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Unknown Executive: Good afternoon, everyone. I think we are pretty much at 2:00, so ready to crack on.
Richard Godden: Yes, afternoon, everybody. This is the Premier Foods Half Year results Bond Investor Call. We had our main webcast call of the results that Alex Whitehouse and Duncan Leggett posted this morning, which should be available to view as a replay. We're hosting this to answer any questions that anyone may have from a credit perspective. So that's the purpose of the call. Duncan is going to do just a couple of slides from the presentation this morning, and then we'll open to any questions.
Duncan Leggett: Perfect. Thanks, Richard, and good afternoon, everyone. Yes, I thought I'll just do a couple of slides. Some of you may have dialed in this morning. There's a webcast on the website for anyone who wants. So I'm just going to take Slides 3 and 4 of our analyst presentation that's on the website. And in terms of the summary, we're really pleased that after a bit of a softer weather impacted quarter 1 that we've seen quarter 2 sort of snap back into slightly more normal levels. So you can see in the middle here, Q2 U.K. branded growth up at 3%, and that brings H1 up to 2%. So really good trajectory. And actually, if you look at quarter 2, July was actually pretty warm. So delivering the 3% after pretty much only August and September being more normal, we're really pleased with. Again, that's where we expect it to be, but it's always good when it comes through. Total branded revenue for the half up at 1.9%. And then market share. So we've had a really good run of market share gains. You can see 130 basis points over 3 years. And that's all around deploying the branded growth model and effectively driving growth that in most cases has been some way ahead of the market. I think we're really pleased that we've been able to hold on to that growth, notwithstanding a bit of a weather impacted first half. So I think we're really pleased we managed to maintain and keep hold of those gains. In terms of profitability, so a slightly unusual one this half because we've got this extended producer responsibility levy, you may have seen from other corporates, but this is -- this is a levy based on producers all around the packaging it uses, the energy intensity, the recyclability. And the way the accounting works is that it's forced us to take a full year's charge in our first half numbers. Now if you think about how we deal with this, we would offset it and recover it over the full 12 months. So on the left-hand side or bottom left, you can see the reported profit delivery. So we have still growing trading profit and adjusted PBT with this full year charge in. But actually, if you exclude the amount that relates to half 2, effectively, we will recover and offset it over the second 6 months of the year. So if you take half of that out on a basis that will be dealt with in H2, then actually trading profit is up 7% and adjusted PBT up 10%. So really good underlying profit generation, which we're really pleased with. And then leverage, I mean, it's been coming down for a while, isn't it? We're well in the rearview mirror in terms of the net debt that we inherited. And as long as we have associated with Premier, I think really positive news that we bought Merchant Gourmet in the half year and net debt to EBITDA is still only 1%. So in terms of strategic progress, so obviously growing the core. And again, we've got good U.K. branded revenue growth, good recovery in grocery and a continued, frankly, pretty stonking performance from Sweet Treats so that grew 9.4% from a branded perspective, really successful consumer insight-driven and BD really, really doing performing well. CapEx, we continue to deploy capital. Everyone will be aware of, this is a key pillar of how we grow our gross margin and that creates the room to reinvest behind our brands, which clearly then drives future growth. CapEx is a big part of it. We are investing in pretty high returning opportunities still in the sort of 2-, 3-, 4-year payback for many of them. And doing pretty well in terms of laying that capital down this year, so well actually that we think we might spend a bit more than we thought, which for us is really good news because it means we're spending money on the projects that drive return and therefore the quicker we can get at those, the better. Category expansion. So this is something that's been growing really well for us. It's still a relatively small base, but you can still see really good growth. So you can see a picture of a FUEL10K yogurt. This is our latest expansion, which is a sort of protein-rich yogurt with a bit of a lid that includes what is now the U.K.'s best-selling Granola SKU, which is our Chocolate Granola for FUEL10K. So a really good combo there. Pretty early days, but seems to be performing pretty well. We've also got Ambrosia Porridge and the Cape Herb and Spice really driving growth in there. International, I think it's -- from an in-market performance perspective, we're very pleased. We are gaining listings of things like Spice and FUEL10K in Europe. We are getting new listings in the U.S. as well, and North America was up -- went into double digits for the second quarter. And in Australia, which is still by far the biggest component of our international business, in market performance, we're growing at 17% for Cake, which is fantastic. That doesn't translate into revenue, which you would have picked up, no doubt because the retailers have decided to reduce their overall stock holdings, if you like. They have been holding a bit of a buffer because of the inconsistent shipping lead times as we've come out of COVID and then the Suez Canal has not been used. And now shipping times and shipping routes are becoming a bit more established and a bit more reliable, they've decided to bring down the in holding stock. So what does that mean. Clearly, it's not anything we can control, we can just control driving the model in Australia, which is working really well. All that means is they just -- the in-market forms isn't flowing through to our revenue because they are effectively -- we are selling all that -- making all those great sales out of stock that's already in market. So that's just a bit of a timing adjustment, if you like, but certainly not a reflection on the overall health of the business. And inorganic opportunities, FUEL10K and Spice Tailor are flying. So U.K. and the U.K., they are growing well into double digits. And as you will know, Merchant Gourmet we acquired in September. So really, really pleased with that, early days, but performing well, and we're getting on with the integration of that and looking to, again, use the benefit of our broader scale and our model to help grow distribution, supercharge the NPD pipeline and generate value. So really, really excited about what that's going to bring. So that's all I was planning to share. I thought it would be a good overview, but I think most important is that we have time and able to answer any questions from yourselves. So happy to pass over, which will facilitate.
Richard Godden: Thanks, Duncan. [Operator Instructions] I think the first one is coming from Neill.
Neill Keaney: Congrats, Duncan, strong set of results. A couple for me. On the acquisition pipeline, you've been pretty consistent on how picky you are and how that fits into the -- how your potential targeting fits into the 5-pillar strategy, et cetera. But just on cadence of acquisition, it's -- I think it's been on average one a year for the last 3 years. I appreciate the gap is wider between FUEL10K and Merchant Gourmet. But if another opportunity came along in the next sort of 6 to 12 months, is that something you would look at? Or do you worry about distraction risk and integration risk with merchants? And then just on the bridge facility and interest guidance, the interest guidance that you've given seems to indicate to me that you would not be looking to refinance the '26 notes until after the end of this fiscal year. Is that the right way to read it? Or is it just you'll be opportunistic as and when you think the right time to come to market is?
Duncan Leggett: Perfect. Thanks a lot, Neill. So taking your second question first, just before I forget it. I think, yes, clearly, what we've done with the bridge facility is just sensible financial planning really, isn't it, just buys us a bit of time, gets us through audit and sign off and stuff and just make sure that we can do our best as best we can to try and pick the market at the right time. I think your interpretation of interest guidance is pretty spot on. I think we're looking at sort of back end of this year, maybe early next will be what the guidance suggests. But clearly, if we thought the right thing was to go somewhere between now and then and we thought it was the best thing to do for the business, then we would seriously look at it. And the first question...
Richard Godden: M&A.
Duncan Leggett: So cadence. I mean, we are always looking. And as you say, roughly one a year, a couple of years almost since FUEL10K one, and we've been looking at a lot of stuff during that time, but we've decided not to get involved or decided that some of the stuff wasn't as attractive to us or -- 2 questions. So if something comes up in the next 3, 6, 12 months, we'll be seriously look at it. Yes, we are looking at stuff now. We always are. And clearly, when we're assessing whether to do a deal, clearly, financials, our commercial criteria, financial criteria are really important as well as our facility headroom. And to your point, we would make sure we don't buy stuff more than we can chew. I think the Merchant Gourmet, we are in the middle of integration. It's relatively straightforward. It's U.K. We are relatively known. So I think in the next few months, we'll be pretty integrated and then flowing that through the existing business. So that will be dealt with pretty quickly. And therefore, yes, clearly, if something comes up. And with these things, you can never tell that something is going to come up. You need to be prepared to act if they do -- isn't it? So yes, we could considerably do another deal if we felt it was the right thing to do in the next 6 to 12 months.
Richard Godden: [Operator Instructions]
Duncan Leggett: In the meantime, just maybe ask a question that you may have heard from this morning, but I guess just in case anyone's got any questions on working capital. So we do build stock during the first half of the year. That's very much how we operate on the basis that going into our Q3 peak sales period, we are sitting on a lot for obvious reasons because that is when we need it and when it sells through. That's probably shown through a bit more in the cash flow than it would normally do, and that's just around, a, the stock build was a bit bigger during H1 than it was the previous before, and that's just making sure that we've got everything ready for the second half. And the other bit is we've just phased the stock build a bit more evenly through the half. So therefore, there's a bit less of a natural offset with the creditors. So you might have seen there's no change to our full year view or full year guidance. But just in case it's a bit more of an outflow than people are expecting purely just a timing piece of when we build stock during the half, and we expect that to sell-through and get the cash in by the year-end.
Richard Godden: Thanks, Duncan. No hands being raised just yet. Maybe just a minute on CapEx guide.
Duncan Leggett: Yes, sure. So we've -- clearly, we're stepping up CapEx investment over the last few years, haven't we. And we guided to GBP 50 million for this year. And that's all around putting -- deploying capital in the way that we see the best way back into the business and generating pretty attractive returns. We guided to GBP 50 million for this year. We're just making really good progress in putting that to work and again, putting that to work for the value-creating projects. And we actually think we're making a bit better progress than we thought we would going into this year. So we've just ticked up guidance from GBP 50 million to GBP 55 million. Looking forward, whether it's GBP 50 million or GBP 55 million probably doesn't matter too much, but it's that sort of range going forward, and we have a good pipeline of effectively margin-enhancing projects we can see over the next sort of 3, 4, 5 years, a great visibility of, I guess, the fuel that's going to drive margin growth, which is going to drive investment back into the brands and drive future growth. So feeling pretty good about that.
Richard Godden: Great. One more question coming from Neill.
Neill Keaney: I'll take the opportunity if no one else does. There's a lot of noise in the press around supermarket price wars, real imagined anywhere in between. In terms of what you're seeing and negotiations, I guess, ramping up around this time of year and into first quarter of next year, any change to the sort of competitive tension between suppliers and retailers that you're seeing, anything we should be aware of this time?
Duncan Leggett: Yes. It's a really good question. I think short answer is no. But you're right in terms of the amount of coverage it gets. What are we seeing? I think quite a lot -- not exclusively, but quite a lot of the, call it, price war, quite a lot of it is around fresh and areas that we're not part of. So we're probably not feeling it there. Clearly, negotiations with customers are never easy, and we're not going to -- otherwise, but they're not really changing. So we just manage them in the usual way. And clearly, having market-leading brands and pretty strong relationships, I think we are pretty well placed. In terms of, I suppose, the other piece is the relative performance of the customers, that's getting probably a bit more polarized with Tesco's winning, Morrisons not having done great, but probably shown some better signs and Asda still in a bit of a trouble. And clearly, therefore, when Asda is declining, we're declining in Asda. But what we're trying to do is grow within Asda even though it might be declining so that we can help Asda help themselves turn around. So we sort of leverage the strong relationships to try and grow the people that are growing, but also help the people that are struggling a bit more to grow their categories through growth of our brands. So that's the other piece that we're just keeping an eye on. But I think summary is no real change to the aggressiveness or otherwise in terms of negotiations.
Neill Keaney: And given that backdrop, is there any change to your promotional strategy? I know that's the other thing we're hearing is promotional rate is elevated and remains so. I think it was 30% in October, which I think we normally only see in the peak weeks before Christmas.
Duncan Leggett: No, we generally agree the promotional plan with the customers at the beginning of the year and broadly stick to it. So I mean, things like cake are generally on promotion a bit more than the grocery, but that's no change. So I wouldn't think there's anything that was called out.
Richard Godden: We did have one question come in on the Q&A unattributed how you're thinking about your short-dated October '26 bonds. I think we've already sort of essentially answered that one.
Duncan Leggett: Yes, I hopefully covered it -- is where we need to refinance. We've just used the bridge facility just to enable us to buy a bit more. So yes, hopefully, that's dealt with.
Richard Godden: Great. Okay. Well, we have no further requests for questions or any further questions. So I think we'll probably wrap it up there if there's no more incoming. All the documents are -- that you might want to refer to are on our website and say -- there should be a recording of the webcast from this morning as well, if that's of help to anybody on the results center of the website. So with that, thank you very much for joining. And we'll have -- next time we'll come to market will be our Q3 trading update, which will be third week in January. Thanks, everybody.
Duncan Leggett: Thanks, everyone. Appreciate you joining.