Preliminary Results

Premier Foods plc 06 March 2007 Premier Foods plc Preliminary Results 2006 Premier delivers encouraging results for 2006, acquisitions transforming business Year ended 31 December Continuing operations 2006 2005 £m £m Change Turnover 959.4 789.7 +21.5% Trading profit ** 132.5 107.3 +23.5% Trading profit margin ** 13.8% 13.6% +20bps Operating profit 97.6 95.3 +2.4% Profit on ordinary activities before tax 58.1 51.8 +12.2% Basic earnings per share*** 12.7p 11.9p +6.7% Adjusted earnings per share**** 18.0p 17.0p +5.9% Recommended final dividend per share***** 2.55p 7.50p Recommended total dividend per share***** 12.00p 11.25p +6.7% • Core like-for-like Grocery turnover including pro forma Meat-free up 3.1% to £710.9m* • Core like-for-like Grocery trading profit including pro forma Meat-free up 5.2% to £117.3m*,** • Brands now 66% of pro forma Grocery sales • Branded sales up 5.6% • Like-for-like drive brand sales up 12.4%* • All acquisitions performing in line or ahead of expectations • Campbell's integration on track • RHM acquisition due to complete 16 March 2007 Robert Schofield, Chief Executive of Premier Foods plc, said, '2006 has been a year of transformation for Premier. The Campbell's business acquired in August fits Premier like a glove. It has significantly enhanced our brand portfolio, adding the iconic British brands of Oxo, Batchelors and Homepride whilst offering us substantial operational synergies. The integration has been proceeding at pace and to plan. 'In December, we announced our agreed offer for RHM, which has received resounding support from both Premier's and RHM's shareholders. This acquisition is due to complete on 16 March, following which Premier will become the UK's number one food supplier. The acquisition meets all our acquisition criteria and again brings a fantastic stable of brands into the portfolio including among others Hovis, Mr Kipling, Bisto and Sharwoods, along with very substantial synergies. 'Above all, these acquisitions have been achieved whilst we have continued to grow our existing business, which has more than compensated for the impact of the end of the Cadbury chocolate beverages licence, significant raw material and energy price inflation and the extended warm weather through the summer and autumn.' For further information: Premier Foods plc Citigate Dewe Rogerson Robert Schofield, Chief Executive Michael Berkeley Paul Thomas, Finance Director Justin Griffiths Gwyn Tyley, Investor Relations Manager Nicola Smith +44 (0)20 7638 9571 +44 (0)20 7638 9571 A presentation to analysts will take place on Tuesday, 6 March at 9am at ABN AMRO, 250 Bishopsgate, London, EC2M 4AA Dial in details: +44 (0)20 7138 0839 The analyst presentation will also be available via a listen only webcast at www.premierfoods.co.uk. The audio can be accessed directly through a computer or through a telephone on +44 (0)20 7138 0839. Additional information Reported sales analysis Sales Growth 2006 2005 £m £m Convenience Foods, Pickles & Sauces 347.2 347.1 - Spreads, Desserts & Beverages excl. Cadbury 253.7 239.2 +6.1% Meat-free 110.0 49.6 - Core like-for-like Grocery including 710.9 635.9 +11.8% Meat-free Campbell's 101.3 - - Grocery excluding Cadbury 812.2 635.9 +27.7% Cadbury 32.6 47.5 (31.4%) Total Grocery sales 844.8 683.4 +23.6% Fresh Produce 114.6 106.3 +7.8% Total sales 959.4 789.7 +21.5% Pro forma Grocery sales analysis Sales Growth 2006 2005 £m £m Convenience Foods, Pickles & Sauces 347.2 347.1 - Spreads, Desserts & Beverages excl. Cadbury 253.7 242.3 +4.7% Pro forma Meat-free 110.0 99.8 +10.2% Core like-for-like Grocery including pro 710.9 689.2 +3.1% forma Meat-free Pro forma Campbell's 243.3 250.2 (2.8%) Pro forma Grocery excluding Cadbury 954.2 939.4 +1.6% Cadbury 32.6 47.5 (31.4%) Pro forma total Grocery sales 986.8 986.9 - Reported trading profit analysis Trading profit Growth 2006 2005 £m £m Core Grocery 98.3 100.3 (2.0%) Meat-free 19.0 6.5 - Core Grocery including Meat-free 117.3 106.8 +9.8% Campbell's 17.1 - - Total Grocery 134.4 106.8 +25.8% Fresh Produce (1.9) 0.5 - Total trading profit 132.5 107.3 +23.5% Pro forma Grocery trading profit analysis Trading profit Growth 2006 2005 £m £m Core Grocery 98.3 100.3 (2.0%) Estimated effect of end of Cadbury licence - (4.0) - Core like-for-like Grocery 98.3 96.3 2.1% Pro forma Meat-free 19.0 15.2 +25.0% Core like-for-like Grocery including pro 117.3 111.5 +5.2% forma Meat-free Pro forma Campbell's 51.2 46.1 +11.1% Pro forma total Grocery 168.5 157.6 +6.9% Adjusted earnings 2006 2005 % increase £m £m Continuing operations Trading profit 132.5 107.3 +23.5% Regular interest charge (42.6) (36.1) +18.0% Adjusted PBT 89.9 71.2 +26.3% Tax at 30% (27.0) (21.4) - Tax shield on allowable amortisation 3.8 3.1 +22.6% Adjusted profit 66.7 52.9 +26.1% Average shares in issue 370.8 311.1 Adjusted eps inc tax amortisation shield (p) 18.0 17.0 +5.9% *Core like-for-like Grocery turnover represents turnover excluding all acquisitions and disposals and any sales relating to Cadbury branded products. Core like-for-like Grocery turnover including pro forma Meat-free excludes the acquisition of Campbell's and disposals and any sales relating to Cadbury branded products but includes sales by our Meat-free division as if it had been acquired on 1 January 2005. Core like-for-like Grocery trading profit including pro forma Meat-free excludes the acquisition of Campbell's and disposals and the estimated effect of the end of the Cadbury licence as indicated at the time of the IPO, but includes trading profit by our Meat-free division as if it had been acquired on 1 January 2005. * * Trading profit represents operating profit before exceptional items, amortisation of intangible assets and the movement in the IAS39 valuation of forward exchange contracts. ***Basic earnings per share represents profit for the year per ordinary share. Comparative data has been adjusted for the rights issue in the year. ****Adjusted earnings per share represents trading profit less normal interest charges after tax per ordinary share. All comparative data has been adjusted for the impact of the rights issue as appropriate. *****2005 comparatives for dividend per share have been adjusted for the impact of the rights issue. Operating review - continuing operations 2006 2005 £m £m Sales Grocery 844.8 683.4 23.6% Fresh Produce 114.6 106.3 7.8% Total Sales 959.4 789.7 21.5% Trading Profit* 132.5 107.3 23.5% Valuation of foreign exchange contracts (3.8) 1.1 - Amortisation of intangibles (11.0) (6.3) 74.6% Operating profit before exceptional items 117.7 102.1 15.3% Exceptional items (20.1) (6.8) - Operating Profit 97.6 95.3 2.4% *Trading profit represents operating profit before exceptional items, amortisation of intangible assets and the movement in the IAS39 valuation of forward exchange contracts. In 2006, Premier has achieved another year of branded sales growth and improved operating margins. In addition, we have significantly enhanced our brand portfolio with the acquisition of Campbell's, which included the category-leading brands of Batchelors, Oxo and Fray Bentos. Our strategy is based upon growing our branded sales, whilst maintaining the benefits derived from also supplying retailer branded products and driving efficiency improvements and cost reductions to improve our operating profit margins. Overall, Grocery sales for continuing operations grew by 23.6%, based on like-for-like Grocery sales growth of 2.0% combined with a strong full year's contribution from our Meat-free business and the addition of the Campbell's business in August of 2006. This was partially offset by the impact of the end of the Cadbury licence in May 2006 under which we had manufactured, marketed and sold Cadbury branded hot cocoa-based beverages. This licence was replaced by a manufacturing agreement under which we supply the products direct to Cadbury who now market and sell the products. Despite the prolonged unseasonably warm weather during the second half of the year, we maintained our normal marketing spend on our existing brands at £31.8m. This marketing spend helped to continue the excellent sales growth of our drive brands with Loyd Grossman growing 25%, Branston 16%, Quorn 13% (on a like-for-like basis), Hartley's 10% and Ambrosia 8%. Excluding Campbell's and the impact of the end of the Cadbury licence, our branded sales grew by 5.5%. In 2005, we spent a total of £34.0m on marketing these brands, but this included an additional spend of £3.5m on the launch of Branston beans. Overall, trading profit for continuing operations grew by 23.5%. Exceptional performances by our Spreads, Desserts & Beverages and Meat-free businesses helped trading profit for the Grocery business including Meat-free to increase by 5.2% to £117.3m on a pro forma basis. Trading profit for our Core Grocery business, ie. excluding Meat-free and Campbell's, declined by 2.0% to £98.3m due to the impact of the end of the Cadbury licence and significant energy and raw material cost inflation during the year, partly offset by the strong performance of our Spreads, Desserts & Beverages business. The Campbell's business performed in line with our expectations at the time of the acquisition. The business has seen declining sales over 2005 and 2006, primarily as a result of a significant reduction in promotional and marketing expenditure prior to its purchase by Premier. We have been developing our detailed marketing and innovation plans for the business, which we have started implementing and we are delighted by the results we have seen so far. Continuing operations - Grocery 2006 2005 £m £m Sales 844.8 683.4 23.6% Like-for-like sales* 600.9 589.4 2.0% Trading profit 134.4 106.8 25.8% Like-for-like trading profit** 98.3 100.3 (2.0%) *Like-for-like sales represents results from continuing operations excluding results from acquisitions and disposals made during 2005 and 2006 and the impact of the end of the Cadbury licence. The 2006 sales include an additional 6 weeks contribution from the Bird's business, which was acquired in February 2005. **Like-for-like trading profit represents results from continuing operations excluding results from acquisitions and disposals made during 2005 and 2006. Convenience Foods, Pickles, Sauces and Meat-free 2006 2005 £m £m Like-for-like sales 347.2 347.1 - Meat-free 110.0 49.6 121.8% Campbell's 101.3 - - Total sales 558.5 396.7 40.8% Like-for-like trading profit 28.0 33.7 (16.9%) Meat-free 19.0 6.5 192.3% Campbell's 17.1 - - Trading profit 64.1 40.2 59.5% Sales for this product group are significantly ahead of 2005 due to the acquisition of Campbell's and the contribution of a full year's sales from Quorn and Cauldron. Like-for-like sales are in line with 2005 sales of £347.1m. The second half has seen the continued strong growth of our Branston and Loyd Grossman brands but this has been offset by the effect of the unseasonably warm summer and autumn which impacted our smaller brands along with the cost pressures resulting from higher utility and energy-related prices which continue to disproportionately affect our Convenience Foods business. Meat-free 2006 2005 £m £m Sales 110.0 49.6 121.8% Trading profit 19.0 6.5 192.3% Pro forma 12 months Sales 110.0 99.8 10.2% Trading profit 19.0 15.2 25.0% We are delighted by the continued progress of our Meat-free business, which has maintained the strong growth rate seen through the first half of the year, and market share in both the chilled and frozen channels and household penetration have all continued to grow. The Group's knowledge of the vegetarian and meat alternative markets is now unique amongst its competitors and we believe the business is well positioned to capitalise further on the growth in these markets, which we expect to result from the continued consumer trend towards healthier eating. During 2006 household penetration increased from 18.2% to 19.8%, so that now nearly one in every five households is eating Quorn. We have continued to invest heavily in marketing, innovation and capacity expansion, and the development of our new £11m Methwold chilled facility is progressing well with production commencing in the first quarter of 2007. On a pro forma basis, the Meat-free business grew sales by 10.2% to £110.0m (2005: £99.8m). Trading profit increased by 25.0% to £19.0m (2005: £15.2m), due to the increased sales and the achievement of our planned synergies. The 2005 pro forma trading profit has been restated to reflect the re-classification of £4.0m of pre-acquisition charges which had previously been treated as a deduction to trading profit. Campbell's 2006 2005 £m £m Sales 101.3 - - Trading profit 17.1 - - Pro forma 12 months Sales 243.3 250.2 (2.8%) Trading profit 51.2 46.1 11.1% We are pleased by the performance of the Campbell's business following its acquisition in August 2006. Sales for the period from acquisition to December 2006 were £101.3m and the trading profit was £17.1m. These were both in line with our expectations at the time of the acquisition. The integration of Campbell's into Premier is progressing well. The Sales and Marketing functions were integrated by the end of 2006 and the remaining administrative functions are scheduled to be integrated by the end of March 2007. In January, we announced the results of our manufacturing review and, following consultation with the affected employees, we have confirmed our plans to close our Kings Lynn and Ashford sites, consolidating production into our Worksop, Long Sutton and Wisbech factories. Following completion of the acquisition, we commissioned an independent review of the cost synergies estimates we had identified pre-acquisition which confirmed our targeted synergies of £28m per annum were deliverable by the end of 2009. Spreads, Desserts & Beverages 2006 2005 £m £m Sales 286.3 286.7 (0.1%) Trading Profit 70.3 66.6 5.6% Like-for-like sales (excluding the impact of the end of Cadbury licence in May 2006 and including pre-acquisition sales for Bird's) grew by 4.7% in 2006 to £253.7m. Total sales, including all sales of Cadbury branded products whether under the Cadbury licence or the subsequent manufacturing agreement, were in line with 2005. Trading profit increased by 5.6% to £70.3m. This increase was due to a combination of strong sales growth in the Ambrosia and Hartley's drive brands, with sales increasing by 6% and 7% respectively, and the realisation of synergies on the transfer of Bird's production into our Knighton factory, partly offset by the reduction in contribution from the manufacture of Cadbury branded products. Fresh Produce 2006 2005 £m £m Sales 114.6 106.3 7.8% Like-for-like sales 90.0 94.2 (4.5%) Trading (loss) / profit (1.9) 0.5 - Like-for-like (loss) / profit (1.5) 0.4 - Sales have increased by 7.8% to £114.6m (2005: £106.3m), following the inclusion of a full year of the FW Gedney business, but trading profit has fallen to a loss of £1.9m (2005: profit £0.5m). This result is disappointing considering the progress the business had made in the first half of the year. However, the hot summer weather had a significant impact on both the quality and quantity of the potato harvest across Europe, which has caused a significant increase in the market price for potatoes. On 5 March 2007 Premier reached a non-binding agreement to sell its Fresh Produce business to the management of that business. Discontinued operations 2006 2005 £m £m Sales - 77.2 - Trading profit - 8.6 - Discontinued operations represent our former Tea business and our former Netherlands based Convenience Foods business, which were both sold in 2005. Business outlook Overall trading performance for the year to date has been in line with our expectations. We are confident that we will continue to develop the business in line with our strategy, focusing on driving our branded sales growth whilst retaining tight control of our cost base. We anticipate completing the integration of all the sales, marketing and administrative functions of Campbell's by the end of March 2007 and we will be commencing the consolidation of its manufacturing facilities into our own network shortly thereafter. We were delighted by the overwhelming support that both Premier and RHM shareholders gave to the proposed acquisition of RHM by Premier and we anticipate completing the acquisition on 16 March, which will follow the expected sanction of the Court to the scheme of arrangement on 14 March. We are looking forward to beginning the process of integrating these two great businesses to create the UK's leading food manufacturer. Premier Foods Plc Year ended 31 December 2006 Financial Review Acquisition of Campbell's Since the publication of our interim results for the six months ending 1 July 2006, the Group has acquired Campbell Grocery Products Limited and Campbell's Soup Ireland Limited together with certain trade marks ('Campbell's'). Campbell's results for the period post acquisition i.e. from 14 August 2006 to 31 December 2006 are included in the consolidated results of the Group for the year. Further information on the acquisition can be found in note 12. The Group purchased Campbell's for £460.0m and incurred acquisition related costs of £8.9m, which are included in the total consideration of £468.9m. The acquisition was primarily funded through a one for one rights issue which raised gross proceeds of £458.6m. Associated costs of £17.0m were incurred on the rights issue (these have been deducted from the share premium account) resulting in net proceeds of £441.6m. At the time of the acquisition, the Group also re-negotiated its borrowing facilities, incurring £4.4m of debt issuance costs, which will be written off over the term of those facilities. The residual un-amortised debt issuance costs of £4.0m on the pre-existing facilities have been written off and classified as an interest charge during the year. Income Statement - continuing operations Sales The Group's continuing operations generated sales of £959.4m, an increase of 21.5% over 2005 (£789.7m). The major element of this increase is the inclusion of a full year's trading for the Quorn, Cauldron and Gedney's businesses following their purchase in 2005, together with the contribution from Campbell's. Total Grocery sales increased by 23.6% to £844.8m, with core like-for-like grocery sales, including pro forma Meat-free (ie excluding the sales generated by Campbell's acquisitions made in 2005 and 2006 and sales of Cadbury hot chocolate beverages) up 3.1%. While this level of growth is just above the top end of our targeted range, it does incorporate an element of price movement offsetting the exceptional levels of energy and raw material cost inflation during the year. Fresh Produce turnover grew by 7.8% to £114.6m largely due to the acquisition of the Gedney's operation in 2005. Like-for-like sales in this business were down 4.5% at £90.0m due to a combination of contracts lost in 2005 partly offset by the movement in the market price of potatoes. Gross Profit Gross profit for the year increased by 28.0% to £264.1m (2005: £206.4m). On a like-for-like basis, gross margins declined marginally from 25.2% in 2005 to 24.4%. While the Spreads, Desserts & Beverages business continued to progress, the Convenience Foods operation was hit by the effects of the extended period of warm weather in the second half of 2006 and the impact of utility and raw material cost inflation. Selling, marketing and distribution costs Selling, marketing and distribution costs for the year were £80.8m, an increase of 9.6% compared to 2005. Like-for-like selling and distribution costs fell by £4.9m (7.6%) due to lower distribution costs in our Fresh Produce and Bird's businesses where we rationalised haulage and distribution operations and the non-recurrence of the exceptional marketing spend in 2005 on the launch of Branston Beans. Within this category and despite the impact of the unseasonably warm weather during 2006, we maintained marketing spend year on year. Administrative costs Administrative costs for 2006 were £82.0m, an increase of 106.0% on 2005 costs of £39.8m. This increase is mainly due to the inclusion of the administrative costs associated with recent acquisitions, the increased charge for exceptional costs taken in the year, the majority of which falls into administrative costs, and increased amortisation costs. Like-for-like administrative costs fell as central head office costs were absorbed over a larger business base. Amortisation of intangible assets increased to £11.0m in 2006 (2005: £6.3m), resulting from a full year's charge for the Quorn and Cauldron brands, together with the amortisation arising on the acquisition of the Campbell's brands. Other operating income and expenditure Other operating expenditure amounted to £3.7m (2005: income £2.4m). This was primarily made up of a fair value movement of £3.8m on ongoing forward foreign exchange contracts. This movement is mainly due to weakening of the US dollar against sterling during the course of the year. Under IAS39, changes in the fair value of unsettled forward foreign exchange contracts that are not designated as hedges are recorded outside of cost of sales as other operating income or expense. The corresponding movement in 2005 was a credit of £0.9m with the balance of other operating income consisting of proceeds of £1.5m under our business interruption insurance in relation to the fire at our Bury St Edmunds factory. Operating profit Operating profit increased by £2.3m, or 2.4%, to £97.6m and after stripping out exceptional costs of £20.1m (2005: £6.8m) operating profit before exceptional items for the continuing business grew to £117.7m, £15.6m or 15.3% up on 2005. Exceptional items Exceptional items are not specifically defined under IFRS. Accordingly the Group has defined exceptional items as those items of sufficient financial significance to be disclosed separately in order to assist in understanding the financial performance achieved and in making projections of future results. These items relate to events or circumstances that are non-recurring in nature. Exceptional items for the year reflect the aggregate of a number of non-recurring events, resulting in a net charge of £20.1m compared to a cost of £6.8m in 2005. The main elements of the charge for the year are costs associated with the closure of our Cauldron factory at Portishead and the set-up of our new Meat-free facility at Methwold, restructuring and redundancy charges related to the integration of the Campbell's administration function and costs associated with the aborted acquisition of United Biscuits. Further details are set out in note 3. Interest The net interest payable charge for the year of £39.5m (2005: £43.5m) was made up of three elements: net cash interest payable, the amortisation of debt issuance costs and the fair value effect of interest rate swaps held at the end of the year. Net cash interest costs increased by 19.8% from £34.4m to £41.2m primarily as a result of the increased level of funding arising from the acquisition of the Bird's, Quorn, Cauldron and Campbell's businesses. The regular charge for the amortisation of debt issuance costs was £1.4m (2005: £1.7m). We extended our debt facilities at the time of the Campbell's acquisition, which resulted in the write-off of £4.0m of unamortised debt issuance costs relating to the pre-existing debt facilities. A comparable charge of £6.3m was recorded in 2005 on the re-negotiation of our debt facilities to fund the acquisition of Quorn. The fair value effect of interest rate swaps held at the end of the year was a credit of £7.1m (2005: cost £1.1m). This movement is largely the result of the increase in UK interest rates seen during the course of the year. Taxation The tax charge on the continuing business for the year was £11.0m (2005: £14.9m), an effective rate of 18.9% after taking into account the release of prior year provisions following the resolution of various outstanding issues with HMRC. The underlying cash tax rate for 2006 was 12.7% primarily reflecting the aggregate effect of tax allowances on the amortisation of goodwill and intangible assets in excess of the amortisation charge recorded in the income statement, capital allowances in excess of the depreciation charge recorded in the income statement and tax relief given on payments to retirement benefit schemes in excess of the amount charged in the income statement. It is anticipated that the effect of the factors referred to above will be to maintain the effective cash tax rate with a range of 20%-25% in the medium term, with movements in deferred tax adjusting the effective rate of tax to be close to the statutory rate of 30%. Earnings per share Basic earnings per share of 12.7p (2005: 11.9p) on continuing operations has been calculated by dividing earnings attributed to ordinary shareholders of £47.1m (2005: £36.9m) by the weighted average number of ordinary shares in issue during the year. Adjusted earnings per share of 18.0p (2005: 17.0p) on continuing operations has been calculated by dividing earnings before exceptional items and amortisation of intangible assets attributed to ordinary shareholders of £66.7m (2005: £52.9m) by the weighted average number of ordinary shares in issue during the year. These earnings have been calculated by reflecting tax at 30% and adjusting for the tax allowance on intangible asset amortisation available on certain business acquisitions. Dividends In line with our stated dividend policy, on 6 August 2006 the Board recommended a first interim dividend of 5.00p per ordinary share, which was paid on 4 January 2007. This was equivalent to 3.95p per ordinary share after adjusting for the bonus element of the rights issue. As part of the agreed offer for RHM plc, the Board recommended a second interim dividend of 5.50p per ordinary share, which was paid on 23 February 2007, to align the cumulative dividend to our shareholders for the year with those announced by RHM plc as payable to its shareholders. A final dividend of 2.55p per ordinary share was proposed by the Board on 5 March 2007, payable on 6 July 2007 to shareholders on the register at 8 June 2007. This will result in a total dividend payable for 2006 of 12.00p per ordinary share (2005: 11.25p), an increase of 6.7%, after adjusting for the bonus element of the rights issue. Pension Schemes Consistent with all public companies, the Group reviews the actuarial assumptions used in calculating its pension obligations on a regular basis. It is our objective to ensure that the balance between the cash flow risk to the business and our responsibilities to our current and former employees is fully and regularly understood and that the impact of changes to the composition of the business on our pension obligation is known in advance. In this context, the Group monitors on a regular and ongoing basis the specific demographic characteristics of the membership of each of its schemes, along with the assumptions relating to discount rates, returns on equity, inflation and the rate of future salary increases. As a result, we have revised the assumptions used in determining the IAS 19 liabilities at 31 December 2006 to reflect changes in the economic environment and circumstances of each scheme. These assumptions are shown in detail in note 6. As a consequence, at 31 December 2006 and on an IAS 19 basis, the Group's pension schemes showed an aggregate deficit of £84.7m (2005: £84.4m). This comprised £55.2m in relation to the existing schemes and £29.5m in relation to the schemes associated with Campbell's. The reduction in the deficit on the Group's existing schemes, which fell from £84.4m to £55.2m, was largely as a result of improved investment performance of the schemes' assets during the year. On a net basis, after adjusting for the effect of deferred tax, the aggregate deficit on Group schemes stood at £59.4m (2005 £59.1m). Cash flow and borrowings The Group's net borrowings increased during the year from £572.1m to £641.4m. Of this movement of £69.3m, the cash and non-cash elements were £63.2m and £6.1m, respectively. The cash inflow from operating activities for the year declined to £40.1m (2005: £73.9m) as a result of the increased level of interest, tax and exceptional costs arising during the year coupled with an outflow on working capital. The latter factor was due to the funding of peak working capital levels in the newly acquired Campbell's business over the year-end and the timing of receipts from major customers and payments to suppliers over the Christmas period. The cash flow statement for the Group also includes the cost of acquiring Campbell's for a total consideration of £468.9m including fees and the net proceeds of £441.6m from the rights issue used to fund the majority of the consideration. The main remaining elements that make up the cash outflow referred to above were net capital expenditure of £52.5m, including the spend on the Group's SAP system implementation and dividends paid of £23.5m. Capital expenditure The Group's capital expenditure programme is geared towards meeting its planned commercial growth, cost efficiency and infrastructure requirements. In general the Group seeks to allocate approximately 3.0-3.5% of its sales to such projects each year, but will also allocate capital over and above this level to major business change projects. In 2006, the Group spent a net £52.5m (2005: £36.2m) on its capital programmes. Of this £12.3m was associated with its implementation of SAP, with the balance made up of its investment in the Meat-free chilled factory in Methwold as well as its normal capital investment programmes. Consolidated income statement Year ended 31 December Note 2006 2005 £m £m Continuing operations Turnover 2 959.4 789.7 Cost of sales (695.3) (583.3) Gross profit 264.1 206.4 Selling, marketing and distribution costs (80.8) (73.7) Administrative costs (82.0) (39.8) Other operating (expenditure)/income (3.7) 2.4 Operating profit 97.6 95.3 Before exceptional items 117.7 102.1 Exceptional items 3 (20.1) (6.8) Interest payable and other financial charges 4 (56.3) (51.5) Interest receivable and other financial income 4 16.8 8.0 Profit before taxation for continuing operations 58.1 51.8 Taxation charge 5 (11.0) (14.9) Profit after taxation for continuing operations 47.1 36.9 Profit from discontinued operations 13 - 46.7 Profit for the year 47.1 83.6 Earnings per share (pence)* 7 Basic 12.7 26.9 Diluted 12.7 26.7 Earnings per share (pence) - continuing* 7 Basic 12.7 11.9 Diluted 12.7 11.8 Earnings per share (pence) - discontinued* 7 Basic - 15.0 Diluted - 14.9 Dividends 8 Recommended final dividend (£m) 12.6 23.5 Declared interim dividend (£m) 39.7 11.8 Recommended final dividend (pence) 2.55 9.50 Declared interim dividends (pence) 10.50 4.75 * Earnings per share in 2005 have been restated to reflect the effect of the rights issue in the current year. Consolidated balance sheet As at 31 December Note 2006 2005* (Restated) £m £m ASSETS: Non-current assets Property, plant and equipment 254.7 196.5 Goodwill 477.0 259.1 Other intangible assets 389.6 165.0 Investments - 0.1 Other non-current assets - 0.4 Current assets Inventories 120.6 89.8 Trade and other receivables 170.6 136.3 Financial assets - derivative financial instruments 6.9 1.3 Cash and cash equivalents 7.8 14.0 Total assets 1,427.2 862.5 LIABILITIES: Current liabilities Trade and other payables (177.9) (166.8) Financial liabilities - short term borrowings 9 (131.5) (35.9) - derivative financial instruments (3.5) (1.5) Interest payable (3.7) (2.0) Provisions (7.7) (0.6) Current tax liabilities (6.9) (19.4) Non-current liabilities Financial liabilities - long term borrowings 9 (517.7) (546.1) - loan notes 9 - (4.1) Retirement benefit obligations 6 (84.7) (84.5) Provisions (0.5) (0.4) Other liabilities - (0.1) Deferred tax liabilities (32.1) (19.1) Total liabilities (966.2) (880.5) Net assets/(liabilities) 461.0 (18.0) EQUITY: Capital and reserves Share capital 5.0 2.5 Share premium 10 760.6 321.5 Merger reserve 10 (136.8) (136.8) Other reserves 10 - (0.2) Profit and loss reserve 10 (167.8) (205.0) Total shareholders' funds/(deficit) 461.0 (18.0) * The 2005 comparatives have been restated for the final fair value adjustments in respect of acquired business which were previously determined on a provisional basis. Signed on behalf of the Board of Directors, who approved the financial statements on 5 March 2007. Robert Schofield Paul Thomas Director and Chief Executive Finance Director Consolidated statement of recognised income and expense Year ended 31 December 2006 2005 £m £m Actuarial gain/(loss) 16.1 (25.9) Deferred tax (charge)/credit on actuarial gain/(loss) (5.1) 7.7 Tax on share options 1.5 0.7 Net gain/(loss) not recognised in income statement 12.5 (17.5) Profit for the year 47.1 83.6 Total recognised income in the year 59.6 66.1 Effect of adopting IAS 39 at 1 January 2005 - (1.8) 59.6 64.3 Consolidated cash flow statement Year ended 31 December Note 2006 2005 £m £m Cash generated from operating activities 11 91.9 117.7 Interest paid (49.2) (42.6) Interest received 9.7 6.3 Taxation paid (12.3) (7.5) Cash inflow from operating activities 40.1 73.9 Acquisition of Campbell's (380.3) - Acquisition of Bird's - (72.1) Acquisition of Marlow - (118.6) Acquisition of Gedney's - (4.6) Acquisition of Cauldron - (27.1) Sale of subsidiaries - 81.6 Purchase of property, plant and equipment (44.7) (49.8) Receipt from insurers - 12.0 Purchase of intangible assets (12.3) (1.1) Sale of property, plant and equipment 4.5 2.7 Cash outflow from investing activities (432.8) (177.0) Repayment of borrowings (29.1) (380.0) Drawdown from borrowings 86.0 585.9 Proceeds from share issue 458.6 - Share issue (costs)/refund (17.0) 0.6 Debt issuance costs (4.4) (5.6) Repayment of debt acquired with Campbell's (88.6) - Repayment of debt acquired with Marlow - (53.4) Dividends paid (23.5) (33.8) Cash inflow from financing activities 382.0 113.7 Net (outflow)/inflow of cash and cash equivalents (10.7) 10.6 Cash and cash equivalents at beginning of year 13.2 2.6 Cash and cash equivalents at end of year 2.5 13.2 1. Basis of preparation The financial information in this announcement does not constitute the Group's statutory accounts for the years ended 31 December 2006 or 2005. The preliminary results for the year ended 31 December 2006 have been extracted from audited consolidated financial statements which have not yet been delivered to the Registrar of Companies. The auditors have reported on the Group's statutory accounts for the year ended 31 December 2006. The report was unqualified and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. The financial information for the year ended 31 December 2005 is derived from the statutory accounts for that year except for restatements relating to the rights issue in 2006 and the finalising of provisional fair values on acquisitions in 2005. The accounting policies and presentation adopted in this announcement are the same as those used in the Group's annual report and accounts for the year ended 31 December 2005. The consolidated financial statements of Premier Foods plc have been prepared in accordance with International Financial Reporting Standards ('IFRS's') as adopted by the European Union, and on the historical cost basis with the exception of derivative financial instruments, pensions and share based payments, which are incorporated using fair value. 2. Segmental analysis The results below for the year ended 31 December 2006 are divided into the two continuing segments described as Grocery and Fresh Produce. Results for the Tea business and Jonker Fris disposed of in 2005 are presented as discontinued operations in the comparative results for the year ended 31 December 2005. Each of these segments primarily supplies the United Kingdom market, although the Group also supplies certain products to mainland Europe and the United States. Inter-segment transfers or transactions are entered into under the same terms and conditions that would be available to unrelated third parties. These segments are the basis on which the Group reports its primary segment information. The segment results for the years ended 31 December 2006 and 2005 are as follows: Year ended 31 December 2006 Grocery Fresh Un-allocated Total for Produce Group £m £m £m £m Total turnover from continuing operations 844.8 114.6 - 959.4 Result Operating profit/(loss) before exceptional 120.2 (2.5) - 117.7 items Exceptional items (19.4) (0.7) - (20.1) Interest payable and other financial charges - - (56.3) (56.3) Interest receivable and other financial income - - 16.8 16.8 Profit/(loss) before taxation for continuing 100.8 (3.2) (39.5) 58.1 operations Taxation - - (11.0) (11.0) Profit/(loss) after taxation for continuing 100.8 (3.2) (50.5) 47.1 operations Discontinued operations - - - - Profit/(loss) for the year 100.8 (3.2) (50.5) 47.1 Balance sheet Segment assets 1,363.7 47.0 - 1,410.7 Unallocated assets - - 16.5 16.5 Consolidated total assets 1,363.7 47.0 16.5 1,427.2 Segment liabilities (263.9) (10.3) - (274.2) Unallocated liabilities - - (692.0) (692.0) Consolidated total liabilities (263.9) (10.3) (692.0) (966.2) Other information Grocery Fresh Dis-continued Total for Produce Group £m £m £m £m Capital expenditure 81.8 2.4 - 84.2 Intangible asset expenditure 453.6 - - 453.6 Depreciation 18.3 1.6 - 19.9 Amortisation 10.9 0.1 - 11.0 Impairment of PPE and Intangibles 4.5 - - 4.5 Year ended 31 December 2005 Grocery Fresh Un-allocated Total for Produce Group £m £m £m £m Total turnover from continuing operations 683.4 106.3 - 789.7 Result Operating profit before exceptional items 101.6 0.5 - 102.1 Exceptional items (3.1) (3.7) - (6.8) Interest payable and other financial charges - - (51.5) (51.5) Interest receivable and other financial income - - 8.0 8.0 Profit/(loss) before taxation for continuing 98.5 (3.2) (43.5) 51.8 operations Taxation - - (14.9) (14.9) Profit/(loss) after taxation for continuing 98.5 (3.2) (58.4) 36.9 operations Discontinued operations 46.7 - - 46.7 Profit/(loss) for the year 145.2 (3.2) (58.4) 83.6 Balance sheet Segment assets 804.1 42.7 - 846.8 Unallocated assets - - 15.7 15.7 Consolidated total assets 804.1 42.7 15.7 862.5 Segment liabilities (243.0) (13.2) - (256.2) Unallocated liabilities - - (624.3) (624.3) Consolidated total liabilities (243.0) (13.2) (624.3) (880.5) Other information Grocery Fresh Dis-continued Total for Produce Group £m £m £m £m Capital expenditure 85.8 4.8 5.1 95.7 Intangible asset expenditure 254.8 0.2 - 255.0 Depreciation 13.0 2.9 2.2 18.1 Amortisation 6.3 - 0.3 6.6 Impairment of PPE and Intangibles - - - - Unallocated assets and liabilities comprise cash and cash equivalents, net borrowings, taxation balances and derivative financial assets and liabilities. Discontinued Operations Discontinued operations had the following effect on the segment results of Grocery, analysed into continuing and discontinued components. Discontinued Continuing Grocery £m £m £m Turnover 2006 - 844.8 844.8 2005 77.2 683.4 760.6 Operating profit 2006 - 100.8 100.8 2005 8.3 98.5 106.8 Segmental analysis - secondary The following table provides an analysis of the Group's turnover, which is allocated on the basis of geographical market destination as well as an analysis of segmental assets and additions to property, plant and equipment and intangible assets, which are allocated by geographical market location. Turnover by Carrying value of Total capital destination segmental assets by expenditure, including location intangibles by location 2006 2005 2006 2005 2006 2005 (Restated) (Restated) £m £m £m £m £m £m United Kingdom 898.7 757.4 1,402.1 862.5 535.8 350.0 Mainland Europe 47.5 25.4 25.1 - 2.0 0.7 Other countries 13.2 6.9 - - - - Total 959.4 789.7 1,427.2 862.5 537.8 350.7 The 2005 comparatives have been restated for the final fair value adjustments on the acquisition of Cauldron and Marlow. 3. Exceptional items During the year, the Group incurred the following: 2006 2005 £m £m Exceptional items - continuing operations Integration of Campbell's (a) 8.0 - Restructure of Meat-Free production (b) 7.2 - Costs of aborted acquisition of United Biscuits (c) 4.5 - Bird's transitional manufacturing and integration costs (d) 0.9 5.2 Restructuring and other costs (e) 2.6 3.0 Property disposal (f) (3.1) (1.4) Total 20.1 6.8 (a) Integration of Campbell's On 14 August 2006 the Group acquired Campbell's Grocery Products Limited and Campbell's Ireland Grocery Products Limited. The administrative functions at Cambourne and Kings Lynn are to be integrated into the existing Grocery operations of the Group, resulting in integration and restructuring costs. (b) Restructure of Meat-free production During 2005 the Group acquired Marlow Foods Holdings Limited and Cauldron Foods Limited (together 'Meat-free'). During the year the Group announced the closure of the Cauldron factory at Portishead and the purchase and development of a new chilled facility at Methwold, enabling the integration of chilled production for Quorn and Cauldron products. As a result, significant one-off restructuring costs have been incurred. (c) Costs of aborted acquisition of United Biscuits During the year the Group entered into negotiations to acquire United Biscuits. In doing so significant costs were incurred including, inter alia, consultancy, banking, due diligence, and legal fees, before discussions with the Group were terminated by the vendor. (d) Bird's transitional manufacturing and integration costs Following the acquisition of the Bird's business from Kraft Foods Inc. the product range continued to be produced by Kraft's at their factory in Banbury under a series of transitional arrangements. These arrangements were extended to the beginning of the current year to ensure the continuity of supply and we have presented the additional cost of sourcing production from Kraft as exceptional costs. (e) Restructuring and other costs Restructuring and other costs of £2.6m include redundancy costs relating to business re-organisations and site closures, costs associated with the restructuring of our warehousing network, costs relating to the government's new 'clean labelling' regime, and raw material write-offs resulting from their contamination in a third party warehouse. The latter costs are currently the subject of a legal claim against that third party. The prior year costs relate to the Sudan 1 recall costs and restructuring of the production and administration facilities in the UK grocery business. (f) Property disposal Disposal gains of £3.1m (2005: £1.4m) relate to the disposal of our North Walsham factory which had previously been used for seasonal stock holding, and also an additional receipt relating to the sale of Langley Mill resulting from provisions in the disposal contract whereby the Group was entitled to a share of any profit made by the buyer on the subsequent sale of the property. The prior year costs relate to the sale of a surplus property in the West Midlands. 4. Net interest payable On 14 August 2006, the Group entered into an Amended and Restated Facilities agreement, incorporating a £325.0m Term A facility, a £200.0m Term B facility, repayable over the period to 6 June 2010 and multi-currency revolving credit facilities of £560.0m. £646.0m was drawn down across the three facilities as at 31 December 2006. As a result of the implementation of these new facilities, debt issuance costs of £4.4m have been capitalised and are being amortised over the period of the loans. In addition £4.0m of debt issuance costs capitalised previously on past financing have been written off in the year. During the year the Group entered into a bridging loan for £450.0m (settled in September 2006 following receipt of the rights issue proceeds) in order to expedite the purchase of Campbell's resulting in additional interest costs of £1.6m. 2006 2005 £m £m Interest payable Interest payable on bank loans, senior notes and overdrafts 10.9 8.6 Interest payable on bridging loan facility 1.6 - Interest payable on term facility 19.4 20.4 Interest payable on revolving facility 19.0 13.4 Amortisation of debt issuance costs 1.4 1.7 Fair valuation of interest rate swaps - 1.1 52.3 45.2 Accelerated amortisation of debt issuance costs 4.0 6.3 Total interest payable and other financial charges 56.3 51.5 Fair valuation of interest rate swaps (7.1) - Interest receivable - bank deposits (9.7) (8.0) Total interest receivable and other financial income (16.8) (8.0) Net interest 39.5 43.5 5. Tax on profit on ordinary activities Analysis of the charge for the year: 2006 2005 Continuing Dis-continued Total Continuing Dis-continued Total operations operations operations operations £m £m £m £m £m £m Current tax - Current year 7.4 - 7.4 12.4 2.5 14.9 - Prior years (8.4) - (8.4) 0.1 - 0.1 Overseas tax current 0.1 - 0.1 - - - tax (current year) Deferred tax - Current year 10.2 - 10.2 2.7 - 2.7 - Prior years 1.7 - 1.7 (0.3) - (0.3) Income tax charge 11.0 - 11.0 14.9 2.5 17.4 for the year The prior year adjustment credit of £8.4m to current tax relates to the release of prior year provisions. Tax relating to items recorded in equity for continuing 2006 2005 operations was: £m £m Current tax credit on pension charges reflected in - (1.6) reserves Current tax credit on share (1.5) (0.7) options Deferred tax charge/(credit) on pension movements reflected 5.1 (6.1) in reserves 3.6 (8.4) The tax charge for the year differs from the standard rate of corporation tax in the United Kingdom (30%) for the years ended 31 December 2006 and 2005. The reasons for this are explained below: 2006 2005 £m £m Profit before taxation for continuing 58.1 51.8 operations Tax at the domestic income tax rate of 30% (2005: 17.4 15.5 30%) Tax effect of: Non deductable/(taxable exceptional 0.5 (0.7) items) Other (non taxable)/ (0.2) 0.3 disallowable items Adjustment to prior (6.7) (0.2) years Tax charge 11.0 14.9 6. Retirement benefit schemes Defined Benefit Schemes Most Group companies participate in the Premier Foods Pension Scheme (the 'PFPS '), the principal funded defined benefit scheme operated by the Group. The Group also operates a smaller funded defined benefit scheme, the Premier Ambient Products Pension Scheme (the 'PAPPS') for employees in the Ambrosia business. Under the schemes, employees are entitled to retirement benefits which vary as a percentage of final salary on retirement. No unfunded post-retirement benefits exist. In addition, on 14 August 2006 the Group inherited two further funded defined benefit pension schemes as a result of the acquisition of Campbell's, the Premier Grocery Products Pension Scheme ('PGPPS') for the UK business, and the Premier Grocery Products Ireland Pension Scheme ('PGPIPS') for the Irish business. The exchange rates used to translate the Campbell's Ireland scheme (which is denominated in Euros) are 1.4817 for the opening position at 14 August 2006, 1.4832 for the average rate during the year, and 1.493 for the closing position at 31 December 2006. The assets of all four schemes are held by the trustees of the respective schemes and are independent of the Group's finances. The schemes invest through investment managers appointed by the trustees in UK and European equities and in investment products comprising a broader range of assets. For the purposes of these financial statements, pension costs presented are calculated by independent, qualified actuaries using the projected unit credit method. The information for PFPS and PAPPS and the results for PGPPS and PGPIPS are combined below. At the balance sheet date, the principal actuarial assumptions used were as follows: PFPS & PGPPS PGPIPS PAPPS % % % 2006 2006 2006 Discount rate 5.20 5.20 5.20 Inflation 3.00 3.00 3.00 Expected salary increases 4.00 4.00 4.00 Future pension increases 3.00 3.00 3.00 Average expected remaining life of a 65 year old male (years) - Future service 18 17 19 - Past service 15 17 19 2005 14 August 2006 14 August 2006 Discount rate 5.00 5.50 5.50 Inflation 2.75 2.75 2.75 Expected salary increases 3.75 3.75 3.75 Future pension increases 2.75 2.75 2.75 Average expected remaining life of a 65 year old male (years) - Future service 18 17 19 - Past service 15 17 19 The mortality assumption used is slightly below the national average because it reflects the socio-economic profile of the membership and the schemes' actual and anticipated mortality experience. The fair values of plan assets and the expected rates of return on assets were: Expected Market Expected Market rate of value rate of value return return 2006 2006 2005 2005 % £m % £m PFPS & PAPPS UBS Global Asset Management 7.80 177.2 8.00 160.8 Insight 7.00 65.3 6.75 66.0 Merrill Lynch 8.00 112.3 7.75 103.8 Cash and other 5.00 1.7 4.50 3.9 Total 7.70 356.5 7.63 334.5 PGPPS & PGPIPS Equities 7.93 75.1 - - Bonds 5.31 33.3 - - Cash and other 6.32 0.8 - - Total 7.12 109.2 - - At 31 December 2006 the actual distribution of assets held within the targeted return investments was: 2006 2005 Cash Equities Total Cash Equities Total £m £m £m £m £m £m UBS Global Asset Management 12.6 164.6 177.2 - 160.8 160.8 Insight targeted return 65.3 - 65.3 66.0 - 66.0 Merrill Lynch targeted return 70.4 41.9 112.3 60.2 43.6 103.8 The expected return on pension scheme assets is based on the long-term investment strategy set out in the Schemes' Statement of Investment Principles at the start of the year. In 2006, the expected return was calculated using the equity return and targeted investment return assumptions of 8.0%, 6.75% and 7.75% respectively. The actual rate of return on plan assets was 9.8% (2005: 13.4%) for PFPS and PAPPS, and 7.0% for PGPPS and PGPIPS. The plan assets do not include any of the Group's own financial instruments, nor any property occupied by, or other assets used by, the Group. The amounts recognised in the balance sheet arising from the Group's obligations in respect of its defined benefit schemes is as follows: PFPS & PAPPS PGPPS & PGPIPS Total £m £m £m 2006 Present value of funded obligations (411.7) (138.7) (550.4) Fair value of plan assets 356.5 109.2 465.7 Deficit in scheme (55.2) (29.5) (84.7) 2005 Present value of funded obligations (418.9) - (418.9) Fair value of plan assets 334.5 - 334.5 Deficit in scheme (84.4) - (84.4) 2004 Present value of funded obligations (368.3) - (368.3) Fair value of plan assets 303.2 - 303.2 Deficit in scheme (65.1) - (65.1) The 2005 net liability of £84.4m comprises a liability of £84.5m and an asset of £0.1m. Changes in the present value of the defined benefit obligation were as follows: PFPS & PAPPS PGPPS & Total PGPIPS £m £m £m 2005 Opening defined benefit obligation (368.3) - (368.3) Current service cost (4.3) - (4.3) Interest cost (20.0) - (20.0) Actuarial losses (43.7) - (43.7) Curtailments 1.2 - 1.2 Contributions by plan participants 2.1) - (2.1) Benefits paid 18.3 - 18.3 Closing defined benefit obligation (418.9) - (418.9) 2006 Opening defined benefit obligation (418.9) - (418.9) Acquisition of subsidiary undertaking - (124.7) (124.7) Current service cost (6.1) (1.1) (7.2) Past service cost - (0.1) (0.1) Interest cost (20.7) (2.6) (23.3) Actuarial gain/(losses) 16.5 (12.1) 4.4 Curtailments - 0.9 0.9 Contributions by plan participants (2.2) (0.5) (2.7) Benefits paid 19.7 1.5 21.2 Closing defined benefit obligation (411.7) (138.7) (550.4) Changes in the fair value of plan assets were as follows: PFPS & PAPPS PGPPS & Total PGPIPS £m £m £m 2005 Opening fair value of plan assets 303.2 - 303.2 Expected return 23.4 - 23.4 Administrative and life insurance costs (1.2) - (1.2) Actuarial gains 17.8 - 17.8 Contributions by employer 7.5 - 7.5 Contributions by plan participants 2.1 - 2.1 Benefits paid (18.3) - (18.3) Closing fair value of plan assets 334.5 - 334.5 2006 Opening fair value of plan assets 334.5 - 334.5 Acquisition of subsidiary undertaking - 99.2 99.2 Expected return 25.2 2.8 28.0 Administrative and life insurance costs (1.4) - (1.4) Actuarial gains 7.6 4.1 11.7 Contributions by employer 8.1 4.1 12.2 Contributions by plan participants 2.2 0.5 2.7 Benefits paid (19.7) (1.5) (21.2) Closing fair value of plan assets 356.5 109.2 465.7 The history of the plan for the current and prior period is as follows: PFPS & PAPPS PGPPS & Total PGPIPS £m £m £m 2006 Actuarial adjustments on plan liabilities 16.5 (12.1) 4.4 Actuarial adjustments on plan assets 7.6 4.1 11.7 Net actuarial gain/(loss) for period 24.1 (8.0) 16.1 Cumulative actuarial loss (57.8) (8.0) (65.8) 2005 Actuarial adjustments on plan liabilities (43.7) - (43.7) Actuarial adjustments on plan assets 17.8 - 17.8 Net actuarial loss for period (25.9) - (25.9) Cumulative actuarial loss (81.9) - (81.9) 2004 Actuarial adjustments on plan liabilities (65.8) - (65.8) Actuarial adjustments on plan assets 9.8 - 9.8 Net actuarial loss for period (56.0) - (56.0) Cumulative actuarial loss - - - In accordance with the transitional provisions in the amendment to IAS 19 ' Employee Benefits' in December 2004, the disclosures above are determined prospectively from the 2004 reporting period. The actual return on plan assets was £39.7m (2005: £41.2m), which is £11.7m more than the expected return on plan assets of £28.0m at the start of the relevant periods. The actuarial gain on liabilities of £4.4m (2005: £43.7m loss) comprises a gain on member experience of £14.2m and a worsening of the expected liabilities due to changes in assumptions of £9.8m. The net actuarial gains taken to the statement of recognised income and expense were £16.1m (2005: £25.9m loss). These were £11.0m (2005: £18.2m loss) net of taxation (with tax at 30% for PFPS, PAPPS, and PGPPS, and 12.5% on PGPIPS). The Group expects to contribute approximately £20.3m to its defined benefit plans in 2007, £6.3m of regular contributions, £6.9m of additional contributions to fund the scheme deficits, and a further one-off contribution of £7.1m to the PGPPS & PGPIPS schemes relating to the acquisition of Campbell's. The amounts recognised in the income statement are as follows: PFPS & PAPPS PGPPS & Total PGPIPS £m £m £m 2006 Current service cost (6.1) (1.1) (7.2) Past service cost - (0.1) (0.1) Administrative and life insurance costs (1.4) - (1.4) Interest cost (20.7) (2.6) (23.3) Expected return on plan assets 25.2 2.8 28.0 Gains on curtailment - 0.9 0.9 Total expense (3.0) (0.1) (3.1) 2005 Current service cost (4.3) - (4.3) Administrative and life insurance costs (1.2) - (1.2) Interest cost (20.0) - (20.0) Expected return on plan assets 23.4 - 23.4 Gains on curtailment 1.2 - 1.2 Total expense (0.9) - (0.9) Defined Contribution Schemes A number of companies in the Group operate defined contribution schemes, predominantly Stakeholder arrangements. In addition a number of schemes providing life assurance benefits only are operated. The total expense recognised in the income statement of £1.1m (2005: £0.9m) represents contributions payable to the plans by the Group at rates specified in the rules of the plans. Other post retirement benefits The Group does not provide any other post retirement benefits. 7. Earnings per share Basic earnings per share have been calculated by dividing earnings attributable to ordinary shareholders of £47.1m (2005: £83.6m) by the weighted average number of ordinary shares of the Company. 2006 2005 (Restated) Basic EPS Dilutive Diluted EPS Basic Dilutive Diluted EPS effect of EPS effect share options of share options Continuing operations Profit after tax (£m) 47.1 - 47.1 36.9 - 36.9 Weighted average number of 370.8 0.6 371.4 311.1 2.6 313.7 shares (million) Earnings per share (pence) 12.7 - 12.7 11.9 (0.1) 11.8 Discontinued operations Profit after tax (£m) - - - 46.7 - 46.7 Weighted average number of - - - 311.1 2.6 313.7 shares (million) Earnings per share (pence) - - - 15.0 (0.1) 14.9 Total Profit after tax (£m) 47.1 - 47.1 83.6 - 83.6 Weighted average number of 370.8 0.6 371.4 311.1 2.6 313.7 shares (million) Earnings per share (pence) 12.7 - 12.7 26.9 (0.2) 26.7 The 2005 comparatives have been restated to reflect the impact of the rights issue in the year. Diluted earnings per share Diluted earnings per share 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 savings related share options. 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 subscription rights attached to the outstanding share options. There was an issue of 247,848,157 ordinary shares on 14 August as part of a rights issue (fully paid on 8 September 2006). These have been included in determining the weighted average for the current year. The number of shares used to calculate ordinary earnings per share is compared below with the number of shares that would have been issued assuming the exercise of the share options. No adjustment is made to earnings in calculating diluted earnings per share. 2006 2005 Number Number Weighted average number of ordinary shares for the purpose of basic earnings per share 370,819,997 311,128,713 Effect of dilutive potential ordinary shares: - Share options 597,921 2,584,281 Weighted average number of ordinary shares for the purpose of diluted earnings per share 371,417,918 313,712,994 8. Dividends 2006 2005 pence pence Actual dividends Interim dividend 5.00 4.75 Bonus interim dividend 5.50 - Final dividend 2.55 9.50 Total 13.05 14.25 Equivalent dividends Interim dividend 3.95 3.75 Bonus interim dividend 5.50 - Final dividend 2.55 7.50 Total 12.00 11.25 The Board proposes a final dividend of 2.55 pence per ordinary share (2005: 9.5 pence) payable on 6 July 2007 to shareholders on the Register of Members at 8 June 2007. The equivalent dividends represent the amounts appropriated to the shareholders for each share, restated to reflect the bonus element of the rights issue in the year. This equates to an uplift in the number of shares of 26.7% and hence a corresponding reduction in the dividend per share. 9. Borrowings 2006 2005 £m £m Due within one year: Secured Senior Credit Facility - Term A (note a) 40.0 - Debt issuance costs (0.7) - 39.3 - Secured Senior Credit Facility - Revolving (note a) 87.0 - Debt issuance costs (0.6) - 86.4 - Secured Senior Credit Facility - Term (note b) - 25.0 Debt issuance costs - (0.6) - 24.4 Secured Senior Credit Facility - Revolving (note b) - 11.0 Debt issuance costs - (0.6) - 10.4 Bank overdrafts 5.3 0.8 Total bank borrowings due within one year 131.0 35.6 Finance lease obligations (note 21) 0.5 0.3 Total borrowings due within one year 131.5 35.9 Due after more than one year: Secured Senior Credit Facility - Term A (note a) 260.0 - Debt issuance costs (1.1) - 258.9 - Secured Senior Credit Facility - Revolving (note a) 259.0 - Debt issuance costs (1.4) - 257.6 - Secured Senior Credit Facility - Term (note b) - 300.0 Debt issuance costs - (1.4) - 298.6 Secured Senior Credit Facility - Revolving (note b) - 249.0 Debt issuance costs - (2.2) - 246.8 Finance lease obligations (note 21) 1.1 0.6 Other unsecured loans 0.1 0.1 Total other 1.2 0.7 Total borrowings due after one year 517.7 546.1 Loan notes due 2008 (note c) - 4.1 Total bank and other borrowings 649.2 586.1 a) Senior Term Credit Facility and Revolving Credit Facility Arrangement - 2006 On 14 August 2006, the Group entered into an amended and restated £1,085.0m term and revolving credit facility. This was arranged by BNP Paribas, J.P. Morgan plc, Lloyds TSB Bank plc and The Royal Bank of Scotland plc as lead arrangers and underwriters and Lloyds TSB Bank plc as facility agent and security trustee. The Senior Term Credit Facility comprises £325.0m Term A facilities and £200.0m Term B facilities. The Revolving Credit Facility is a multi-currency revolving credit facility of up to £560.0m (or its equivalent in other currencies). The final maturity date of the above arrangements is 6 June 2010. In addition the Group entered into a £450.0m bridging loan facility with ABN AMRO Bank N.V. and Merrill Lynch International on 12 July 2006 which was settled on 13 September 2006. b) Senior Term Credit Facility and Revolving Credit Facility Arrangement - 2005 On 14 August 2006 the Senior Term Credit Facility and Revolving Credit Facility were replaced by a combination of the Term A facility, Term B facility and the Revolving facility noted above. (c) Loan notes - 2008 As part of the acquisition arrangement of Marlow Foods Holdings Limited on 6 June 2005, the Group entered into deferred consideration arrangements with certain individuals. This resulted in loan notes being issued to the Group. The loan notes were fully repaid during the year. 10. Reserves Share premium Merger reserve Other reserves Profit and loss reserve Total £m £m £m £m £m At 1 January 2005 320.9 (136.8) (1.8) (238.4) (56.1) Profit for the year - - - 83.6 83.6 Dividends paid - - - (33.8) (33.8) Actuarial gains and losses (net of taxation) (18.2) (18.2) (a) Settlement of derivatives (b) - - 1.6 - 1.6 Share based payments (c) - - - 1.1 1.1 Issue costs refund 0.6 - - - 0.6 Tax on share options (d) - - - 0.7 0.7 At 31 December 2005 321.5 (136.8) (0.2) (205.0) (20.5) Rights issue (e) 456.1 - - - 456.1 Rights issue costs (e) (17.0) - - - (17.0) Profit for the year - - - 47.1 47.1 Dividends paid - - - (23.5) (23.5) Actuarial gains and losses (net of taxation) 11.0 11.0 (a) Settlement of derivatives (b) - - 0.2 - 0.2 Share based payments (c) - - - 1.6 1.6 Tax on share options (d) - - - 1.5 1.5 Exchange differences on - - - (0.5) (0.5) translation At 31 December 2006 760.6 (136.8) - (167.8) 456.0 (a) Actuarial gains and losses relating to the Group's retirement benefit schemes are recognised directly within the profit and loss reserve. (b) On 1 January 2005, the Group adopted the provisions of IAS 32 and IAS 39, Financial Instruments. The primary effect of this change in accounting policy relates to the accounting, presentation and disclosure of the Group's interests in forward exchange contracts and interest rate swaps and the effect of these changes was to increase the Group's net liabilities at 31 December 2004 by £1.8m and create a Cash Flow Hedge (CFH) reserve. An amount of £1.6m of the CFH has been transferred to net profit on settlement of derivatives in 2005 and £0.2m in 2006. (c) Amounts are in respect of outstanding share option schemes in accordance with IFRS 2: 'Share based payment'. (d) Amounts are in respect to deferred tax on the intrinsic value of outstanding options in (c). (e) On 14 August 2006, Premier Foods plc issued 247,848,157 new 1 pence ordinary shares for a premium of 184 pence, in a one for one Rights Issue of existing ordinary shares. Rights issue costs of £17.0m were incurred and have been charged to the Share Premium account. 11. Cash flow notes Reconciliation of operating profit to cash flows from operating activities 2006 2005 £m £m Continuing operations Operating profit 97.6 95.3 Depreciation of property plant & equipment 19.9 15.9 Amortisation of intangible assets 11.0 6.3 Amortisation of debenture stock 0.1 - Impairment / loss/(gain) on disposal of 1.6 (4.7) fixed assets Impairment of intangibles assets 0.1 - Revaluation losses/(gains) on financial 3.8 (1.1) instruments Share based payments 1.6 1.1 Net cash inflow from operating activities before 135.7 112.8 interest and tax and movements in working capital Increase in inventories (2.1) (0.7) Increase in receivables (3.9) (12.4) (Decrease)/Increase in other payables and (28.7) 16.9 provisions Movement in net retirement benefit (9.1) (5.4) obligations Cash generated from continuing operations 91.9 111.2 Discontinued operations - 6.5 Cash generated from operating activities 91.9 117.7 Exceptional items cash flow (9.2) (8.9) Cash generated from operations before 101.1 126.6 exceptional items Additional analysis of cash flows 2006 2005 £m £m Interest received 9.7 6.3 Interest paid (49.2) (42.6) Issue costs of new bank loan (4.4) (5.6) Return on financing (43.9) (41.9) Sale of subsidiaries / businesses - 81.6 Reconciliation of cash and cash equivalents to net borrowings 2006 2005 £m £m Net (outflow)/inflow of cash and cash equivalents (10.7) 10.6 Debt acquired with Campbell's (88.6) - Debt acquired with Marlow - (53.4) Decrease/(increase) in borrowings 36.1 (146.0) Other non-cash changes (6.1) (13.0) Increase in borrowings net of cash (69.3) (201.8) Total borrowings net of cash at beginning of year (572.1) (370.3) Total borrowings at end of year (641.4) (572.1) Analysis of movement in borrowings As at 1 Cash flow Other non As at 31 January 2006 cash changes December 2006 £m £m £m £m Bank overdrafts (0.8) (4.5) - (5.3) Cash and bank 14.0 (6.2) - 7.8 deposits Cash and cash equivalents net of overdrafts 13.2 (10.7) - 2.5 Borrowings - term facilities (325.0) 25.0 - (300.0) Borrowings - revolving credit facilities (260.0) (86.0) - (346.0) Loan notes (4.1) 4.1 - - Finance leases (0.9) - (0.7) (1.6) Other (0.1) - - (0.1) Gross borrowings net of cash (576.9) (67.6) (0.7) (645.2) Debt issuance costs 4.8 4.4 (5.4) 3.8 Total net borrowings (572.1) (63.2) (6.1) (641.4) 12. Acquisitions The following companies were acquired during the year: Name of Principal Date of Shares Voting equity Cash outflow on Total net businesses activities acquisition acquired instruments acquisition consideration* acquired acquired % £m £m Campbell's Manufacture and 14 August Yes 100 379.7 444.9 Grocery distribution of Products soups, meat and Limited other food products Campbell's Manufacture and 14 August Yes 100 0.6 31.0 Grocery distribution of Products soups, meat and Ireland Limited other food products Total 380.3 475.9 *Total net consideration includes net debt, cash, and a working capital adjustment of £7.0m acquired as well as costs of acquisition. The financial performance of the companies acquired was as follows: Name of businesses acquired Revenue post Profit* post Proforma Revenue Proforma acquisition acquisition for Year** Profit for Year* £m £m £m £m Campbell's Grocery Products Limited 91.8 6.4 221.9 36.3 Campbell's Grocery Products Ireland Limited 9.5 1.1 21.4 1.4 Total 101.3 7.5 243.3 37.7 * Profit is defined as operating profit before interest and tax. ** As if the acquisition had occurred on 1 January 2006. The pre-acquisition results for Campbell's are sourced from management information. 13. Discontinued operations The Group has not incurred any income or expenditure in relation to discontinued operations during the year. The following information provides information on the results arising from discontinued operations in the prior year. On 30 October 2005, the Group entered into a sale agreement to dispose of its Tea businesses for £80.2m. Also, on 7 December 2005, the Group entered into a sale agreement to dispose of Jonker Fris business for £4.4m. These disposals were effected in order to generate cash flows for the expansion of the Group's other businesses. The results of the discontinued operations for the period from 1 January 2005 to the dates of disposal are as follows: 2006 2005 £m £m Turnover - 77.2 Expenses - (68.9) Profit before tax - 8.3 Taxation charge - (2.5) Profit after tax on discontinued operations for the period - 5.8 Profit on disposal before tax - 40.9 Tax on profit on disposal - - Profit on disposal after taxation - 40.9 Total profit arising from discontinued operations - 46.7 During the year discontinued businesses contributed £nil (2005: £6.5m) to the Group's net operating cash flows, paid £nil (2005: £5.1m) in respect of investing activities and paid £nil (2005: £nil) in respect of financing activities. A cash inflow of £nil (2005: £81.6m) arose on the disposal of discontinued businesses. 14. Post balance sheet events Acquisition of RHM Plc ('RHM') On 4 December 2006 Premier announced an offer to acquire the entire share capital of RHM by way of scheme of arrangement. The consideration under the offer is one new ordinary Premier share and 83.2p in cash for each RHM share held. At an Extraordinary Meeting held on 15 February, the shareholders of Premier approved the acquisition of RHM. Also on that date, the shareholders of RHM approved the proposal to proceed with the scheme of arrangement. The court hearing to sanction the scheme of arrangement is anticipated to take place on 14 March 2007, with completion of the acquisition expected on 16 March 2007. Acquisition of Chivers Ireland Limited In addition, Premier acquired Chivers Ireland Limited, a leading supplier of preserves to Ireland's retail grocery and foodservice markets for £21.0m on 19 January 2007. The allocation of the fair value of the assets acquired and liabilities assumed to the cost of the business combination has not been performed because it is impractical to do so because the process is still ongoing. Announcement of restructuring plans On 19 January 2007 Premier announced a consultation on the proposed closure of its factories in Kings Lynn and Ashford. The proposal is for the Kings Lynn factory to close by December 2007 and the Ashford factory to close by May 2008. Agreement to sell Fresh Produce business On 5 March 2007 Premier reached a non-binding agreement to sell its Fresh Produce business to the management of that business. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Premier Foods (PFD)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today