–
–
–
–
–
351.7
351.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(9.3)
(9.3)
–
–
–
–
–
–
–
–
–
816.7
(167.0)
5.2
0.3
655.2
701.7
–
1.3
0.5
(0.1)
(156.6)
(156.6)
106.0
(750.3)
132.9
9.2
(1.0)
(609.2)
(503.2)
–
1,409.8
3.1
(0.2)
(0.2)
–
351.7
–
(9.3)
2.2
755.1
2.2
1,183.6
1 Following shareholder approval at a General Meeting held on 11 January 2021 and a hearing in the High Court of Justice, Business and Property Courts of England and Wales
on 9 February 2021, an order was given confirming the cancellation of the entire amount standing to the credit of the Company’s share premium account, which amounted to
£1,409.8m ('Capital Reduction'). The order was produced to the Registrar of Companies and was registered on 10 February 2021, making the Reduction of Capital effective.
The notes on pages 103 to 144 form an integral part of the consolidated financial statements.
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Notes to the financial statements
FINANCIAL STATEMENTS
1. General information
Premier Foods plc (the 'Company') is a public limited company incorporated, domiciled and registered in England and Wales, the registered
number 5160050, with its registered address 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 19 May 2021.
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
These Group financial statements were prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union. Amounts are presented to the nearest £0.1m.
The statutory accounting period is the 53 weeks from 29 March 2020 to 3 April 2021 and comparative results are for the 52 weeks from
31 March 2019 to 28 March 2020. All references to the ‘period’, unless otherwise stated, are for the 53 weeks ended 3 April 2021 and the
comparative period, 52 weeks ended 28 March 2020.
The preparation of financial statements in conformity with adopted IFRS requires the use of certain significant 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 2020:
International Financial Reporting Standards
Amendments to IFRS 3
Amendments to IFRS 16
Business Combinations
Leases Covid 19-Related Rent Concessions
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 2021:
International Financial Reporting Standards
Amendments to IFRS 4
Amendments to IFRS 9, IAS 39 and IFRS 7, IFRS 4,
and IFRS 16
Insurance Contracts
Interest Rate Benchmark Reform
The following standards and amendments to published standards, effective for periods on or after 1 January 2021, have not been early
adopted by the Group:
International Financial Reporting Standards
IFRS 17
Amendments to IAS 1
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
Amendments to IAS 8
Amendments to IFRS 16
Amendments to IAS 12
Insurance Contracts
Presentation of Financial Statements
Business Combinations
Property, Plant and Equipment
Provisions, Contingent Liabilities and Contingent Assets
Accounting policies, Changes in Accounting Estimates and Errors
Leases
Income Taxes
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103
Notes to the financial statements continued
2. Accounting policies continued
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 27. 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 26 September 2020 and
3 April 2021.
Having undertaken a robust assessment of the Group’s forecasts with specific consideration to the trading performance of the Group,
cashflows and covenant compliance in the context of the current Covid-19 pandemic, the directors have a reasonable expectation that the
Group is able to operate within the level of its current facilities, meet the required covenant tests and has adequate resources to continue
in operational existence for at least 12 months from the date of approval of these financial statements. The Group and Company therefore
continues to adopt the going concern basis in preparing its financial information for the reasons set out below:
At 3 April 2021, the Group had total assets less current liabilities of £2,011.2m and net assets of £1,183.6m. Liquidity as at that date was
£177m, made up of cash and cash equivalents, and undrawn committed credit facilities of £173m expiring in December 2022. At the time
of the approval of these financial statements, the cash and liquidity position of the group has not changed significantly. The revolving
credit facility was refinanced in May 2021, the new facility is for £175m and expires in May 2024 with the option of extending for up to two
additional years. Further details of the refinancing are included in note 27.
The Group operates in the Food Manufacturing industry, considered as essential during the current pandemic, and whilst uncertainty exists
in respect of the potential future impact of Covid-19, HM Government restrictions when necessary to be put in place, mean more meals are
eaten at home and hence increased demand for the Group’s product ranges. The Group’s first priority remains the health and wellbeing of
its colleagues, customers and other stakeholders and to date the Group has experienced no net financial adverse impact of the Covid-19
pandemic with elevated levels of demand seen.
The directors have rigorously reviewed the situation relating to Covid-19 and have modelled a series of ‘downside case’ scenarios impacting
future financial performance, cash flows and covenant compliance, that cover a period of at least 12 months from the date of approval of
the financial statements. These downside cases represent severe but plausible scenarios and include assumptions relating to estimation of
the impact of the closure of all manufacturing sites due to colleague absence as opposed to Government imposed guidelines. The directors
believe that the risk of enforced site closures is low and have implemented additional health and safety measures in all factories to
minimise the risk of a major supply disruption, to date there have been no manufacturing site closures. The directors have also considered
upcoming UK regulations impacting the food industry and consumer preferences that may have an adverse impact on the demand for
certain product groups.
Whilst these downside scenarios are severe but plausible, each is considered by the directors to be prudent, having an adverse impact
on revenue, margin and cash flow. The directors, in response, identified mitigating actions within their control, 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 directors have assumed no significant structural changes to the business will be needed in
any of the scenarios modelled.
The directors, after reviewing financial forecasts and financing arrangements, consider that the Group and Company has adequate
resources to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements.
Accordingly, the directors are satisfied that it is appropriate to adopt the going concern basis in preparing its financial statements.
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 during the period was Hovis, which ceased to be an associate post sale of Group’s interest in Hovis to Endless
LLP. All transactions with Hovis up until the date of sale have been disclosed within note 25.
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FINANCIAL STATEMENTS
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. Transaction price per case is pre agreed per the price list with any discount related to an individual customer-run promotional
agreed in advance. Long term discounts and rebates are part of a commercial arrangement and the Group uses actual and forecast
sales to estimate the level of discount or rebate. The Group uses the ‘most likely amount’ method to estimate the value of the variable
consideration. 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.
(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 is used to estimate and provide for rebates and discounts
and revenue 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 Foreign currency translation
Transactions in foreign currencies are translated to the Company’s functional currencies at the foreign exchange rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the
functional currency at the foreign exchange rate ruling at that date.
The results of overseas subsidiaries with functional currencies other than in sterling are translated into sterling at the closing 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.
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral
part of the Company’s cash management are included as a component of cash and cash equivalents for the purpose only of the cash flow
statement.
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.
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105
Notes to the financial statements continued
2. Accounting policies continued
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.
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.
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FINANCIAL STATEMENTS
2.11 Leases
Lease recognition
The Group 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.
The Group 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. 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 average incremental borrowing rate used for the purposes of calculating the present value of lease payments is 3.32%.
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.
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.
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107
Notes to the financial statements continued
2. Accounting policies continued
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 directors' 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.
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 schemes.
Defined benefit plan
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 a 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
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. There are no restrictions on the current realisability of the surplus.
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.
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FINANCIAL STATEMENTS
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. 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 and contract assets.
To measure the expected credit losses, trade receivables and contract assets are grouped based on shared credit risk characteristics and the
days past due. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of the
loss rates for the contract assets.
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.
3. Significant 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.
Significant accounting policies
The following are considered to be the significant 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.
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.
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,
reflecting the directors’ intention regarding the manner of recovery of the deferred tax 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.
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Notes to the financial statements continued
3. Significant accounting policies, estimates and judgements continued
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.
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.
3.3 Goodwill
Impairment reviews in respect of goodwill are performed at least annually and more regularly if there is an indicator of impairment.
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. See note 11 for further details.
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.
A material adjustment is not expected in the 12 months of the estimate.
Judgements
The following are considered to be the key judgements within the financial statements:
110
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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.
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', and 'International'. During the year, following the announcement
at the end of FY2020 to re-integrate Knighton Foods ('Knighton') subsidiary into the rest of the Group, Knighton ceases to be an operating
segment. 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% 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.
The segment results for the period ended 3 April 2021 and for the period ended 28 March 2020 and the reconciliation of the segment
measures to the respective statutory items included in the consolidated financial statements are as follows:
53 weeks ended 3 April 2021
52 weeks ended 28 March 2020
Revenue
Divisional contribution
Group and corporate costs
Trading profit
Amortisation of intangible assets
Fair value movements on foreign exchange
and other derivative contracts
Reversal of impairment losses on financial
assets1
Profit on disposal of investment in associate1
Net interest on pensions and administrative
expenses and past service costs
Non-trading items:2
- GMP equalisation charge
- Restructuring costs
- Other non-trading items
Operating profit
Finance cost
Finance income1
Profit before taxation
Depreciation3
Grocery
£m
702.6
174.7
Sweet
Treats
£m
244.4
23.2
(11.5)
(7.6)
Total
£m
947.0
197.9
(46.6)
151.3
(30.4)
(2.3)
15.7
16.9
9.7
(2.9)
(4.9)
(0.5)
152.6
(36.2)
6.4
122.8
(19.1)
Grocery
£m
611.6
148.2
Sweet
Treats
£m
235.5
23.7
(11.1)
(8.8)
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
(19.9)
1 In April 2014, the Group entered into a partnership with The Gores Group LLC in respect of Hovis Holdings Limited ('Hovis'). This partnership, of which the Group held a 49%
equity interest, was subsequently written off in FY 2015/16. On 5 November 2020, the Group completed the sale of its interest in Hovis to Endless LLP. As part of the sale, the
Group has received a total consideration of £37.3m, of which £16.9m was in respect of equity and £20.4m reflected the settlement of the outstanding loan to associate including
interest of £4.7m.
2 Non-trading items include restructuring costs of £4.9m (2019/20: £4.1m) relating primarily to costs associated with the Strategic review and integration of the Knighton business.
For further details of GMP equalisation please refer to note 13.
3 Depreciation in the period ended 3 April 2021 includes £2.2m (2019/20: £2.6m) of depreciation of IFRS 16 right of use assets.
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Premier Foods plc
www.premierfoods.co.uk
111
Notes to the financial statements continued
4. Segmental analysis continued
Revenues in the period ended 3 April 2021, from the Group’s four principal customers, which individually represent over 10% of total Group
revenue, are £240.2m, £138.8m, £112.0m and £98.5m (2019/20: £190.6m, £125.9m, £95.2m and £84.8m). 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.
Revenue
United Kingdom
Other Europe
Rest of world
Total
Non-current assets
United Kingdom
Non-current assets exclude deferred tax assets and net retirement benefit assets.
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)
Repairs and maintenance expenditure
Research and development costs
Non-trading items
– GMP equalisation charge1
– Restructuring costs
– Other non-trading items
Auditor remuneration (note 5.2)
1 For further detail on GMP equalisation in the prior period please refer to note 13.
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
Total auditor remuneration
The total operating profit charge for auditor remuneration was £0.9m (2019/20: £0.6m).
6. Employees
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53 weeks
ended
3 Apr 2021
£m
892.9
28.5
25.6
947.0
52 weeks
ended
28 Mar 2020
£m
803.8
22.0
21.3
847.1
As at
3 Apr 2021
£m
1,155.3
As at
28 Mar 2020
£m
1,181.3
53 weeks
ended
3 Apr 2021
£m
(182.5)
(19.1)
(30.4)
(27.5)
(7.2)
52 weeks
ended
28 Mar 2020
£m
(168.9)
(19.9)
(29.4)
(22.6)
(7.2)
(2.9)
(4.9)
(0.5)
(0.9)
–
(4.1)
(0.9)
(0.6)
53 weeks
ended
3 Apr 2021
£m
52 weeks
ended
28 Mar 2020
£m
(0.7)
(0.1)
(0.1)
(0.9)
(0.4)
(0.1)
(0.1)
(0.6)
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Employee benefits expense
Wages, salaries and bonuses
GMP past service cost related to defined benefit pension schemes (note 13)
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
FINANCIAL STATEMENTS
53 weeks
ended
3 Apr 2021
£m
52 weeks
ended
28 Mar 2020
£m
(153.6)
(2.9)
(14.8)
(0.3)
(3.1)
(7.8)
(182.5)
(145.5)
–
(12.6)
(2.2)
(1.3)
(7.3)
(168.9)
2020/21
Number
2019/20
Number
531
343
3,333
4,207
564
382
3,209
4,155
Directors’ remuneration is disclosed in the audited section of the Directors' Remuneration Report on pages 68 to 83, which forms 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 receivable/(payable)1
Amortisation of debt issuance costs
Write off of financing costs2
Total finance cost
Interest receivable on bank deposits
Other finance income3
Total finance income
Net finance cost
53 weeks
ended
3 Apr 2021
£m
(5.7)
(25.9)
(0.6)
0.2
(2.9)
(34.9)
(1.3)
(36.2)
1.7
4.7
6.4
(29.8)
52 weeks
ended
28 Mar 2020
£m
(7.2)
(31.0)
(0.2)
(2.4)
(3.3)
(44.1)
–
(44.1)
2.4
–
2.4
(41.7)
1 Included in other interest receivable/(payable) is £0.9m charge (2019/20: £1.1m) relating to non-cash interest costs arising following the adoption of IFRS 16 and £1.1m credit
(2019/20: £1.3m charge) relating to the unwind of the discount on certain of the Group’s long term provisions.
2 Relates to write off of the financing costs for the £190m floating rate note redeemed during the 53 weeks ended 3 April 2021 .
3 Other finance income of £4.7m (2019/20: £nil) relates to the reversal of the impairment of the interest on the Hovis loan note settled as part of the sale consideration. For further
detail please refer to note 4.
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Premier Foods plc
www.premierfoods.co.uk
113
Notes to the financial statements continued
8. Taxation
Current tax
Current tax
– Current period
Deferred tax
– Current period
– Prior periods
– Changes in tax rate
Income tax charge
The applicable rate of corporation tax for the period is 19%.
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/(charge) on pension movements
53 weeks
ended
3 Apr 2021
£m
52 weeks
ended
28 Mar 2020
£m
(9.2)
(9.2)
1.6
–
(16.8)
(5.2)
(6.3)
(0.5)
4.9
(7.1)
53 weeks
ended
3 Apr 2021
£m
9.2
–
132.9
142.1
52 weeks
ended
28 Mar 2020
£m
5.2
(6.4)
(160.6)
(161.8)
The tax charge for the period differs from the standard rate of corporation tax in the United Kingdom of 19.0% (2019/20: 19.0%). The
reasons for this are explained below:
Profit before taxation
Tax charge at the domestic income tax rate of 19.0% (2019/20: 19.0%)
Tax effect of:
Non-deductible items
Other disallowable items
Capital gain on disposal of business
Overseas losses not recognised
Changes in tax rate
Adjustments to prior periods
Income tax charge
53 weeks
ended
3 Apr 2021
£m
122.8
52 weeks
ended
28 Mar 2020
£m
53.6
(23.3)
(10.2)
(1.4)
(0.3)
6.6
–
–
1.6
(16.8)
(0.6)
(0.4)
–
(0.3)
4.9
(0.5)
(7.1)
The movements in losses recognised for the 53 weeks ended 3 April 2021 is £nil (2019/20: £nil). Corporation tax losses are not recognised
where future recoverability is uncertain.
The adjustments to prior periods of £1.6m (2019/20: £(0.5)m) relates mainly to the adjustment of prior period losses and capital allowances
following verifications in submitted returns.
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FINANCIAL STATEMENTS
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%
(2019/20: 19.0%).
At 3 April 2021/29 March 2020
Implementation of IFRS 16
Adjusted balance at 3 April 2021/29 March 2020
Charged to the statement of profit or loss
Credited/(charged) to other comprehensive income
Credited to equity
At 3 April 2021/29 March 2020
2020/21
£m
(184.9)
–
(184.9)
(7.6)
132.9
2.2
(57.4)
2019/20
£m
(13.5)
(2.9)
(16.4)
(1.9)
(167.0)
0.4
(184.9)
The Group has not recognised £1.7m of deferred tax assets (2019/20: £1.9m not recognised) relating to UK corporation tax losses. In
addition, the Group has not recognised a tax asset of £83.9m (2019/20: £83.9m) relating to Advanced Corporation Tax (ACT) and £58.1m
(2019/20: £56.5m) relating to capital losses. Under current legislation these can generally be carried forward indefinitely.
In the Spring Budget of 2021, it was proposed that the corporation tax rate starting April 2023 will increase from the current 19% to 25%.
The tax rate increase will be followed by legislation in the 2021 Finance Bill. Since the change in tax rate is yet to be substantively enacted
by law, the current tax rate of 19% is used to calculate deferred tax above. The increase in tax rate is expected to increase the deferred tax
asset by £8.4m and deferred tax liability by £28.2m giving a net P&L charge of £19.8m.
Deferred tax liabilities
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
At 29 March 2020
Current period credit/(charge)
Reclassified from deferred tax assets
Credited to other comprehensive income
At 3 April 2021
Retirement
benefit
obligation
£m
Intangibles
£m
(47.6)
–
(47.6)
(5.6)
–
1.2
–
–
(52.0)
(52.0)
1.9
–
–
(50.1)
(62.5)
–
(62.5)
0.6
(8.0)
(2.3)
(160.6)
0.1
(232.7)
(232.7)
(2.1)
–
132.9
(101.9)
IFRS 16
£m
–
(2.9)
(2.9)
–
–
–
–
–
(2.9)
(2.9)
–
–
–
(2.9)
Other
£m
(1.0)
–
(1.0)
1.0
–
–
–
–
–
–
–
(1.0)
–
(1.0)
Total
£m
(111.1)
(2.9)
(114.0)
(4.0)
(8.0)
(1.1)
(160.6)
0.1
(287.6)
(287.6)
(0.2)
(1.0)
132.9
(155.9)
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Premier Foods plc
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115
Notes to the financial statements continued
8. Taxation continued
Deferred tax assets
At 31 March 2019
Prior period credit/(charge)
– To statement of profit or loss
– To other comprehensive income
– To equity
Current period charge
Credited to equity
Charged to other comprehensive income
Prior period (charge)/credit:
– To statement of profit or loss
– To equity
At 28 March 2020
At 29 March 2020
Current period (charge)/credit
Reclassified to deferred tax liabilities
Credited to equity
Prior period credit:
– To statement of profit or loss
At 3 April 2021
Deferred tax asset on losses and accelerated tax depreciation
As at 3 April 2021
Net deferred tax liability
As at 3 April 2021
As at 28 March 2020
Accelerated
tax
depreciation
£m
Share based
payments
£m
52.7
0.9
Losses
£m
41.0
Other
£m
3.0
6.2
–
–
(2.2)
–
–
–
–
56.7
56.7
(8.6)
–
–
1.4
49.5
0.2
–
–
(0.2)
0.7
–
(1.3)
(0.2)
0.1
0.1
0.4
–
2.2
–
2.7
3.2
1.6
–
(0.9)
–
–
1.0
–
45.9
45.9
(0.9)
–
–
–
45.0
(0.7)
–
(0.1)
(1.9)
–
(0.1)
(0.2)
–
–
–
0.1
1.0
–
0.2
1.3
Total
£m
97.6
8.9
1.6
(0.1)
(5.2)
0.7
(0.1)
(0.5)
(0.2)
102.7
102.7
(9.0)
1.0
2.2
1.6
98.5
£m
28.4
£m
(85.8)
(184.9)
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 except non-trading losses of £18.7m and accelerated tax depreciation of
£9.7m. The remainder of deferred tax assets have therefore 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 per share
Basic earnings per share has been calculated by dividing the profit attributable to owners of the parent of £106.0m (2019/20: £46.5m
profit) 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
2020/21
Number (m)
851.4
2019/20
Number (m)
846.6
17.1
868.5
7.9
854.5
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FINANCIAL STATEMENTS
Earnings per share calculation
Profit after tax (£m)
Weighted average number of shares (m)
Earnings per share (pence)
53 weeks ended 3 April 2021
Dilutive effect
of share
options
Basic
106.0
851.4
12.5
Diluted
106.0
868.5
12.2
Basic
46.5
846.6
5.5
17.1
(0.3)
52 weeks ended 28 March 2020
Dilutive effect
of share
options
Diluted
46.5
854.5
5.4
7.9
(0.1)
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 in calculating basic and diluted earnings per share.
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% (2019/20: 19.0%)
divided by the weighted average number of ordinary shares of the Company.
Net regular interest is defined as net finance cost after excluding write-off of financing costs, other interest receivable/payable and other
finance income.
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% (2019/20: 19%)
Adjusted profit after tax
Average shares in issue (m)
Adjusted EPS (pence)
Dilutive effect of share options
Diluted adjusted EPS (pence)
Net regular interest
Net finance cost
Exclude other finance income
Exclude write-off of financing costs
Exclude other interest receivable/payable
Net regular interest
53 weeks
ended
3 Apr 2021
£m
151.3
(33.4)
117.9
(22.4)
95.5
851.4
11.2
(0.2)
11.0
52 weeks
ended
28 Mar 2020
£m
132.6
(39.3)
93.3
(17.7)
75.6
846.6
8.9
(0.1)
8.8
(29.8)
(4.7)
1.3
(0.2)
(33.4)
(41.7)
–
–
2.4
(39.3)
Premier Foods plc
www.premierfoods.co.uk
117
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Notes to the financial statements continued
10. Property, plant and equipment
Cost
At 30 March 2019
Adjustment on transition to IFRS 16
Additions
Disposals
Reclassification of cost
Transferred into use
At 28 March 2020
Balance at 29 March 2020
Additions
Disposals
Remeasurement
Reclassified to intangibles
Transferred into use
At 3 April 2021
Aggregate depreciation and impairment
At 30 March 2019
Depreciation charge
Disposals
Reclassification of depreciation
Impairment charge
At 28 March 2020
Depreciation charge
Disposals
Impairment charge
At 3 April 2021
Net book value
At 28 March 2020
At 3 April 2021
Land and
buildings
£m
Vehicles,
plant and
equipment
£m
Assets under
construction
£m
Right of use
Assets
£m
104.9
–
0.1
(0.6)
(2.4)
–
102.0
102.0
0.3
(2.2)
–
–
0.2
100.3
(43.8)
(2.1)
0.5
1.0
–
(44.4)
(2.1)
2.1
–
(44.4)
57.6
55.9
309.7
–
7.5
(3.7)
2.4
7.1
323.0
323.0
7.2
(1.5)
–
0.1
5.6
334.4
(195.3)
(15.2)
3.4
(0.6)
–
(207.7)
(14.8)
1.2
(0.2)
(221.5)
115.3
112.9
10.5
–
5.9
–
–
(7.1)
9.3
9.3
11.3
–
–
(0.5)
(5.8)
14.3
–
–
–
–
–
–
–
–
–
–
9.3
14.3
–
14.0
0.6
(0.4)
–
–
14.2
14.2
1.0
(0.9)
(1.4)
–
–
12.9
–
(2.6)
0.4
–
(0.2)
(2.4)
(2.2)
0.8
(0.1)
(3.9)
11.8
9.0
Total
£m
425.1
14.0
14.1
(4.7)
–
–
448.5
448.5
19.8
(4.6)
(1.4)
(0.4)
–
461.9
(239.1)
(19.9)
4.3
0.4
(0.2)
(254.5)
(19.1)
4.1
(0.3)
(269.8)
194.0
192.1
118
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Included in the right of use asset are the following:
Cost
At 30 March 2019
Adjustment on transition to IFRS 16
Additions
Disposals
At 28 March 2020
Balance at 29 March 2020
Additions
Disposals
Remeasurement
At 3 April 2021
Aggregate depreciation and impairment
At 30 March 2019
Depreciation charge
Disposals
Impairment charge
At 28 March 2020
Depreciation charge
Disposals
Impairment charge
At 3 April 2021
Net book value
At 28 March 2020
At 3 April 2021
FINANCIAL STATEMENTS
Land and
buildings
£m
Vehicles,
plant and
equipment
£m
–
10.1
0.3
(0.1)
10.3
10.3
0.5
(0.1)
(1.4)
9.3
–
(1.2)
0.1
(0.2)
(1.3)
(1.2)
0.1
(0.1)
(2.5)
9.0
6.8
–
3.9
0.3
(0.3)
3.9
3.9
0.5
(0.8)
–
3.6
–
(1.4)
0.3
–
(1.1)
(1.0)
0.7
–
(1.4)
2.8
2.2
Total
£m
–
14.0
0.6
(0.4)
14.2
14.2
1.0
(0.9)
(1.4)
12.9
–
(2.6)
0.4
(0.2)
(2.4)
(2.2)
0.8
(0.1)
(3.9)
11.8
9.0
The Group’s borrowings are secured on the assets of the Group including property, plant and equipment.
11. Goodwill
Carrying value
Opening balance
Closing balance
As at
3 Apr 2020
£m
As at
28 Mar 2020
£m
646.0
646.0
646.0
646.0
Goodwill is allocated to the Group’s Grocery CGU. Goodwill impairment testing is performed at the Grocery CGU level, which is the lowest
level at which goodwill is allocated and monitored for internal reporting purposes.
Key assumptions
The key assumptions for calculating value in use are revenue growth, divisional contribution margin growth, long term growth rate and
discount rate.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units. It is not amortised but is
tested annually for impairment.
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Premier Foods plc
www.premierfoods.co.uk
119
Notes to the financial statements continued
11. Goodwill continued
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 revenue growth rate over the three-year forecast period is 0.7% (2019/20: 2.7%). The compound revenue growth
rate over the three-year forecast period is 0.7% (2019/20: 2.7%). The compound annual growth rate has dropped from 2.7% in prior year as
a result of baseline revenue in the current year compared to previous year.
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% (2019/20: 1.1%) 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 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 7.5% (2019/20: 8.0%).
On a pre-tax basis a discount rate of 9.1% (2019/20: 9.7%) would have been applied.
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 1.5%
Increase/decrease by 1.5%
Increase/decrease by 0.5%
Increase/decrease by 0.5%
Impact on value in use
Increase/decrease by £84.8m/£82.4m
Increase/decrease by £116.7
Increase/decrease by £103.9m/£88.9m
Decrease/increase by £97.6m/£114.0m
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 2020/21 (2019/20: £nil).
120
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FINANCIAL STATEMENTS
12. Other intangible assets
Cost
At 30 March 2019
Additions
Disposals
Transferred into use
At 28 March 2020
Additions
Disposals
Reclassified from property, plant & equipment
Transferred into use
At 3 April 2021
Accumulated amortisation and impairment
At 30 March 2019
Disposals
Amortisation charge
Reclassification of amortisation
At 28 March 2020
Disposals
Amortisation charge
Impairment charge
At 3 April 2021
Net book value
At 28 March 2020
At 3 April 2021
Brands/
trademarks/
licences
£m
Software
£m
Customer
relationships
£m
Assets under
construction
£m
141.0
1.6
(0.2)
1.7
144.1
2.9
(0.5)
(0.1)
2.9
149.3
(120.0)
0.2
(8.6)
(0.4)
(128.8)
0.5
(6.7)
(0.1)
(135.1)
15.3
14.2
693.2
–
–
–
693.2
–
–
–
–
693.2
(349.7)
–
(20.8)
–
(370.5)
–
(23.7)
–
(394.2)
322.7
299.0
134.8
–
–
–
134.8
–
–
–
–
134.8
(134.8)
–
–
–
(134.8)
–
–
–
(134.8)
1.9
3.1
–
(1.7)
3.3
3.1
–
0.5
(2.9)
4.0
–
–
–
–
–
–
–
–
–
–
–
3.3
4.0
Total
£m
970.9
4.7
(0.2)
–
975.4
6.0
(0.5)
0.4
–
981.3
(604.5)
0.2
(29.4)
(0.4)
(634.1)
0.5
(30.4)
(0.1)
(664.1)
341.3
317.2
All amortisation is recognised within administrative costs.
Included in the assets under construction additions for the period are £1.1m (2019/20: £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
Sharwood's
Carrying
value at
3 April 2021
£m
95.5
69.9
49.8
37.1
20.8
Estimated
useful
life
remaining
Years
16
25
16
16
16
Premier Foods plc
www.premierfoods.co.uk
121
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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') (transfer of assets and liabilities to the Premier Foods Section of the RHM Pension Scheme
completed 26 February 2021)
Premier Grocery Products Pension Scheme ('PGPPS') (transfer of assets and liabilities to the Premier Grocery Products Section of the RHM
Pension Scheme completed 29 January 2021)
Premier Grocery Products Ireland Pension Scheme ('PGPIPS')
Chivers 1987 Pension Scheme
Chivers 1987 Supplementary Pension Scheme
Hillsdown Holdings Limited Pension Scheme
(b) The RHM schemes, which comprise:
RHM Pension Scheme
Premier Foods Ireland Pension Scheme
With effect from 30th June 2020, the Premier Foods Pension Scheme (PFPS) and Premier Grocery Products Pension Scheme (PGPPS) were
merged on a segregated basis with the RHM Pension Scheme. The transfer of assets and liabilities to new sections of the RHM Pension
Scheme for both the PFPS and PGPPS has been completed. The RHM Pension Scheme now operates as three sections, the RHM Section,
Premier Foods Section and Premier Grocery Products Section.
A winding up lump sum (WULS) exercise was completed in February 2021. The winding up of the Premier Foods Pension Scheme Trustees
Limited and the Premier Grocery Products Pension Schemes Trustee Limited will be completed in 2021.
Actuarial valuations are being conducted for the Premier Foods and Premier Grocery Products Sections as at 31 March 2021. The triennial
valuation cycle will then continue with effect from 31 March 2022 for all three sections of the RHM Pension Scheme.
The exchange rates used to translate the overseas euro based schemes are £1.00 = €1.1215 for the average rate during the period, and
£1.00 = €1.1740 for the closing position at 3 April 2021.
All defined benefit schemes 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. Trustee directors undertake regular training and development to ensure that they are
equipped appropriately to carry out the role. 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 scheme 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 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.
122
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FINANCIAL STATEMENTS
• 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 exposure to the yield and inflation risks described above can be hedged 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 new Premier Foods Section is currently hedged to 60% for interest rates and 55% to
inflation. The Premier Grocery Products Sections is hedged to 75% for interest rates and 100% to inflation.
The liabilities of the schemes are approximately 45% in respect of former active members who have yet to retire and approximately 55% in
respect of 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 3 Apr 2021
At 28 Mar 2020
Premier
schemes
2.00%
3.25%
2.80%
n/a
2.10%
RHM
schemes
2.00%
3.25%
2.80%
n/a
2.10%
Premier
schemes
2.50%
2.65%
1.65%
n/a
1.90%
RHM
schemes
2.50%
2.65%
1.65%
n/a
1.90%
For the smaller overseas schemes, the discount rate used was 1.10% (2019/20: 1.00%) and future pension increases were 1.60%
(2019/20: 0.80%).
At 3 April 2021 and 28 March 2020, 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 Group continued to set RPI inflation in line with the market break-even expectations less an inflation risk premium. The inflation risk
premium has been increased from 0.2% at 28 March 2020 to 0.3% at 3 April 2021, reflecting an allowance for additional market distortions
caused by the RPI reform proposals.
At 28 March 2020, the CPI inflation assumption was derived by taking the value of the RPI inflation assumption and deducting 1.00% p.a.
Following the 25 November 2020, joint HM Treasury and UK Statistics Authority ('UKSA') response to the consultation on the ‘Reform to RPI
Methodology’, and specifically the proposal to align RPI with CPIH (CPI including owner occupiers' housing costs), the Group's approach to
deriving the CPI assumption has been refined at 3 April 2021:
• Pre-2030 the CPI inflation assumption was derived by taking the value of the RPI inflation assumption and deducting 1.00% p.a
following the UKSA stating no intention to make changes prior to 2030;
• Post-2030 the CPI inflation assumption is that CPI and RPI will be aligned.
For CPI, the Group reduced the assumed difference between the RPI and CPI by 0.55% to an average of 0.45% per annum. The estimated
impact of the change in RPI/CPI methodology is approximately a £95m increase in the defined benefit obligation in respect of the schemes.
The RHM scheme invests directly in interest rate and inflation swaps to protect from fluctuations in interest rates and inflation.
The directors have considered the impact of the current Covid-19 pandemic on the mortality assumptions and consider that use of the
updated Continuous Mortality Improvement (CMI) 2020 projections released in March 2021 for the future improvement assumption a
reasonable approach. Whilst the CMI projections are the latest available, it is too soon to quantify the impact Covid-19 may have on the
scheme liabilities and the directors will continue to monitor any potential future impact upon the mortality assumptions used.
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Premier Foods plc
www.premierfoods.co.uk
123
Notes to the financial statements continued
13. Retirement benefit schemes continued
Premier
schemes
£m
% of total
%
RHM
schemes
£m
% of total
%
Total
£m
% of total
Assets with a quoted price in an active
market at 3 April 2021:
Government bonds
Cash
Assets without a quoted price in an active
market at 3 April 2021:
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
Other1
Fair value of scheme assets as at 3 April 2021
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
45.1
14.9
0.6
8.1
34.3
1.0
84.6
20.6
228.2
19.3
–
–
22.3
191.2
122.3
792.5
–
6.9
0.1
6.7
24.3
25.3
42.4
0.8
364.0
–
–
–
0.6
268.3
35.3
774.7
5.7
1.9
0.1
1.0
4.3
0.1
10.7
2.6
28.8
2.5
–
–
2.8
24.1
15.4
100
–
0.9
0.0
0.9
3.1
3.3
5.5
0.1
46.9
–
–
–
0.1
34.6
4.6
100
1,527.7
64.9
0.3
5.9
18.3
–
278.8
83.9
883.9
302.2
464.2
21.2
218.3
–
589.8
4,459.4
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
4,745.3
34.3
1.5
0.0
0.1
0.4
–
6.2
1.9
19.8
6.8
10.4
0.5
4.9
–
13.2
100
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
100
1,572.8
79.8
0.9
14.0
52.6
1.0
363.4
104.5
1,112.1
321.5
464.2
21.2
240.6
191.2
712.1
5,251.9
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
5,520.0
29.9
1.5
0.1
0.3
1.0
0.0
6.9
2.0
21.1
6.1
8.8
0.4
4.6
3.6
13.7
100
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
100
1 Included in Other in the RHM schemes is £106.3m of assets which have been sold during the 53 weeks ended 3 April 2021 and are awaiting settlement at the year end date.
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. Where pensions asset valuations are not available as at the balance sheet, the directors use the most recent valuation
available, reflect cash movements to the balance sheet date and then assess and make adjustments based upon their review of appropriate
market movements which could impact upon the valuations reported. Pension asset valuations are therefore subject to estimation
uncertainty due to market volatility, which could result in a material movement in asset values over the next 12 months.
124
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FINANCIAL STATEMENTS
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 3 Apr 2021
At 28 Mar 2020
Premier
schemes
87.2
89.4
87.8
90.4
RHM
schemes
85.4
87.8
86.6
89.4
Premier
schemes
87.0
89.2
87.6
90.2
RHM
schemes
85.4
87.8
86.6
89.3
A sensitivity analysis on the principal assumptions used to measure the scheme liabilities at the period end is as follows:
Discount rate
Inflation
Assumed life expectancy at age 60 (rate of mortality)
Change in assumption
Increase/decrease by 0.1%
Increase/decrease by 0.1%
Increase/decrease by 1 year
Impact on scheme liabilities
Decrease/increase by £77.4m/£79.2m
Increase/decrease by £39.4m/£24.4m
Increase/decrease by £223.2m/£222.6m
The sensitivity information has been derived using projected cash flows for the Schemes valued using the relevant assumptions and
membership profile as at 3 April 2021. Extrapolation of these results beyond the sensitivity figures shown may not be appropriate.
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 scheme assets
(Deficit)/surplus in schemes
Premier
schemes
£m
(1,175.1)
792.5
(382.6)
At 3 April 2021
RHM
schemes
£m
(3,536.9)
4,459.4
922.5
Total
£m
(4,712.0)
5,251.9
539.9
At 28 March 2020
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
The aggregate surplus of £1,230.4m has decreased to a surplus of £539.9m in the current period. This decrease of £690.5m (2019/20:
£857.3m increase) is primarily due to changes in financial assumptions, being the lower discount rate and higher inflation versus 2019/20.
Changes in the present value of the defined benefit obligation were as follows:
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
Interest cost
Past service cost
Settlement
Remeasurement loss
Exchange differences
Benefits paid
Defined benefit obligation at 3 April 2021
Premier
schemes
£m
(1,171.8)
(0.5)
(27.8)
0.9
113.6
(2.0)
38.0
(1,049.6)
(22.8)
(0.4)
27.4
(171.6)
2.6
39.3
(1,175.1)
RHM
schemes
£m
(3,495.8)
–
(83.3)
36.1
157.6
(1.3)
146.7
(3,240.0)
(60.4)
(2.5)
57.8
(442.8)
1.5
149.5
(3,536.9)
Total
£m
(4,667.6)
(0.5)
(111.1)
37.0
271.2
(3.3)
184.7
(4,289.6)
(83.2)
(2.9)
85.2
(614.4)
4.1
188.8
(4,712.0)
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Notes to the financial statements continued
13. Retirement benefit schemes continued
Changes in the fair value of scheme assets were as follows:
Fair value of scheme assets at 30 March 2019
Recognition of HHL pension scheme
Interest income on scheme assets
Remeasurement gains
Administrative costs
Settlement
Contributions by employer
Exchange differences
Benefits paid
Fair value of scheme assets at 28 March 2020
Interest income on scheme assets
Remeasurement gains/(losses)
Administrative costs
Settlement
Contributions by employer
One-off contribution by employer1
Exchange differences
Benefits paid
Fair value of scheme assets at 3 April 2021
1 One-off contribution by employer is related to Hovis disposal proceeds due to the Premier schemes.
The reconciliation of the net defined benefit (deficit)/surplus over the period is as follows:
(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
(Deficit)/surplus in schemes at 28 March 2020
Amount recognised in profit or loss
Remeasurements recognised in other comprehensive income
Contributions by employer
One-off contribution by employer
Exchange differences recognised in other comprehensive income
(Deficit)/surplus in schemes at 3 April 2021
Premier
schemes
£m
707.1
0.5
16.7
49.3
(5.6)
(1.0)
43.3
2.4
(38.0)
774.7
16.2
16.7
(6.8)
(18.1)
45.5
7.0
(3.4)
(39.3)
792.5
Premier
schemes
£m
(464.7)
(16.8)
162.9
43.3
0.4
(274.9)
(4.5)
(154.9)
45.5
7.0
(0.8)
(382.6)
RHM
schemes
£m
4,333.6
–
103.7
496.2
(4.6)
(39.7)
1.4
1.4
(146.7)
4,745.3
81.4
(152.6)
(3.9)
(61.1)
1.5
–
(1.7)
(149.5)
4,459.4
RHM
schemes
£m
837.8
12.2
653.8
1.4
0.1
1,505.3
11.3
(595.4)
1.5
–
(0.2)
922.5
Remeasurements recognised in the consolidated statement of comprehensive income are as follows:
Premier
schemes
£m
(171.6)
16.7
(154.9)
2020/21
RHM
schemes
£m
(442.8)
(152.6)
(595.4)
Total
£m
(614.4)
(135.9)
(750.3)
Premier
schemes
£m
113.6
49.3
162.9
2019/20
RHM
schemes
£m
157.6
496.2
653.8
Remeasurement (loss)/gain on scheme
liabilities
Remeasurement gain/(loss) on scheme assets
Net remeasurement (loss)/gain for the period
126
Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
Total
£m
5,040.7
0.5
120.4
545.5
(10.2)
(40.7)
44.7
3.8
(184.7)
5,520.0
97.6
(135.9)
(10.7)
(79.2)
47.0
7.0
(5.1)
(188.8)
5,251.9
Total
£m
373.1
(4.6)
816.7
44.7
0.5
1,230.4
6.8
(750.3)
47.0
7.0
(1.0)
539.9
Total
£m
271.2
545.5
816.7
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FINANCIAL STATEMENTS
The actual return on scheme assets was a £38.3m loss (2019/20: £665.9m gain), which is £135.9m less (2019/20: £545.5m more) than the
interest income on scheme assets of £97.6m (2019/20: £120.4m).
The remeasurement loss on liabilities of £614.4m (2019/20: £271.2 gain) comprises a loss due to changes in financial assumptions of
£575.1m (2019/20: £184.5m gain), a gain due to member experience of £6.7m (2019/20: £76.5m gain) and a loss due to demographic
assumptions of £46.0m (2019/20: £10.2m gain).
The net remeasurement loss taken to the consolidated statement of comprehensive income was £750.3m (2019/20: £816.7m gain). This
loss was £607.7m (2019/20: £661.4m gain) net of taxation (with tax at 19% for UK schemes, and 12.5% for Irish schemes).
The Group expects to contribute between £4m and £6m annually to its defined benefit schemes in relation to expenses and government
levies and £35-38m of additional annual contributions to fund the scheme deficits up to 2 April 2022.
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.
The total amounts recognised in the consolidated statement of profit or loss are as follows:
Operating profit
Past service cost
Settlement credit/(costs)
Administrative costs
Net interest (cost)/credit
Total (cost)/credit
Premier
schemes
£m
2020/21
RHM
schemes
£m
(0.4)
9.3
(6.8)
(6.6)
(4.5)
(2.5)
(3.3)
(3.9)
21.0
11.3
Premier
schemes
£m
2019/20
RHM
schemes
£m
–
(0.1)
(5.6)
(11.1)
(16.8)
–
(3.6)
(4.6)
20.4
12.2
Total
£m
(2.9)
6.0
(10.7)
14.4
6.8
Total
£m
–
(3.7)
(10.2)
9.3
(4.6)
In November 2020 the high court ruled that pension scheme trustees are also legally responsible for equalising the Guaranteed Minimum
Pensions (GMP) for the employees who transferred out of UK defined benefit pension schemes. Accordingly, the directors have revisited
historic cash equivalent transfer values that were previously not equalised and made adjustments where necessary. A non-cash charge
of £2.9m in the year, which represents the directors’ best estimate of the cost based on actuarial advice, reflects the past service costs
associated with this equalisation.
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 £7.8m (2019/20: £7.3m) represents contributions payable to the schemes by the Group at
rates specified in the rules of the schemes.
14. Stocks
Raw materials
Work in progress
Finished goods and goods for resale
Total stocks
As at
3 Apr 2021
£m
14.9
2.5
51.4
68.8
As at
28 Mar 2020
£m
15.8
2.5
49.7
68.0
Stock write-offs in the period amounted to £7.1m (2019/20: £3.6m). The increase in the current period is related to one-off write-offs due
to customers that primarily serve out of home sectors.
The borrowings of the Group are secured on the assets of the Group including inventories.
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Premier Foods plc
www.premierfoods.co.uk
127
Notes to the financial statements continued
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
3 Apr 2021
£m
55.0
(3.5)
51.5
17.6
13.9
0.4
83.4
As at
28 Mar 2020
£m
67.2
(3.2)
64.0
14.2
10.6
0.3
89.1
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 3 April 2021, £27.7 million was drawn (2019/20: £28.6 million).
16. Notes to the cash flow statement
Reconciliation of profit before tax to cash flows from operations
Profit 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 tangible assets
Impairment of intangible assets
Fair value movements on foreign exchange and other derivative contracts
Reversal of impairment losses on financial assets1
Profit on disposal of investment in associate1
Equity settled employee incentive schemes
GMP equalisation and past service cost related to defined benefit pension schemes2
(Increase)/decrease in inventories
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables and provisions
Movement in retirement benefit obligations
Cash generated from operations
53 weeks
ended
3 Apr 2021
£m
122.8
29.8
152.6
19.1
30.4
0.4
0.3
0.1
2.3
(15.7)
(16.9)
3.1
2.9
(0.8)
5.7
(1.6)
(63.7)
118.2
52 weeks
ended
28 Mar 2020
£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
1 On 5 November 2020, the Group completed the sale of its interest in Hovis to Endless LLP. As part of the sale, the group has received a total consideration of £37.3m, of which
£16.9m was in respect of equity and £20.4m reflected the settlement of the outstanding loan to associate including interest of £4.7m.
2 For further details of GMP equalisation please refer to note 13.
128
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Annual Report for the 53 weeks ended 3 April 2021
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FINANCIAL STATEMENTS
53 weeks
ended
3 Apr 2021
£m
(176.8)
2.9
275.0
(4.2)
96.9
(429.6)
(332.7)
52 weeks
ended
28 Mar 2020
£m
150.1
(21.5)
(85.0)
(3.3)
40.3
(469.9)
(429.6)
Reconciliation of cash and cash equivalents to net borrowings
Net (outflow)/inflow of cash and cash equivalents
Movement in lease liabilities
Decrease/(increase) 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
Bank overdrafts
Cash and bank deposits
Net cash and cash equivalents
Borrowings - revolving credit facilities
Borrowings - senior secured notes
Lease liabilities
Gross borrowings net of cash1
Debt issuance costs2
Total net borrowings1
Total net borrowings excluding lease liabilities1
As at
28 Mar 2020
£m
–
177.9
177.9
(85.0)
(510.0)
(21.5)
(438.6)
9.0
(429.6)
(408.1)
Cash flows
£m
(3.1)
(173.7)
(176.8)
85.0
190.0
2.7
100.9
–
100.9
98.2
Non-cash
interest
expense
£m
–
–
–
–
–
(0.9)
(0.9)
–
(0.9)
–
Other
non-cash
movements
£m
–
–
–
–
–
1.1
1.1
(4.2)
(3.1)
(4.2)
As at
3 Apr 2021
£m
(3.1)
4.2
1.1
–
(320.0)
(18.6)
(337.5)
4.8
(332.7)
(314.1)
1 Borrowings exclude derivative financial instruments.
2 The non-cash movement in debt issuance costs relates to the amortisation of capitalised borrowing costs only.
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 3 April 2021
As at 28 Mar 2020
Offset
asset
138.2
Offset
liability
Net offset
liability
(141.3)
(3.1)
Offset
asset
312.8
Offset
liability
(134.9)
Net offset
asset
177.9
As at
3 Apr 2021
£m
(126.1)
(75.5)
(6.0)
(42.2)
(249.8)
As at
28 Mar 2020
£m
(154.0)
(52.4)
(4.9)
(38.4)
(249.7)
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www.premierfoods.co.uk
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Notes to the financial statements continued
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.
18.1 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
53 weeks
ended
3 April 2021
1.1740
1.1215
52 weeks
ended
28 Mar 2020
1.1128
1.1444
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 3 April 2021 and 28 March 2020 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.
Net foreign currency monetary assets:
– Euro
– US dollar
– Other
Total
Functional currency of
subsidiaries - Sterling
As at
3 Apr 2021
£m
As at
28 Mar 2020
£m
(3.4)
1.1
(0.1)
(2.4)
(3.2)
1.4
(0.0)
(1.8)
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
3 Apr 2021
£m
(50.3)
(50.3)
As at
28 Mar 2020
£m
(41.6)
(41.6)
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FINANCIAL STATEMENTS
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 (2019/20: £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 £0.2m (2019/20: £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 £3.0m
(2019/20: £2.9m 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
£3.6m (2019/20: £3.4m increase).
(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.
18.2 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 3 April 2021, trade and other receivables of £6.4m (2019/20: £7.4m) were past due but not impaired. These relate to customers with
whom there is no history of default.
The ageing of trade and other receivables was as follows:
Fully performing
£m
1-30 days
£m
31-60 days
£m
Past due
61-90 days
£m
91-120 days
£m
120+ days
£m
Trade and other receivables
As at 3 April 2021
As at 28 March 2020
45.5
56.9
1.8
2.7
0.8
1.2
0.9
1.2
0.5
0.7
2.4
1.6
Total
£m
51.9
64.3
At 3 April 2021, trade and other receivables of £3.5m (2019/20: £3.2m) 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 28 March 2020/30 March 2019
Receivables written off during the period as uncollectable
Provision for receivables impairment raised
As at 3 April 2021/28 March 2020
2020/21
£m
3.2
(0.8)
1.1
3.5
2019/20
£m
4.8
(2.7)
1.1
3.2
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www.premierfoods.co.uk
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Notes to the financial statements continued
18. Financial instruments continued
18.3 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 3 April 2021
Trade and other payables
Senior secured notes - fixed
Senior secured notes - floating
At 28 March 2020
Trade and other payables
Senior secured notes - fixed
Senior secured notes - floating
Secured senior credit facility – revolving
Within 1 year
£m
1 and 2 years
£m
2 and 3 years
£m
3 and 4 years
£m
(243.8)
(18.8)
(1.0)
(244.8)
(18.8)
(13.6)
(85.0)
–
(18.8)
(20.3)
–
(18.8)
(12.0)
–
–
(310.9)
–
–
(18.8)
(214.0)
–
–
–
–
–
(310.9)
–
–
Total
£m
(243.8)
(348.5)
(21.3)
(244.8)
(367.3)
(239.6)
(85.0)
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 3 April 2021, the Group had £158.5m (2019/20: £76.6m) of facilities not drawn, expiring between one to two years (2019/20: two to
three 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.
The following table analyses the contractual undiscounted cash flows of interest on the fixed and floating rate debt to maturity. Floating
rate is based on the last fixed rate reset of 0.08325% (2019/20: 0.6678%) plus applicable margin.
At 3 April 2021
At 28 March 2020
Within 1 year
£m
19.8
32.4
1 and 2 years
£m
19.1
30.8
2 and 3 years
£m
10.9
22.8
3 and 4 years
£m
4 and 5 years
£m
Over 5 years
£m
–
10.9
–
–
–
–
Total
£m
49.8
96.9
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FINANCIAL STATEMENTS
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.
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
Total
£m
At 3 April 2021
Forward foreign exchange
contracts:
– Outflow
– Inflow
Commodities:
– Outflow
Total derivative financial
instruments
At 28 March 2020
Forward foreign exchange
contracts:
– Outflow
– Inflow
Commodities:
– Outflow
Total derivative financial
instruments
(50.2)
47.9
(2.6)
(4.9)
(41.6)
42.5
(1.5)
(0.6)
–
–
(1.6)
(1.6)
–
–
(1.6)
(1.6)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(50.2)
47.9
(4.2)
(6.5)
(41.6)
42.5
(3.1)
(2.2)
18.4 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
Derivative financial instruments
– Forward foreign currency exchange contracts
– Commodity and energy derivatives
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
Bank overdraft
As at 3 April 2021
Fair
value
£m
Carrying
amount
£m
As at 28 Mar 2020
Fair
value
£m
Carrying
amount
£m
4.2
4.2
177.9
177.9
49.4
49.4
61.4
61.4
2.5
–
0.1
(2.3)
–
(243.8)
(320.0)
–
(3.1)
2.5
–
0.1
(2.3)
–
(243.8)
(326.6)
–
(3.1)
2.9
0.9
–
–
(0.8)
(244.8)
(510.0)
(85.0)
–
2.8
0.9
–
–
(0.8)
(244.8)
(459.4)
(85.0)
–
Premier Foods plc
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Notes to the financial statements continued
18. Financial instruments continued
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 assets at fair value through profit or loss:
Derivative financial instruments
– Commodity and energy derivatives
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:
Senior secured notes
Fair value estimation
Derivatives
As at 3 April 2021
Level 1
£m
Level 2
£m
As at 28 Mar 2020
Level 1
£m
Level 2
£m
–
–
–
0.1
(2.3)
–
–
–
–
(326.6)
–
(459.4)
0.9
(0.8)
–
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 £3.3m has been charged to the statement of profit or loss in the period
(2019/20: £2.4m credit).
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 £1m has been credited to the statement of profit or loss (2019/20: £0.7m 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.
18.5 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 propose final dividend of 1.0 pence per share for the period ended 3 April 2021 (2019/20: £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.
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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
FINANCIAL STATEMENTS
As at
3 Apr 2021
£m
(336.9)
4.2
(332.7)
(1,183.6)
(1,516.3)
As at
28 Mar 2020
£m
(607.5)
177.9
(429.6)
(1,680.0)
(2,109.6)
22%
20%
Gearing is higher year-on-year due to a lower pension surplus partially offset by lower borrowings.
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 2020 and 3 April 2021.
18.6 Financial compliance risk
Risk
The Group continues to operate with a high level of Net debt of £332.7m (2019/20: £429.6m) 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 undrawn at 3 April 2021 (2019/20: £85.0m).
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, which are set up as sections of the RHM Pension Scheme. Two of the
three sections have significant technical funding deficits, which could have an adverse impact on the financial condition of the Group.
Mitigation
The Group has financing arrangements which provide funding until between 2022 and 2023. On 19 May 2021 the Group announced that it
signed a new revolving credit facility and issue of new fixed rate notes. Please refer to note 27 for more details.
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 continues to monitor the pension risks closely, working with the trustee to ensure a collaborative approach.
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Premier Foods plc
www.premierfoods.co.uk
135
Notes to the financial statements continued
19. Bank and other borrowings
Current:
Bank overdrafts
Lease liabilities
Secured senior credit facility – revolving
Total borrowings due within one year
Non-current:
Lease liabilities
Transaction costs1
Senior secured notes
Total borrowings due after more than one year
Total bank and other borrowings
1 Included in transaction costs is £2.6m (2019/20: £4.2m) relating to the revolving credit facility.
As at
3 Apr 2021
£m
As at
28 Mar 2020
£m
(3.1)
(2.3)
–
(5.4)
(16.3)
(16.3)
4.8
4.8
(320.0)
(320.0)
(331.5)
(336.9)
–
(2.5)
(85.0)
(87.5)
(19.0)
(19.0)
9.0
9.0
(510.0)
(510.0)
(520.0)
(607.5)
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:
2021/22 FY
2023/24 HY
1 Net debt, EBITDA and Interest are as defined under the revolving credit facility.
Net debt /
EBITDA1
4.00x
4.25x
Net debt /
Interest1
2.90x
2.90x
On 19 May 2021 the Group announced that it signed a new revolving credit facility agreement. Please refer to note 27 for more details.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock Exchange. The notes totalling £320m 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 £20m matures in
July 2022 and attracts an interest rate of 5.00% above LIBOR.
Lease liabilities
The following table analyses the Group’s lease liabilities into relevant maturity groupings based on the contractual undiscounted cash flows.
At 3 April 2021
Lease liabilities
At 28 March 2020
Lease liabilities
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
Total
£m
(2.3)
(2.5)
(2.2)
(2.2)
(2.1)
(2.0)
(2.0)
(1.9)
(1.7)
(8.3)
(18.6)
(1.9)
(11.0)
(21.5)
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FINANCIAL STATEMENTS
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 0.07% and 1.34% (2019/20: 0.12% and 0.77%). The unwinding of the discount is charged or credited to the statement of
profit or loss under finance cost.
At 30 March 2019
Utilised during the period
Additional charge in the period
Unwind of discount
Released during the period
Release under IFRS 16
At 28 March 2020
Utilised during the period
Additional charge in the period
Reclassification
Unwind of discount
Released during the period
At 3 April 2021
Ageing of total provisions:
Within one year
Between 2 and 5 years
After 5 years
Total
21. Other liabilities
Deferred income
Other accruals
Other liabilities
Deferred income relates to amounts received in relation to a previously disposed business.
Property
£m
(31.8)
0.2
(0.2)
(1.4)
0.7
24.5
(8.0)
–
(1.3)
–
1.1
–
(8.2)
Other
£m
(10.3)
2.9
(1.5)
(0.0)
0.9
–
(8.0)
0.9
(0.6)
(0.3)
–
1.6
(6.4)
Total
£m
(42.1)
3.1
(1.7)
(1.4)
1.6
24.5
(16.0)
0.9
(1.9)
(0.3)
1.1
1.6
(14.6)
As at
3 Apr 2021
£m
(6.2)
(3.3)
(5.1)
(14.6)
As at
28 Mar 2020
£m
(6.4)
(1.8)
(7.8)
(16.0)
As at
3 Apr 2021
£m
(6.4)
(0.7)
(7.1)
As at
28 Mar 2020
£m
(7.4)
(1.3)
(8.7)
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Premier Foods plc
www.premierfoods.co.uk
137
Notes to the financial statements continued
22. Reserves and share capital
Share premium
The share premium reserve comprises the premium paid over the nominal value of shares for shares issued. On 11 January 2021 following
shareholder approval at a General Meeting held and a hearing in the High Court of Justice, Business and Property Courts of England and
Wales on 9 February 2021, an order was given confirming the cancellation of the entire amount standing to the credit of the Company’s
share premium account, which amounted £1,409.8m ('Capital Reduction'). The order was produced to the Registrar of Companies and was
registered on 10 February 2021, making the Reduction of Capital effective.
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. 1,230,629 shares in Premier Foods plc were held by the Employee Benefit Trust at 3
April 2021, with a market value of £1.2m (2019/20: 81,714 shares with a market value of £0.0m).
Share capital
At 30 March 2019
Shares issued under share schemes
At 28 March 2020
Shares issued under share schemes
Capital reduction
At 3 April 2021
Share award schemes
The Company’s share award schemes are summarised as follows:
Ordinary
shares @
nominal
value (£0.10/
share)
£m
84.5
0.3
84.8
0.7
–
85.5
Number of
shares
844,928,687
3,280,793
848,209,480
6,917,325
–
855,126,805
Share
premium
£m
1,408.6
0.8
1,409.4
1.0
(1,409.8)
0.6
Total
£m
1,493.1
1.1
1,494.2
1.7
(1,409.8)
86.1
1. A Long-Term Incentive Plan ('LTIP') for executive directors and senior managers, approved by shareholders in 2011 and a new 10 year
LTIP approved by shareholders in 2021. 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 2018, 2019
and 2020 Performance Share awards are conditional on achievement of a combination of absolute adjusted earnings per share targets
(1/3) and relative TSR targets (2/3). During the period the EPS element of the 2017 LTIP vested and the TSR element lapsed. The EPS and
TSR targets for the 2018 LTIP award have been achieved which will result in full vesting in August 2021.
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
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FINANCIAL STATEMENTS
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 18.8 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
Transferred/sold during the period
Forfeited during the period
Outstanding at the end of the period
Exercisable at the end of the period
2020/21
Awards
21,241,936
5,129,025
(1,278,435)
(6,297,633)
18,794,893
858,067
2019/20
Awards
24,510,476
5,167,304
–
(8,435,844)
21,241,936
–
The awards outstanding at 3 April 2021 had a weighted average remaining contractual life of 1 year (2019/20: 1.1 years). The weighted
average fair value of awards granted during the period was nil pence per award.
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
Transferred/sold during the period
Exercised during the period
Outstanding at the end of the period
Exercisable at the end of the period
2020/21
Awards
68,542
(67,042)
–
1,500
1,500
2019/20
Awards
373,705
–
(305,163)
68,542
68,542
The awards outstanding at 3 April 2021 had a weighted average remaining contractual life of nil years (2019/20: 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
2020/21
Awards
643,688
172,543
816,231
–
2019/20
Awards
423,856
219,832
643,688
–
The awards outstanding at 3 April 2021 had a weighted average remaining contractual life of 1 year (2019/20: 1.6 years). The weighted
average fair value of awards granted during the period was nil pence per award.
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Premier Foods plc
www.premierfoods.co.uk
139
Notes to the financial statements continued
22. Reserves and share capital continued
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
2020/21
Awards
932,801
(397,188)
(20,000)
–
515,613
–
2019/20
Awards
1,169,732
(213,453)
(23,978)
500
932,801
–
The awards outstanding at 3 April 2021 had a weighted average remaining contractual life of nil years (2019/20: 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
2020/21
2019/20
Weighted
average
exercise price
(p)
31
34
72
33
43
33
Options
16,387,497
(4,417,325)
4,867,531
(1,252,029)
15,585,674
865,135
Weighted
average
exercise price
(p)
32
33
29
32
31
35
Options
16,103,887
(3,280,793)
6,297,698
(2,733,295)
16,387,497
2,327,362
During the period 4.9 million (2019/20: 6.3 million) options were granted under the Sharesave Plan, with a weighted average exercise price
at the date of exercise of 72 pence per ordinary share (2019/20: 29 pence).
The options outstanding at 3 April 2021 had a weighted average exercise price of 43 pence (2019/20: 31 pence), and a weighted average
remaining contractual life of 1.8 years (2019/20: 1.7 years).
In 2020/21, the Group recognised an expense of £3.1m (2019/20: £1.3m), related to all equity-settled share-based payment transactions.
A summary of the range of exercise prices and weighted average remaining contractual life is shown below:
Weighted average remaining life and exercise prices
As at 3 Apr 2021
As at 28 Mar 2020
Weighted
average
remaining
contractual
life (years)
1.0
1.8
1.3
Weighted
average
exercise price
(p)
10
43
24
Number
outstanding
22,886,967
16,387,497
39,274,464
Weighted
average
remaining
contractual
life (years)
1.1
1.6
1.3
Weighted
average
exercise price
(p)
10
31
20
Number
outstanding
20,128,237
15,585,674
35,713,911
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.
140
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Annual Report for the 53 weeks ended 3 April 2021
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FINANCIAL STATEMENTS
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 3 April 2021 of £6.3m (2019/20: £6.7m).
24. Contingencies
There were no material contingent liabilities at 3 April 2021 (2019/20: none).
25. Related party transactions
The following transactions were carried out with related parties:
25.1 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 68 to 83.
Key management compensation
Short term employee benefits
Termination benefits
Share-based payments
Total
53 weeks
ended
3 Apr 2021
£m
4.8
–
2.1
6.9
52 weeks
ended
28 Mar 2020
£m
3.8
1.2
1.0
6.0
25.2 Other related parties
As at 3 April 2021 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 19.24% (2019/20: 19.39%)
equity shareholding in Premier Foods plc and of its power to appoint a member to the Board of directors.
Oasis Management Company Ltd ('Oasis') and Paulson Investment Company LLC, ('Paulson') were considered to be a related party in FY
2019/20 by virtue of its 11.94% and 11.93% equity shareholding, respectively, in Premier Foods plc. As at 3 April 2021, Oasis and Paulson
holds less than 10% of the Group’s total issued share capital.
The Group’s associates are also considered to be related parties. On 5 November 2020, the Group completed the sale of its interest in Hovis
to Endless LLP and hence is no longer treated as an associate after this date. The table below discloses sale of services to Hovis before the
sale. Transactions with parties are settled in cash.
Transactions with related parties
Sale of services:
– Hovis
Total sales
Purchase of goods:
– Nissin
Purchase of services:
– Nissin
Total purchases
53 weeks
ended
3 Apr 2021
£m
52 weeks
ended
28 Mar 2020
£m
0.4
0.4
16.4
–
16.4
0.7
0.7
12.2
0.2
12.4
25.3 Retirement benefit obligations
As stated in note 13, the Group has entered into an arrangement with the Pension Scheme Trustees as part of the funding requirements for
any actuarial deficit in the Scheme. Full details of this arrangement are set out in note 13 to these financial statements.
26. Investments
Premier Foods plc
www.premierfoods.co.uk
141
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Notes to the financial statements continued
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 3 April 2021 is disclosed below.
Registered Address
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
Family Loaf Bakery Limited (The)*
W & J B Eastwood Limited**
Vic Hallam Holdings Limited**
% Held
by Parent
Company of
the Group
100%
% Held
by Group
companies, if
different
100%
0%
0%
0%
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%
100%
100%
100%
Share Class
£1.00 Ordinary shares
£1.00 Ordinary shares
Country
England
& Wales
£1.00 Ordinary shares
£0.001 Ordinary shares
£0.10 Ordinary shares
£0.01 Ordinary shares
£0.01 Ordinary shares
£0.01 Ordinary shares
£0.25 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 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
£1.00 Ordinary A shares
£1.00 Ordinary B shares
£1.00 Preference shares
£1.00 Ordinary A shares
£1.00 Ordinary B shares
£0.25 Ordinary shares
£1.00 redeemable
cumulative preference
shares
142
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FINANCIAL STATEMENTS
Country
Registered Address
% Held
by Parent
Company of
the Group
0%
% Held
by Group
companies, if
different
100%
0%
0%
0%
Share Class
£1.00 Ordinary shares
£0.25 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary shares
£1.00 Ordinary Shares
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Company
DFL Oldco Limited**
F.M.C. (Meat) Limited**
Haywards Foods Limited**
RLP Old Co Limited**
Hillsdown Holdings Pension Trustees Limited* 0%
Premier Foods Group Life Plan Trustees
Limited*
Winsford Bacon Company Limited
The Specialist Soup Company Limited**
Tiffany Sharwood’s Frozen Foods Limited**
Manor Bakeries Limited**
James Robertson & Sons Limited**
0%
0%
0%
0%
0%
0%
00241018 Limited (formerly British Bakeries)** 0%
AB Old Co Limited (00815338)**
Daltonmoor Limited**
PFF Old Co Limited (921417)**
Premier Grocery Products Limited**
RFB Old Co Limited**
RHM Group Four Limited (349904)**
Citadel Insurance Company Limited
Arkway Limited**
Woolgate Nitrovit Limited**
0%
0%
0%
0%
0%
0%
0%
0%
0%
100%
100%
£1.00 Ordinary shares
£0.25 Ordinary shares
England
& Wales
Isle of
Man
Ioma House
Hope Street, Douglas
Isle of Man
IM1 1AP
2 Woolgate Court St
Benedicts Street
Norwich, Norfolk
NR2 4AP
Diamond Foods Lebensmittelhandel GmbH
0%
100%
€0.5113 Ordinary shares Germany Gärtnerstraße 3,
Premier Brands Limited*
Beatties Northern Limited (SC018898)**
Premier Foods, Inc.
0%
0%
0%
Premier Foods ROI Limited
Premier Foods Ireland Manufacturing Limited*
0%
0%
Formwood (Coleford) Limited (344678)**
0%
100%
100%
100%
100%
100%
100%
G P Woolgate Limited (452169)**
0%
100%
£1.00 Ordinary shares
* Dormant entities
** Restored companies
£1.00 Ordinary shares
£1.00 Ordinary shares
Scotland
USD$0.01 Common Stock
shares
United
States
€1.00 Ordinary shares
€1.26 Ordinary shares
Ireland
£1.00 Ordinary shares
England
& Wales
England
& Wales
25485 Hemdingen,
Germany
Summit House
4–5 Mitchell Street
Edinburgh, Scotland
EH6 7BD
The Corporation
Trust Company
Corporation Trust
Centre
1209 Orange Street,
Wilmington
DE 19801, USA
25–28 North Wall
Quay, Dublin 1
Ireland
Hillsdown House,
32 Hampstead High
Street, London, NW3
1QD
PWC LLP, Benson
House 33 Wellington
Street, Leeds, LS1 4JP
Premier Foods plc
www.premierfoods.co.uk
143
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Notes to the financial statements continued
27. Subsequent events
On 19 May the directors have proposed a final dividend of 1.0 pence per share for the period ended 3 April 2021 subject to the ratification
at the AGM by the shareholders.
On 19 May 2021 the Group announced the proposed issue of new five year £300m Senior Secured fixed rate notes due 2026, to refinance
its £300m existing Senior Secured fixed rate notes, due to mature October 2023. Pricing of the new £300m Senior Secured fixed rate notes
is to be confirmed and the notes are expected to be callable after two years.
The Group has also announced that it has signed a new revolving credit facility (RCF) agreement with an updated lending group for a period
of three years from May 2021 with the option of extending for up to two additional years. This new senior secured RCF is a committed
facility of £175m with an interest margin grid broadly in line with the previous RCF, undrawn elements of the RCF will continue to attract
interest equivalent to 35% of the applicable margin. The covenant package attached to the revolving credit facility tested bi-annually is:
2021/22 HY
Subsequent test dates
1 Net debt, EBITDA and Interest are as defined under the revolving credit facility.
Net debt/
EBITDA1
3.75x
Net debt/
Interest1
3.00x
3.50x
3.00x
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Balance sheet
FINANCIAL STATEMENTS
The following statements reflect the financial position of the Company, Premier Foods plc as at 3 April 2021 and 29 March 2020. 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
Debtors
Deferred tax assets
Cash at bank and in hand
Total assets
Creditors: 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 3 Apr
2021
£m
As at 28 Mar
2020
£m
Note
3
4
5
6
7
1,112.5
15.0
–
0.8
36.1
1,149.4
(1.2)
35.7
1,148.2
85.5
0.6
1,062.1
1,148.2
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
The notes on pages 147 to 150 form an integral part of the financial statements.
The financial statements on pages 145 to 150 were approved by the Board of directors on 19 May 2021 and signed on its behalf by:
Alex Whitehouse
Chief Executive Officer
Duncan Leggett
Chief Financial Officer
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Premier Foods plc
www.premierfoods.co.uk
145
Statement of changes in equity
At 30 March 2019
Profit for the period
Share-based payments
Shares issued
At 28 March 2020
Profit for the period1
Share-based payments
Purchase of shares to satisfy share awards
Shares issued
Capital reduction2
Deferred tax movements on share-based payments
At 3 April 2021
Called up
share capital
£m
84.5
–
–
0.3
84.8
–
–
–
0.7
–
–
85.5
Share
premium
account
£m
1,408.6
–
–
0.8
1,409.4
–
–
–
1.0
(1,409.8)
–
0.6
Profit and
loss account
£m
(477.8)
9.9
1.3
–
(466.6)
115.4
3.1
(0.2)
–
1,409.8
0.6
1,062.1
Total
£m
1,015.3
9.9
1.3
1.1
1,027.6
115.4
3.1
(0.2)
1.7
–
0.6
1,148.2
1 Profit for the year includes dividend income of £102.5m. During the year, as part of a Group-wide capital re-organisation, the Company’s debts worth £72.5m owed to Group
undertakings were waived by way of dividends. In addition to this, the Company also received dividends worth £30m from its immediate subsidiary.
2 Following shareholder approval at a General Meeting held on 11 January 2021 and a hearing in the High Court of Justice, Business and Property Courts of England and Wales
on 9 February 2021, an order was given confirming the cancellation of the entire amount standing to the credit of the Company’s share premium account, which amounted to
£1,409.8m ('Capital Reduction'). The order was produced to the Registrar of Companies and was registered on 10 February 2021, making the Reduction of Capital effective.
The Company has considered the profits available for distribution to shareholders. At 3 April 2021, the Company had retained earnings of
£1.1bn, of which the unrealised profit element was £0.5bn. The Company had profits available for distribution of £0.6bn.
The notes on pages 147 to 150 form an integral part of the financial statements.
146
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Notes to the Company financial statements
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
accounting standards in conformity with the requirements of the Companies Act 2006 ('Adopted IFRSs'), but makes amendments where
necessary in order to comply with Companies Act 2006 and has set out below where advantage of the FRS 101 disclosure exemptions has
been taken. 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;
• Disclosures in respect of compensation of key management personnel;
• Certain disclosures regarding revenue; and
• Certain disclosures regarding leases
The profit for the period of £115.4m (2019/20: £9.9m profit) is recorded in the accounts of Premier Foods plc, which includes dividend
income of £102.5m. During the year, as part of a Group-wide capital re-organisation, the Company’s debts worth £72.5m owed to Group
undertakings were waived by way of dividends. In addition to this, the Company also received dividends worth £30m from its immediate
subsidiary.
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.
Impairment of Non-financial assets (including investments)
The carrying amounts of the Company’s non-financial assets, including investments in subsidiaries, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset exceeds its
estimated recoverable amount. Impairment losses are recognised in the profit and loss
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.
Debtors
Debtors in FY 2019/20 comprise intercompany loans, a recoverability assessment of these balances has been performed and no impairment
is needed.
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Premier Foods plc
www.premierfoods.co.uk
147
Notes to the Company financial statements
continued
1. Accounting policies continued
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.
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 (2019/20: £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 3 April 2021, the Company had two employees (2019/20: two). Directors’ emolument disclosures are provided in the Single Figure Table
on page 72 of this annual report.
3. Investments in Group undertakings
Cost
At 29 March 2020/30 March 2019
Additions
At 3 April 2021/28 March 2020
Accumulated impairment
At 29 March 2020/30 March 2019
At 3 April 2021/28 March 2020
NBV at 3 April 2021/28 March 2020
2020/21
£m
2019/20
£m
1,774.3
1,097.5
2,871.8
(1,759.3)
(1,759.3)
1,112.5
1,773.5
0.8
1,774.3
(1,759.3)
(1,759.3)
15.0
In 2020/21 a capital contribution of £2.5m (2019/20: £0.8m) was given in the form of share incentive awards to employees of subsidiary
companies which were reflected as an increase in investments. As part of a Group wide capital re-organisation, the directors passed a
resolution to waive an intercompany debt along with accrued interest owed by Premier Foods Investment Limited, a group subsidiary
undertaking, via capital contribution amounting to £1,095.0m. Refer to note 26 in the Group financial statements for a full list of the
undertakings.
148
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FINANCIAL STATEMENTS
Impairment testing for the period ended 3 April 2021 has identified that the recoverable amount of the investment in Premier Foods
Investments No.1 Limited of £1.3bn is sensitive to reasonably possible changes in assumptions as set out in the table below.
The key assumptions used in the impairment test which include long term growth rates and discount rates are the same as that used for the
Grocery CGU described further in note 11 of the consolidated financial statements. An illustration of the reasonably possible changes in key
assumptions in the impairment test for the investment in Premier Foods Investments No.1 are as follows:
Revenue growth
Divisional contribution margin
Long term growth rate
Discount rate
Reasonably possible change in assumption
Increase/decrease by 1.5%
Increase/decrease by 1.5%
Increase/decrease by 0.5%
Increase/decrease by 0.5%
Impact on headroom
Increase/decrease by £106.8m/£103.8m
Increase/decrease by £184.2m
Increase/decrease by £123.7m/£105.9m
Decrease/increase by £116.2m/£135.7m
Under each of the above sensitivities no individual scenarios would trigger and impairment of the investment.
4. Debtors
Amounts owed by Group undertakings
IFRS 9 ECL provision charge
Total debtors
As at
3 Apr 2021
£m
–
–
–
As at
28 Mar 2020
£m
1,325.8
(3.3)
1,322.5
In 2020/21, as part of a Group-wide re-organisation the debts receivable from a Group subsidiary were waived. See note 3 for more details.
5. Deferred tax
The deferred tax asset relates to share-based payments.
At 29 March 2020/30 March 2019
Credited/(charged) to the statement of profit and loss
Credited to equity
At 3 April 2021/28 March 2020
6. Creditors: amounts falling due within one year
Amounts owed to Group undertakings
Other payable
Total creditors
2020/21
£m
0.1
0.1
0.6
0.8
2019/20
£m
2.2
(2.1)
–
0.1
As at
3 Apr 2021
£m
–
(1.2)
(1.2)
As at
28 Mar 2020
£m
(313.5)
(1.1)
(314.6)
With effect from 3 April 2016, the losses surrendered as Group Relief between UK members of the Group have been surrendered for no
consideration.
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Premier Foods plc
www.premierfoods.co.uk
149
Notes to the Company financial statements
continued
7. Called up share capital and other reserves
a) Called up share capital
As at
3 Apr 2021
£m
As at
28 Mar 2020
£m
Authorised, issued and fully paid
855,126,805 (2019/20: 848,209,480) ordinary shares of 10 pence each
85.5
84.8
All of the ordinary shares rank equally with respect to voting rights and the rights to receive dividends and distributions on a winding up.
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 (2019/20: £0.6m). Further details of these schemes can be found in
the Directors' Remuneration Report on page 68 to 83.
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 3 April 2021 is £0.5bn (2019/20: £0.7bn).
9. Subsequent events
On 19 May the directors have proposed a final dividend of 1.0 pence per share for the period ended 3 April 2021 subject to the ratification
at the AGM by the shareholders.
On 19 May 2021 the Group announced the proposed issue of new five year £300m Senior Secured fixed rate notes due 2026, to refinance
its £300m existing Senior Secured fixed rate notes, due to mature October 2023. Pricing of the new £300m Senior Secured fixed rate notes
is to be confirmed and the notes are expected to be callable after two years.
The Group has also announced that it has signed a new revolving credit facility (RCF) agreement with an updated lending group for a period
of three years from May 2021 with the option of extending for up to two additional years. This new senior secured RCF is a committed
facility of £175m with an interest margin grid broadly in line with the previous RCF, undrawn elements of the RCF will continue to attract
interest equivalent to 35% of the applicable margin. The covenant package attached to the revolving credit facility tested bi-annually is:
2021/22 HY
Subsequent test dates
1 Net debt, EBITDA and Interest are as defined under the revolving credit facility
Net debt/
EBITDA1
3.75x
Net debt/
Interest1
3.00x
3.50x
3.00x
150
Premier Foods plc
Annual Report for the 53 weeks ended 3 April 2021
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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
FINANCIAL STATEMENTS
Trade marks
The Company’s trademarks 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 trademark 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. Cup Noodles and Soba Noodles
are trademarks of Nissin Foods Holding Co., Limited (‘Nissin’), who
is the Company’s largest shareholder. The Company has entered
into a co-operation agreement with Nissin to market and distribute
certain Cup Noodles and Soba Noodles products in the UK and
certain other jurisdictions.
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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Premier Foods plc
www.premierfoods.co.uk
151
30415 26 May 2021 2:24 pm V6Premier Foods plc Annual Report for the 53 weeks ended 3 April 2021Premier Foods plcPremier HouseCentrium Business ParkGriffiths WaySt AlbansHertfordshireAL1 2RE01727 815850www.premierfoods.co.ukRegistered in England and Wales No. 516005030415 Premier foods AR2021 Strategic.indd 330415 Premier foods AR2021 Strategic.indd 326-May-21 2:34:54 PM26-May-21 2:34:54 PM