REG - Premier Foods plc Premier Foods Fin - Preliminary Results
16/05/2024 07:00
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RNS Number : 6924O Premier Foods plc 16 May 2024
16 May 2024
Premier Foods plc (the "Group" or the "Company")
Preliminary results for the 52 weeks ended 30 March 2024
Full year ahead of expectations and return to volume growth in Q4
Headline results (£m) FY23/24 FY22/23 change
Headline Revenue 1,122.6 975.6 15.1%
Trading profit(1) 179.5 157.5 14.0%
Adjusted profit before taxation(4) 157.9 137.2 15.1%
Adjusted earnings per share(7) (pence) 13.7 12.9 6.4%
Net debt(11) 235.6 274.3 £38.7m lower
Statutory measures (£m) FY23/24 FY22/23 change
Revenue 1,137.5 1,006.4 13.0%
Profit before taxation 151.4 112.4 34.7%
Profit after taxation 112.5 91.6 22.8%
Basic earnings per share (pence) 13.0 10.6 22.6%
Dividend per share (pence) 1.728 1.44 20.0%
Alternative performance measures above are defined below and reconciled to
statutory measures throughout.
Headline Revenue presented for FY23/24 excludes 'Knighton Foods', Statutory
Revenue includes Knighton Foods
Financial headlines
· Headline revenue up 15.1%; Branded revenue up 13.5%, including strong branded
volume growth in Quarter 4
· Total Headline Grocery revenue up 16.7%, Sweet Treats revenue up 10.6%
· Full Year market share(13) increased +29bps; both Grocery and Sweet Treats
grew share in H2
· Trading profit ahead of expectations and up 14.0% versus prior year
· Adjusted profit before tax up 15.1% at £157.9m; adjusted earnings per share
up 6.4% reflecting tax rate increase
· Profit before tax up 34.7% to £151.4m
· Profit after tax up 22.8%; basic earnings per share up 22.6% to 13.0 pence
· Net debt/EBITDA reduced to 1.2x; lowest ever leverage
· Pension deficit contributions suspended from 1 April 2024(17)
· On track for FY24/25 expectations
Strategic headlines
· UK branded revenue up 13.6%
· Increased marketing investment across all major brands
· Infrastructure investment increased to £32.8m year on year, in line with
guidance
· New categories revenue up 72% led by porridge pots and driving Ambrosia to a
£100m brand
· International revenue up 12%(8); continuing to build distribution in target
markets
· The Spice Tailor now listed in 10 countries and returns well ahead of original
plan
· FUEL10K acquisition in H2, integration completed, gaining market share and
initial returns ahead of plan
Alex Whitehouse, Chief Executive Officer
"This has been another really strong year for the business with considerable
progress across all our key financial metrics and five pillar growth strategy.
In the UK, branded revenue increased by 13.6%, accompanied by 29 basis points
of market share gain, as we continued to outperform the market. Our brands
continue to demonstrate their relevance to consumers, helping them cook and
prepare nutritious and affordable meals during what has been a challenging
time for many people. All our leading brands benefitted from increased
marketing investment, as we extended our 'Best Restaurant in Town' campaign
into its second year. Ambrosia has now become our fourth £100m brand, in part
driven by the premium Ambrosia Deluxe range and the extension into breakfast
through porridge pots. Additionally, we continue to work very closely
alongside our partner, Nissin, and yet again, Nissin was one of our fastest
growing brands having grown by 54% on average over the last five years."
"We continue to invest in our manufacturing sites, with capex stepping up as
planned to £33m, as we invest in driving efficiencies and facilitating growth
through product innovation. Our expansion into new categories is proving to be
particularly successful with revenue growing by over 70%, led by Ambrosia
porridge, and we extended distribution of Angel Delight ice-cream, Cape Herb
& Spice and Oxo Marinades. International sales grew by 12%(8) with The
Spice Tailor delivering returns ahead of plan and distribution now available
in 10 countries. We were also delighted to acquire FUEL10K which is now fully
integrated into the core business, is performing very well and for which we
have exciting future plans."
"We continue to maintain our strong financial discipline; leverage reduced to
1.2x Net debt/EBITDA this year, our lowest ever level, and we are proposing
another 20% increase in the dividend. We recently announced the suspension of
pension deficit contributions, significantly increasing our free cash flow,
which enhances our ability to invest in infrastructure and pursue M&A
opportunities to deliver future growth. We have a strong set of plans for this
year, across each of our strategic pillars and with our return to volume
growth, we are on track to deliver on full year expectations."
Dividend
Subject to shareholder approval, the directors have proposed a final dividend
of 1.728 pence in respect of the 52 weeks ended 30 March 2024 (FY22/23:
1.44p), payable on 26 July 2024 to shareholders on the register at the close
of business on 28 June 2024. This represents a 20% increase in the dividend
paid per share compared to FY22/23, is ahead of adjusted earnings per share
growth, reflecting the confidence we have in the future and is consistent with
the Board's progressive dividend approach. The ex-dividend date is 27 June
2024.
Outlook
The Group expects a return to volume driven revenue growth this year, as
demonstrated in quarter four, partially offset by a lower price per unit.
Further progress in FY24/25 is expected to be delivered across all the Group's
strategic pillars, through the application of the Group's proven branded
growth model, with expectations for the full year on track. Following the
successful de-risking of pension obligations and the suspension of deficit
contribution payments, the Group has a number of opportunities to invest in
the business at attractive returns to increase efficiency and innovation,
while continuing to explore M&A opportunities and apply its progressive
approach to dividends.
Enhanced capital allocation opportunities
The Group is highly cash generative, benefits from strong EBITDA margins in
line with global branded food sector peers, and has substantially reduced its
interest costs in recent years.
In March 2024, the Group announced the suspension of pension deficit
contribution payments, which historically has consumed a significant
proportion of cash. This position frees up £33m free cash flow in FY24/25,
presenting enhanced options to help the Group deliver on its growth ambitions.
These are summarised as follows:
1. Capital investment: To increase efficiency and automation at our manufacturing
sites and facilitate growth through product innovation
2. M&A: Continue to pursue branded assets which would benefit from the
application of the Group's branded growth model. We will maintain our
financial discipline on M&A, applying a similar approach as to the recent
acquisitions of The Spice Tailor and FUEL10K, with a focus on Return on
Invested Capital.
3. Dividends: Expect to pay a progressive dividend, growing ahead of earnings.
The Group's Net debt/EBITDA leverage target of 1.5x remains unchanged.
Strategy overview
The Group's five pillar strategy drives growth and creates value, as outlined
below.
1. Continue to grow the UK core business
We have a well established and growing UK business which provides the basis
for further expansion. The Group's branded growth model is at the heart of
what we do and is core to our success. Leveraging our leading category
positions, we launch new products to market driven by consumer trends, support
our brands with sustained levels of marketing investment and foster strong
customer and retailer partnerships.
Proof point: UK branded revenue growth of 13.6%.
2. Supply chain investment
We invest in operational infrastructure to increase efficiency and
productivity across our manufacturing and logistics operations, providing a
virtuous cycle for brand investment. Capital investment in our sites also
facilitates growth through our innovation strategy and enhances the safety and
working conditions of our colleagues. We are also now investing in low energy
manufacturing solutions to reduce energy costs and drive scope 1 and 2
emission reductions, aligned to our Enriching Life Plan.
Proof point: Capital investment increased to £32.8m.
3. Expand UK business into new categories
We leverage the strength of our brands, using our proven branded growth model
to launch products in adjacent, new food categories.
Proof point: Revenue growth of products in new categories increased by 72%
compared to the prior year.
4. Build international businesses with critical mass
We are building sustainable business units with critical mass overseas,
applying our brand building capabilities to deliver growth in our target
markets of Republic of Ireland, Australia & New Zealand, North America and
EMEA. Our primary brands to drive this expansion are Mr Kipling, Sharwood's
and The Spice Tailor.
Proof point: Revenue growth of 12%(8) with The Spice Tailor now available in
10 countries.
5. Inorganic opportunities
We are looking to acquire brands where we believe we can drive significant
value through the application of our branded growth model.
Proof point: The Spice Tailor performed ahead of original returns expectations
this year and we also acquired FUEL10K, the vibrant Breakfast brand.
Environmental, Social and Governance (ESG)
The Group's 'Enriching Life Plan', encompasses the three strategic pillars of
Product, Planet and People, with encouraging progress delivered against each
of these pillars(18). In Product, revenue from products with a high
nutritional standard(19) such as Loyd Grossman Tomato & Basil cooking
sauces and Bisto 25% reduced salt Beef Gravy increased by 19% in the year.
Additionally, 44% of the Group's products are now classified as having a
regulated health or nutrition claim and are of a high nutritional
standard(19). Progress in Planet includes a 13.6% reduction in Scope 1 and 2
carbon emissions, with the first solar panels to be installed at a Group
manufacturing site completed at Stoke. In People, the Group continued its
partnership with FareShare, donating nearly 950,000 meals during the year, a
31% increase on last year; furthermore, embracing diversity is an important
part of the Premier Foods culture and 46% of management colleagues are female.
Further information
A presentation to investors and analysts will be webcast today at 9:00am BST.
To register for the webcast follow the link:
www.premierfoods.co.uk/investors/investor-centre
(http://www.premierfoods.co.uk/investors/investor-centre)
A recording of the webcast will be available on the Company's website later in
the day.
A conference call for bond investors and analysts will take place today, 16
May 2024, at 2:00pm BST. Dial in details are outlined below:
Telephone: 0800 358 1035 (UK toll free)
+44 20 3936 2999 (standard international access)
Access code: 061561
A factsheet providing an overview of the Preliminary results is available at:
www.premierfoods.co.uk/investors/results-centre
(http://www.premierfoods.co.uk/investors/results-centre)
A Premier Foods image gallery is available using the following link:
www.premierfoods.co.uk/media/image-gallery/
(http://www.premierfoods.co.uk/media/image-gallery/)
As one of Britain's largest food producers, we're passionate about food and
believe each and every day we have the opportunity to enrich life for
everyone. Premier Foods employs over 4,000 people operating from 14 sites
across the country, supplying a range of retail,
wholesale, foodservice and other customers with our iconic brands which
feature in millions of homes every day.
Through some of the nation's best-loved brands, including Ambrosia,
Batchelors, Bisto, Loyd Grossman, Mr Kipling, Oxo and Sharwood's, we're
creating great tasting products that contribute to healthy and balanced diets,
while committing to nurturing our people and our local communities, and going
further in the pursuit of a healthier planet, in line with our Purpose of
'Enriching Life Through Food'.
Contacts:
Institutional investors and analysts:
Duncan Leggett, Chief Financial Officer
Richard Godden, Director of Investor Relations
Investor.relations@premier (mailto:Investor.relations@premier) foods.co.uk
Media enquiries:
Sarah Grimshaw, External Communications Manager
Headland
Ed Young +44 (0) 7884 666830
Jack Gault +44 (0) 7799 089357
- Ends -
This announcement may contain "forward-looking statements" that are based on
estimates and assumptions and are subject to risks and uncertainties.
Forward-looking statements are all statements other than statements of
historical fact or statements in the present tense, and can be identified by
words such as "targets", "aims", "aspires", "assumes", "believes",
"estimates", "anticipates", "expects", "intends", "hopes", "may", "would",
"should", "could", "will", "plans", "predicts" and "potential", as well as the
negatives of these terms and other words of similar meaning. Any
forward-looking statements in this announcement are made based upon Premier
Foods' estimates, expectations and beliefs concerning future events affecting
the Group and subject to a number of known and unknown risks and
uncertainties. Such forward-looking statements are based on numerous
assumptions regarding the Premier Foods Group's present and future business
strategies and the environment in which it will operate, which may prove not
to be accurate. Premier Foods cautions that these forward-looking statements
are not guarantees and that actual results could differ materially from those
expressed or implied in these forward-looking statements. Undue reliance
should, therefore, not be placed on such forward-looking statements. Any
forward-looking statements contained in this announcement apply only as at the
date of this announcement and are not intended to give any assurance as to
future results. Premier Foods will update this announcement as required by
applicable law, including the Prospectus Rules, the Listing Rules, the
Disclosure and Transparency Rules, London Stock Exchange and any other
applicable law or regulations, but otherwise expressly disclaims any
obligation or undertaking to update or revise any forward-looking statement,
whether as a result of new information, future developments or otherwise.
Financial results
Overview
£m FY23/24 FY22/23 % change
Branded revenue 958.1 844.2 13.5%
Non-branded revenue 164.5 131.4 25.2%
Headline revenue 1,122.6 975.6 15.1%
Divisional contribution(2) 253.5 216.2 17.3%
Trading profit(1) 179.5 157.5 14.0%
Trading profit margin 16.0% 16.1% (0.1ppt)
Adjusted EBITDA(3) 203.9 182.3 11.8%
Adjusted profit before tax(4) 157.9 137.2 15.1%
Adjusted earnings per share(7) (pence) 13.7 12.9 6.4%
Basic earnings per share (pence) 13.0 10.6 22.6%
Headline revenue excludes Knighton Foods, reconciliations are provided in the
appendices.
Headline Revenue increased by 15.1% to £1,122.6m in FY23/24. Divisional
contribution grew by 17.3% to £253.5m and Trading profit increased by 14.0%
to £179.5m. Group and corporate costs were higher in the period due to
investment to improve planning systems and support strategic priorities, wage
and salary inflation and wider management incentive scheme costs. In addition,
the prior year included non-repeating income of £3.8m which related to a
temporary interruption at a manufacturing site.
Trading profit margins of 16.0% were broadly in line with the prior year.
Adjusted profit before tax increased by 15.1%, while adjusted earnings per
share grew by 6.4%, reflecting an increase in the UK corporation tax rate from
19% to 25%. Basic earnings per share for FY23/24 increased by 22.6% to 13.0p.
Statutory overview
£m FY23/24 FY22/23 % change
Grocery
Branded revenue 740.4 635.3 16.5%
Non-branded revenue 110.0 111.5 (1.4%)
Total revenue 850.4 746.8 13.9%
Sweet Treats
Branded revenue 217.7 208.9 4.2%
Non-branded revenue 69.4 50.7 36.9%
Total revenue 287.1 259.6 10.6%
Group
Branded revenue 958.1 844.2 13.5%
Non-branded revenue 179.4 162.2 10.6%
Statutory revenue 1,137.5 1,006.4 13.0%
Profit before tax 151.4 112.4 34.7%
Basic earnings per share (pence) 13.0 10.6 22.6%
The table above is presented including revenue from Knighton Foods.
Group revenue on a statutory basis increased by 13.0% in FY23/24, with branded
revenue growing by 13.5% and non-branded revenue up 10.6%. Grocery revenue was
£850.4m, 13.9% higher than the prior year. Non-branded Grocery revenue
declined by (1.4%) to £110.0m as price increases on existing contracts were
offset by managed contract exits associated with the closure of Knighton Foods
and Charnwood. Commentary on Sweet Treats is provided below.
Trading performance
Grocery
£m FY23/24 FY22/23 % change
Branded revenue 740.4 635.3 16.5%
Non-branded revenue 95.1 80.7 17.8%
Total headline revenue 835.5 716.0 16.7%
Divisional contribution(2) 219.8 189.2 16.2%
Divisional contribution margin 26.3% 26.4% (0.1ppt)
On a headline basis Grocery revenue increased by 16.7% in the year to
£835.5m, with Branded revenue up 16.5% to £740.4m. Non-branded revenue
increased by 17.8% to £95.1m largely due to pricing to recover input cost
inflation in retailer branded product ranges. The Group gained market
share(13) in its Grocery categories across the year, as its leading brands
continue to demonstrate their strength and resilience in what has been a
challenging consumer environment. Divisional contribution increased by 16.2%
to £219.8m, with margins broadly flat to last year.
In the fourth quarter, Grocery headline revenue increased by 10.3%, with
branded growth of 12.4% partly offset by non-branded revenue which was 5.4%
lower.
Grocery volumes returned to growth in the fourth quarter, as elasticity
effects of price increases dissipated. In the second half of the year, the
Group also implemented sharper promotional pricing across a number of its
products, such as Loyd Grossman cooking sauces and Batchelors Super Noodles,
which served to strengthen these volume trends.
As the Group has consistently highlighted, its branded growth model generates
value by leveraging the strength of its market leading brands, launching
insightful new products, supporting its brands with emotionally engaging
advertising and building strategic retail partnerships. Effective application
of this strategy has resulted in consistent UK branded revenue growth of 5.1%
over the last three years.
Growth in the Grocery portfolio was broad based across all brands in the year.
The Grocery business's major brands, Ambrosia, Batchelors, Bisto, Sharwood's,
Oxo and Loyd Grossman all benefitted from consumer marketing investment in
FY23/24, including through the 'Best Restaurant in Town' campaign, which
highlighted great value meal ideas across the Grocery portfolio.
Oxo was a particularly strong performer in the period, benefitting not only
from increased brand advertising but also further expansion of new Oxo Stock
pots. Nissin noodles ranges again enjoyed another great year, delivering
revenue growth of over 30%, recording retail sales of nearly £50m(13) and
also benefitting from the launch of the Big Soba pots range. Ambrosia became a
£100m revenue brand for the first time in FY23/24, gaining over 100 basis
points of market share, with growth due to both its core range and the launch
of Ambrosia Deluxe creamed rice in can and pot formats.
Another element of the branded growth model is to build and maintain strong,
collaborative partnerships with customers. For example, Batchelors extended
its successful partnership with DC Warner Brothers in the year, this time
through its tie-up with Batman and Aquaman, producing some highly impactful
instore execution displays. The Group also extended its partnership with its
charity partner, Fareshare, with the 'Win a Dinner, Give a Dinner' campaign,
to help fight hunger and address food waste. During the year, the Group's
Grocery categories increased total distribution by 1.8%, with Quick Meals,
Snack & Soups and Desserts being strong contributors to this growth.
The Group continues to make strong progress expanding into adjacent
categories, leveraging the equity of its leading brands, with revenue
increasing 72% compared to last year. Ambrosia porridge pots again led the
way; sales more than doubled year on year and market share increased to
10.2%(14) in a category growing at 19%. During the year, the range was
extended with the launch of an Apple & Blueberry variant; it also featured
in the main Ambrosia 'Moley' television advert and benefitted from outdoor
media activity.
Ice-cream also performed well, with revenue growth of over 50%, as it
increased distribution in major multiple retailers through ranges under the
Angel Delight and Mr Kipling brands. This will be extended in FY24/25 with the
launch of handheld Angel Delight ice-cream in Butterscotch and Banana
flavours.
The Spice Tailor continues to benefit from the Group's commercial
capabilities, its category expertise and has a strong set of product
innovation plans in the next 12 months, such as Stir fry sauces and East Asian
meal kits. Instore execution was enhanced in the year with end of aisle
displays delivering greater visibility, while the brand also benefitted from
digital advertising in both the UK and Australia. Additionally, the brand's
returns performance is now running ahead of the Group's original expectations.
The Group acquired FUEL10K, the vibrant, protein enriched breakfast brand in
October 2023 for an initial consideration of £29.6m. This acquisition expands
the Group's nascent presence in the breakfast category, providing the ideal
platform to build on the initial success of Ambrosia porridge pots. FUEL10K
has continued to perform well in its first five months with the Group, growing
sales and market share and developing further exciting product innovation
which will be instore from FY24/25 onwards.
In the fourth quarter of the year, and following a review of operations, the
Group announced to colleagues the proposed closure of its Charnwood frozen
pizza base business. This closure has since been confirmed, will affect c.60
colleagues and is expected to complete in the first half of FY24/25. Charnwood
is an entirely non-branded business and this move reflects the Group's
strategic priorities as a brand-focused business.
Sweet Treats
£m FY23/24 FY22/23 % change
Branded revenue 217.7 208.9 4.2%
Non-branded revenue 69.4 50.7 36.9%
Total headline revenue 287.1 259.6 10.6%
Divisional contribution(2) 33.7 27.0 24.8%
Divisional contribution margin 11.7% 10.4% 1.3ppts
Total revenue increased by 10.6% in Sweet Treats, with Branded revenue up 4.2%
and non-branded revenue ahead 36.9%. The growth in non-branded was
consistently strong throughout the year and was due to a combination of
contract wins in pies and tarts and price increases on existing ranges.
Divisional contribution increased to £33.7m in Sweet Treats, and margins
improved to 11.7%, a 130 basis point improvement on the prior year, reflecting
volume recovery assisted by sharper promotional pricing.
In the fourth quarter of the year, Sweet Treats revenue increased by 6.3%,
with branded revenue up 5.0% and non-branded revenue ahead 16.7%.
FY23/24 revenue growth for Mr Kipling reflected activity commemorating the
King's Coronation, impactful instore brand activation to assist shoppers
navigate the cake category with greater ease and a strong promotional campaign
in partnership with the Minions franchise. Brand investment in Mr Kipling
television advertising featured the new 'Piano' advert, demonstrating the
Group's media approach of building emotional connections with consumers. New
products launched in the year included Mr Kipling 'Best Ever' Signature mince
pies, which received strong consumer reviews while the Signature Brownie Bites
range also performed well. As a result of lower levels of input cost inflation
in the second half of the year, the Group increased its investment in
promotional pricing, which assisted volume recovery.
Cadbury cake revenue grew strongly in the second half, partly due to lapping a
softer comparative period and also due to impactful instore brand activation
and the relaunch of Crème Egg cake bars.
International
Revenue overseas increased by 12%(8) compared to last year. In-market cake
sales in Australia continue to grow, however, as previously disclosed, revenue
was impacted by reduced shipping times which in turn led to lower stock
holdings in the supply chain.
Ireland delivered a consistently strong year, with broad based growth across
many brands; Ambrosia, Bisto and Oxo were particularly strong performers due
to continued successful application of the branded growth model and pricing
benefits. In Europe, sales of Sharwood's increased reflecting significant new
listings in major retailers in Germany and Netherlands.
Building sustainable businesses in the Group's target markets continues to
progress well. The Mr Kipling and Cadbury cake brands reached a combined
record market share in Australia during the year of 16.1%(14) and delivered
further retail sales growth. Execution of the Company's branded growth model
included Mr Kipling benefitting from TV advertising in the form of the
engaging 'Little Thief' advert and also the sponsorship of the Great
Australian Bake Off, while new products launched in the period included
Caramel Bakewell Tarts and Salted Caramel Slices.
In the USA, the distribution of Mr Kipling to a range of retailers is building
well, with more than 3,000 stores now stocking the Group's largest brand
across North America, up from c.200 at the start of the year.
Distribution of The Spice Tailor is accelerating strongly; listings have now
been agreed with major retailers in ten countries globally, including for
1,000 stores in the USA and three countries in continental Europe.
Operating profit
Operating profit increased by £45.5m to £177.7m in the year. Trading profit
increased by 14.0% to £179.5m, as described above and brand amortisation of
£20.9m was £0.2m higher than the prior year. Net interest on pensions and
administrative expenses was a credit of £31.6m (FY22/23: £17.7m credit), due
to an interest credit on the opening combined surplus of the pension scheme of
£37.2m, partly offset by £5.6m of administrative expenses. Non-trading
items(9) of £11.4m were £9.1m lower than the prior year principally due to
Knighton closure costs in FY22/23. Impairment of fixed assets and
restructuring costs were £4.2m (FY22/23: £3.6m) and £5.3m (FY22/23:
£11.1m) respectively and both relate to closures of the Knighton and
Charnwood manufacturing sites. Other non-trading items of £1.9m relate
primarily to M&A transaction costs.
Finance costs
Net finance cost was £26.3m in FY23/24, compared to £19.8m in the prior
year. Net regular interest(5) increased by £1.3m to £21.6m, predominantly
due to a higher SONIA rate applicable to the Group's revolving credit and
debtors securitisation facilities. Interest on the Group's Senior secured
notes of £11.5m were, as expected, in line with the prior year. Other
interest payable was £5.2m (FY22/23: £0.6m) the majority of which related to
the unwind of both long-term provisions and contingent consideration related
to acquisitions. Interest income increased by £2.8m to £3.6m in the year due
to higher interest rates on cash reserves.
Taxation
The tax charge for the year was £38.9m (FY22/23: £20.8m) and was largely due
to a £37.9m (FY22/23: £21.4m) charge at the domestic income tax rate of 25%
(FY22/23: 19%). The increase compared to the prior year is due to an increase
in the UK corporation tax rate from 19% to 25% and higher profit before tax.
The Group is able to offset a proportion of cash tax payable through available
brought forward losses and capital allowances. Following the suspension of
pension deficit contributions, which are allowable for tax, ongoing annual
cash tax payable is expected to be in the single digit £'millions in the
medium term.
Earnings per share
£m FY23/24 FY22/23 % change
Operating profit 177.7 132.2 34.4%
Net finance cost (26.3) (19.8) (32.8%)
Profit before taxation 151.4 112.4 34.7%
Taxation (38.9) (20.8) 87.0%
Profit after taxation 112.5 91.6 22.8%
Average shares in issue (million) 862.4 861.2 0.1%
Basic Earnings per share (pence) 13.0 10.6 22.6%
The Group reported profit before tax of £151.4m in FY23/24, a 34.7% increase
on the prior year. Profit after tax was £112.5m, an increase of £20.9m and
basic earnings per share was 13.0 pence, an increase of 22.6%.
Cash flow
Net debt as at 30 March 2024 was £235.6m, a reduction of £38.7m compared to
the prior year. Net debt / EBITDA reduced from 1.5x to 1.2x during the year,
as Adjusted EBITDA(3) increased by 11.8% to £203.9m.
Trading profit was £179.5m, as described above. Depreciation plus software
amortisation was £24.4m in the year, resulting in Adjusted EBITDA(3) of
£203.9m, 11.8% higher than FY23/24. A £9.0m outflow of working capital, an
improved trend on the prior year, was due to higher stock reflecting inflation
of both raw materials and finished goods. Pension deficit contribution
payments were £33.1m and Pension Trustee and administration costs were
£5.6m, totalling a £38.7m cash outflow to the schemes. Non-trading items
were £14.4m and related to payments associated with closure of the Knighton
manufacturing site and a lease exit of a non-operational site.
On a statutory basis, cash generated from operating activities was £121.7m
(FY22/23: £87.2m) after deducting net interest paid of £20.3m (FY22/23:
£19.6m). The Group paid Tax of £4.4m in the period (FY22/23: £1.5m).
Cash used in investing activities was £62.1m (FY22/23: £63.8m), of which the
acquisition of FUEL10K represented £29.3m and capital investment was £32.8m.
The Group has a number of opportunities to invest in the business at
attractive returns to increase efficiency and innovation. During the year it
replaced air compressors across a number of sites which have improved
efficiency and also installed solar panels at the Group's Stoke manufacturing
site. In FY24/25, the Group expects to increase its capital investment which
will include the development of a new, innovative energy efficient process to
manufacture iced-topped cake products and a project to deliver additional
capacity for Ambrosia porridge pot production reflecting success since launch.
Cash used in financing activities was £20.7m in the year (FY22/23: £14.3m)
which included a £12.4m dividend payment to shareholders (FY22/23: £10.3m)
and £6.3m purchase of shares to satisfy share awards (FY22/23: £2.5m). A
dividend match payment to the Group's pension schemes of £3.8m was also made
in the period. As at 30 March 2024, the Group held cash and bank deposits of
£102.3m and its £175m revolving credit facility was undrawn.
Pensions
The Pension scheme has continued to make strong progress, benefiting from
a successful investment strategy for both the RHM and Premier Foods sections
since the segregated merger of the scheme in June 2020. On 6 March 2024, the
Group announced another major strategic step with the suspension of deficit
contribution payments to the pension scheme Trustee with effect from 1 April
2024.
Consequently, the Group will benefit from £33m increased free cash flow for
the financial year ending 29 March 2025, and subject to the results of the
next triennial valuation, at 31 March 2025, the Group anticipates no further
contributions to be payable after this date. Administrative expenses, which
are expected to be £5-6m in FY24/25, and the dividend match mechanism remain
in place. A full resolution of the pension scheme, where the scheme has fully
de-risked, is forecast to take place by the end of 2026.
IAS 19 Accounting Valuation (£m) 30 March 2024 1 April 2023
RHM Premier Foods Combined RHM Premier Foods Combined
Assets 3,032.0 533.0 3,565.0 3,240.2 552.6 3,792.8
Liabilities (2,232.8) (730.7) (2,963.5) (2,291.9) (735.4) (3,027.3)
Surplus/(Deficit) 799.2 (197.7) 601.5 948.3 (182.8) 765.5
Net of deferred tax (25%) 599.4 (148.3) 451.1 711.2 (137.1) 574.1
The Group's pension scheme reported a combined surplus of £601.5m as at 30
March 2024, a reduction of £164.0m compared to the prior year. This is
equivalent to a surplus of £451.1m net of a deferred tax charge of 25.0%.
Asset values fell in both sections of the schemes and reduced by £227.8m
overall. Of note, the illiquid Credit and Global Credit asset classes were
lower in the year. The value of liabilities fell by £63.8m, or 2.1% to
£2,963.5m. The applicable discount rate used to value liabilities was
unchanged at 4.80% and the RPI inflation rate assumption used was 3.15%
(FY22/23: 3.30%). The reduction in assets is greater than the reduction in
liabilities due to the scheme being over hedged on an accounting basis and
hence as underlying gilt yields increase the assets reduce more than
liabilities.
A deferred tax rate of 25.0% is deducted from the IAS19 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.
Principal risks and uncertainties
Strong risk management is key to delivery of the Group's strategic objectives.
It has an established risk management process, with the Executive Leadership
Team performing a formal robust assessment of the principal risks bi-annually
which is reviewed by the Board and Audit Committee. Risks are monitored at a
segment and functional level throughout the year considering both internal and
external factors. The Group's principal risks will be disclosed in the
annual report and accounts for the financial period ended 30 March 2024. The
major strategic and operational risks are summarised under the headings of
Macroeconomic and geopolitical instability, Impact of Government
legislation, Market and retailer actions, Operational integrity, Legal
compliance, Climate risk, Technology, Product portfolio, HR and employee
risk, Strategy delivery.
Alex Whitehouse Duncan Leggett
Chief Executive Officer Chief Financial Officer
Appendices
The Company's Preliminary results are presented for the 52 weeks ended 30
March 2024 and the comparative period, 52 weeks ended 1 April 2023. All
references to the 'period', unless otherwise stated, are for the 52 weeks
ended 30 March 2024 and the comparative period, 52 weeks ended 1 April 2023.
All references to the 'quarter', unless otherwise stated, are for the 13 weeks
ended 30 March 2024 and the comparative period, 13 weeks ended 1 April 2023.
Full year and Quarter 4 Revenue
Full year revenue (£m) FY23/24
Statutory revenue Knighton Foods Headline revenue Headline revenue
% change vs prior year
Grocery
Branded 740.4 - 740.4 16.5%
Non-branded 110.0 (14.9) 95.1 17.8%
Total 850.4 (14.9) 835.5 16.7%
Sweet Treats
Branded 217.7 - 217.7 4.2%
Non-branded 69.4 - 69.4 36.9%
Total 287.1 - 287.1 10.6%
Group
Branded 958.1 - 958.1 13.5%
Non-branded 179.4 (14.9) 164.5 25.2%
Total 1,137.5 (14.9) 1,122.6 15.1%
Quarter 4 Revenue (£m) FY23/24
Statutory revenue Knighton Foods Headline revenue Headline revenue
% change vs prior year
Grocery
Branded 198.4 - 198.4 12.4%
Non-branded 23.4 (1.6) 21.8 (5.4%)
Total 221.8 (1.6) 220.2 10.3%
Sweet Treats
Branded 57.1 - 57.1 5.0%
Non-branded 8.2 - 8.2 16.7%
Total 65.3 - 65.3 6.3%
Group
Branded 255.5 - 255.5 10.6%
Non-branded 31.6 (1.6) 30.0 (0.1%)
Total 287.1 (1.6) 285.5 9.4%
EBITDA to Operating profit reconciliation (£m) FY23/24 FY22/23
Adjusted EBITDA(3) 203.9 182.3
Depreciation (19.5) (19.9)
Software amortisation(10) (4.9) (4.9)
Trading profit 179.5 157.5
Amortisation of brand assets (20.9) (20.7)
Fair value movements on foreign exchange & derivative contracts (1.1) (1.8)
Net interest on pensions and administrative expenses 31.6 17.7
Non-trading items:
Impairment of fixed assets (4.2) (3.6)
Restructuring costs (5.3) (11.1)
Other non-trading items (1.9) (5.8)
Operating profit 177.7 132.2
Finance costs (£m) FY23/24 FY22/23 Change
Senior secured notes interest 11.5 11.5 -
Bank debt interest - net 8.3 6.9 (1.4)
19.8 18.4 (1.4)
Amortisation of debt issuance costs 1.8 1.9 0.1
Net regular interest(5) 21.6 20.3 (1.3)
Re-measurement due to discount rate change & contingent consideration 3.9 (1.1) (5.0)
Other finance cost 0.8 0.6 (0.2)
Net finance cost 26.3 19.8 (6.5)
Adjusted earnings per share (£m) FY23/24 FY22/23 Change
Trading profit 179.5 157.5 14.0%
Less: Net regular interest(5) (21.6) (20.3) (6.3%)
Adjusted profit before tax 157.9 137.2 15.1%
Less: Notional tax (25%/19%) (39.5) (26.1) (51.4%)
Adjusted profit after tax(6) 118.4 111.1 6.6%
Average shares in issue (millions) 862.4 861.2 0.1%
Adjusted earnings per share (pence) 13.7 12.9 6.4%
Net debt (£m)
Net debt(11) at 1 April 2023 274.3
Movement in cash (38.9)
Movement in debt issuance costs 1.3
Movement in lease creditor (1.1)
Net debt at 30 March 2024 235.6
Adjusted EBITDA 203.9
Net debt / Adjusted EBITDA 1.2x
Free cash flow (£m) FY23/24 FY22/23
Trading profit 179.5 157.5
Depreciation & software amortisation 24.4 24.8
Other non-cash items 6.6 4.7
Capital expenditure (32.8) (20.0)
Working capital (9.0) (24.8)
Operating cash flow(16) 168.7 142.2
Interest (20.3) (19.6)
Pension contributions (38.7) (45.1)
Free cash flow(12) 109.7 77.5
Non-trading items (14.4) (8.3)
Net purchase of shares (6.0) (1.1)
Financing fees (0.5) (0.7)
Taxation (4.4) (1.5)
Dividend (including pensions match) (16.2) (13.0)
Acquisition (29.3) (43.8)
Movement in cash 38.9 9.1
Proceeds from borrowings - -
Net increase in cash and cash equivalents 38.9 9.1
The following table outlines the basis on which the Group will report Headline
revenue, Trading profit and adjusted earnings per share for FY24/25. This
includes acquisitions but excludes Revenue and Trading profit from the
Charnwood site which will be closed in FY24/25. In FY23/24, all Charnwood
revenue was reported in Grocery - Non-branded.
Group results ex Charnwood (£m) FY23/24
Revenue Quarter 1 Quarter 2 Quarter 3 Quarter 4 Full Year
Statutory revenue 235.9 258.2 356.3 287.1 1,137.5
Less: Knighton (4.8) (4.9) (3.6) (1.6) (14.9)
Headline revenue (FY23/24 basis) 231.1 253.3 352.7 285.5 1,122.6
Less: Charnwood (3.9) (3.8) (3.1) (3.1) (13.9)
Headline revenue (FY24/25 basis) 227.2 249.5 349.6 282.4 1,108.7
Trading profit (£m) to adjusted eps (p) Half 1 Half 2 Full Year
Trading profit as reported 67.5 112.0 179.5
Less: Charnwood (0.9) (1.4) (2.3)
Headline Trading profit (FY24/25 basis) 66.6 110.6 177.2
Net regular interest (10.6) (11.0) (21.6)
Adjusted profit before tax 56.0 99.6 155.6
Adjusted profit after tax at 25% 42.0 74.7 116.7
Adjusted earnings per share (pence) 4.9p 8.6p 13.5p
Notes and definitions of alternative performance measures
The Company uses a number of alternative performance measures to measure and
assess the financial performance of the business. The directors believe that
these alternative performance measures assist in providing additional useful
information on the underlying trends, performance and position of the Group.
These alternative performance measures are used by the Group for reporting and
planning purposes and it considers them to be helpful indicators for investors
to assist them in assessing the strategic progress of the Group.
1. The Group uses Trading profit to review overall Group profitability. Trading
profit is defined as profit/(loss) before tax, before net finance costs,
amortisation of intangible assets, non-trading items (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.
2. Divisional contribution refers to Gross Profit less selling, distribution and
marketing expenses directly attributable to the relevant business segment.
3. Adjusted EBITDA is Trading profit as defined in (1) above excluding
depreciation and software amortisation.
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, early redemption fees, other finance cost 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 25.0%.
7. References to Adjusted earnings per share are on a non-diluted basis and is
calculated using Adjusted profit after tax as defined in (6) above divided by
the weighted average of the number of shares of 862.4 million (52 weeks ended
1 April 2023: 861.2 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. The constant
currency adjustment is calculated by applying a blended rate.
£m Reported Adjustment Constant currency
FY23/24 70.4 0.4 70.8
FY22/23 63.3 N/A 63.3
Growth % 11.2% N/A 11.8%
9. 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.
10. Software amortisation is the annual charge related to the amortisation of the
Group's software assets during the period.
11. Net debt is defined as total borrowings, less cash and cash equivalents and
less capitalised debt issuance costs.
12. Free cash flow is Net increase or decrease in cash and cash equivalents
excluding proceeds and repayment of borrowings, less dividend payments,
disposal proceeds, re-financing fees, net proceeds from share issues, tax,
acquisitions and non-trading items.
13. Circana, 52 weeks ended 30 March 2024.
14. Circana, 4 week rolling, 9 March 2024.
15. Acquisition accounting pertaining to FUEL10K acquisition can be found in Note
28.
16. Operating cash flow excludes interest and pension contributions.
17. Pension deficit contributions are suspended from 1 April 2024; subject to the
results of the next triennial valuation, the Group anticipates no further
contributions to be payable after this date.
18. Further details of progress on the Group's Enriching Life Plan will be
provided in the forthcoming publication of the 2024 Annual Report.
19. Defined as scoring less than 4 on UK Government's Nutrient Profiling Model
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 brand asset amortisation and impairment are excluded from
Trading profit because they are non-cash items.
· Non-trading items 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 reported segment and are disclosed at total
Group level.
· In line with accounting standards, the International operating segment, the
results of which are aggregated within the Grocery reported segment, are not
required to be separately disclosed for reporting purposes.
Consolidated statement of profit or loss
52 weeks ended 52 weeks ended
30 March2024 1 April 2023
Note £m £m
Revenue 3 1,137.5 1,006.4
Cost of sales (705.2) (648.2)
Gross profit 432.3 358.2
Selling, marketing and distribution costs (178.8) (142.0)
Administrative costs (75.8) (87.8)
Other income - 3.8
Operating profit 3 177.7 132.2
Finance cost 4 (30.4) (21.7)
Finance income 4 4.1 1.9
Profit before taxation 151.4 112.4
Taxation 5 (38.9) (20.8)
Profit for the period attributable to owners of the parent 112.5 91.6
Earnings per share (pence)
Basic 6 13.0 10.6
Diluted 6 12.7 10.4
Consolidated statement of comprehensive income
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
Note £m £m
Profit for the period 112.5 91.6
Other comprehensive (expense)/income, net of tax
Items that will never be reclassified to profit or loss
Remeasurements of defined benefit schemes 7 (237.7) (245.6)
Deferred tax credit 5 50.6 52.7
Current tax credit 5 8.4 7.2
Items that are or may be reclassified subsequently to
profit or loss
Exchange differences on translation (0.5) 0.6
Other comprehensive expense, net of tax (179.2) (185.1)
Total comprehensive expense attributable to owners of the parent (66.7) (93.5)
Consolidated balance sheet
As at As at
30 March 2024 1 April 2023
Note £m £m
ASSETS:
Non-current assets
Property, plant and equipment 190.4 185.9
Goodwill 702.7 680.3
Other intangible assets 289.6 294.4
Deferred tax assets 5 22.4 22.4
Net retirement benefit assets 7 810.0 960.1
2,015.1 2,143.1
Current assets
Inventories 98.9 93.7
Trade and other receivables 115.7 103.9
Cash and cash equivalents 8 102.3 64.4
Derivative financial instruments 9 - 0.8
316.9 262.8
Total assets 2,332.0 2,405.9
LIABILITIES:
Current liabilities
Trade and other payables (264.6) (255.4)
Financial liabilities
- short-term borrowings 10 - (1.0)
- derivative financial instruments 9 (0.8) (0.5)
Lease liabilities (2.7) (2.1)
Provisions for liabilities and charges (9.8) (13.3)
Current income tax liabilities 5 (0.4) -
(278.3) (272.3)
Non-current liabilities
Long-term borrowings 10 (325.7) (324.4)
Lease liabilities (9.5) (11.2)
Net retirement benefit obligations 7 (208.5) (194.6)
Provisions for liabilities and charges (7.3) (6.6)
Deferred tax liabilities 5 (152.9) (177.9)
Other liabilities (22.9) (12.9)
(726.8) (727.6)
Total liabilities (1,005.1) (999.9)
Net assets 1,326.9 1,406.0
EQUITY:
Capital and reserves
Share capital 86.9 86.8
Share premium 2.7 2.5
Merger reserve 351.7 351.7
Other reserves (9.3) (9.3)
Retained earnings 894.9 974.3
Total equity 1,326.9 1,406.0
Consolidated statement of cash flows
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
Note £m £m
Cash generated from operations 8 146.4 108.3
Interest paid (23.9) (20.4)
Interest received 3.6 0.8
Taxation paid (4.4) (1.5)
Cash generated from operating activities 121.7 87.2
Acquisition of subsidiaries, net of cash acquired 15 (29.3) (43.8)
Purchases of property, plant and equipment (24.7) (15.5)
Purchases of intangible assets (8.1) (4.5)
Cash used in investing activities (62.1) (63.8)
Principal element of lease payments (1.8) (2.3)
Financing fees (0.5) (0.7)
Dividends paid 11 (12.4) (10.3)
Purchase of shares to satisfy share awards (6.3) (2.5)
Proceeds from share issue 0.3 1.5
Cash used in financing activities (20.7) (14.3)
Net increase in cash and cash equivalents 38.9 9.1
Cash, cash equivalents and bank overdrafts at beginning of period 63.4 54.3
Cash, cash equivalents and bank overdrafts at end of period(1) 8 102.3 63.4
(1)Cash and cash equivalents of £102.3m (2022/23: £63.4m) includes bank
overdraft of £nil (2022/23: £1.0m) and cash and bank deposits of £102.3m
(2022/23: £64.4m). See notes 8 and 10 for more details.
Consolidated statement of changes in equity
Note Share capital Share premium Merger reserve Other reserves Retained earnings(1) Total equity
£m £m £m £m £m £m
At 3 April 2022 86.3 1.5 351.7 (9.3) 1,076.7 1,506.9
Profit for the period - - - - 91.6 91.6
Remeasurements of defined benefit schemes 7 - - - - (245.6) (245.6)
Deferred tax credit 5 - - - - 52.7 52.7
Current tax credit 5 - - - - 7.2 7.2
Exchange differences on - - - - 0.6 0.6
translation
Other comprehensive expense - - - - (185.1) (185.1)
Total comprehensive expense - - - - (93.5) (93.5)
Shares issued 0.5 1.0 - - - 1.5
Share-based payments - - - - 4.6 4.6
Purchase of shares to satisfy share awards - - - - (2.5) (2.5)
Deferred tax movements on share-based payments 5 - - - - (0.7) (0.7)
Dividends 11 - - - - (10.3) (10.3)
At 1 April 2023 86.8 2.5 351.7 (9.3) 974.3 1,406.0
At 2 April 2023 86.8 2.5 351.7 (9.3) 974.3 1,406.0
Profit for the period - - - - 112.5 112.5
Remeasurements of defined benefit schemes 7 - - - - (237.7) (237.7)
Deferred tax credit 5 - - - - 50.6 50.6
Current tax credit 5 - - - - 8.4 8.4
Exchange differences on translation - - - - (0.5) (0.5)
Other comprehensive expense - - - - (179.2) (179.2)
Total comprehensive expense - - - - (66.7) (66.7)
Shares issued 0.1 0.2 - - - 0.3
Share-based payments - - - - 4.4 4.4
Purchase of shares to satisfy share awards - - - - (6.3) (6.3)
Deferred tax movements on share-based payments 5 - - - - 1.6 1.6
Dividends 11 - - - - (12.4) (12.4)
At 30 March 2024 86.9 2.7 351.7 (9.3) 894.9 1,326.9
(1)Included in Retained earnings at 30 March 2024 is £3.9m in relation to
cumulative translation losses (2022/23: £3.4m loss, 2021/22: £3.7m loss).
1. General information
The financial information included in this preliminary announcement does not
constitute the Company's statutory accounts for the 52 weeks ended 30 March
2024 and for the 52 weeks ended 1 April 2023, but is derived from those
accounts. Statutory accounts for the 52 weeks ended 1 April 2023 have been
delivered to the registrar of companies, and those for 52 weeks ended 30 March
2024 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention to by way of emphasis
without qualifying their report, and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements of the Company have been prepared in
accordance with UK-adopted international accounting standards.
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 10. 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 30 September 2023 and 30 March 2024.
Having undertaken a robust assessment of the Group's forecasts with specific
consideration to the trading performance of the Group, cashflows and covenant
compliance, 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, therefore continues to adopt the going concern basis in
preparing its financial information for the reasons set out below:
At 30 March 2024, the Group had total assets less current liabilities of
£2,053.7m (2022/23: £2,133.6m), net current assets of £38.6m (2022/23: net
current liabilities of £9.5m) and net assets of £1,326.9m (2022/23:
£1,406.0m). Liquidity as at that date was £284.3m, made up of cash and cash
equivalents, available overdrafts and undrawn committed credit facilities of
£175.0m expiring in May 2026. At the time of the approval of this report, the
cash and liquidity position of the Group has not changed significantly.
The directors have rigorously reviewed the global political and economic
uncertainty driven by current conflict, the inflationary pressures across the
industry and the cost-of-living crisis and have modelled a severe but
plausible downside case 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. The downside case represents severe
but plausible assumptions related primarily to the impact of inflation during
the review period. The directors have also considered the impact of the
outbreak of an infectious disease, climate change, cyber attacks and changes
in consumer preferences in the downside case modelled and have assumed all
scenarios within the downside case impact during the period reviewed.
Whilst the downside scenario is deemed severe but plausible, it is considered
by the directors to be a robust stress test of going concern, having an
adverse impact on revenue, margin and cash flow. Should circumstances mean
there is further downside, whilst not deemed plausible, the directors, in
response have identified mitigating actions within their control, that would
reduce costs, optimise cashflow and liquidity. Among 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. None of the scenarios modelled are sufficiently material to prevent
the Group from continuing as a going concern.
The directors, after reviewing financial forecasts and financing arrangements,
have a reasonable expectation that the Group has adequate resources to
continue to meet its liabilities as they fall due for at least 12 months from
the date of approval of this report. Accordingly, the directors are satisfied
that it is appropriate to continue to adopt the going concern basis (in
accordance with the guidance 'Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting' issued by the FRC) in preparing
its consolidated financial statements.
Climate change
The Group has considered the impact of both physical and transitional climate
change risks on the financial statements of the Group. The Group does not
consider there to be a material impact on the valuation of the Group's assets
or liabilities, including useful economic life of property, plant and
equipment, or on any significant accounting estimates or judgements. See note
7 for further details on how the trustee of the Group's pension scheme plans
to integrate climate change considerations into their investment strategy. The
Group will continue to monitor the impact on valuations of assets and
liabilities as government policy evolves.
The impact of climate change has been considered in the projected cash flows
used for impairment testing.
2. Significant estimates and judgements
The following are areas of particular significance to the Group's financial
statements and may include the use of estimates. Results may differ from
actual amounts.
Significant accounting estimates
The following are considered to be the key estimates within the financial
statements:
2.1 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 7.
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 pensions asset valuations were not available at the reporting date, as
is usual practice, valuations at 31 December 2023 are rolled forward for cash
movements to the end of March 2024 to estimate the valuations for these
assets. This approach is principally relevant for Infrastructure Funds,
Private Equity, Absolute Return Products, Property Assets, Illiquid Credits
and Global Credits. Management have reviewed the individual investments to
establish where valuations are not expected to be available for inclusion in
these financial statements, movements in the most comparable indexes have then
been applied to these investments to be reported as lagged valuations to
establish any potential estimation uncertainty within the results.
2.2 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.
2.3 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
one-two 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. If the Commercial accruals balance moved by 5.0% in either direction,
this would have an impact of £3.7m.
2.4 Estimated values of acquired intangible assets on acquisitions
During the year, the Group completed the acquisition of Fuel10K Limited. An
intangible asset relating to the brand was recognised as a fair value
adjustment to the opening balance sheet. The brand asset is valued using a
relief from royalty approach. The key assumptions underpinning the brand asset
valuation are the revenue and profit projections, discount rates and
contributory asset charges. Applying different assumptions could result in a
significantly different brand intangible asset and a corresponding increase or
decrease in the value of the residual goodwill recognised.
Judgements
The following are considered to be the key judgements within the financial
statements:
2.5 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.
3. 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'. The CODM reviews the performance by operating segment. The
Grocery segment primarily sells savoury ambient food products and the Sweet
Treats segment sells primarily sweet ambient food products. The International
segment has been aggregated within the Grocery segment for reporting purposes
as revenue is below 10.0% of the Group's total revenue and the segment is
considered to have similar characteristics to that of Grocery as identified in
IFRS 8. There has been no change to the segments during the period.
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 pre-tax profit/loss before net finance costs,
amortisation of intangible assets, fair value movements on foreign exchange
and other derivative contracts, net interest on pensions and administrative
expenses, and any material items that require 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.
Revenues in the period ended 30 March 2024, from the Group's four principal
customers, which individually represent over 10.0% of total Group revenue, are
£289.9m, £156.5m, £127.9m and £109.6m (2022/23: £242.6m, £142.7m,
£114.4m and £96.2m). These revenues relate to both the Grocery and Sweet
Treats reportable segments.
The Group primarily supplies the UK market, although it also supplies certain
products to other countries in Europe and the rest of the world. The following
table provides an analysis of the Group's revenue, which is allocated on the
basis of geographical market destination, and an analysis of the Group's
non-current assets by geographical location.
The segment results for the period ended 30 March 2024, for the period ended 1
April 2023 and the reconciliation of the segment measures to the respective
statutory items included in the consolidated financial statements are as
follows:
52 weeks ended 30 March 2024 52 weeks ended 1 April 2023
Grocery Sweet Total Grocery Sweet Total
Treats Treats
£m £m £m £m £m £m
External revenues 850.4 287.1 1,137.5 746.8 259.6 1,006.4
Divisional contribution 219.8 33.7 253.5 189.2 27.0 216.2
Group and corporate costs (74.0) (62.5)
Other income - 3.8
Trading profit 179.5 157.5
Amortisation of brand assets (20.9) (20.7)
Fair value movements on foreign exchange (1.1) (1.8)
and other derivative contracts(1)
Net interest on pensions and administrative 31.6 17.7
expenses
Non-trading items:
- Impairment of fixed assets(2) (4.2) (3.6)
- Restructuring costs³ (5.3) (11.1)
- Other non-trading items(4) (1.9) (5.8)
Operating profit 177.7 132.2
Finance cost (30.4) (21.7)
Finance income 4.1 1.9
Profit before taxation 151.4 112.4
(1)The loss of £1.1m (2022/23: loss of £1.8m) reflects changes in fair value
rate during the 52-week period and movement in nominal value of the
instruments held at 30 March 2024 from the 1 April 2023 position.
(2) Impairment of fixed assets in the current period relates to the closure of
the Knighton and Charnwood sites. Impairment of fixed assets in the prior
period related to the Knighton site closure.
(3) Restructuring costs in the current period includes £3.7m, which relates
to the closure of the Knighton site with the remainder relating to the closure
of the Charnwood site. Restructuring costs in the prior period included
£7.6m, which relates to the closure of the Knighton site with the remainder
primarily relating to some supply chain restructuring.
(4)Other non-trading items in both the current and the prior period relate
primarily to M&A transaction costs.
Revenue
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
United Kingdom 1,067.1 943.1
Other Europe 34.9 28.1
Rest of world 35.5 35.2
Total 1,137.5 1,006.4
Non-current assets
As at As at
30 March 2024 1 April 2023
£m £m
United Kingdom 1,182.7 1,160.6
Non-current assets exclude deferred tax assets and net retirement benefit
assets.
4. Finance income and costs
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Interest payable on bank loans and overdrafts (11.9) (7.4)
Interest payable on senior secured notes (11.5) (11.5)
Interest payable on revolving facility - (0.3)
Other interest payable(1) (5.2) (0.6)
Amortisation of debt issuance costs (1.8) (1.9)
Total finance cost (30.4) (21.7)
Interest receivable on bank deposits 3.6 0.8
Other finance income(2) 0.5 1.1
Total finance income 4.1 1.9
Net finance cost (26.3) (19.8)
(1)Included in other interest payable is £0.8m charge (2022/23: £0.6m
charge) relating to non-cash interest costs on lease liabilities under IFRS 16
and £4.4m (2022/23: £nil) relating to the unwind of the Group's long-term
provisions and contingent consideration related to Group acquisitions.
(2)Other finance income primarily relates to the unwind of the discount of the
Group's long-term provisions.
5. Taxation
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Current tax
- Current period (14.6) (8.1)
- Prior periods 0.6 -
Deferred tax
- Current period (24.9) (15.8)
- Prior periods - 0.7
- Changes in tax rate on the opening balance - 2.4
Income tax charge (38.9) (20.8)
Tax relating to items recorded in other comprehensive income included:
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Corporation tax credit on pension movements 8.4 7.2
Deferred tax credit on pension movements 50.6 52.7
59.0 59.9
The applicable rate of corporation tax for the period increased to 25.0% from
19.0% starting in April 2023. This was previously enacted in 2021 and UK
deferred taxes at 30 March 2024 and 1 April 2023 have been measured using
these enacted tax rates.
The tax charge for the period differs from the standard rate of corporation
tax in the United Kingdom of 25.0% (2022/23: 19.0%). The reasons for this are
explained below:
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Profit before taxation 151.4 112.4
Tax charge at the domestic income tax rate of 25.0% (2022/23: 19.0%) (37.9) (21.4)
Tax effect of:
Non-deductible items (1.3) (0.1)
Impairment of tangible assets (0.5) -
Overseas losses not recognised (0.8) -
Acquisitions 1.0 -
Recognition of previously unrecognised losses - 0.2
Adjustment due to change in tax rate on the opening balances - 2.3
Difference between current and deferred tax rate - (3.5)
Tax incentives - 1.0
Adjustments to prior periods 0.6 0.7
Income tax charge (38.9) (20.8)
There is no movement in losses recognised for the 52 weeks ended 31 March
2024. In the prior year £0.2m was recognised in relation to overseas
losses. Corporation tax losses are not recognised where future recoverability
is uncertain.
The adjustments to prior periods of £0.6m (2022/23: £0.7m) relates primarily
to the changes in prior period intangibles, movement in provisions, capital
allowances and RDEC (Research and Development expenditure credit) following
verifications in submitted returns.
Pillar Two legislation has been enacted, or substantively enacted, in certain
jurisdictions in which the Group operates, including the UK. The legislation
will be effective for the Group's financial year beginning 31 March 2024. The
Group is in scope of the Pillar Two legislation and has performed an
assessment of the Group's potential exposure to Pillar Two income taxes. The
assessment of the potential exposure to Pillar Two income taxes is based on
the most recent country-by-country reporting prepared for the Group and based
on this assessment, the Group does not expect any material potential exposure
to Pillar Two top-up taxes.
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.
2023/24 2022/23
£m £m
At 2 April 2023 / 3 April 2022 (155.5) (189.8)
Business combinations (2.3) (5.0)
Charged to the statement of profit or loss (24.9) (12.7)
Credited to other comprehensive income 50.6 52.7
Credited / (Charged) to equity 1.6 (0.7)
At 30 March 2024 / 1 April 2023 (130.5) (155.5)
The Group has not recognised £10m of deferred tax assets (2022/23: £2.2m not
recognised) relating to UK and international corporation tax losses as future
recoverability is considered uncertain. In addition, the Group has not
recognised a tax asset of £67.8m (2022/23: £67.8m) relating to Advanced
Corporation Tax ('ACT') and £75.8m (2022/23: £75.8m) relating to capital
losses. Under current legislation these can generally be carried forward
indefinitely.
Deferred tax liabilities Intangibles Retirement benefit obligation Leases Other Total
£m £m £m £m £m
At 3 April 2022 (64.5) (233.9) (3.8) (1.3) (303.5)
Acquisition of The Spice Tailor (5.0) - - - (5.0)
Charge due to change in corporate tax rate
- To statement of profit or loss (0.3) - - - (0.3)
Current period credit/(charge) 1.5 (6.7) 3.0 - (2.2)
Credited to other comprehensive (expense) / income - 52.7 - - 52.7
At 1 April 2023 (68.3) (187.9) (0.8) (1.3) (258.3)
At 2 April 2023 (68.3) (187.9) (0.8) (1.3) (258.3)
Acquisition of FUEL10K Limited (3.6) - - - (3.6)
Current period credit/(charge) 1.7 (10.0) 0.4 1.0 (6.9)
Credited to other comprehensive income - 50.6 - - 50.6
At 30 March 2024 (70.2) (147.3) (0.4) (0.3) (218.2)
Deferred tax assets Accelerated tax depreciation Share-based payments Losses Other Total
£m £m £m £m £m
At 3 April 2022 51.3 3.9 57.7 0.8 113.7
Credit due to change in corporate tax rate
- To statement of profit or loss 2.3 - 0.3 0.1 2.7
Current period (charge)/credit (13.9) 0.5 (2.2) 2.0 (13.6)
Credited to equity - (1.2) - - (1.2)
Prior period credit
- To statement of profit or loss 0.5 0.2 - - 0.7
- To equity - 0.5 - - 0.5
At 1 April 2023 40.2 3.9 55.8 2.9 102.8
At 2 April 2023 40.2 3.9 55.8 2.9 102.8
Acquisition of FUEL10K Limited - - 1.3 - 1.3
Current period (charge)/credit (11.3) 1.0 (7.4) (0.3) (18.0)
Credited to equity - 1.6 - - 1.6
Prior period (charge) / credit
- To statement of profit or loss 0.1 - 0.7 (0.8) -
At 30 March 2024 29.0 6.5 50.4 1.8 87.7
Deferred tax asset on losses and accelerated tax depreciation
As at 30 March 2024 22.4
As at 1 April 2023 22.4
Net deferred tax liability £m
As at 30 March 2024 (152.9)
As at 1 April 2023 (177.9)
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 £22.4m (2022/23: £22.4m). 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.
6. Earnings per share
Basic earnings per share has been calculated by dividing the profit
attributable to owners of the parent of £112.5m (2022/23: £91.6m profit) by
the weighted average number of ordinary shares of the Company.
Weighted average shares
2023/24 2022/23
Number (m) Number (m)
Weighted average number of ordinary shares for the purpose of basic earnings 862.4 861.2
per share
Effect of dilutive potential ordinary shares:
- Share options 21.1 19.5
Weighted average number of ordinary shares for the purpose of diluted earnings 883.5 880.7
per share
Earnings per share calculation
52 weeks ended 30 March 2024 52 weeks ended 1 April 2023
Basic Dilutive effect of share options Diluted Basic Dilutive effect of share options Diluted
Profit after tax (£m) 112.5 - 112.5 91.6 - 91.6
Weighted average number of shares (m) 862.4 21.1 883.5 861.2 19.5 880.7
Earnings per share (pence) 13.0 (0.3) 12.7 10.6 (0.2) 10.4
Dilutive effect of share options
The dilutive effect of share options is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. The only dilutive potential ordinary
shares of the Company are share options and share awards. A calculation is
performed to determine the number of shares that could have been acquired at
fair value (determined as the average annual market share price of the
Company's shares) based on the monetary value of the share awards and the
subscription rights attached to the outstanding share options.
No adjustment is made to the profit or loss in calculating basic and diluted
earnings per share.
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 25.0% (2022/23: 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 other
interest payable and other interest receivable.
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.
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Trading profit (note 3) 179.5 157.5
Less net regular interest (21.6) (20.3)
Adjusted profit before taxation 157.9 137.2
Notional tax at 25.0% (2022/23: 19.0%) (39.5) (26.1)
Adjusted profit after taxation 118.4 111.1
Average shares in issue (m) 862.4 861.2
Adjusted basic EPS (pence) 13.7 12.9
Net regular interest
Net finance cost (26.3) (19.8)
Exclude other finance income (0.5) (1.1)
Exclude other interest payable 5.2 0.6
Net regular interest (21.6) (20.3)
7. 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. Although the Premier Foods Section, Premier Grocery Products
Section and RHM Section identified below are no longer separate schemes
following the merger in 2020, historically, Premier Foods companies' pension
liabilities and ex-RHM companies' liabilities have been shown separately.
These are as follows:
(a) The 'Premier' Schemes, which comprise:
Premier Foods Pension Section of RHM Pension Scheme
Premier Grocery Products Pension Section of RHM Pension Scheme
Chivers 1987 Pension Scheme
(b) The 'RHM' Pension Schemes, which comprise:
RHM Section of the RHM Pension Scheme
Premier Foods Ireland Pension Scheme
The Premier Foods Pension Scheme and Premier Grocery Products Pension Scheme
were wound up following the merger of assets and liabilities on a segregated
basis with the RHM Pension Scheme in June 2020. The RHM Pension Scheme
operates as three sections, the RHM Section, Premier Foods Section and Premier
Grocery Products Section.
On 6 March 2024, the Group announced that following the strong performance of
the pensions schemes since the 2020 segregated merger, deficit contribution
payments would be suspended from 1 April 2024. Subject to the results of the
next triennial valuation due at 31 March 2025 for all three sections of the
RHM Pensions Scheme, the Group anticipates no further contributions to be
payable after this date.
The exchange rates used to translate the overseas euro-based schemes are
£1.00 = €1.1587 (2022/23: £1.00 = €1.1582) for the average rate during
the period, and £1.00 = €1.1699 (2022/23: £1.00 = €1.1377) for the
closing position at period-end.
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 advisors to give them the specialist
expertise they need to support them in the areas of investment, funding,
legal, covenant and administration.
The trustee boards generally meet at least four times a year to conduct their
business. To support these meetings, certain aspects of the schemes' operation
are delegated 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, infrastructure, illiquid credits and global
credits.
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.
In setting the investment strategy, the primary concern for the trustee of the
RHM Pension Scheme is to act in the best financial interests of all
beneficiaries, seeking the best return that is consistent with a prudent and
appropriate level of risk. This includes the risk that environmental, social
and governance factors, including climate change, negatively impact the value
of investments held if not understood and evaluated properly. The trustee
considers this risk by taking advice from its investment advisors when
choosing asset classes, selecting managers, and monitoring performance.
From 1 October 2022, the trustee is required by regulation to:
· implement climate change governance measures and produce a Task force on
Climate-related Financial Disclosures ('TCFD') report containing associated
disclosures; and
· publish its TCFD report on a publicly available website, accessible free of
charge
The trustee disclosed the scheme's first TCFD report as part of the 2023
year-end reporting cycle.
The main risks to which the Group is exposed in relation to the funded pension
schemes are as follows:
· Liquidity risk - the PF and PGP Sections of the RHM Pension Scheme have
significant technical funding deficits, which could increase. The RHM Section
of 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 position of the Group. The Group continues to monitor the pension
risks closely working with the trustees to ensure a collaborative approach.
· Mortality risk - the assumptions adopted make allowance for future
improvements in life expectancy. However, if life expectancy improves at a
faster rate than assumed, this would result in greater payments from the
schemes and consequently, increases in the schemes liabilities. The trustees
review the mortality assumption on a regular basis to minimise the risk of
using an inappropriate assumption.
· Yield risk - a fall in government bond yields will increase the schemes
liabilities and certain of the assets. However, the liabilities may grow by
more in monetary terms, thus increasing the deficit in the scheme.
· Inflation risk - the majority of the schemes liabilities increase in line with
inflation and so if inflation is greater than expected, the liabilities will
increase.
· Investment risk - the risk that investments do not perform in line with
expectations.
The 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 as a
whole has largely hedged inflation and interest rate exposure to the extent of
its funding level.
The liabilities of the schemes are approximately 35.0% in respect of former
active members who have yet to retire and approximately 65.0% in respect of
pensioner members already in receipt of benefits.
The average duration of the sectionalised pension liabilities in the RHM
Pension Scheme is 13.0 years (12.8 years for the RHM Section; 13.9 years for
the PF Section and 13.4 years for the PGP Section).
All pension schemes are closed to future accrual.
At the balance sheet date, the combined principal accounting valuation
assumptions were as follows:
At 30 March 2024 At 1 April 2023
Premier Schemes RHM Schemes Premier Schemes RHM Schemes
Discount rate 4.80% 4.80% 4.80% 4.80%
Inflation - RPI 3.15% 3.15% 3.30% 3.30%
Inflation - CPI 2.75% 2.75% 2.85% 2.85%
Future pension increases
- RPI (min 0.0% and max 5.0%) 2.90% 2.90% 3.05% 3.05%
- CPI (min 3.0% and max 5.0%) 3.55% 3.55% 3.55% 3.55%
For the smaller overseas schemes, the discount rate used was 3.30% (2022/23:
3.65%) and future pension increases were 2.10% (2022/23: 2.45%).
At 30 March 2024 and 1 April 2023, 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 of
0.3% (2022/23: 0.3%), reflects an allowance for additional market distortions
caused by the RPI reform proposals.
The Group has set the CPI assumption by assuming it is 0.9% p.a. lower than
RPI pre 2030 (2022/23: 1.0% lower pre 2030), reflecting UKSA's stated
intention to make no changes before 2030, and 0.1% lower than RPI post 2030
(2022/23: 0.1% lower post 2030), this being our expectation of the long-term
average difference between CPI and CPI-H. Using this approach, the assumed
difference between the RPI and CPI is an average of 0.40% (2022/23: 0.45%)
p.a.
The assumptions take into account the timing of the expected future cashflows
from the pension schemes.
The RHM scheme invests directly in interest rate and inflation swaps to
protect from fluctuations in interest rates and inflation.
The mortality assumptions are based on the latest standard mortality tables at
the reporting date. The directors have considered the impact of the recent
Covid-19 pandemic on the mortality assumptions and consider that use of the
updated Continuous Mortality Improvement ('CMI') 2022 projections for the
future improvement assumption a reasonable approach.
The life expectancy assumptions are as follows:
At 30 March 2024 At 1 April 2023
Premier Schemes RHM Schemes Premier Schemes RHM Schemes
Male pensioner, currently aged 65 86.3 84.6 86.5 84.7
Female pensioner, currently aged 65 88.1 87.0 88.2 87.1
Male non-pensioner, currently aged 45 87.2 85.8 87.4 86.0
Female non-pensioner, currently aged 45 89.5 88.8 89.7 89.0
A sensitivity analysis on the principal assumptions used to measure the scheme
liabilities at the period-end is as follows:
Change in assumption Impact on scheme liabilities
Discount rate Increase/decrease by 0.1% Decrease/increase by £38.4m/£39.0m
Inflation Increase/decrease by 0.1% Increase/decrease by £16.8m/£16.8m
Assumed life expectancy at age 60 (rate of mortality) Increase/decrease by 1 year Increase/decrease by £109.6m/£118.4m
The sensitivity information has been derived using projected cash flows for
the schemes valued using the relevant assumptions and membership profile as at
30 March 2024. Extrapolation of these results beyond the sensitivity figures
shown may not be appropriate.
Premier Schemes % of total RHM Schemes % of total Total % of total
£m £m £m
Assets with a quoted price in an active market at 30 March 2024:
Government bonds 276.5 51.8 958.9 31.7 1,235.4 34.6
Cash 9.7 1.8 31.6 1.0 41.3 1.2
Assets without a quoted price in an active market at 30 March 2024:
UK equities - - - - - -
Global equities - - 2.1 0.1 2.1 0.1
Government bonds 29.8 5.6 4.3 0.1 34.1 1.0
Corporate bonds 7.4 1.4 4.0 0.1 11.4 0.3
Global property 72.3 13.5 376.3 12.4 448.6 12.5
Absolute return products 5.3 1.0 239.3 7.9 244.6 6.9
Infrastructure funds 22.7 4.3 355.8 11.7 378.5 10.5
Interest rate swaps - - 241.6 8.0 241.6 6.8
Inflation swaps - - 24.0 0.8 24.0 0.7
Private equity 39.2 7.4 326.3 10.8 365.5 10.3
LDI - - 7.2 0.2 7.2 0.2
Global credit 3.2 0.6 178.0 5.9 181.2 5.1
Illiquid credit 61.7 11.6 201.6 6.6 263.3 7.4
Cash 3.6 0.7 0.6 - 4.2 0.1
Other 1.6 0.3 80.4 2.7 82.0 2.3
Fair value of scheme assets as at 30 March 2024 533.0 100 3,032.0 100 3,565.0 100
Assets with a quoted price in an active market at 1 April 2023:
Government bonds 197.8 35.8 815.1 25.2 1,012.9 26.7
Cash 8.2 1.5 59.1 1.8 67.3 1.8
Assets without a quoted price in an active market at 1 April 2023:
UK equities 0.1 - - - 0.1 -
Global equities 2.3 0.4 4.6 0.1 6.9 0.2
Government bonds 30.5 5.5 2.1 0.1 32.6 0.9
Corporate bonds 7.4 1.4 4.9 0.2 12.3 0.3
Global property 113.4 20.5 418.6 12.9 532.0 14.0
Absolute return products 6.8 1.2 426.6 13.2 433.4 11.4
Infrastructure funds 27.4 5 342.5 10.6 369.9 9.8
Interest rate swaps - - 286.6 8.8 286.6 7.6
Inflation swaps - - 43.4 1.3 43.4 1.1
Private equity 48.8 8.8 310.8 9.6 359.6 9.5
LDI - - 7.1 0.2 7.1 0.2
Global credit 4.3 0.8 205.9 6.4 210.2 5.5
Illiquid credit 101.4 18.3 227.5 7.00 328.9 8.7
Cash 0.5 0.1 0.1 - 0.6 -
Other 3.7 0.7 85.3 2.6 89.0 2.3
Fair value of scheme assets 552.6 100 3,240.2 100 3,792.8 100
as at 1 April 2023
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.
Pension assets have been reported using 30 March 2024 valuations where
available. As is usual practice for pensions assets where valuations at this
date were not available, the most recent valuations (predominantly at 31
December 2023) have been rolled forward for cash movements to 30 March 2024
and recognised as lagged valuations. This is considered by management the most
appropriate estimate of valuations for these assets using the information
available at the time. At 30 March 2024, the financial statements include
£363.8m of assets (2022/23: £371.0m) using lagged valuations and were these
lagged valuations to move by 1.0% there would be a £3.6m (2022/23: £3.7m)
impact on the fair value of scheme assets. This approach is principally
relevant for Private Equity, Property Assets, Illiquid Credits and Global
Credits asset categories. Pension assets valuations are subject to estimation
uncertainty due to market volatility, which could result in a material
movement in asset values over the next 12 months. The amounts recognised in
the balance sheet arising from the Group's obligations in respect of its
defined benefit schemes are as follows:
Premier Schemes RHM Schemes Total
£m £m £m
At 30 March 2024
Present value of defined benefit obligation (730.7) (2,232.8) (2,963.5)
Fair value of plan assets 533.0 3,032.0 3,565.0
(Deficit)/surplus in schemes (197.7) 799.2 601.5
At 1 April 2023
Present value of defined benefit obligation (735.4) (2,291.9) (3,027.3)
Fair value of plan assets 552.6 3,240.2 3,792.8
(Deficit)/surplus in schemes (182.8) 948.3 765.5
The aggregate surplus of £765.5m has decreased to a surplus of £601.5m in
the current period. This decrease of £164.0m (2022/23: £179.4m decrease) is
primarily due to a lower return on scheme assets. Further details are provided
later in this note.
The disclosures in note 7 represent those schemes that are associated with
Premier ('Premier Schemes') and those that are associated with ex-RHM
companies ('RHM Schemes'). These differ 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. The disclosures in note 7 reconcile to
those disclosed on the balance sheet as shown below:
At 30 March 2024 At 1 April 2023
Premier Schemes RHM Total Premier Schemes RHM Total
Schemes Schemes
£m £m £m £m £m £m
Schemes in net asset position 10.8 799.2 810.0 11.8 948.3 960.1
Schemes in net liability position (208.5) - (208.5) (194.6) - (194.6)
Net (Deficit)/surplus in schemes (197.7) 799.2 601.5 (182.8) 948.3 765.5
Changes in the present value of the defined benefit obligation were as
follows:
Premier Schemes RHM Schemes Total
£m £m £m
Defined benefit obligation at 3 April 2022 (1,020.2) (3,134.9) (4,155.1)
Interest cost (27.0) (83.9) (110.9)
Settlement 0.3 - 0.3
Remeasurement gain 271.9 787.3 1,059.2
Exchange differences (1.6) (1.1) (2.7)
Benefits paid 41.2 140.7 181.9
Defined benefit obligation at 1 April 2023 (735.4) (2,291.9) (3,027.3)
Interest cost (33.9) (105.8) (139.7)
Remeasurement (loss) / gain (1.9) 18.5 16.6
Exchange differences 0.9 0.5 1.4
Benefits paid 39.6 145.9 185.5
Defined benefit obligation at 30 March 2024 (730.7) (2,232.8) (2,963.5)
Changes in the fair value of plan assets were as follows:
Premier RHM schemes Total
Schemes Schemes
£m £m £m
Fair value of scheme assets at 3 April 2022 826.3 4,273.7 5,100.0
Interest income on scheme assets 22.1 115.1 137.2
Remeasurement losses (295.7) (1,009.1) (1,304.8)
Administrative costs (4.2) (4.4) (8.6)
Settlement (0.3) - (0.3)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences 2.3 1.1 3.4
Benefits paid (41.2) (140.7) (181.9)
Fair value of scheme assets at 1 April 2023 552.6 3,240.2 3,792.8
Interest income on scheme assets 25.9 151.0 176.9
Remeasurement losses (40.5) (213.8) (254.3)
Administrative costs (2.7) (2.9) (5.6)
Contributions by employer 34.8 3.9 38.7
Additional employer contribution(1) 3.8 - 3.8
Exchange differences (1.3) (0.5) (1.8)
Benefits paid (39.6) (145.9) (185.5)
Fair value of plan assets at 30 March 2024 533.0 3,032.0 3,565.0
(1)Contribution by the Group to the Premier Schemes due to the payment of
dividends during the year.
The reconciliation of the net defined benefit (deficit)/surplus over the
period is as follows:
Premier Schemes RHM Schemes Total
£m £m £m
(Deficit)/surplus in schemes at 3 April 2022 (193.9) 1,138.8 944.9
Amount recognised in profit or loss (9.1) 26.8 17.7
Remeasurements recognised in other comprehensive income (23.8) (221.8) (245.6)
Contributions by employer 40.6 4.5 45.1
Additional employer contribution(1) 2.7 - 2.7
Exchange differences recognised in other comprehensive income 0.7 - 0.7
(Deficit)/surplus in schemes at 1 April 2023 (182.8) 948.3 765.5
Amount recognised in profit or loss (10.7) 42.3 31.6
Remeasurements recognised in other comprehensive income (42.4) (195.3) (237.7)
Contributions by employer 34.8 3.9 38.7
Additional employer contribution(1) 3.8 - 3.8
Exchange differences recognised in other comprehensive income (0.4) - (0.4)
(Deficit)/surplus in schemes at 30 March 2024 (197.7) 799.2 601.5
(1)Contribution by the Group to the Premier Schemes due to the payment of
dividends during the year.
Remeasurements recognised in the consolidated statement of comprehensive
income are as follows:
At 30 March 2024 At 1 April 2023
Premier Schemes RHM Total Premier Schemes RHM Total
Schemes Schemes
£m £m £m £m £m £m
Remeasurement (loss) / gain on scheme liabilities (1.9) 18.5 16.6 271.9 787.3 1,059.2
Remeasurement loss on scheme assets (40.5) (213.8) (254.3) (295.7) (1,009.1) (1,304.8)
Net remeasurement loss for the period (42.4) (195.3) (237.7) (23.8) (221.8) (245.6)
The actual return on scheme assets was a £77.4m loss (2022/23: £1,167.6m
loss), which is £254.3m less (2022/23: £1,304.8m less) than the interest
income on scheme assets of £176.9m (2022/23: £137.2m).
The remeasurement gain on liabilities of £16.6m (2022/23: £1,059.2m gain)
comprises a gain due to changes in financial assumptions of £6.9m (2022/23:
£1,089.8m gain), a loss due to member experience of £21.2m (2022/23: £69.7m
loss) and a gain due to demographic assumptions of £30.9m (2022/23: £39.1m
gain).
The Group expects to contribute £6.0m annually to its defined benefit schemes
in relation to expenses and government levies up to 29 March 2025. An
agreement has been reached with the RHM Pension Scheme Trustee to suspend
deficit contributions payments from 1 April 2024, as a result of this
agreement, the Group has entered into a Letter of Credit in favour of the
Scheme, equal to the suspended deficit contributions.
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 Group is aware of the Virgin Media court ruling on rule amendments to
Defined Benefit schemes and that it may impact the obligation of the legacy
Defined Benefit pension plans in the UK. However, the extent of the impact
is uncertain, the case is being appealed and it is also possible that the
government may intervene, using powers in the existing legislation. On this
basis, the Group is waiting for the outcome of these before taking action.
The total amounts recognised in the consolidated statement of profit or loss
are as follows:
Premier schemes RHM schemes Total
£m £m £m
Period ended 30 March 2024
Operating profit
Administrative costs (2.7) (2.9) (5.6)
Net interest (cost)/credit (8.0) 45.2 37.2
Total (cost)/credit (10.7) 42.3 31.6
Period ended 1 April 2023
Operating profit
Administrative costs (4.2) (4.4) (8.6)
Net interest (cost)/credit (4.9) 31.2 26.3
Total (cost)/credit (9.1) 26.8 17.7
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 £10.2m (2022/23: £8.2m) represents contributions payable to the schemes
by the Group at rates specified in the rules of the schemes.
8. Notes to the cash flow
Reconciliation of profit before taxation to cash flows from operations
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Profit before taxation 151.4 112.4
Net finance cost 26.3 19.8
Operating profit 177.7 132.2
Depreciation of property, plant and equipment 19.5 19.9
Amortisation of intangible assets 25.8 25.6
Impairment of non-current assets¹ 6.2 3.6
Net (gain)/ loss on disposal of non-current assets (0.2) 0.3
Fair value movements on foreign exchange and other derivative contracts 1.1 1.8
Net interest on pensions and administrative expenses (31.6) (17.7)
Equity-settled employee incentive schemes 4.4 4.6
Increase in inventories (7.5) (12.4)
Increase in trade and other receivables (16.9) (1.9)
Increase in trade and other payables and provisions 10.4 0.1
Additional employer contribution² (3.8) (2.7)
Contribution to defined benefit pension schemes (38.7) (45.1)
Cash generated from operations 146.4 108.3
¹ Impairment of non-current assets primarily relates to the closure of the
Knighton and Charnwood sites.
²Contribution by the Group to the Premier Schemes due to the payment of
dividends during the year.
Reconciliation of cash and cash equivalents to net borrowings
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m £m
Net inflow of cash and cash equivalents 38.9 9.1
Movement in lease liabilities 1.1 2.8
Debt issuance costs in the period 0.5 0.7
Other non-cash movements (1.8) (1.9)
Decrease in borrowings net of cash 38.7 10.7
Total net borrowings at beginning of period (274.3) (285.0)
Total net borrowings at end of period (235.6) (274.3)
Analysis of movement in borrowings
As at Cash flows Non-cash interest expense Other As at 30 March 2024
2 April 2023 non-cash movements
£m £m £m £m £m
Bank overdrafts (1.0) 1.0 - - -
Cash and bank deposits 64.4 37.9 - - 102.3
Net cash and cash equivalents 63.4 38.9 - - 102.3
Borrowings - Senior Secured Fixed Rate Notes maturing October 2026 (330.0) - - - (330.0)
Lease liabilities (13.3) 2.6 (0.8) (0.7) (12.2)
Gross borrowings net of cash(1) (279.9) 41.5 (0.8) (0.7) (239.9)
Debt issuance costs(2) 5.6 0.5 (1.8) - 4.3
Total net borrowings(1) (274.3) 42.0 (2.6) (0.7) (235.6)
Total net borrowings excluding lease liabilities(1) (261.0) 39.4 (1.8) - (223.4)
(1) Borrowings exclude derivative financial instruments.
(2) The non-cash movement in debt issuance costs relates to the amortisation
of capitalised borrowing costs only.
Cash outflows of £2.6m (2022/23: £2.9m) in relation to repayments of lease
liabilities have been included in the consolidated statement of cash flows,
including £0.8m included in interest paid within cash flows from operating
activities.
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.
As at 30 March 2024 As at 1 April 2023
Offset asset Offset liability Net offset asset Offset asset Offset liability Net offset liability
Cash, cash equivalents and bank overdrafts 16.0 (12.5) 3.5 12.6 (13.6) (1.0)
9. Financial instruments
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.
As at 30 March 2024 As at 1 April 2023
Carrying amount Fair Carrying amount Fair
value value
£m £m £m £m
Financial assets at amortised cost:
Trade and other receivables 72.7 72.7 63.7 63.7
Cash and cash equivalents¹ 102.3 102.3 64.4 64.4
Financial assets at fair value through profit or loss:
Trade and other receivables 7.8 7.8 4.2 4.2
Derivative financial instruments
- Forward foreign currency exchange contracts - - 0.7 0.7
- Commodity and energy derivatives - - 0.1 0.1
Financial liabilities at fair value through profit or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts (0.8) (0.8) (0.5) (0.5)
- Commodity and energy derivatives - - - -
Other financial liabilities at fair value through profit or loss:
- Deferred contingent consideration (note 15) (19.1) (19.1) (8.2) (8.2)
Financial liabilities at amortised cost:
Trade and other payables (255.8) (255.8) (248.3) (248.3)
Senior secured notes (330.0) (315.0) (330.0) (297.8)
Bank overdrafts - - (1.0) (1.0)
(¹) (Re-presented to include cash and cash equivalents at amortised cost)
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).
As at 30 March 2024 As at 1 April 2023
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
£m £m £m £m £m £m
Financial assets at fair value through profit
or loss:
Trade and other receivables - 4.9 2.9 - 1.8 2.4
Derivative financial instruments
- Forward foreign currency exchange contracts - - - - 0.7 -
- Commodity and energy derivatives - - - - 0.1 -
Financial liabilities at fair value through profit
or loss:
Derivative financial instruments
- Forward foreign currency exchange contracts - (0.8) - - (0.5) -
Other financial liabilities at fair value through
profit or loss:
- Deferred contingent consideration (note 15) - - (19.1) - - (8.2)
Financial liabilities at amortised cost:
Senior secured notes (315.0) - - (297.8) - -
10. Bank and other borrowings
As at As at
30 March 2024 1 April 2023
£m £m
Current:
Bank overdrafts - (1.0)
Lease liabilities (2.7) (2.1)
Total borrowings due within one year (2.7) (3.1)
Non-current:
Transaction costs(1) 4.3 5.6
Senior secured notes (330.0) (330.0)
(325.7) (324.4)
Lease liabilities (9.5) (11.2)
Total borrowings due after more than one year (335.2) (335.6)
Total bank and other borrowings (337.9) (338.7)
(1)Included in transaction costs is £1.6m (2022/23: £1.7m) relating to the
revolving credit facility.
Secured senior credit facility - revolving
The RCF of £175m attracts a leverage-based margin of between 2.0% and 4.0%
above SONIA. 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:
Net debt / EBITDA(1) Net debt / Interest(1)
2023/24 FY 3.50x 3.00x
2024/25 FY 3.50x 3.00x
(1)Net debt, EBITDA and Interest are as defined under the revolving credit
facility.
During the period, the Group extended the period of its revolving credit
facility ('RCF') by one year to May 2026.
Senior secured notes
The senior secured notes are listed on the Irish GEM Stock Exchange. The notes
totalling £330m mature in October 2026 and attract an interest rate of 3.5%.
11. Dividends
The following dividends were declared and paid during the period:
52 weeks ended 52 weeks ended
30 March 2024 1 April 2023
£m £m
Ordinary final of 1.44 pence per ordinary share (2022/23: 1.2 pence) 12.4 10.3
After the balance sheet date, a final dividend for 2023/24 of 1.728 pence per
qualifying ordinary share
(2022/23: 1.44 pence) was proposed for approval at the Annual General Meeting
on 18 July 2024 and will be payable on 26 July 2024. Dividend distributions
are recognised as a liability in the period in which the dividends are
approved by Group's shareholders.
12. 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 30 March 2024
of £17.3m (2022/23: £8.9m).
13. Contingencies
There were no material contingent liabilities at 30 March 2024 (2022/23:
none).
14. Related party transactions
There has been no material change to transactions with related parties during
the period.
15. Acquisition of subsidiary
Acquisition of FUEL 10K Limited
On 29 October 2023, the Group acquired 100% of the ordinary share capital of
FUEL 10K Limited ('FUEL10K') for initial consideration of £29.6m. A minimum
further deferred consideration of £4.0m will be payable in 2026/27, with any
increment to this dependent upon certain growth targets, and subject to a
maximum cap of total consideration (comprising initial consideration and
additional deferred consideration) of £55m. The acquisition provides an
ideal platform to accelerate the Group's expansion into the Breakfast
category, building on the recent successful launch of Ambrosia porridge pots
and possessing a differentiated category position, with its protein enriched
product range and appealing to a younger demographic.
The following table summarises the Group's provisional assessment of the
consideration for FUEL10K, and the amounts of the assets acquired and
liabilities assumed.
IFRS book value at acquisition Fair value adjustments Fair value
Recognised amounts of identifiable assets acquired and liabilities assumed £m £m £m
Brands and other intangible assets - 14.4 14.4
Deferred tax asset - 1.5 1.5
Inventories 2.0 0.3 2.3
Trade and other receivables(1) 3.7 1.4 5.1
Cash and cash equivalents 0.3 - 0.3
Trade and other payables (4.8) - (4.8)
Deferred tax liability - (3.6) (3.6)
Provisions - (1.4) (1.4)
Total identifiable net assets 1.2 12.6 13.8
Goodwill on acquisition 22.4
Initial consideration transferred in cash 29.6
Deferred contingent consideration 6.6
Total consideration 36.2
(1) Fair value adjustment relates to the recognition of indemnification assets
in relation to contingent liabilities acquired.
Identifiable net assets
The fair values of the identifiable assets and liabilities acquired have been
determined provisionally at the acquisition date. As permitted under IFRS 3
the Group may, within 12 months of the acquisition date, retrospectively
adjust the provisional amounts recognised to reflect new information obtained
about facts and circumstances that existed and, if known, would have affected
the measurement of the amounts recognised as at the acquisition date.
As a result of the business combination, the Group recognised provisions of
£1.4m in relation to the fair value of contingent liabilities acquired which
relate primarily to future tax liabilities in line with IAS 37.
The fair value of the trade and other receivables acquired as part of the
business combination was £5.1m. This includes an indemnification asset of
£1.4m in relation to the contingent liabilities assumed, and trade
receivables amounting to £3.7m, which approximated to the contractual cash
flows.
Consideration transferred
Consideration included cash of £29.6m transferred on completion of the
acquisition. An additional £6.6m was recognised in relation to the fair value
of deferred contingent consideration being a minimum payment of £4.0m payable
in 2026/27 with an increment to this subject to growth targets dependent on
future performance. The deferred contingent consideration is included within
non-current other liabilities.
The fair value of deferred contingent consideration represents the present
value of estimate payments measured at the time of acquisition based on the
Group's estimate of future performance. The fair value is based on
unobservable inputs and is a classified as a level 3 fair value estimate under
the IFRS fair value hierarchy. See note 9 for further details.
Acquisition-related costs amounting to £1.8m are not included as part of
consideration transferred and have been recognised as an expense in the
consolidated statement of profit or loss, as part of administrative expenses.
Goodwill
Goodwill amounting to £22.4m was recognised on acquisition and while FUEL10K
brand forms much of the enterprise value of the business, there is a premium
associated to the purchase of a pre-existing, well positioned business. This
goodwill is not expected to be deductible for tax purposes and is allocated to
the Group's Grocery CGU.
FUEL10K contribution to the Group results
From the date of the acquisition to 30 March 2024, FUEL10K contributed £8.1m
to the Group's Revenues and a profit before taxation of £0.8m. Had the
acquisition occurred on 2 April 2023, on a pro forma basis, the Group's
revenue for the period to 30 March 2024 would have been £1,149.1m and profit
before taxation for the same period would have been £151.5m.
16. Subsequent events
On 16 May 2024, the directors have proposed a final dividend of 1.728 pence
for the period ended 30 March 2024 for approval at the Annual General Meeting.
See note 11 for more details.
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