Final Results
Premier Foods plc
02 March 2005
2 March 2005
Premier Foods plc Preliminary Results 2004
Premier delivers maiden preliminary results in line with expectations at time of
IPO
'Business on-track and on strategy'
Year ended
31 December
2004 2003
£m £m Change
Turnover* 842.2 773.8 +8.8%
EBITA*,** 107.4 85.6 +25.5%
EBITA margin*,** 12.8% 11.1% +170bps
Operating profit before exceptional items* 97.3 76.4 +27.4%
Operating profit margin* 11.6% 9.9% +170bps
Operating profit after operating exceptional items* 71.9 65.9 +9.1%
Profit on ordinary activities before tax 8.7 (0.3) na
Recommended dividend per share 9p - -
* Continuing operations
** EBITA represents operating profit before amortisation and
exceptional items
• Total sales of £842.2m up 8.8%
• Like-for-like sales for continuing operations up 1.9%
• Like-for-like grocery sales, adjusted for sales lost because of the
fire up 1.3%
• Like-for-like grocery branded sales, adjusted for sales lost because
of the fire up 2.5%
• EBITA of £107.4m up 25.5%
• Like-for-like operating profit up 14.8%
• EBITA margin up 170bps
• Improved branded mix of business: 55% of grocery sales (2003: 50%)
• Cost saving programme delivering
• Ambrosia fully integrated with sales up 7% on 2003
• Net debt at 31 December 2004 of £377.5m
Robert Schofield, Chief Executive of Premier Foods plc, said,
'2004 has been a tremendously exciting year for Premier and we are pleased to
deliver a robust set of full year results in line with our expectations at the
time of the IPO. We have grown our profits despite challenging market
conditions and the serious fire at our Bury St Edmunds factory, which held back
sales of two of our drive brands - Branston and Loyd Grossman. Ambrosia has
made an excellent contribution to the business in its first full year of
ownership, on top of a strong performance from the existing business.
Accordingly, the Directors are pleased to recommend a final dividend of 9p per
share in respect of 2004, payable in May 2005.
'We were also delighted to announce the acquisition of Bird's custard and Angel
Delight this year which will provide further growth opportunities for the group.
Our business is underpinned by strong brands, scale, efficiency and cash
generation which will enable us to deliver continuing healthy growth.
'The Sudan 1 issue has been an upheaval for the business in terms of time and
effort. However, in financial terms, based upon our assessment of claims and our
insurance position, we believe the company does not have a material financial
exposure.
'We will continue to review the situation on a daily basis and should the
situation change materially we will update the markets accordingly'.
For further information:
Premier Foods plc
Robert Schofield, Chief Executive
Paul Thomas, Finance Director
Gwyn Tyley, Investor Relations Manager +44 (0) 20 7638 9571
Citigate Dewe Rogerson
Michael Berkeley
Sara Batchelor
Anthony Kennaway +44 (0) 20 7638 9571
A presentation to analysts will take place on Wednesday 2 March at 9am at ABN
AMRO, 250 Bishopsgate, London, EC2M 5AA
Group results - continuing operations
£m 2004 2003
Sales 842.2 773.8 +8.8%
Operating profit before amortisation and exceptional items 107.4 85.6 +25.5%
Amortisation (10.1) (9.2)
Operating exceptional items (25.4) (10.5)
Operating profit 71.9 65.9 +9.1%
This is a strong set of results for 2004, in line with our expectations at the
time of the IPO in July last year, despite the serious fire at our Bury St
Edmunds factory in October and the challenging market conditions which led to
slower sales over the Christmas period.
We have achieved this by continuing to implement a well-defined strategy based
on the use of our scale to drive organic branded growth, to develop customer
relationships and to deliver cost savings, whilst managing our retailer brands
proactively and seeking further branded acquisitions.
The performance during the year has demonstrated the strength of the company's
strategy:
• Branded sales increased from 50% to 55% of grocery sales;
• Drive brands have shown strong growth;
• The Masterbrand strategy is progressing well with Hartley's and Crosse
& Blackwell benefiting from significantly greater scale;
• Product innovation and brand extension are enhancing our brands with
Loyd Grossman soups and Branston sour pickles showing strong growth;
• The integration of Ambrosia during 2004 proceeded smoothly, with
increased management focus on this brand delivering like-for-like growth
of 7% over 2003, returning the brand and the category to growth after a
number of years of decline;
• Our customer relationship strategy has enabled us to secure
longer-term contracts and pursue category development plans;
• Brand development, leveraging our scale and improved manufacturing
efficiency have enabled us to increase our EBITA margin from 11.1% in 2003
to 12.8% in 2004; and
• The acquisition of the Bird's and Angel Delight brands, which completed in
February 2005, further strengthens our portfolio of great British food
brands.
Group sales from continuing operations increased by 8.8% to £842.2m, which
included a full year's contribution from Ambrosia. Like-for-like sales from
continuing operations were 1.9% ahead of 2003. Continued focus on cost control
and improving manufacturing efficiency drove margin improvement delivering an
increase in operating profit before exceptional items from continuing operations
increased of 27.4% to £97.3m.
These figures exclude Materne, a French spreads business, which was sold as part
of the IPO. Like-for-like grocery sales, excluding Ambrosia and the MBM potato
business were level with 2003 and like-for-like grocery operating profit before
exceptional items increased by 14.8%. We have estimated that the fire at the
Bury St Edmunds factory resulted in lost sales of £8.2m. If we had achieved
these sales, like-for-like grocery turnover would have increased by 1.3%. £3.0m
has been recognised in operating profit in respect of the insurance claim for
loss of profits associated with the fire.
We increased our marketing expenditure by 5% to £30.4m in 2004, reflecting our
focus on drive brands, which showed sales of Loyd Grossman up 18%, Branston up
2% and Typhoo up 3%. The gains made on Loyd Grossman and Branston are despite
the fire and we estimate that these brands would otherwise have shown growth of
31% and 12% respectively. Sales of Ambrosia were 7% higher than in 2003,
rewarding the additional focus placed on the brand since its acquisition.
Hartley's also performed exceptionally well, with an organic sales increase of
19% over 2003. Branded sales now represent 55% of our grocery product turnover,
up from 50% in 2003.
We completed the closure of the Hadfield factory in the first quarter of the
year and the transfer of tea production from Edinburgh to Moreton in December
2004. The Edinburgh rationalisation programme cost £2.4m, and is expected to
generate annual savings of £1.1m.
As previously stated, the 2003 comparatives benefited from the reversal of £3.3m
of accruals made at the end of 2002, which subsequently proved to be
over-provided.
Convenience Foods, Pickles & Sauces
£m 2004 2003
Sales 374.8 374.6 +0.1%
Operating profit before exceptional items 33.2 32.7 +1.5%
Sales by the Convenience Foods, Pickles & Sauces business increased by 0.1% to
£374.8m. We estimate that we would have shown growth of approximately 2.2%, but
for the fire at our Bury St Edmunds factory. The consolidation of our
convenience foods products, particularly our foodservice offering, under Crosse
& Blackwell has created a £25m brand and this greater scale will help us to
develop our foodservice business during 2005.
Branded sales in 2004 amounted to 38% of sales for the segment, the same as
2003.
Operating profit before exceptional items for the division was £33.2m in 2004,
an increase of £0.5m on 2003, though an increase of £2.7m after taking account
of the accrual reversal referred to above. This increase is primarily due to
improved manufacturing efficiency, particularly savings from the closure of the
Hadfield factory. In addition, this segment is seeing increases in raw material
prices, principally tin plate, however we have achieved price rises on the
affected products, which largely recovers the anticipated cost inflation.
Tea & Beverages
£m 2004 2003
Sales 140.3 143.0 -1.9%
Operating profit before exceptional items 31.9 26.9 +18.6%
Sales by the Tea & Beverages business declined by 2% to £140.3m. The decline was
principally due to the exit from certain low-margin retailer brand tea
contracts. Sales of Typhoo increased by 3% in 2004, with UK sales of London
Fruit & Herb successfully transferred to the Typhoo brand.
Branded sales in 2004 amounted to 81% of sales for the segment up from 79% in
2003.
Operating profit before exceptional items for the tea and beverages segment
increased by £5.0m to £31.9m. This improvement comes from lower raw material
costs, savings starting to flow from the consolidation of tea production into
the Moreton factory and the reallocation of marketing expenditure from Tea and
Beverages to other divisions.
Spreads & Desserts
£m 2004 2003
Sales 176.8 120.4 +46.8%
Like for like sales 117.8 115.2 +2.3%
Operating profit before exceptional items 26.7 11.2 +138.4%
Like for like operating profit before exceptional items 16.3 10.5 +55.2%
Sales by the Spreads and Desserts business have increased to £176.8m. This
increase is primarily due to the inclusion of Ambrosia, following its
acquisition in December 2003. Like-for-like sales increased by 2.3% with
Hartley's, Rose's, and Gale's all performing strongly; like-for-like branded
sales grew by 6%, offset by a decline in retailer brand sales of 1%. The
development of the Hartley's fruit masterbrand is progressing well with Chiver's
marmalades successfully transferred during the second half of 2004 and the
transfer of Rowntree's jellies currently underway. On completion of the brand
consolidation, the Hartley's brand will have sales of £33m (based on 2004
turnover), enabling advertising scale economies. Our initiatives to improve the
display of the spreads fixture has helped Hartley's to achieve organic growth
over 2003 of 19% becoming the UK's leading jam brand.
The integration of Ambrosia went smoothly, with the acquired business fully
integrated by the end of the first quarter of 2004. We launched a
brandy-flavoured custard and new yoghurt-pot style 4 packs of custard and rice
puddings in the fourth quarter of the year. These product developments and the
enhanced focus that we have been able to apply to the brand resulted in an
increase in like-for-like sales for Ambrosia of 7% in 2004. In February 2005,
Ambrosia launched its first TV advertising campaign for 6 years.
Branded sales in 2004 amounted to 69% of sales for the segment up from 54% in
2003.
Operating profit before exceptional items increased from £11.2m in 2003 to
£26.7m in 2004. This was mainly due to the inclusion of Ambrosia, which
contributed £10.4m at the operating profit level, compared to £0.7m in 2003.
Like-for-like operating profit before exceptional items increased by £5.8m,
principally as a result of the improved branded sales and reduced manufacturing
costs following the closure of the Hadfield factory.
Potatoes
£m 2004 2003
Sales 150.3 135.8 +10.7%
Operating profit before exceptional items 5.5 5.6 -1.8%
Sales by our Potatoes business increased by 11% to £150.3m, primarily due to the
higher market price of potatoes compared to last year during the first half of
the year, though a good harvest in the second half of 2004 softened market
prices and improved margins.
The potato supply industry became more competitive through 2004 with increased
supplier rationalisation. We have responded by strengthening the management
team to provide the business with a more appropriate skills mix to underpin its
future development. We also took action to address the business's cost base and
closed two out of its six packing houses.
At the end of 2004, we received notice from Sainsbury's that they would cease to
source potatoes from Premier from July 2005. However, we have recently confirmed
a number of new supply contracts with other customers, which will replace a
significant part of this volume. The industry remains very competitive and we
are therefore continuing to review the future shape and strategy of the
business.
Bird's Acquisition
On 13 February 2005 we completed the acquisition of the ambient desserts
business of Kraft Foods UK Limited. This business principally comprises the
Bird's custard and Angel Delight instant desserts brands. The acquisition is an
excellent strategic fit, bringing to the group further iconic category-leading
brands with significant consumer awareness, which will be integrated into our
Spreads and Desserts business. The acquisition will further enhance the branded
mix of the group, lifting branded sales as a percentage of grocery sales by
approximately two percentage points.
The products are primarily powders and we are integrating their production into
the Knighton factory. This should be completed by December 2005.
Sudan 1 Product recall
On 18 February 2005, the Food Standards Agency initiated a recall of a number of
products, which had been identified as possibly being contaminated with a dye '
Sudan 1' not authorised for use in food products. The dye was traced to a batch
of chilli powder supplied to Premier, which was used by Premier in the
manufacture of Worcester sauce. Premier used the Worcester sauce in the
manufacture of 3 other products and supplied Worcester sauce to a number of
retail and food ingredient customers.
A number of Premier's customers have indicated that they intend to claim for
their costs associated with the product recall. These claims may comprise
claims for damage to their own products, the costs of recalling and destroying
recovered product and claims for consequential loss among others.
Given the nature of the recall, the limited number of claims that have been
received at this stage and intrinsic uncertainty involved in such situations, it
has not been possible to fully quantify the claim and consequently, our
auditors, PricewaterhouseCoopers may refer to the uncertainty in their audit
report. However, the company has made a preliminary assessment of the quantum
and nature of the claims based on a set of assumptions reflecting management's
current view of the situation and after having taken appropriate legal advice.
At this time, based on this assessment, its own insurance position and its
potential claims against its suppliers and their own insurers, Premier does not
believe that it has any material financial exposure.
We will continue to review the situation on a daily basis and should the
situation change materially we will update the markets accordingly
Outlook
As a result of improving conditions through January, we remain confident that we
will achieve sales growth for the full year in line with our strategic targets.
This will be underpinned by our strong pipeline of new product and category
development which will help to drive branded sales growth.
We continue to focus on manufacturing efficiency through capital and other
projects. We do not anticipate any significant net raw material price movements
beyond the rise in tin plate costs, referred to above.
Following completion of the Bird's acquisition, we have commenced the
integration process and our initial impressions are very encouraging. This
acquisition will lift sales by our Spreads and Desserts business to over £200m
and increase its branded sales mix to approximately 72%.
Financial review
Basis of preparation
Premier Foods plc acquired the Premier Foods Investments No. 3 group through a
group reconstruction as part of the IPO process. The results have been prepared
using merger accounting. Please see note 1 to this announcement.
Premier Consolidated Profit and Loss Account for continuing businesses
Gross Profit
Gross profit before exceptional items was £210.4m for 2004, an increase of 15.2%
over 2003. This is principally due to the inclusion of the Ambrosia business,
but is also a reflection of the improved operating efficiency of the business.
Gross margin was 25.0% for 2004, an increase of 140 basis points compared to the
same period in 2003. This increase was largely due to the inclusion of
Ambrosia, which contributed 90 basis points. The balance of the improvement in
margin was due to the increase in sales of branded products, improvements in
manufacturing efficiency and a lower depreciation charge offset by a higher
pension cost and the effect of higher market prices on margins in the Potatoes
business.
Selling and Distribution Expenses
Selling and distribution expenses before exceptional items were £75.6m in 2004,
an increase of £2.3m, or 3.1%, over the same period in 2003. The increase is
principally due to the inclusion of a full year's costs for Ambrosia and a 5%
increase in our marketing spend. Like-for-like selling and distribution
expenses decreased by £2.1m or 2.9%.
Administrative Expenses
Administrative expenses before exceptional items have increased from £23.8m in
2003 to £30.4m in 2004. After adjusting for the impact of the accrual reversals
of £3.3m referred to earlier, administrative expenses increased by £3.3m. This
increase is principally due to the inclusion of a full year's costs for Ambrosia
and increased pension costs.
Operating Profit Before Exceptional Items
Operating profit before exceptional items was £97.3m for 2004, an increase of
£20.9m, or 27.4%, compared to 2003. Like-for-like operating profit increased by
£11.2m or 14.8% and for the grocery businesses by £11.3m or 16.1%.
Exceptional Items
Operating exceptional items charged during the year were £25.4m, of which £16.7m
was associated with the IPO in July. Non-IPO operating exceptional items were
£8.7m in 2004. Included in this was costs related to the closure of the
Edinburgh site and the integration of its operations into Moreton, together with
restructuring costs and provisions for the impairment of assets in the Potatoes
business.
Also included in the £8.7m was a charge of £1.0m incurred on the merger of three
of our principal pension schemes. The merger required a one-off cash
contribution of £10.0m to equalise the level of funding in the schemes, £9.0m of
which had been previously provided against.
Prior year operating exceptional items primarily related to the provision for
the closure of the Hadfield site and the integration of its operations into the
Histon and Bury St Edmunds plants.
The non-operating exceptional credit of £12.9m in 2004 is made up of the profit
of £11.7m made on the sale of our Materne business as part of the IPO, the gain
made on the replacement of fixed assets at the Bury St Edmunds site following
the fire, offset by the write-down of fixed assets at the closed Edinburgh
factory and potato packing sites.
IPO Exceptional Items and associated costs
As referred to above we charged £16.7m of IPO costs as exceptional items during
the year. This was made up of share option related costs of £14.5m and sundry
legal, accountancy and ancillary items totalling £2.2m.
We incurred costs of £10.2m on the primary share offer, which have been treated
as a deduction from the primary proceeds thus reducing the share premium arising
on the issue of the shares.
Costs of £8.1m were incurred on the arrangement of the new senior credit
facility. These have been capitalised and will be amortised over the term of
the facility. The un-amortised issuance costs of £10.5m associated with the
previous senior credit facility have been written off and charged as an
exceptional interest charge. We repaid our Senior Notes in September 2004,
which resulted in an early redemption penalty of £11.1m. This has been treated
as an exceptional interest charge.
These are summarised as:
Item £m Treatment
Options - Cash cancellation 8.2 Operating exceptional cost
- Rollover options 6.3 Operating exceptional cost
Sundry IPO expenses 2.2 Operating exceptional cost
16.7
Equity: - Underwriting, legal and accounting 10.2 Share premium account
Debt: - Issuance costs - new facility 8.1 FRS 4 asset
- Issuance costs - old facilities 10.5 Exceptional Interest cost
Senior Notes early redemption penalty 11.1 Exceptional interest cost
Bury St Edmunds Fire
On 27 October 2004 we suffered a serious fire at our Bury St Edmunds plant,
which is the main manufacturing site for our Pickles and Sauces business. With
the exception of Branston sweet pickles, where we were able to recommence
manufacture within 3 weeks, we either transferred production to our Jonker Fris
subsidiary in the Netherlands or outsourced production to third parties. This
minimised disruption to our customers, which was especially important during the
peak Christmas season. All the lines are now operational at the site and
distribution is close to pre fire levels.
We have recognised the loss of profits recoverable through our insurance policy
as other operating income. The assets destroyed by the fire have been written
down as a non-operating exceptional loss and the insurance proceeds received to
replace the assets, from which the £1.0m insurance excess has been deducted,
have been recorded as non-operating exceptional income of £3.5m.
Cash Flow and Debt
Net cash flow from operating activities before exceptional items for the
continuing businesses was £115.2m in 2004, compared to £110.9m in 2003.
Exceptional cash flow items in 2004 included the payment of a one off
contribution to the pension scheme of £10.0m to facilitate the merger of the
three predecessor schemes and the cash costs of the closure of the Hadfield
site. The net proceeds of the shares issued in the IPO and the effective
capitalisation of the PFI No. 3 Loan Notes reduced debt by £303.0m. Gross debt
net of cash and before debt issuance costs was £377.5m at 31 December 2004.
Capital expenditure
Gross capital expenditure during 2004 was £36.8m, of which £6.9m was for assets
purchased to replace the assets damaged in the fire at Bury St Edmunds. After
the deduction of the £1.0m excess, we received £5.9m from our insurers to fund
this replacement programme. We also received proceeds of £4.0m from the sale of
the Hadfield factory.
Interest
Interest charged in 2004 was £78.3m. This comprises a net £41.7m payable of
cash interest, £11.1m of interest payable on the PFI No. 3 Loan Notes, prior to
their effective capitalisation, a total of £14.4m of debt issuance costs
amortisation and a charge of £11.1m on the early redemption of the Senior Notes.
Interest charges will fall significantly in 2005 following the changes to our
capital structure in the IPO. Net interest paid in 2004 was £59.4m, comprising
£48.3m of interest on term debt and the Senior Notes and the £11.1m early
redemption penalty on the Senior Notes. We anticipate that our ongoing cash
interest costs will total approximately 7% of net debt, comprising 6% on the
term debt and an additional 1% to cover other associated financing charges.
Taxation
The tax charge for 2004 was £2.5m on profit before tax of £8.7m. Tax paid in
the year was £0.2m.
Pensions
We provide retirement benefits for UK employees under our main defined benefit
(final salary) scheme, the Premier Foods Pension Scheme (the 'PF Scheme'), which
was formed by the merger of three pension schemes in May 2004. A second smaller
defined benefit (final salary) scheme, the Premier Ambient Products Pension
Scheme (the 'PAPP Scheme') provides benefits solely for former employees of
Unilever Bestfoods employed in the Ambrosia business.
We regularly review our actuarial assumptions and in light of increased
inflationary pressures in the economy have changed our FRS 17 assumptions. The
net effect of this adjustment is to increase the reported net deficit after
deferred tax in the scheme, as calculated under FRS 17 assumptions, by £25.2m to
£45.2m. The revision to the FRS17 assumptions does not affect the actuarial
deficit on which the cash contributions that the company is making to the scheme
are based and contributions remain at the same rate as during 2004.
CONSOLIDATED PROFIT AND LOSS ACCOUNT - unaudited
Year ended Year ended
31 December 2004 31 December 2003
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations operations
£m £m £m £m £m £m
Turnover 842.2 54.6 896.8 773.8 96.8 870.6
Operating profit
Before amortisation and exceptional items 107.4 2.1 109.5 85.6 3.0 88.6
Amortisation of intangible assets (10.1) (0.1) (10.2) (6.8) (0.3) (7.1)
Amortisation of pension prepayment - - - (2.4) - (2.4)
Operating profit before exceptional items 97.3 2.0 99.3 76.4 2.7 79.1
Operating exceptional items (25.4) - (25.4) (10.5) (0.5) (11.0)
Operating profit 71.9 2.0 73.9 65.9 2.2 68.1
Non-operating exceptional items 12.9 0.2 13.1 2.0 - 2.0
Profit on ordinary activities before interest 87.0 70.1
Net interest payable (78.3) (70.4)
Profit / (loss) on ordinary activities before 8.7 (0.3)
taxation
Taxation (charge) / credit on profit / (loss)
on ordinary activities (2.5) 8.9
Profit on ordinary activities after taxation 6.2 8.6
Dividends (22.0) -
Retained (loss)/profit for the year (15.8) 8.6
Earnings per share (pence)
Basic 3.9 9.6
Diluted 3.8 9.3
The accompanying notes are an integral part of this consolidated financial
information.
CONSOLIDATED BALANCE SHEET - unaudited
31 December 31 December
2004 2003
£m £m
Fixed assets
Intangible assets 174.6 190.4
Tangible assets 147.3 153.1
Investments 0.1 0.3
322.0 343.8
Current assets
Stocks 98.2 120.6
Debtors due:
Within one year 110.6 120.7
After more than one year 9.4 6.5
Cash at bank and in hand 12.5 28.1
230.7 275.9
Creditors: amounts falling due within one year
Borrowings (27.9) (40.4)
Other creditors (173.2) (195.2)
(201.1) (235.6)
Net current assets 29.6 40.3
Total assets less current liabilities 351.6 384.1
Creditors: amounts falling due after more than one year
Borrowings (354.9) (681.6)
Other creditors - (0.2)
(354.9) (681.8)
Provisions for liabilities and charges (11.6) (19.1)
Net liabilities (14.9) (316.8)
Capital and reserves
Share capital 2.4 -
Share premium account 320.9 10.0
Reserves (338.2) (326.8)
Total shareholders' deficit (14.9) (316.8)
The accompanying notes are an integral part of this consolidated financial
information.
CONSOLIDATED CASH FLOW STATEMENT - unaudited
Year ended
31 December
Note 2004 2003
£m £m
Net cash inflow from operating activities (a) 98.4 109.9
Return on investments and servicing of finance (b) (67.5) (47.1)
Taxation (0.2) 1.7
Capital expenditure and financial investment (b) (26.9) (21.0)
Acquisitions and disposals (b) 34.2 (106.3)
Cash inflow/(outflow) before financing 38.0 (62.8)
Financing
Issue of ordinary share capital 98.7 -
(Decrease)/increase in borrowings (355.7) 34.8
Effective capitalisation of PFI No.3 loan notes by issue of shares 204.3 -
Decrease in net cash in the year (14.7) (28.0)
Reconciliation of net cash flow to movement in net debt
Decrease in net cash in the year (14.7) (28.0)
Decrease/(increase) in borrowings 355.7 (34.8)
Exchange adjustments - (3.8)
Other non-cash movements (17.4) (19.8)
Decrease/(increase) in net debt in the year 323.6 (86.4)
Net debt at beginning of year (693.9) (607.5)
Net debt at end of year (370.3) (693.9)
Analysis of movements in net debt
At 1 Cash Issue of Effective Other At 31
January flow share capitalisation non-cash December
2004 capital of PFI No.3 loan movement 2004
notes
£m £m £m £m £m £m
Cash at bank and in hand 28.1 (15.6) - - - 12.5
Less: Bank overdrafts (10.8) 0.9 - - - (9.9)
Net cash 17.3 (14.7) - - - 2.6
Debt due within one year (34.2) 14.2 - - - (20.0)
Debt due after one year (690.4) 38.5 98.7 204.3 (11.1) (360.0)
Other non-bank debt (0.1) - - - - (0.1)
Gross debt (724.7) 52.7 98.7 204.3 (11.1) (380.1)
Gross debt net of cash (707.4) 38.0 98.7 204.3 (11.1) (377.5)
Debt issuance costs 13.5 - - - (6.3) 7.2
Total net debt (693.9) 38.0 98.7 204.3 (17.4) (370.3)
The accompanying notes are an integral part of this consolidated financial
information.
NOTE TO THE CONSOLIDATED CASH FLOW STATEMENT - unaudited
(a) Reconciliation of operating profit to operating cash flows
Year ended 31 December
2004 2003
£m £m
Continuing operations
Operating profit before exceptional items 97.3 76.4
Depreciation 18.6 21.2
Amortisation of intangible assets 10.1 6.8
Amortisation of pension prepayment - 2.4
Decrease/(increase) in stocks 7.0 (4.4)
(Increase)/decrease in debtors (16.4) 14.9
Decrease in creditors (1.4) (7.7)
Exchange movement in working capital - 1.3
Net cash inflow from operating activities before exceptional items
115.2 110.9
Cash flows relating to merger of pension schemes (10.0) -
Cash flows relating to exceptional items (8.6) (10.3)
96.6 100.6
Discontinued operations
Operating profit before exceptional items 2.0 2.7
Depreciation 1.1 2.2
Amortisation of intangible assets 0.1 0.3
Decrease/(increase) in stocks 2.8 (0.8)
Increase in debtors (0.8) (1.8)
(Decrease)/increase in creditors (3.0) 8.2
Exchange movement in working capital (0.4) (0.7)
Net cash inflow from operating activities before exceptional items
1.8 10.1
Cash flows relating to exceptional items - (0.8)
1.8 9.3
Net cash inflow from operating activities 98.4 109.9
Year ended 31
December
(b) Additional analysis of cash flows
2004 2003
£m £m
Return on investments and servicing of finance
Interest received 5.3 5.1
Interest paid (64.7) (47.9)
Issue costs of new bank loan (8.1) (4.3)
Return on investments and servicing of finance (67.5) (47.1)
Capital expenditure and financial investment
Purchase of tangible fixed assets (36.8) (27.3)
Receipts from insurers 5.9 -
Purchase of intangible assets - (0.2)
Sale of tangible fixed assets 4.0 6.5
Capital expenditure and financial investment (26.9) (21.0)
Acquisitions and disposals
Sale/(purchase) of subsidiary undertakings 34.8 (106.3)
Cash disposed of upon sale of subsidiary undertakings (0.6) -
Acquisitions and disposals 34.2 (106.3)
STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES - unaudited
Year ended
31 December
2004 2003
£m £m
Profit on ordinary activities after taxation 6.2 8.6
Dividends (22.0) -
Exchange adjustments offset in reserves (1.9) 3.3
Total recognised gains and losses for the year (17.7) 11.9
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' DEFICIT - unaudited
Year ended
31 December
2004 2003
£m £m
Profit on ordinary activities after taxation 6.2 8.6
Dividends (22.0) -
Other recognised gains and losses relating to the year (1.9) 3.3
Issue of share capital 109.0 -
Issue of share options 6.3 -
Effective capitalisation of PFI No.3 loan notes by issue of shares 204.3 -
Net change in shareholders' deficit 301.9 11.9
Opening shareholders' deficit (316.8) (328.7)
Closing shareholders' deficit (14.9) (316.8)
The accompanying notes are an integral part of this consolidated financial
information.
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION - unaudited
Year ended 31 December 2004
1. Basis of Preparation
The Consolidated Financial Information includes the financial information of
Premier Foods plc. The profits and losses of the subsidiary undertakings are
included from the effective date of acquisition until the effective date of
disposal.
On 22 June 2004, Premier Foods plc was incorporated with an issued share capital
of 5,000,000 1p ordinary shares. Premier Foods plc became the ultimate holding
company of the Group on 15 July 2004. On this date, HMTF Premier Limited
(HMTFPL) contributed its shares in Premier Foods Investment No.3 Limited (PFI
No.3) to Premier Foods plc in exchange for 1,000 1p ordinary shares in Premier
Foods plc. The scheme of arrangement has been accounted for as a group
reconstruction in accordance with the principles of merger accounting.
FRS 6 requires acquisition accounting to be adopted where all of the conditions
laid down by merger accounting are not satisfied. One of the requirements of
merger accounting under Schedule 4A 10(1) of the Companies Act 1985 is that at
least 90% of the consideration (calculated by reference to the nominal value of
shares issued) should be in the form of equity shares. On 23 January 2004, PFI
No.3 acquired, through its wholly owned subsidiary undertakings Premier Foods
Investments No.2 Limited (PFI No.2) and Premier Foods Investments No.1 Limited
(PFI No.1), the entire share capital of Premier Foods Investments Limited and
its subsidiaries by the issue of one ordinary £1 share to HMTFPL and the
assumption of £194.4m of loan notes due 2017 to Premier Investments Holdings
L.P. The obligations under the loan notes constituted more than 10% of the total
consideration.
As a result of the transactions executed on 23 January 2004, the shareholders in
PFI No.3 were the same as the former shareholders of Premier Foods Investments
Limited, the ultimate parent company at 31 December 2003 and the rights of each
shareholder, relative to the others, were unchanged. Consequently, the Directors
have considered that to record the group reconstruction as an acquisition by PFI
No.3, to attribute fair values to the assets and liabilities of PFI No.2, PFI
No.1 and Premier Foods Investments Limited, and to reflect in each case only the
post group reconstruction consolidated results of the Group within the
Consolidated Financial Information would fail to give a true and fair view of
the Group's consolidated results and financial position.
Accordingly, having regard to the overriding requirement under Section 227(6) of
the Companies Act 1985 for the Consolidated Financial Information to give a true
and fair view of the Group's results and financial position, the Directors have
adopted merger accounting principles in respect of the group reconstruction in
drawing up the financial statements underlying the Consolidated Financial
Information. As a result, all equity shares which were outstanding at the date
of the group reconstruction have, together with all disclosures, been restated
and presented throughout the period of the Consolidated Financial Information to
give the effect of the group reconstruction as if it had occurred immediately
prior to the beginning of the period. The Directors have considered it is not
practicable to quantify the effect of this departure from FRS 6.
The preliminary results for the year ended 31 December 2004 are unaudited. The
unaudited financial statements for 2004 are prepared using consistent accounting
policies. The financial information set out in the announcement does not
constitute the Company's statutory accounts for the year ended 31 December 2004.
The statutory accounts for the year ended 31 December 2004 will be finalised
on the basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. As described on page 6, given
the nature of the recall, the limited number of claims that have been received
at this stage and intrinsic uncertainty involved in such situations, it has not
been possible to fully quantify the claim and consequently, our auditors,
PricewaterhouseCoopers, may refer to the uncertainty in their audit report.
However, the Company has made a preliminary assessment of the quantum and nature
of the claims based on a set of assumptions reflecting management's current view
of the situation and, after having taken appropriate legal advice, does not
believe the Company has a material financial exposure.
2. Profit and loss account
Year ended 31 December 2004
Continuing operations Discontinued Total
operations
Before Operating Including Including
exceptional exceptional operating operating
items items exceptional exceptional
items items
£m £m £m £m
Turnover 842.2 - 54.6 896.8
Cost of sales (631.8) (4.5) (40.7) (677.0)
Gross profit 210.4 (4.5) 13.9 219.8
Selling and distribution expenses (75.6) (0.6) (9.5) (85.7)
Administrative expenses (30.4) (20.3) (2.3) (53.0)
Insurance recovery 3.0 - 3.0
Operating profit before amortisation 107.4 (25.4) 2.1 84.1
Amortisation of intangible assets (10.1) - (0.1) (10.2)
Operating profit 97.3 (25.4) 2.0 73.9
Year ended 31 December 2003
Continuing operations Discontinued Total
operations
Before Operating Including Including
exceptional exceptional operating operating
items items exceptional exceptional
items items
£m £m £m £m
Turnover 773.8 - 96.8 870.6
Cost of sales (591.1) (8.9) (77.2) (677.2)
Gross profit 182.7 (8.9) 19.6 193.4
Selling and distribution expenses (73.3) (1.4) (13.2) (87.9)
Administrative expenses (23.8) (0.2) (3.9) (27.9)
Operating profit before amortisation 85.6 (10.5) 2.5 77.6
Amortisation of intangible assets (6.8) - (0.3) (7.1)
Amortisation of pension prepayment (2.4) - - (2.4)
Operating profit 76.4 (10.5) 2.2 68.1
3. Summary Segmental Analysis
2004 2003
Turnover £m £m
Convenience Foods, Pickles & Sauces 374.8 374.6
Tea & Beverages 140.3 143.0
Spreads & Desserts 176.8 120.4
Grocery products 691.9 638.0
Potatoes 150.3 135.8
Continuing operations 842.2 773.8
Discontinued operations - Grocery products 54.6 96.8
Total 896.8 870.6
Segmental analysis of EBITA1 and operating profit before exceptional items
Year ended 31 December 2004
EBITA1 Goodwill Amortisation of Operating
amortisation pension profit(3)
prepayment(2)
£m £m £m £m
Convenience Foods, Pickles & Sauces 36.2 (3.0) - 33.2
Tea & Beverages 32.4 (0.5) - 31.9
Spreads & Desserts 33.0 (6.3) - 26.7
Grocery products 101.6 (9.8) - 91.8
Potatoes 5.8 (0.3) - 5.5
Continuing operations 107.4 (10.1) - 97.3
Discontinued operations - Grocery products 2.1 (0.1) - 2.0
Total 109.5 (10.2) - 99.3
Year ended 31 December 2003
EBITA1 Goodwill Amortisation of Operating
amortisation pension profit(3)
prepayment(2)
£m £m £m £m
Convenience Foods, Pickles & Sauces 37.3 (3.2) (1.4) 32.7
Tea & Beverages 27.9 (0.5) (0.5) 26.9
Spreads & Desserts 14.4 (2.7) (0.5) 11.2
Grocery products 79.6 (6.4) (2.4) 70.8
Potatoes 6.0 (0.4) - 5.6
Continuing operations 85.6 (6.8) (2.4) 76.4
Discontinued operations - Grocery products 3.0 (0.3) - 2.7
Total 88.6 (7.1) (2.4) 79.1
1. EBITA is defined as operating profit before amortisation and
exceptional items.
2. No amortisation of pension prepayment in 2004 as employer pension
contributions recommenced in July 2003.
3. Operating profit is stated here before exceptional items.
Segmental analysis of operating assets 2004 2003
£m £m
Grocery products
Net operating assets 166.5 139.5
Intangible assets 174.6 185.2
341.1 324.7
Potatoes
Net operating assets 14.3 18.1
Intangible assets - 0.2
14.3 18.3
Continuing operations 355.4 343.0
Grocery products
Net operating assets - 29.1
Intangible assets - 5.0
Discontinued operations - 34.1
Net operating assets 355.4 377.1
Net debt (370.3) (693.9)
Net shareholders' deficit (14.9) (316.8)
Geographical analysis of turnover By origin By destination
2004 2003 2004 2003
£m £m £m £m
United Kingdom 814.9 745.2 792.0 726.4
Mainland Europe 27.3 28.6 41.7 39.9
Other countries - - 8.5 7.5
Continuing operations 842.2 773.8 842.2 773.8
Discontinued operations - Mainland Europe 54.6 96.8 54.6 96.8
Total 896.8 870.6 896.8 870.6
Geographical analysis of operating profit before exceptional By origin
items
2004 2003
£m £m
United Kingdom 94.9 74.5
Mainland Europe 2.4 1.9
Continuing operations 97.3 76.4
Discontinued operations - Mainland Europe 2.0 2.7
Total 99.3 79.1
Operating profit is stated here before exceptional items.
Geographical analysis of operating assets 2004 2003
£m £m
United Kingdom
Net operating assets 172.6 147.7
Intangible assets 174.6 185.3
347.2 333.0
Mainland Europe
Net operating assets 8.2 9.9
Intangible assets - 0.1
8.2 10.0
Continuing operations 355.4 343.0
Net operating assets - 29.1
Intangible assets - 5.0
Discontinued operations - Mainland Europe - 34.1
Net operating assets 355.4 377.1
Net debt (370.3) (693.9)
Net shareholders' deficit (14.9) (316.8)
4. Exceptional items
2004 2003
£m £m
Operating exceptional items:
Restructuring of production facilities (4.5) (8.9)
Restructuring of distribution facilities (0.6) (1.4)
Restructuring of administration facilities (2.6) (0.2)
Merger of pension schemes (1.0) -
IPO costs (16.7) -
Continuing operations (25.4) (10.5)
Restructuring of production facilities - (0.5)
Discontinued operations - (0.5)
(25.4) (11.0)
Non-operating exceptional items:
(Loss)/profit on disposal of fixed assets (2.3) 2.0
Net insurance recovery on fixed assets 3.5 -
Profit on sale of subsidiary undertakings 11.7 -
Continuing operations 12.9 2.0
Profit on sale of fixed assets 0.2 -
Discontinued operations 0.2 -
13.1 2.0
Restructuring of production facilities
The charge in the year ended 31 December 2004 relates to the closure costs of
our Edinburgh site and the consolidation of tea production into our operations
at Moreton, additional costs relating to the Hadfield factory closure that
commenced in 2003, together with costs linked to the restructuring of the potato
business.
The charge in the year ended 31 December 2003 relates to the closure costs of
the Hadfield factory following transfer of production to other sites and
additional costs relating to the North Walsham factory closure that commenced in
2002.
Restructuring of distribution facilities
The charge in the year ended 31 December 2004 relates to the further
restructuring of our sales force.
Following the disposal of Horizon Biscuits in January 2001 the Group integrated
the distribution facility of its French biscuit business with those of Materne
Boin S.A.S., the French spreads and desserts manufacturing operation, resulting
in an exceptional charge in the year ended 31 December 2003. In addition, in the
year ended 31 December 2003, the Group reorganised its sales function and
distribution arrangements.
Restructuring of administration facilities
The charge in the year ended 31 December 2004 relates to the restructuring of
the administration function at our potato business and the integration of the
Ambrosia business.
The exceptional charge during the year ended 31 December 2003 relates to the
relocation of the Group's principal administration functions to St Albans.
Merger of pension schemes
We incurred a charge of £1.0m on the merger of three of our principal pension
schemes. The merger required a one-off cash contribution of £10.0m to equalise
the level of funding in the schemes, £9.0m of which had been previously provided
against.
IPO costs
The IPO resulted in £16.7m of operating exceptional items.
The cash cancellation of existing share options resulted in a charge of £8.2m,
which has been treated as an operating exceptional profit and loss charge. The
cancellation of senior management's share options comprised a cash cancellation
in respect of 30% of their options, included within the £8.2m referred to above,
and the issue of new 1p ordinary share options exercisable one year after the
IPO in respect of the cancellation of the remaining options. The issue of these
options incurred a non-cash operating exceptional charge of £6.3m. We also
incurred a further £2.2m of costs, which have also been treated as an operating
exceptional cost.
(Loss)/profit on disposal of fixed assets
The loss on disposal of fixed assets relates to the disposal and provision
against fixed assets for the restructuring of our potato business and closure of
our Edinburgh site.
Net insurance recovery on fixed assets
On 27 October 2004 we suffered a serious fire at our Bury St Edmunds factory,
which is the main manufacturing site for pickles and sauces. Since that date, we
have undertaken a comprehensive clean-up process to restore production.
Significant progress has been made and we are back to full production at the
site, although the clean up is not yet complete. An exceptional profit amount of
£3.5m is included, representing the difference between the insurance
reimbursement for new assets installed less the book value of assets destroyed
by the fire.
Profit on sale of subsidiary undertakings
On 22 July 2004 the Group disposed of Hillsdown Holland BV and its subsidiaries,
including Materne Boin S.A.S. (Materne'), our French spreads business, to
Financiere Materne S.A.S. and Materne Luxembourg Sarl, companies under the
control of Hicks Muse, Tate and Furst, our principal shareholder prior to IPO,
for a net cash consideration of £35.5m. The profit arising on the sale was
£11.7 m (see note 11).
5. Net interest payable
2004 2003
£m £m
Interest payable
Interest payable on bank loans, Senior Notes and overdrafts 47.0 47.1
Interest payable on PFI No.3 loan notes 11.1 18.4
Exchange loss on U.S. dollar denominated Senior Notes - 5.0
Amortisation of debt issuance costs 3.9 5.7
62.0 76.2
Senior Notes early redemption penalty 11.1 -
Exceptional amortisation of debt issuance costs 10.5 -
21.6 -
83.6 76.2
Interest receivable - bank deposits (5.3) (5.8)
78.3 70.4
6. Pensions
Background
The Group companies participate in a number of pension schemes, principally the
Premier Foods Pension Scheme, which is a funded defined benefit scheme. The
Premier Foods Pension Scheme (formerly called the HF Pension Scheme) comprises
the assets and liabilities of the Premier Brands Pension Fund and the Hillsdown
Foods Group Pension Scheme, which were transferred to the Premier Foods Pension
Scheme on merger of the three schemes on 21 May 2004. There is also a further
funded defined benefit scheme, the Premier Ambient Products Pension Scheme.
There are in addition a small number of company defined contribution schemes,
personal pension schemes and life assurance only arrangements. The scheme funds
are administered by trustees and are independent of the Group's finances. The
defined benefit schemes invest in a mixture of United Kingdom and European
equities and corporate and government bonds.
Actuarial assessments
The total pension cost for the Group in the periods has been assessed in
accordance with the advice of independent qualified actuaries, using the
projected unit method. The last formal actuarial assessments of the Premier
Foods Pension Scheme and the Premier Ambient Products Pension Scheme were
undertaken as at 21 May 2004 and as at 31 December 2004 respectively.
As at the date of the most recent actuarial valuations for the Premier Foods
Pension Scheme and the Premier Ambient Products Pension Scheme, the actuarial
value of the assets was sufficient to cover 92% and 157%, respectively, of the
benefits that had accrued to members after allowing for future salary increases.
The market value of assets at the valuation dates were £285.1m and £2.1m,
respectively.
The principal actuarial assumptions used for scheme funding and accounting
purposes were that the rate of discount of liabilities is 3% more than wage
inflation and 4% more than pension increases. Allowance was made for pensions in
payment to increase as required by statute and in accordance with the rules of
the schemes, and also to reflect the Group's investment policies. The
significant assumption used was that future investment returns would be 7% per
annum. Assets have been taken at market values at the valuation dates and the
year end. For accounting purposes in previous years assets had been valued
using a discounted dividend approach. The market value of the assets at 31
December 2004 and 31 December 2003 was £303.7m and £273.3m, respectively
The actuarial valuation of the Premier Foods Pension Scheme has been updated to
31 December 2004 for assessment of the pension cost. The normal cost of the
Group's defined benefit pension schemes was £3.9m and £4.1m in the years ended
31 December 2004 and 2003 respectively, which, after interest on the recognised
surplus and amortisation of the remaining unrecognised surplus, resulted in a
net defined benefit pensions expense of £5.3m and £4.3m in the respective years.
Contributions
The Group contributed a total of £18.6m to the Premier Foods Pension Scheme
(including those contributed to the HF Pension Scheme, the Premier Brands
Pension Fund and the Hillsdown Foods Group Pension Scheme prior to the merger)
in the year ended 31 December 2004. The Group contributed £0.4m to the Premier
Ambient Products Pension Scheme in the year ended 31 December 2004.
The Group contributed £2.2m to the Hillsdown Foods Group Pension Scheme in the
year ended 31 December 2003. In the six month period to 30 June 2003 the Group
did not contribute to the HF Pension Scheme and the Premier Brands Pension Fund,
due to the schemes' surplus at that time. The Group recommenced contributions to
the schemes from July 2003, paying £1.6m and accruing £0.3m in contributions to
31 December 2003.
Contributions to the Premier Ambient Products Pension Scheme in the year ended
31 December 2003 amounted to £0.5m.
Pension prepayment and provisions
The pension prepayment in respect of the HF Pension Scheme and the Premier
Brands Pension Fund at 31 December 2004 and 2003 were £9.1m and £5.8m
respectively. The increase in prepayment of £3.3m was primarily due to an
increase of cash contributions in the year to reduce fund deficits. The
reduction in the prepayment of £2.4m in the year ended 31 December 2003 is due
to the net defined benefit pensions expense exceeding the cash contributions
paid.
A provision of £7.2m in respect of the Hillsdown Foods Group Pension Scheme was
held at 31 December 2003, which represented the estimated scheme deficit upon
Premier Foods Holdings becoming principal employer for the scheme less cash
contributions made to the scheme. This provision was fully utilised following
the merger of the pension schemes in May 2004.
Continental Europe post retirement and unfunded pension benefits
The Group also operates plans in continental Europe, which provide employees
with certain post retirement and unfunded pension benefits. The liabilities in
respect of these benefits amounted to £0.1m and £0.2m in the years ended 31
December 2004 and 31 December 2003 respectively. The costs of these plans were
£0.4m in the years ended 31 December 2004 and 2003 respectively.
Defined contribution schemes
The cost of the defined contribution schemes was £0.4m and £0.3m for the years
ended 31 December 2004 and 2003 respectively.
FRS 17 'Retirement benefit' disclosures
The figures below are consolidated figures including both the Premier Foods
Pension Scheme and the Premier Ambient Products Pension Scheme (PAPPS). A full
actuarial valuation was carried out at 21 May 2004 for the Premier Foods Pension
Scheme and updated to 31 December 2004 by a qualified independent actuary to
take account of the requirements of FRS 17 in order to assess the liabilities of
the Scheme at 31 December 2004.
A valuation is being carried out for the PAPPS currently and the provisional
results are used in the disclosure figures. Scheme assets are stated at their
market values at the respective balance sheet dates.
The major assumptions used by the actuary were:
2004 2003
Rate of increase in salaries 3.5% 2.5%
Rate of increase in pensions in payment 2.5% 1.5%
Rate of increase in pensions in deferment 2.5% 1.5%
Discount rate 5.5% 5.5%
Inflation assumption 2.5% 1.5%
The assets in the scheme and the expected rate of return at 31 December were:
Expected Market Expected Market
rate of value rate of value
return return
2004 2004 2003 2003
Asset £m £m
Equities 8.5% 136.8 8.5% 206.7
Bonds 6.0% - 6.0% 63.9
Other 4.8% 166.9 4.0% 2.7
Total market value of scheme assets 6.5% 303.7 7.9% 273.3
The larger than normal proportion of funds held in other assets (cash) at the
year end, reflects short term tactical decisions taken by the Trustee of the
Premier Foods Pension Scheme in consultation with the Company, pending
discussions to take place in the first quarter of 2005, on an agreed longer term
investment strategy for the Scheme.
The following amounts at 31 December were measured in accordance with the
requirements of FRS 17 'Retirement benefits'.
2004 2003
£m £m
Total market value of scheme assets 303.7 273.3
Present value of scheme liabilities (368.3) (301.9)
Deficit in the schemes (64.6) (28.6)
Related deferred tax asset 19.4 8.6
Net pension liability (45.2) (20.0)
If the above amounts had been recognised in the financial statements, Premier
Food's net liabilities and profit and loss reserve at 31 December would be as
follows:
2004 2003
£m £m
Net shareholders' deficit (including pension prepayment recognised under SSAP 24)
(14.9) (316.8)
Pension (prepayment)/liability recognised under SSAP 24 (9.1) 1.4
Related deferred tax asset/(liability) 2.7 (0.4)
Net pension liability recognised under FRS 17 (45.2) (20.0)
Net shareholders' deficit (including pension liability recognised under FRS 17) (66.5) (335.8)
Profit and loss reserve (including pension prepayment recognised under
SSAP 24) 376.2 (194.0)
Pension (prepayment)/liability recognised under SSAP 24 (9.1) 1.4
Related deferred tax asset/(liability) 2.7 (0.4)
Net pension liability recognised under FRS 17 (45.2) (20.0)
Profit and loss reserve (including pension liability recognised under FRS 17) 324.6 (213.0)
The following amounts would have been recognised in the performance statements
in the year under the requirements of FRS 17:
2004 2003
£m £m
Analysis of amounts charged to operating profit
Current service charge 4.1 4.3
Past service charge (gross) - 1.0
Total operating charge 4.1 5.3
Analysis of amounts credited to other finance income
Expected return on pension scheme assets 21.5 20.5
Interest on pension scheme liabilities (16.1) (15.7)
Net return 5.4 4.8
Analysis of amounts recognised in Statement of Total Recognised Gains and Losses
Actual return less expected return on pension scheme assets 8.1 17.8
Experience losses arising on the scheme liabilities (15.1) (13.6)
Changes in assumptions underlying the present value of the scheme liabilities (49.3) -
Actuarial (loss)/gain recognised in the Statement of Total Recognised Gains and Losses (56.3) 4.2
Movement in deficit during the year
Deficit in the scheme at beginning of the year (28.6) (36.1)
Movement in year:
Current service charge (4.1) (4.3)
Employer contributions 19.0 3.8
Past service charge - (1.0)
Other finance income 5.4 4.8
Actuarial (loss)/gain recognised in the Statement of Total Recognised Gains and Losses (56.3) 4.2
Deficit in the scheme at end of year (64.6) (28.6)
History of experience gains and losses 2004 2003
Difference between the expected and actual return on scheme assets:
Amount (£m) 8.1 17.8
Percentage of scheme assets at period end 2.7% 6.5%
Experience losses of scheme liabilities:
Amount (£m) (15.1) (13.6)
Percentage of the present value of the scheme liabilities at year end (4.1%) (4.5%)
Total amount recognised in Statement of Total Recognised Gains and Losses:
Amount (£m) (56.3) 4.2
Percentage of the present value of the scheme liabilities at year end (15.3%) 1.4%
Employer contributions in the year ended 31 December 2004 were £19.0m (2003: £3.8m). It is expected that
contributions will be £9.7m in 2005 and per annum thereafter.
7. Taxation
The taxation charge on profit for the year represents a taxation rate of 29%.
This taxation rate takes into account the non-operating exceptional items that
are not taxable and the provision for operating exceptional items arising from
the IPO that are non-deductible.
8. Earnings per share
2004 2003
Basic EPS Dilutive Diluted EPS Basic EPS Dilutive Diluted EPS
effect of
effect of share
share options
options
Continuing operations
Earnings (£m) 4.0 - 4.0 6.2 - 6.2
Weighted average number of shares 159.2 3.0 162.2 89.3 2.9 92.2
(million)
Earnings per share (pence) 2.5 - 2.5 6.9 (0.2) 6.7
Discontinued operations
Earnings (£m) 2.2 - 2.2 2.4 - 2.4
Weighted average number of shares 159.2 3.0 162.2 89.3 2.9 92.2
(million)
Earnings per share (pence) 1.4 (0.1) 1.3 2.7 (0.1) 2.6
Total business
Earnings (£m) 6.2 - 6.2 8.6 - 8.6
Weighted average number of shares 159.2 3.0 162.2 89.3 2.9 92.2
(million)
Earnings per share (pence) 3.9 (0.1) 3.8 9.6 (0.3) 9.3
9. Dividends
The board proposes a final dividend of 9 pence per ordinary share, which is
payable on 31 May 2005 to shareholders on the Register of Members at 6 May 2005.
No interim dividend was paid during 2004.
10. Bank and other borrowings
2004 2003
£m £m
Due within one year:
Secured Senior Credit facility £175.8m (note a) 9.3 -
Debt issuance costs (0.9) -
8.4 -
Secured Senior Credit facility £204.2m (note a) 10.7 -
Debt issuance costs (1.1) -
9.6 -
Secured Senior Credit Facility (note b) - 34.2
Bank loans and overdrafts 9.9 10.8
Debt issuance costs - (4.7)
Total bank borrowings 9.9 40.3
Finance lease obligations - 0.1
27.9 40.4
Due after more than one year:
Secured Senior Credit facility £175.8m (note a) 166.5 -
Debt issuance costs (2.4) -
164.1 -
Secured Senior Credit facility £204.2m (note a) 193.5 -
Debt issuance costs (2.8) -
190.7 -
Secured Senior Credit Facility (note b) - 217.9
Debt issuance costs - (5.4)
- 212.5
Acquisition Facility (note b) - 75.0
Debt issuance costs - (3.4)
- 71.6
Unsecured subordinated US$200.0m 12% Senior
Notes due 2009 (note b) - 129.2
Unsecured subordinated £75.0m 12.25% Senior
Notes due 2009 (note b) - 75.0
- 204.2
Unsecured unguaranteed loan notes due 2017 (note b) - 193.2
Other unsecured loans 0.1 0.1
354.9 681.6
(a) Senior Credit Facility and Acquisition Facility Arrangement - 2004
On 20 July 2004 the Group entered into an amended and restated Senior Credit
Facility and Acquisition Facility agreement with J.P. Morgan plc as arranger,
JPMorgan Chase Bank as underwriter, with J.P. Morgan Europe Limited as agent and
security trustee. Under the Senior Credit Facility, a syndicate of financial
institutions made £380.0m of senior facilities available to the Group.
The Senior Credit Facility comprises of (i) £175.8m Term A Facilities and (ii)
£204.2m Term B facilities.
In addition, an Acquisition Facility is available to the Group, which is a
multi-currency revolving credit facility amounting to £200.0m (or its equivalent
in other currencies).
Duration
The final maturity date of the arrangements is 20 July 2009.
(b) Senior Credit Facility, Acquisition Facility Arrangement, Unsecured
Subordinated Loan Notes and Unsecured Unguaranteed Loan Notes - 2003
The facilities in place at 31 December 2003 included Secured Senior Credit
facilities, an Acquisition Facility along with the Unsecured Subordinated Notes
Facilities for US$200.0m and £75.0m.
On 23 July 2004 the Secured Credit Facilities, Acquisition Facility and
Unsecured Unguaranteed Loan Notes were replaced by a combination of the Term A
facilities, noted above and the primary proceeds raised on IPO.
The Unsecured Subordinated Notes were repaid on 1 September 2004 using the Term
B facilities, noted above.
11. Sale of subsidiary undertakings
On 23 July 2004 the Group disposed of Hillsdown Holland BV and its subsidiaries,
including Materne to Financiere Materne S.A.S. and Materne Luxembourg Sarl,
companies under the control of Hicks Muse, Tate & Furst, our principal
shareholder prior to IPO.
The net assets on the date of disposal and the consideration received was as
follows:
£m
Intangible assets 5.0
Tangible assets 11.9
Investments 0.2
Stock 15.0
Debtors 24.4
Creditors: amounts falling due within one year (32.1)
Provisions for liabilities and charges (1.9)
Net assets disposed 22.5
Cash consideration 35.5
Cash disposed of on sale of subsidiary undertakings (0.6)
Expenses incurred on disposal (0.7)
34.2
Profit on disposal 11.7
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