6th Mar 2007 07:06
Premier Foods plc06 March 2007 Premier Foods plc Preliminary Results 2006 Premier delivers encouraging results for 2006, acquisitions transformingbusiness Year ended 31 DecemberContinuing 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 7.50pRecommended 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 businessacquired in August fits Premier like a glove. It has significantly enhanced ourbrand portfolio, adding the iconic British brands of Oxo, Batchelors andHomepride whilst offering us substantial operational synergies. The integrationhas been proceeding at pace and to plan. "In December, we announced our agreed offer for RHM, which has receivedresounding support from both Premier's and RHM's shareholders. This acquisitionis due to complete on 16 March, following which Premier will become the UK'snumber one food supplier. The acquisition meets all our acquisition criteriaand again brings a fantastic stable of brands into the portfolio including amongothers Hovis, Mr Kipling, Bisto and Sharwoods, along with very substantialsynergies. "Above all, these acquisitions have been achieved whilst we have continued togrow our existing business, which has more than compensated for the impact ofthe end of the Cadbury chocolate beverages licence, significant raw material andenergy price inflation and the extended warm weather through the summer andautumn." For further information: Premier Foods plc Citigate Dewe RogersonRobert Schofield, Chief Executive Michael BerkeleyPaul Thomas, Finance Director Justin GriffithsGwyn 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 ABNAMRO, 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 atwww.premierfoods.co.uk. The audio can be accessed directly through a computer orthrough 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-freeCampbell'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-freePro 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-freePro 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 £mContinuing operationsTrading 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 370.8 311.1Adjusted eps inc tax amortisation shield (p) 18.0 17.0 +5.9% *Core like-for-like Grocery turnover represents turnover excluding allacquisitions and disposals and any sales relating to Cadbury branded products.Core like-for-like Grocery turnover including pro forma Meat-free excludes theacquisition of Campbell's and disposals and any sales relating to Cadburybranded products but includes sales by our Meat-free division as if it had beenacquired on 1 January 2005. Core like-for-like Grocery trading profit includingpro forma Meat-free excludes the acquisition of Campbell's and disposals and theestimated effect of the end of the Cadbury licence as indicated at the time ofthe IPO, but includes trading profit by our Meat-free division as if it had beenacquired on 1 January 2005. * * Trading profit represents operating profit before exceptional items,amortisation of intangible assets and the movement in the IAS39 valuation offorward 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 interestcharges after tax per ordinary share. All comparative data has been adjusted forthe impact of the rights issue as appropriate. *****2005 comparatives for dividend per share have been adjusted for the impactof the rights issue. Operating review - continuing operations 2006 2005 £m £mSalesGrocery 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 offorward exchange contracts. In 2006, Premier has achieved another year of branded sales growth and improvedoperating margins. In addition, we have significantly enhanced our brandportfolio with the acquisition of Campbell's, which included thecategory-leading brands of Batchelors, Oxo and Fray Bentos. Our strategy is based upon growing our branded sales, whilst maintaining thebenefits derived from also supplying retailer branded products and drivingefficiency improvements and cost reductions to improve our operating profitmargins. Overall, Grocery sales for continuing operations grew by 23.6%, based onlike-for-like Grocery sales growth of 2.0% combined with a strong full year'scontribution from our Meat-free business and the addition of the Campbell'sbusiness in August of 2006. This was partially offset by the impact of the endof the Cadbury licence in May 2006 under which we had manufactured, marketed andsold Cadbury branded hot cocoa-based beverages. This licence was replaced by amanufacturing agreement under which we supply the products direct to Cadbury whonow market and sell the products. Despite the prolonged unseasonably warm weather during the second half of theyear, we maintained our normal marketing spend on our existing brands at £31.8m.This marketing spend helped to continue the excellent sales growth of ourdrive brands with Loyd Grossman growing 25%, Branston 16%, Quorn 13% (on alike-for-like basis), Hartley's 10% and Ambrosia 8%. Excluding Campbell's andthe impact of the end of the Cadbury licence, our branded sales grew by 5.5%. In2005, we spent a total of £34.0m on marketing these brands, but this included anadditional spend of £3.5m on the launch of Branston beans. Overall, trading profit for continuing operations grew by 23.5%. Exceptionalperformances by our Spreads, Desserts & Beverages and Meat-free businesseshelped trading profit for the Grocery business including Meat-free to increaseby 5.2% to £117.3m on a pro forma basis. Trading profit for our Core Grocerybusiness, ie. excluding Meat-free and Campbell's, declined by 2.0% to £98.3m dueto the impact of the end of the Cadbury licence and significant energy and rawmaterial cost inflation during the year, partly offset by the strong performanceof our Spreads, Desserts & Beverages business. The Campbell's business performed in line with our expectations at the time ofthe acquisition. The business has seen declining sales over 2005 and 2006,primarily as a result of a significant reduction in promotional and marketingexpenditure prior to its purchase by Premier. We have been developing ourdetailed marketing and innovation plans for the business, which we have startedimplementing 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 excludingresults from acquisitions and disposals made during 2005 and 2006 and the impactof the end of the Cadbury licence. The 2006 sales include an additional 6 weekscontribution from the Bird's business, which was acquired in February 2005. **Like-for-like trading profit represents results from continuing operationsexcluding 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 theacquisition of Campbell's and the contribution of a full year's sales from Quornand Cauldron. Like-for-like sales are in line with 2005 sales of £347.1m. Thesecond half has seen the continued strong growth of our Branston and LoydGrossman brands but this has been offset by the effect of the unseasonably warmsummer and autumn which impacted our smaller brands along with the costpressures resulting from higher utility and energy-related prices which continueto disproportionately affect our Convenience Foods business. Meat-free 2006 2005 £m £mSales 110.0 49.6 121.8%Trading profit 19.0 6.5 192.3% Pro forma 12 monthsSales 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 hasmaintained the strong growth rate seen through the first half of the year, andmarket share in both the chilled and frozen channels and household penetrationhave all continued to grow. The Group's knowledge of the vegetarian and meatalternative markets is now unique amongst its competitors and we believe thebusiness is well positioned to capitalise further on the growth in thesemarkets, which we expect to result from the continued consumer trend towardshealthier eating. During 2006 household penetration increased from 18.2% to 19.8%, so that nownearly one in every five households is eating Quorn. We have continued to investheavily in marketing, innovation and capacity expansion, and the development ofour new £11m Methwold chilled facility is progressing well with productioncommencing 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), dueto the increased sales and the achievement of our planned synergies. The 2005pro forma trading profit has been restated to reflect the re-classification of£4.0m of pre-acquisition charges which had previously been treated as adeduction to trading profit. Campbell's 2006 2005 £m £mSales 101.3 - -Trading profit 17.1 - - Pro forma 12 monthsSales 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 itsacquisition in August 2006. Sales for the period from acquisition to December2006 were £101.3m and the trading profit was £17.1m. These were both in linewith our expectations at the time of the acquisition. The integration of Campbell's into Premier is progressing well. The Sales andMarketing functions were integrated by the end of 2006 and the remainingadministrative functions are scheduled to be integrated by the end of March2007. In January, we announced the results of our manufacturing review and,following consultation with the affected employees, we have confirmed our plansto close our Kings Lynn and Ashford sites, consolidating production into ourWorksop, Long Sutton and Wisbech factories. Following completion of theacquisition, we commissioned an independent review of the cost synergiesestimates we had identified pre-acquisition which confirmed our targetedsynergies of £28m per annum were deliverable by the end of 2009. Spreads, Desserts & Beverages 2006 2005 £m £mSales 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 May2006 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 whetherunder the Cadbury licence or the subsequent manufacturing agreement, were inline with 2005. Trading profit increased by 5.6% to £70.3m. This increase was due to acombination of strong sales growth in the Ambrosia and Hartley's drive brands,with sales increasing by 6% and 7% respectively, and the realisation ofsynergies on the transfer of Bird's production into our Knighton factory, partlyoffset by the reduction in contribution from the manufacture of Cadbury brandedproducts. Fresh Produce 2006 2005 £m £mSales 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 inclusionof a full year of the FW Gedney business, but trading profit has fallen to aloss of £1.9m (2005: profit £0.5m). This result is disappointing considering theprogress the business had made in the first half of the year. However, the hotsummer weather had a significant impact on both the quality and quantity of thepotato harvest across Europe, which has caused a significant increase in themarket price for potatoes. On 5 March 2007 Premier reached a non-binding agreement to sell its FreshProduce business to the management of that business. Discontinued operations 2006 2005 £m £mSales - 77.2 -Trading profit - 8.6 - Discontinued operations represent our former Tea business and our formerNetherlands 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 ourexpectations. We are confident that we will continue to develop the business inline with our strategy, focusing on driving our branded sales growth whilstretaining tight control of our cost base. We anticipate completing the integration of all the sales, marketing andadministrative functions of Campbell's by the end of March 2007 and we will becommencing the consolidation of its manufacturing facilities into our ownnetwork shortly thereafter. We were delighted by the overwhelming support that both Premier and RHMshareholders gave to the proposed acquisition of RHM by Premier and weanticipate completing the acquisition on 16 March, which will follow theexpected sanction of the Court to the scheme of arrangement on 14 March. We arelooking forward to beginning the process of integrating these two greatbusinesses 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 July2006, the Group has acquired Campbell Grocery Products Limited and Campbell'sSoup Ireland Limited together with certain trade marks ("Campbell's").Campbell's results for the period post acquisition i.e. from 14 August 2006 to31 December 2006 are included in the consolidated results of the Group for theyear. Further information on the acquisition can be found in note 12. The Group purchased Campbell's for £460.0m and incurred acquisition relatedcosts of £8.9m, which are included in the total consideration of £468.9m. Theacquisition was primarily funded through a one for one rights issue which raisedgross proceeds of £458.6m. Associated costs of £17.0m were incurred on therights issue (these have been deducted from the share premium account) resultingin net proceeds of £441.6m. At the time of the acquisition, the Group also re-negotiated its borrowingfacilities, incurring £4.4m of debt issuance costs, which will be written offover the term of those facilities. The residual un-amortised debt issuancecosts of £4.0m on the pre-existing facilities have been written off andclassified as an interest charge during the year. Income Statement - continuing operations Sales The Group's continuing operations generated sales of £959.4m, an increase of21.5% over 2005 (£789.7m). The major element of this increase is the inclusionof a full year's trading for the Quorn, Cauldron and Gedney's businessesfollowing their purchase in 2005, together with the contribution fromCampbell's. Total Grocery sales increased by 23.6% to £844.8m, with core like-for-likegrocery sales, including pro forma Meat-free (ie excluding the sales generatedby Campbell's acquisitions made in 2005 and 2006 and sales of Cadbury hotchocolate beverages) up 3.1%. While this level of growth is just above the topend of our targeted range, it does incorporate an element of price movementoffsetting the exceptional levels of energy and raw material cost inflationduring the year. Fresh Produce turnover grew by 7.8% to £114.6m largely due to the acquisition ofthe Gedney's operation in 2005. Like-for-like sales in this business were down4.5% at £90.0m due to a combination of contracts lost in 2005 partly offset bythe 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 alike-for-like basis, gross margins declined marginally from 25.2% in 2005 to24.4%. While the Spreads, Desserts & Beverages business continued to progress,the Convenience Foods operation was hit by the effects of the extended period ofwarm weather in the second half of 2006 and the impact of utility and rawmaterial cost inflation. Selling, marketing and distribution costs Selling, marketing and distribution costs for the year were £80.8m, an increaseof 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'sbusinesses where we rationalised haulage and distribution operations and thenon-recurrence of the exceptional marketing spend in 2005 on the launch ofBranston Beans. Within this category and despite the impact of the unseasonablywarm 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 costsof £39.8m. This increase is mainly due to the inclusion of the administrativecosts associated with recent acquisitions, the increased charge for exceptionalcosts taken in the year, the majority of which falls into administrative costs,and increased amortisation costs. Like-for-like administrative costs fell ascentral 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, togetherwith 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 wasprimarily made up of a fair value movement of £3.8m on ongoing forward foreignexchange contracts. This movement is mainly due to weakening of the US dollaragainst sterling during the course of the year. Under IAS39, changes in the fairvalue of unsettled forward foreign exchange contracts that are not designated ashedges are recorded outside of cost of sales as other operating income orexpense. The corresponding movement in 2005 was a credit of £0.9m with thebalance of other operating income consisting of proceeds of £1.5m under ourbusiness interruption insurance in relation to the fire at our Bury St Edmundsfactory. Operating profit Operating profit increased by £2.3m, or 2.4%, to £97.6m and after stripping outexceptional costs of £20.1m (2005: £6.8m) operating profit before exceptionalitems 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 theGroup has defined exceptional items as those items of sufficient financialsignificance to be disclosed separately in order to assist in understanding thefinancial 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 ofnon-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 costsassociated with the closure of our Cauldron factory at Portishead and the set-upof our new Meat-free facility at Methwold, restructuring and redundancy chargesrelated to the integration of the Campbell's administration function and costsassociated with the aborted acquisition of United Biscuits. Further details areset out in note 3. Interest The net interest payable charge for the year of £39.5m (2005: £43.5m) was madeup of three elements: net cash interest payable, the amortisation of debtissuance costs and the fair value effect of interest rate swaps held at the endof the year. Net cash interest costs increased by 19.8% from £34.4m to £41.2mprimarily as a result of the increased level of funding arising from theacquisition 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'sacquisition, which resulted in the write-off of £4.0m of unamortised debtissuance costs relating to the pre-existing debt facilities. A comparablecharge of £6.3m was recorded in 2005 on the re-negotiation of our debtfacilities to fund the acquisition of Quorn. The fair value effect of interest rate swaps held at the end of the year was acredit of £7.1m (2005: cost £1.1m). This movement is largely the result of theincrease 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 ofprior year provisions following the resolution of various outstanding issueswith HMRC. The underlying cash tax rate for 2006 was 12.7% primarily reflecting theaggregate effect of tax allowances on the amortisation of goodwill andintangible assets in excess of the amortisation charge recorded in the incomestatement, capital allowances in excess of the depreciation charge recorded inthe income statement and tax relief given on payments to retirement benefitschemes in excess of the amount charged in the income statement. It is anticipated that the effect of the factors referred to above will be tomaintain 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 closeto the statutory rate of 30%. Earnings per share Basic earnings per share of 12.7p (2005: 11.9p) on continuing operations hasbeen calculated by dividing earnings attributed to ordinary shareholders of£47.1m (2005: £36.9m) by the weighted average number of ordinary shares in issueduring the year. Adjusted earnings per share of 18.0p (2005: 17.0p) on continuing operations hasbeen calculated by dividing earnings before exceptional items and amortisationof intangible assets attributed to ordinary shareholders of £66.7m (2005:£52.9m) by the weighted average number of ordinary shares in issue during theyear. These earnings have been calculated by reflecting tax at 30% and adjustingfor the tax allowance on intangible asset amortisation available on certainbusiness acquisitions. Dividends In line with our stated dividend policy, on 6 August 2006 the Board recommendeda first interim dividend of 5.00p per ordinary share, which was paid on 4January 2007. This was equivalent to 3.95p per ordinary share after adjustingfor the bonus element of the rights issue. As part of the agreed offer for RHM plc, the Board recommended a second interimdividend of 5.50p per ordinary share, which was paid on 23 February 2007, toalign the cumulative dividend to our shareholders for the year with thoseannounced by RHM plc as payable to its shareholders. A final dividend of 2.55p per ordinary share was proposed by the Board on 5March 2007, payable on 6 July 2007 to shareholders on the register at 8 June2007. This will result in a total dividend payable for 2006 of 12.00p perordinary share (2005: 11.25p), an increase of 6.7%, after adjusting for thebonus element of the rights issue. Pension Schemes Consistent with all public companies, the Group reviews the actuarialassumptions used in calculating its pension obligations on a regular basis. Itis our objective to ensure that the balance between the cash flow risk to thebusiness and our responsibilities to our current and former employees is fullyand regularly understood and that the impact of changes to the composition ofthe business on our pension obligation is known in advance. In this context, the Group monitors on a regular and ongoing basis the specificdemographic characteristics of the membership of each of its schemes, along withthe assumptions relating to discount rates, returns on equity, inflation and therate of future salary increases. As a result, we have revised the assumptionsused in determining the IAS 19 liabilities at 31 December 2006 to reflectchanges in the economic environment and circumstances of each scheme. Theseassumptions are shown in detail in note 6. As a consequence, at 31 December 2006 and on an IAS 19 basis, the Group'spension schemes showed an aggregate deficit of £84.7m (2005: £84.4m). Thiscomprised £55.2m in relation to the existing schemes and £29.5m in relation tothe schemes associated with Campbell's. The reduction in the deficit on theGroup's existing schemes, which fell from £84.4m to £55.2m, was largely as aresult of improved investment performance of the schemes' assets during theyear. On a net basis, after adjusting for the effect of deferred tax, theaggregate 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. Ofthis 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 exceptionalcosts arising during the year coupled with an outflow on working capital. Thelatter factor was due to the funding of peak working capital levels in the newlyacquired Campbell's business over the year-end and the timing of receipts frommajor customers and payments to suppliers over the Christmas period. The cash flow statement for the Group also includes the cost of acquiringCampbell's for a total consideration of £468.9m including fees and the netproceeds of £441.6m from the rights issue used to fund the majority of theconsideration. The main remaining elements that make up the cash outflow referred to above werenet capital expenditure of £52.5m, including the spend on the Group's SAP systemimplementation and dividends paid of £23.5m. Capital expenditure The Group's capital expenditure programme is geared towards meeting its plannedcommercial growth, cost efficiency and infrastructure requirements. In generalthe Group seeks to allocate approximately 3.0-3.5% of its sales to such projectseach year, but will also allocate capital over and above this level to majorbusiness 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 balancemade up of its investment in the Meat-free chilled factory in Methwold as wellas its normal capital investment programmes. Consolidated income statement Year ended 31 December Note 2006 2005 £m £m Continuing operationsTurnover 2 959.4 789.7Cost 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 117.7 102.1Exceptional 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)* 7Basic 12.7 26.9Diluted 12.7 26.7Earnings per share (pence) - continuing* 7Basic 12.7 11.9Diluted 12.7 11.8Earnings per share (pence) - discontinued* 7Basic - 15.0Diluted - 14.9Dividends 8Recommended final dividend (£m) 12.6 23.5Declared interim dividend (£m) 39.7 11.8Recommended final dividend (pence) 2.55 9.50Declared interim dividends (pence) 10.50 4.75* Earnings per share in 2005 have been restated to reflect the effect of the rightsissue in the current year. Consolidated balance sheet As at 31 December Note 2006 2005* (Restated) £m £mASSETS: 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 ofacquired business which were previously determined on a provisional basis. Signed on behalf of the Board of Directors, who approved the financialstatements on 5 March 2007. Robert Schofield Paul ThomasDirector and Chief Executive Finance Director Consolidated statement of recognised income and expense Year ended 31 December 2006 2005 £m £mActuarial gain/(loss) 16.1 (25.9)Deferred tax (charge)/credit on actuarial gain/(loss) (5.1) 7.7Tax on share options 1.5 0.7Net gain/(loss) not recognised in income statement 12.5 (17.5)Profit for the year 47.1 83.6Total recognised income in the year 59.6 66.1Effect 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 6.3Taxation 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 - 81.6Purchase of property, plant and equipment (44.7) (49.8)Receipt from insurers - 12.0Purchase of intangible assets (12.3) (1.1)Sale of property, plant and equipment 4.5 2.7Cash outflow from investing activities (432.8) (177.0) Repayment of borrowings (29.1) (380.0)Drawdown from borrowings 86.0 585.9Proceeds from share issue 458.6 -Share issue (costs)/refund (17.0) 0.6Debt 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) 10.6Cash and cash equivalents at beginning of year 13.2 2.6Cash 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'sstatutory accounts for the years ended 31 December 2006 or 2005. The preliminaryresults for the year ended 31 December 2006 have been extracted from auditedconsolidated financial statements which have not yet been delivered to theRegistrar of Companies. The auditors have reported on the Group's statutoryaccounts for the year ended 31 December 2006. The report was unqualified and didnot 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 fromthe statutory accounts for that year except for restatements relating to therights issue in 2006 and the finalising of provisional fair values onacquisitions in 2005. The accounting policies and presentation adopted in this announcement are thesame as those used in the Group's annual report and accounts for the yearended 31 December 2005. The consolidated financial statements of Premier Foods plc have been prepared inaccordance with International Financial Reporting Standards ("IFRS's") asadopted by the European Union, and on the historical cost basis with theexception of derivative financial instruments, pensions and share basedpayments, which are incorporated using fair value. 2. Segmental analysis The results below for the year ended 31 December 2006 are divided into the twocontinuing segments described as Grocery and Fresh Produce. Results for the Teabusiness and Jonker Fris disposed of in 2005 are presented as discontinuedoperations in the comparative results for the year ended 31 December 2005. Each of these segments primarily supplies the United Kingdom market, althoughthe Group also supplies certain products to mainland Europe and the UnitedStates. Inter-segment transfers or transactions are entered into under the sameterms and conditions that would be available to unrelated third parties. Thesesegments are the basis on which the Group reports its primary segmentinformation. The segment results for the years ended 31 December 2006 and 2005are 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 ResultOperating profit/(loss) before exceptional 120.2 (2.5) - 117.7itemsExceptional 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 16.8Profit/(loss) before taxation for continuing 100.8 (3.2) (39.5) 58.1operationsTaxation - - (11.0) (11.0)Profit/(loss) after taxation for continuing 100.8 (3.2) (50.5) 47.1operationsDiscontinued operations - - - -Profit/(loss) for the year 100.8 (3.2) (50.5) 47.1 Balance sheetSegment assets 1,363.7 47.0 - 1,410.7Unallocated assets - - 16.5 16.5Consolidated 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 £mCapital expenditure 81.8 2.4 - 84.2Intangible asset expenditure 453.6 - - 453.6Depreciation 18.3 1.6 - 19.9Amortisation 10.9 0.1 - 11.0Impairment 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 ResultOperating profit before exceptional items 101.6 0.5 - 102.1Exceptional 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 8.0Profit/(loss) before taxation for continuing 98.5 (3.2) (43.5) 51.8operationsTaxation - - (14.9) (14.9)Profit/(loss) after taxation for continuing 98.5 (3.2) (58.4) 36.9operationsDiscontinued operations 46.7 - - 46.7Profit/(loss) for the year 145.2 (3.2) (58.4) 83.6 Balance sheetSegment assets 804.1 42.7 - 846.8Unallocated assets - - 15.7 15.7Consolidated 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 £mCapital expenditure 85.8 4.8 5.1 95.7Intangible asset expenditure 254.8 0.2 - 255.0Depreciation 13.0 2.9 2.2 18.1Amortisation 6.3 - 0.3 6.6Impairment of PPE and Intangibles - - - - Unallocated assets and liabilities comprise cash and cash equivalents, netborrowings, taxation balances and derivative financial assets and liabilities. Discontinued Operations Discontinued operations had the following effect on the segment results ofGrocery, analysed into continuing and discontinued components. Discontinued Continuing Grocery £m £m £mTurnover2006 - 844.8 844.82005 77.2 683.4 760.6Operating profit2006 - 100.8 100.82005 8.3 98.5 106.8 Segmental analysis - secondary The following table provides an analysis of the Group's turnover, which isallocated on the basis of geographical market destination as well as an analysisof segmental assets and additions to property, plant and equipment andintangible 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 onthe acquisition of Cauldron and Marlow. 3. Exceptional items During the year, the Group incurred the following: 2006 2005 £m £mExceptional items - continuing operationsIntegration 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 5.2Restructuring and other costs (e) 2.6 3.0Property 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 andCampbell's Ireland Grocery Products Limited. The administrative functions atCambourne and Kings Lynn are to be integrated into the existing Groceryoperations 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 FoodsLimited (together "Meat-free"). During the year the Group announced the closureof the Cauldron factory at Portishead and the purchase and development of a newchilled facility at Methwold, enabling the integration of chilled production forQuorn and Cauldron products. As a result, significant one-off restructuringcosts 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 wereterminated by the vendor. (d) Bird's transitional manufacturing and integration costs Following the acquisition of the Bird's business from Kraft Foods Inc. theproduct range continued to be produced by Kraft's at their factory in Banburyunder a series of transitional arrangements. These arrangements were extended tothe beginning of the current year to ensure the continuity of supply and we havepresented the additional cost of sourcing production from Kraft as exceptionalcosts. (e) Restructuring and other costs Restructuring and other costs of £2.6m include redundancy costs relating tobusiness re-organisations and site closures, costs associated with therestructuring of our warehousing network, costs relating to the government's new"clean labelling" regime, and raw material write-offs resulting from theircontamination in a third party warehouse. The latter costs are currently thesubject of a legal claim against that third party. The prior year costs relate to the Sudan 1 recall costs and restructuring of theproduction 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 NorthWalsham factory which had previously been used for seasonal stock holding, andalso an additional receipt relating to the sale of Langley Mill resulting fromprovisions in the disposal contract whereby the Group was entitled to a share ofany 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 WestMidlands. 4. Net interest payable On 14 August 2006, the Group entered into an Amended and Restated Facilitiesagreement, 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 creditfacilities of £560.0m. £646.0m was drawn down across the three facilities as at31 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 overthe period of the loans. In addition £4.0m of debt issuance costs capitalisedpreviously on past financing have been written off in the year. During the year the Group entered into a bridging loan for £450.0m (settled inSeptember 2006 following receipt of the rights issue proceeds) in order toexpedite the purchase of Campbell's resulting in additional interest costs of£1.6m. 2006 2005 £m £mInterest payableInterest payable on bank loans, senior notes and overdrafts 10.9 8.6Interest payable on bridging loan facility 1.6 -Interest payable on term facility 19.4 20.4Interest payable on revolving facility 19.0 13.4Amortisation of debt issuance costs 1.4 1.7Fair valuation of interest rate swaps - 1.1 52.3 45.2Accelerated amortisation of debt issuance costs 4.0 6.3Total interest payable and other financial charges 56.3 51.5Fair 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 - 0.1Overseas 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 17.4for the year The prior year adjustment credit of £8.4m to current tax relates to the releaseof prior year provisions. Tax relating to items recorded in equity for continuing 2006 2005operations was: £m £m Current tax credit on pension charges reflected in - (1.6)reservesCurrent tax credit on share (1.5) (0.7)optionsDeferred 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 inthe United Kingdom (30%) for the years ended 31 December 2006 and 2005. Thereasons for this are explained below: 2006 2005 £m £m Profit before taxation for continuing 58.1 51.8operations Tax at the domestic income tax rate of 30% (2005: 17.4 15.530%)Tax effect of:Non deductable/(taxable exceptional 0.5 (0.7)items)Other (non taxable)/ (0.2) 0.3disallowable itemsAdjustment to prior (6.7) (0.2)yearsTax 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 Groupalso operates a smaller funded defined benefit scheme, the Premier AmbientProducts Pension Scheme (the "PAPPS") for employees in the Ambrosia business.Under the schemes, employees are entitled to retirement benefits which vary as apercentage of final salary on retirement. No unfunded post-retirement benefitsexist. In addition, on 14 August 2006 the Group inherited two further funded definedbenefit pension schemes as a result of the acquisition of Campbell's, thePremier Grocery Products Pension Scheme ("PGPPS") for the UK business, and thePremier Grocery Products Ireland Pension Scheme ("PGPIPS") for the Irishbusiness. 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 August2006, 1.4832 for the average rate during the year, and 1.493 for the closingposition at 31 December 2006. The assets of all four schemes are held by the trustees of the respectiveschemes and are independent of the Group's finances. The schemes invest throughinvestment managers appointed by the trustees in UK and European equities and ininvestment products comprising a broader range of assets. For the purposes of these financial statements, pension costs presented arecalculated by independent, qualified actuaries using the projected unit creditmethod. The information for PFPS and PAPPS and the results for PGPPS and PGPIPSare combined below. At the balance sheet date, the principal actuarial assumptions used were asfollows: PFPS & PGPPS PGPIPS PAPPS % % % 2006 2006 2006Discount rate 5.20 5.20 5.20Inflation 3.00 3.00 3.00Expected salary increases 4.00 4.00 4.00Future pension increases 3.00 3.00 3.00Average expected remaining life of a 65 year oldmale (years) - Future service 18 17 19 - Past service 15 17 19 2005 14 August 2006 14 August 2006Discount rate 5.00 5.50 5.50Inflation 2.75 2.75 2.75Expected salary increases 3.75 3.75 3.75Future pension increases 2.75 2.75 2.75Average expected remaining life of a 65 year oldmale (years) - Future service 18 17 19 - Past service 15 17 19 The mortality assumption used is slightly below the national average because itreflects the socio-economic profile of the membership and the schemes' actualand 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 % £mPFPS & PAPPSUBS Global Asset Management 7.80 177.2 8.00 160.8Insight 7.00 65.3 6.75 66.0Merrill Lynch 8.00 112.3 7.75 103.8Cash and other 5.00 1.7 4.50 3.9Total 7.70 356.5 7.63 334.5PGPPS & PGPIPSEquities 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 targetedreturn investments was: 2006 2005 Cash Equities Total Cash Equities Total £m £m £m £m £m £mUBS Global Asset Management 12.6 164.6 177.2 - 160.8 160.8Insight targeted return 65.3 - 65.3 66.0 - 66.0Merrill 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-terminvestment strategy set out in the Schemes' Statement of Investment Principlesat the start of the year. In 2006, the expected return was calculated using theequity return and targeted investment return assumptions of 8.0%, 6.75% and7.75% respectively. The actual rate of return on plan assets was 9.8% (2005: 13.4%) for PFPS andPAPPS, and 7.0% for PGPPS and PGPIPS. The plan assets do not include any of theGroup's own financial instruments, nor any property occupied by, or other assetsused by, the Group. The amounts recognised in the balance sheet arising from the Group's obligationsin respect of its defined benefit schemes is as follows: PFPS & PAPPS PGPPS & PGPIPS Total £m £m £m2006Present value of funded obligations (411.7) (138.7) (550.4)Fair value of plan assets 356.5 109.2 465.7Deficit in scheme (55.2) (29.5) (84.7)2005Present value of funded obligations (418.9) - (418.9)Fair value of plan assets 334.5 - 334.5Deficit in scheme (84.4) - (84.4)2004Present value of funded obligations (368.3) - (368.3)Fair value of plan assets 303.2 - 303.2Deficit 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 £m2005Opening 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 - 1.2Contributions by plan participants 2.1) - (2.1)Benefits paid 18.3 - 18.3Closing defined benefit obligation (418.9) - (418.9)2006Opening 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) 4.4Curtailments - 0.9 0.9Contributions by plan participants (2.2) (0.5) (2.7)Benefits paid 19.7 1.5 21.2Closing 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 £m2005Opening fair value of plan assets 303.2 - 303.2Expected return 23.4 - 23.4Administrative and life insurance costs (1.2) - (1.2)Actuarial gains 17.8 - 17.8Contributions by employer 7.5 - 7.5Contributions by plan participants 2.1 - 2.1Benefits paid (18.3) - (18.3)Closing fair value of plan assets 334.5 - 334.52006Opening fair value of plan assets 334.5 - 334.5Acquisition of subsidiary undertaking - 99.2 99.2Expected return 25.2 2.8 28.0Administrative and life insurance costs (1.4) - (1.4)Actuarial gains 7.6 4.1 11.7Contributions by employer 8.1 4.1 12.2Contributions by plan participants 2.2 0.5 2.7Benefits 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 £m2006Actuarial adjustments on plan liabilities 16.5 (12.1) 4.4Actuarial adjustments on plan assets 7.6 4.1 11.7Net actuarial gain/(loss) for period 24.1 (8.0) 16.1Cumulative actuarial loss (57.8) (8.0) (65.8)2005Actuarial adjustments on plan liabilities (43.7) - (43.7)Actuarial adjustments on plan assets 17.8 - 17.8Net actuarial loss for period (25.9) - (25.9)Cumulative actuarial loss (81.9) - (81.9)2004Actuarial adjustments on plan liabilities (65.8) - (65.8)Actuarial adjustments on plan assets 9.8 - 9.8Net 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 determinedprospectively from the 2004 reporting period. The actual return on plan assets was £39.7m (2005: £41.2m), which is £11.7m morethan the expected return on plan assets of £28.0m at the start of the relevantperiods. The actuarial gain on liabilities of £4.4m (2005: £43.7m loss) comprises a gainon member experience of £14.2m and a worsening of the expected liabilities dueto changes in assumptions of £9.8m. The net actuarial gains taken to the statement of recognised income and expensewere £16.1m (2005: £25.9m loss). These were £11.0m (2005: £18.2m loss) net oftaxation (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 benefitplans in 2007, £6.3m of regular contributions, £6.9m of additional contributionsto fund the scheme deficits, and a further one-off contribution of £7.1m to thePGPPS & 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 £m2006Current 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 28.0Gains on curtailment - 0.9 0.9Total expense (3.0) (0.1) (3.1)2005Current 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 - 23.4Gains on curtailment 1.2 - 1.2Total 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 schemesproviding life assurance benefits only are operated. The total expenserecognised in the income statement of £1.1m (2005: £0.9m) representscontributions payable to the plans by the Group at rates specified in the rulesof 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 attributableto ordinary shareholders of £47.1m (2005: £83.6m) by the weighted average numberof 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 operationsProfit after tax (£m) 47.1 - 47.1 36.9 - 36.9Weighted average number of 370.8 0.6 371.4 311.1 2.6 313.7shares (million)Earnings per share (pence) 12.7 - 12.7 11.9 (0.1) 11.8 Discontinued operationsProfit after tax (£m) - - - 46.7 - 46.7Weighted average number of - - - 311.1 2.6 313.7shares (million)Earnings per share (pence) - - - 15.0 (0.1) 14.9 TotalProfit after tax (£m) 47.1 - 47.1 83.6 - 83.6Weighted average number of 370.8 0.6 371.4 311.1 2.6 313.7shares (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 rightsissue in the year. Diluted earnings per share Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. The only dilutive potential ordinary shares of theCompany are savings related share options. A calculation is performed todetermine 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 theoutstanding share options. There was an issue of 247,848,157 ordinary shares on 14 August as part of arights issue (fully paid on 8 September 2006). These have been included indetermining the weighted average for the current year. The number of shares used to calculate ordinary earnings per share is comparedbelow with the number of shares that would have been issued assuming theexercise of the share options. No adjustment is made to earnings in calculating diluted earnings per share. 2006 2005 Number Number Weighted average number of ordinaryshares for the purpose of basicearnings per share 370,819,997 311,128,713 Effect of dilutive potential ordinaryshares:- Share options 597,921 2,584,281 Weighted average number of ordinaryshares for the purpose of dilutedearnings per share 371,417,918 313,712,994 8. Dividends 2006 2005 pence penceActual dividendsInterim dividend 5.00 4.75Bonus interim dividend 5.50 -Final dividend 2.55 9.50Total 13.05 14.25Equivalent dividendsInterim dividend 3.95 3.75Bonus interim dividend 5.50 -Final dividend 2.55 7.50Total 12.00 11.25 The Board proposes a final dividend of 2.55 pence per ordinary share (2005: 9.5pence) payable on 6 July 2007 to shareholders on the Register of Members at 8June 2007. The equivalent dividends represent the amounts appropriated to the shareholdersfor each share, restated to reflect the bonus element of the rights issue in theyear. This equates to an uplift in the number of shares of 26.7% and hence acorresponding reduction in the dividend per share. 9. Borrowings 2006 2005 £m £mDue 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) - 25.0Debt issuance costs - (0.6) - 24.4 Secured Senior Credit Facility - Revolving (note b) - 11.0Debt issuance costs - (0.6) - 10.4 Bank overdrafts 5.3 0.8 Total bank borrowings due within one year 131.0 35.6Finance lease obligations (note 21) 0.5 0.3Total borrowings due within one year 131.5 35.9Due 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) - 300.0Debt issuance costs - (1.4) - 298.6 Secured Senior Credit Facility - Revolving (note b) - 249.0Debt issuance costs - (2.2) - 246.8 Finance lease obligations (note 21) 1.1 0.6Other unsecured loans 0.1 0.1Total other 1.2 0.7Total 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 termand revolving credit facility. This was arranged by BNP Paribas, J.P. Morganplc, Lloyds TSB Bank plc and The Royal Bank of Scotland plc as lead arrangersand underwriters and Lloyds TSB Bank plc as facility agent and security trustee. The Senior Term Credit Facility comprises £325.0m Term A facilities and £200.0mTerm B facilities. The Revolving Credit Facility is a multi-currency revolvingcredit facility of up to £560.0m (or its equivalent in other currencies). Thefinal maturity date of the above arrangements is 6 June 2010. In addition the Group entered into a £450.0m bridging loan facility with ABNAMRO Bank N.V. and Merrill Lynch International on 12 July 2006 which was settledon 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 Facilitywere replaced by a combination of the Term A facility, Term B facility and theRevolving facility noted above. (c) Loan notes - 2008 As part of the acquisition arrangement of Marlow Foods Holdings Limited on 6June 2005, the Group entered into deferred consideration arrangements withcertain individuals. This resulted in loan notes being issued to the Group. Theloan notes were fully repaid during the year. 10. Reserves Share premium Merger reserve Other reserves Profit and loss reserve Total £m £m £m £m £mAt 1 January 2005 320.9 (136.8) (1.8) (238.4) (56.1)Profit for the year - - - 83.6 83.6Dividends paid - - - (33.8) (33.8)Actuarial gains and losses (net of taxation) (18.2) (18.2)(a)Settlement of derivatives (b) - - 1.6 - 1.6Share based payments (c) - - - 1.1 1.1Issue costs refund 0.6 - - - 0.6Tax on share options (d) - - - 0.7 0.7At 31 December 2005 321.5 (136.8) (0.2) (205.0) (20.5)Rights issue (e) 456.1 - - - 456.1Rights issue costs (e) (17.0) - - - (17.0)Profit for the year - - - 47.1 47.1Dividends paid - - - (23.5) (23.5)Actuarial gains and losses (net of taxation) 11.0 11.0(a)Settlement of derivatives (b) - - 0.2 - 0.2Share based payments (c) - - - 1.6 1.6Tax on share options (d) - - - 1.5 1.5Exchange differences on - - - (0.5) (0.5)translationAt 31 December 2006 760.6 (136.8) - (167.8) 456.0 (a) Actuarial gains and losses relating to the Group's retirement benefitschemes are recognised directly within the profit and loss reserve. (b) On 1 January 2005, the Group adopted the provisions of IAS 32 and IAS39, Financial Instruments. The primary effect of this change in accountingpolicy relates to the accounting, presentation and disclosure of the Group'sinterests in forward exchange contracts and interest rate swaps and the effectof these changes was to increase the Group's net liabilities at 31 December 2004by £1.8m and create a Cash Flow Hedge (CFH) reserve. An amount of £1.6m of theCFH 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 inaccordance with IFRS 2: "Share based payment". (d) Amounts are in respect to deferred tax on the intrinsic value ofoutstanding options in (c). (e) On 14 August 2006, Premier Foods plc issued247,848,157 new 1 pence ordinary shares for a premium of 184 pence, in a one forone Rights Issue of existing ordinary shares. Rights issue costs of £17.0m wereincurred 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 £mContinuing operationsOperating 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 1.1Net cash inflow from operating activities before 135.7 112.8interest and tax and movements in working capitalIncrease in inventories (2.1) (0.7)Increase in receivables (3.9) (12.4)(Decrease)/Increase in other payables and (28.7) 16.9provisionsMovement in net retirement benefit (9.1) (5.4)obligationsCash generated from continuing operations 91.9 111.2Discontinued operations - 6.5Cash generated from operating activities 91.9 117.7 Exceptional items cash flow (9.2) (8.9)Cash generated from operations before 101.1 126.6exceptional items Additional analysis of cash flows 2006 2005 £m £m Interest received 9.7 6.3Interest 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 £mNet (outflow)/inflow of cash and cash equivalents (10.7) 10.6Debt 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) - 7.8depositsCash and cash equivalents net of overdrafts 13.2 (10.7) - 2.5Borrowings - 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) 3.8Total 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 netbusinesses activities acquisition acquired instruments acquisition consideration*acquired acquired % £m £m Campbell's Manufacture and 14 August Yes 100 379.7 444.9Grocery distribution ofProducts soups, meat andLimited other food products Campbell's Manufacture and 14 August Yes 100 0.6 31.0Grocery distribution ofProducts soups, meat andIreland Limited other food productsTotal 380.3 475.9 \* Total net consideration includes net debt, cash, and a working capitaladjustment 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 £mCampbell's Grocery ProductsLimited 91.8 6.4 221.9 36.3Campbell's Grocery ProductsIreland Limited 9.5 1.1 21.4 1.4Total 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 managementinformation. 13. Discontinued operations The Group has not incurred any income or expenditure in relation to discontinuedoperations during the year. The following information provides information onthe results arising from discontinued operations in the prior year. On 30 October 2005, the Group entered into a sale agreement to dispose of itsTea businesses for £80.2m. Also, on 7 December 2005, the Group entered into asale agreement to dispose of Jonker Fris business for £4.4m. These disposalswere effected in order to generate cash flows for the expansion of the Group'sother businesses. The results of the discontinued operations for the period from1 January 2005 to the dates of disposal are as follows: 2006 2005 £m £m Turnover - 77.2Expenses - (68.9)Profit before tax - 8.3Taxation charge - (2.5)Profit after tax on discontinued operations for the period - 5.8 Profit on disposal before tax - 40.9Tax 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 theGroup's net operating cash flows, paid £nil (2005: £5.1m) in respect ofinvesting activities and paid £nil (2005: £nil) in respect of financingactivities. A cash inflow of £nil (2005: £81.6m) arose on the disposal of discontinuedbusinesses. 14. Post balance sheet events Acquisition of RHM Plc ("RHM") On 4 December 2006 Premier announced an offer to acquire the entire sharecapital of RHM by way of scheme of arrangement. The consideration under theoffer is one new ordinary Premier share and 83.2p in cash for each RHM shareheld. At an Extraordinary Meeting held on 15 February, the shareholders of Premierapproved the acquisition of RHM. Also on that date, the shareholders of RHMapproved the proposal to proceed with the scheme of arrangement. The courthearing to sanction the scheme of arrangement is anticipated to take place on 14March 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 ofpreserves to Ireland's retail grocery and foodservice markets for £21.0m on 19January 2007. The allocation of the fair value of the assets acquired and liabilities assumedto the cost of the business combination has not been performed because it isimpractical 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 ofits factories in Kings Lynn and Ashford. The proposal is for the Kings Lynnfactory 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 FreshProduce business to the management of that business. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Premier Foods