Premier Foods : We announce our Preliminary results for 2016/17

16 May 2017

Preliminary results for the 52 weeks ended 1 April 2017

Headlines

• Full year Group underlying sales (1.4%) lower; Q4 Group underlying sales down (1.0%)

• Market share growth in six of eight largest brands

• International sales increased +18%

• Underlying Trading profit £117.0m compared to £129.1m in FY15/16

• Adjusted profit before tax £74.2m; Statutory profit before tax £12.0m

• Net debt13reduced to £523.2m from £534.2m

• Pensions combined surplus £104.8m; Net present value of deficit contribution schedule £300-£320m

  Strategic update

• A balanced approach across revenue growth, cost efficiencies and cash generation

• UK to grow ahead of category levels through continued brand investment and innovation

• International business unit to continue delivering strong double-digit sales growth

• Exciting Cadbury and Nissin strategic partnerships significantly enhance growth ambitions

• Substantial cost savings programmes to deliver £20m benefits over next two years

• Extended revolving credit facility and launched offering of new £210m 5 year Senior Secured floating rate notes

• Significant focus on reducing Net debt/EBITDA7ratio to below 3.0x in the next 3-4 years

Gavin Darby, Chief Executive Officer

"This financial year has been a challenging one for the industry, with the return of food inflation and changing retailer promotional strategies. Despite this, we have grown market share in six of our eight largest brands, outperformed many of our peers in the latter part of the year and accelerated International sales growth to 18%. We have continued to invest in brand innovation and marketing, our customer relationships remain strong and we recently agreed a £32m reduction in cash payments to our pension schemes over the next three years."

"With the industry changing rapidly, we have updated our strategy to give an equal focus to revenue growth, cost efficiencies and cash generation. In the UK, growing ahead of our categories continues to be a core objective for us and our plans for International are for further strong growth. We are excited by our global strategic relationships with Cadbury and Nissin and our recently announced cost savings programme is expected to deliver £20m over the next two years. We are focused on reducing our leverage ratio through profit improvement and debt reduction."

"This year has started on a solid footing; we are very pleased to announce an extension of our bank facilities and the proposed issue of a new bond. We plan to deliver progress in FY17/18, while noting this progress is expected to be weighted more to the second half of the year."

Non-GAAP measures above are defined on page 13 and reconciled to statutory measures throughout Net debt/EBITDA is EBITDA on an adjusted basis as defined in the appendices

A presentation to investors and analysts will take place today, 16 May 2017, at 9:00am BST. The presentation will be webcast at www.premierfoods.co.uk/investors/investor-centre. A recording of the webcast will be available on the Company's website later in the day.

A conference call for bond investors and analysts will take place today, 16 May 2017, at 1:30pm BST. Dial in details are outlined below:

Telephone: 0800 376 7922 (UK toll free)

+44 20 7192 8000 (standard international access)

Conference ID: 19055320

A factsheet of the Preliminary results is available at: www.premierfoods.co.uk/investors/results-centre

A Premier Foods image gallery is available using the following link: www.premierfoods.co.uk/media/image-gallery/

Alastair Murray, Chief Financial Officer +44 (0) 1727 815 850

Richard Godden, Head of Investor Relations +44 (0) 1727 815 850

Richard Johnson, Corporate Affairs Director +44 (0) 1727 815 850

Marisa Fitch, Head of External Affairs +44 (0) 1727 815 850

Maitland +44 (0) 20 7379 5151

Kate O'Neill Tom Eckersley

- Ends -

THIS ANNOUNCEMENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE A PROSPECTUS OR ANY OFFER OF SECURITIES FOR SALE OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES IN THE UNITED STATES (AS DEFINED IN THE

U.S. SECURITIES ACT OF 1933, AS AMENDED (the "SECURITIES ACT")), OR IN ANY OTHER JURISDICTION.

Any securities referred to in this announcement have not been and will not be registered under the Securities Act, or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, taken up, delivered, distributed or transferred, directly or indirectly, into or within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. No public offering of any securities is being made in the United States.

This announcement may contain "forward-looking statements" that are based on estimates and assumptions and are subject to risks and uncertainties. Forward-looking statements are all statements other than statements of historical fact or statements in the present tense, and can be identified by words such as "targets", "aims", "aspires", "assumes", "believes", "estimates", "anticipates", "expects", "intends", "hopes", "may", "would", "should", "could", "will", "plans", "predicts" and "potential", as well as the negatives of these terms and other words of similar meaning. Any forward-looking statements in this announcement are made based upon Premier Foods' estimates, expectations and beliefs concerning future events affecting the Group and subject to a number of known and unknown risks and uncertainties. Such forward-looking statements are based on numerous assumptions regarding the Premier Foods Group's present and future business strategies and the environment in which it will operate, which may prove not to be accurate. Premier Foods cautions that these forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in these forward-looking statements. Undue reliance should, therefore, not be placed on such forward- looking statements. Any forward-looking statements contained in this announcement apply only as at the date of this announcement and are not intended to give any assurance as to future results. Premier Foods will update this announcement as required by applicable law, including the Prospectus Rules, the Listing Rules, the Disclosure and Transparency Rules, London Stock Exchange and any other applicable law or regulations, but otherwise expressly disclaims any obligation or undertaking to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Strategic update

Recent developments in the external environment have adversely affected the Group's performance. As a result, the Board has reviewed its strategy and decided to adjust the balance of priorities between existing strategic objectives. Previously this balance was weighted towards delivering category (and hence sales) growth. Going forward the Board will pursue a strategy which is more evenly balanced between the three objectives of delivering sales growth, achieving cost and efficiency savings and reducing net debt. The following summary outlines this balanced approach:

1. Protect and drive revenues

2. UK

3. Continuing to invest in innovation and marketing to drive growth ahead of category levels, using the Group's UK focused consumer insights, launching relevant and innovative products to market.

4. Continue to build on the Group's strong customer relationships through collaboration, category management expertise and UK based shopper insights.

5. International

   Deliver double-digit sales growth in the medium term, building on strong progress in key geographies such as Australasia and the USA and extending more widely to the Middle East, Canada and South Africa.

6. Strategic partnerships

   The Group has recently signed non-binding Heads of Terms to be a Strategic Global Partner with Mondelez International for Cadbury cake. Once finalised, this agreement will extend the Group's long standing partnership for another five years with the option to the Group of extending this for an additional three years. Additionally, the licence will cover a total of 46 countries with the potential to use the full list of brands in the Cadbury family including Flake, Caramel, Crunchie and Marvellous Creations in addition to the Oreo brand.

   Nissin Foods ("Nissin"), the Group's largest shareholder and one of the global leaders in the instant Noodles market provides the Group with access to significant knowledge and expertise in food technology. Nissin has a global presence in many markets which the Group expects to access in fulfilling its international ambitions.

7. Cost and efficiency

   The Group will increase its focus on cost and efficiency programmes, and expects to deliver aggregate cost efficiency savings of £20m over the next two years.

8. Logistics restructuring

   The Group is establishing a centralised warehousing and distribution operation, combining previously separate Grocery and Sweet Treats logistics operations. The benefits of this restructuring are expected to significantly reduce annual transport miles and pallet transfers.

9. SG&A restructuring

   The Group has reviewed its SG&A overhead cost base and decided to reduce its Executive leadership team from ten to seven and also reduce the number of roles at its head office by over 50. This aims to reduce duplication and complexity in some functional areas.

10. Manufacturing and procurement

    Continuous improvement programmes in manufacturing consist of both capital and non-capital cost reduction projects with objectives including improving manufacturing line efficiencies and reducing process loss.

11. Cash generation

12. Lower pension cash payments

    In March 2017, the Group announced it had agreed with the Trustees of the Group pension schemes a reduction of £32m in payments to the schemes over the next three years.

13. Maintain diversified sources of financing

    Extended maturity of the Group's revolving credit facilities and new issuance of 5 year Senior Secured Floating rate notes to 2022

14. Tightly focused capital expenditure

    The Group plans to maintain a tight focus on capital expenditure in the range of £20-£25m over the medium term. The capital projects it invests in are expected to be split in broadly equal parts between growth, cost reduction and infrastructure & maintenance.

15. Leverage target

16. Combining all three strategic pillars outlined above, the Group aims to lower its Net debt / EBITDA ratio to below 3.0x in the next 3-4 years.

    Financial results

    Sales

    Group underlying sales (£m)	Grocery	Sweet Treats	Group
    Branded	482.0	177.5	659.5
    Non-branded	81.1	49.8	130.9
    Total	563.1	227.3	790.4
    % change
    Branded	(4.5%)	(0.5%)	(3.5%)
    Non-branded	10.7%	11.6%	11.1%
    Total	(2.6%)	1.9%	(1.4%)
    Statutory revenue
    FY16/17	563.1	227.3	790.4
    FY15/16	548.6	223.1	771.7

    Note: FY15/16 statutory revenue excludes Knighton Foods revenue of £29.6m. Knighton is consolidated in the results for the Grocery business in FY16/17.

    Group underlying sales for the 52 weeks ended 1 April 2017 were £790.4m, a decrease of (1.4%) on the prior year. Branded sales were (3.5%) lower in the year while Non-branded underlying sales increased by 11.1% to £130.9m.

    On a statutory basis, revenue grew from £771.7m in the year to £790.4m, an increase of 2.4%, reflecting the inclusion of results from Knighton Foods in FY16/17.

    In the fourth quarter of the year, Group underlying sales declined by (1.0%) to £191.0m compared to the equivalent quarter a year ago. While Branded sales were (2.9%) lower, six of the Group's eight largest brands gained value market share in the quarter, with Batchelors a particularly strong performer.

    The Grocery business unit reported full year underlying sales of £563.1m, which were (2.6%) lower than a year ago. The year started strongly, with the first quarter of the year displaying both Branded and Non- branded sales growth, however a particularly warm end to the second quarter in the UK resulted in a sharp slowdown in some of the key Grocery categories such as gravy, stocks and soups, which resulted in lower sales.

    Additionally, the Grocery business has been impacted by changing retailer promotional strategies during the course of the year, and particularly in the second half. A variety of different promotional deals for products sold in major retailers have long been a feature of the grocery landscape in the UK. In FY16/17, the number of multi-buy promotional deals, by aggregate sales value, reduced by 24% across the Group's categories, according to Kantar Worldpanel. In categories which are considered to be expandable, this has resulted in lower sales volumes compared to the comparative period. The Group expects this effect to continue into the first half of FY17/18, and then stabilise thereafter. The Group is introducing multipack formats such as Ambrosia custard 4-packs to mitigate the adverse effect of this change in retailer promotional strategies.

    The Group's strategy of bringing new innovative products to market continued during the course of the year, with Oxo Stock Pots, Ambrosia Deluxe custard and Batchelors Super Noodles in a pot format all contributing to market share gains for their respective brands. In particular, Batchelors delivered volume growth in the year due to both the Super Noodles pot product launched in the fourth quarter and a refreshed range of Pasta 'n' Sauce products with new contemporary flavours such as Smoky Cheese and Pancetta.