Premier Foods PLC

LSE:PFD

Earnings Call Transcript 2021-Q3

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Premier Foods quarter 3 trading update conference call. [Operator Instructions] I must advise you that this conference is being recorded today on the 19th of January 2021.I would now like to hand the conference over to your first speaker today, Alex Whitehouse. Please go ahead, sir.

[Alexander Whitehouse, CEO & Director]

Thank you very much, and good morning, everyone. Thank you for joining us on our quarter 3 trading update call, which covers the 13 weeks to the 26th of December 2020.I'm joined this morning on the call by Duncan Leggett, our Chief Finance Officer. So I'll give a brief overview now of our third quarter trading before handing over to Duncan, who will take you through a few of the more financial topics before we open the call to your questions.So firstly, here are some of the headlines from our statement this morning. We've had another exceptional quarter of growth, in particular, for our brands. And the key factor has obviously been the external environment. So obviously, with more meals being eaten at home given the restrictions on out-of-home meeting. But at the same time, we continue to strongly support our brands and to drive our branded growth model. And it's that focus on the branded growth model that's therefore delivered further market share gains and gaining both value and volume share in the quarter.Online growth was again exceptional, up 90% in the quarter. And internationally, we also again performed very strongly, and we've also had good progress there actually with executing our new strategy for our overseas markets. So overall, we now expect trading profit for the year to be in the range of GBP 145 million to GBP 150 million. And as a reminder, that compares to last year's trading profit of GBP 132.6 million and I think reflects the strong growth and progress we've made this year.And then following further cash generation in the quarter, we will also now be making another GBP 40 million part payment of the floating rate note. And then we also expect our net debt to EBITDA to fall below 2x by the time we get to our year-end. If we look at some of the key figures that make up this morning's statement, our Q3 group sales increased by 9% compared to last year. So this continues to be a quite exceptional year, and this quarter is ahead of what we reported in Q2, which you might recall was plus 8.1%. And on a year-to-date basis, that means group sales are up 12.5%.Our branded portfolio, and in particular, Grocery, is really driving the growth. So in the quarter, our branded sales increased by 12.1% compared to the same period a year ago. And this translates to a growth of 16% on a year-to-date basis. Grocery branded was actually up 14.6% in the quarter, and so therefore, is over 20% up year-to-date.Now look, clearly, like everyone, we have -- Premier Foods have continued to feel the effects of the pandemic across our business. And throughout 2020, our supply chain colleagues have performed what I think is a truly magnificent job, keeping each other safe, keeping our sites running and ensuring that we continue to supply our customers with this elevated level of demand and, ultimately, to keep the shelves stocked for people. And of course, they've now been doing this over a prolonged period of time. So a really remarkable effort, and I think shows an incredible amount of robustness in our supply organization.As we said before, we put in place a strict regime of additional safety measures back in February last year to ensure the safety of our colleagues. And all those protocols remain firmly in place. And they are working well for us, and we will keep adhering to them for as long as this is necessary.Alongside the outstanding performance from our supply chain, as I've said, we've continued to drive our branded growth model strategy and leveraging our great market-leading brands, so specifically bringing exciting new products to market-based on our understanding of consumer needs and current trends, supporting our major brands with engaging and meaningful advertising and delivering excellent in-store execution, which, of course, is always important, but it's particularly so in quarter 3, which is our key and largest sales quarter.We've demonstrated our strong commitment to investing behind our brands again this year. And in the third quarter, we actually have 5 of our major brands benefiting from TV advertising. So that was Bisto and Oxo, and Batchelors, Mr Kipling and also now some new advertising for Ambrosia. Ambrosia is our fourth largest brand, and we've not supported that with advertising for a number of years. So back on air in Q3 and will run through Q4, and it brings Ambrosia back to its Devon roots with a well-known line of Devon Knows, how they make it so creamy, which we know is well-known and recognized by our consumers.During the quarter, we also brought a number of new products to market, all based on key consumer trends. And in particular, as you'll already know, we focus on providing healthier options for our consumers. And a good example during the quarter was we launched Sharwood's 30% less-sugar, stir-fried sauces. And this gives consumers the ability to make a healthy stir-fry with less sugar than the other sauces that you will generally find commonly available in the market.And as I've already mentioned, some excellent in-store execution in retailers. So important in this key quarter 3. And I think we did a really good job on that again this year despite some additional challenges. And all this together means that we have again outperformed both the Grocery and the Sweet Treats markets in the U.K., both in volume terms and in value terms.If you look at how this Christmas period was different from the norm, we saw significant increases in household penetration and notably on seasonally important brands like Bisto, which was household penetration up 160 basis points, Oxo up 181 and Paxo which was up 112. So what it tells is this is new households buying into these products that don't normally do so. And I think this supports what we know from talking to our consumers that this Christmas was one where more households were cooking Christmas dinner for themselves with less people around the dining table.Sharwood's cooking sauces and complements also delivered an excellent quarter. Sales there were up 40% and market share growth. And also household penetration gains of a quite incredible 550 basis points in the quarter. That's an awful lot of new houses buying into Sharwood's. We brought a number of new Sharwood's products to market in the year, and we've also strengthened our commercial model. However, we also believe Sharwood's is benefiting from ongoing home cooking fatigue and a quest for some excitement amongst home cooks and likely, I suspect, cooking an Indian meal at home, because the local Indian restaurant is unfortunately not currently open.Nissin Soba and Cup noodles also continued to perform extremely well. Sales up nearly 60% compared to same quarter a year ago and actually 63% on a year-to-date basis, with Soba extending its leadership in the premium noodles segment.In our Sweet Treats business, Mr Kipling enjoyed another strong quarter. All metrics ahead, whether you look at sales, volume, share or household penetration. This is our big brand, of course. And it benefited from a prolonged period of TV advertising through the last couple of years and we continue to launch new product offerings into the market. The premium signature range and also the smaller cakes, such as the mini tarts and the mini pies, were also key drivers of performance in the quarter.And by contrast, our sales of Non-branded products were actually lower, 2.7% down in the quarter. And we did see growth in Non-branded Grocery sales. They were actually up 2.4% compared to a year ago. And there was growth there from the own-label products that we sell to the major U.K. retailers, but these were partially offset by a decline at Charnwood Foods, which supplies out-of-home meeting sector. So not a surprise there. In Non-branded Sweet Treats, sales were 7.5% lower, and that is largely due to the exit from a low-margin seasonal mince pie contract.Moving to online growth. As I've said before, we've been working hard on our online presence over the last couple of years or so, investing in our online capabilities and ensuring that our brands are presented and marketed effectively using the tools that are available in this channel. And this has helped the business benefit from the significant move of consumers to online shopping this year. And our Q3 sales were actually up 90% online and, again, a little ahead of the channel growth there.Moving on to our International business. You'll remember that a few months ago we set out a revised strategy and a new approach to our overseas businesses, focused on ensuring we've got the right execution in market. And by which, I mean, making sure we've got the right products, that they're in the right stores on the right shelf and in the right place in those stores and priced it correctly and the right promotional strategy. And the intention there is to build a sustainable brand-focused businesses, just as we've done in the U.K. It's very much really about applying the successful and proven growth models we've got in the U.K., but adapting them to the local market conditions. And I'm pleased to say that we're making good progress, and we can start to see this in the results. Q3 sales were up by 43%, although, clearly, there's some benefit there from restrictions in out-of-home meeting in that number.Overseas sales of Sharwood's nearly doubled in the quarter compared to last year. And in the U.S., for example, this was driven by that increased focus on in-market execution and, in this case, by significantly expanding the distribution of our Sharwood's products in the U.S., so more stores are selling more of our Sharwood's range.In Ireland, we've seen excellent results on Mr Kipling, and that's coming from the adoption of the U.K. growth model, including the U.K. TV advertising. And given that success, we'll now be continuing to support Mr Kipling on TV in quarter 4 in Ireland and also going to bring Bisto to TV in Ireland in Q4 as well. And I think that's a great example of applying the U.K.-branded growth models to another market with appropriate local adaptation to build sustainable long-term growth.In Australia, we've seen a return to substantial growth for the 3 main brands we currently distribute there, so Sharwood's, Mr Kipling and Cadbury, which collectively grew by an average of 45% in quarter 3. And then moving to Canada, the in-market test that we're running on Mr Kipling, which I've mentioned before, that's running in approximately 300 stores, and that's delivering some encouraging early results.I've also mentioned before our plans to conduct a robust in-market test of Mr Kipling in the United States with the intention of replicating the success we've had with the brand in Australia, but obviously, in a much, much bigger market. And so to that end, we're delighted to have just signed a distribution agreement with North American-based Western Foods and to distribute Mr Kipling cakes for us in the U.S., and Western, obviously, a large major-scale player, very impressive capabilities and reach across the U.S. And we strongly believe they're the perfect partner to help us build our largest brand in what is clearly an absolutely enormous cake market. And first shipments there are expecting to take place in the first quarter of our next financial year.I'm now going to pause for a moment and hand you over to our CFO, Duncan, who's going to take you through a few of the finance-related pieces from our statement this morning.

[Duncan Leggett, CFO & Director]

Thanks, Alex. Good morning, everyone. So as you recall, we've already made 2 part payments for our floating rate notes so far this year to GBP 80 million back in June and a further GBP 40 million at the beginning of December. As a reminder, we pay interest at 5% above LIBOR on these, and they're currently callable at par, and there's no financial penalty for repaying them early. I'm pleased today with our continued good progress this quarter. We're now in a position to repay a further GBP 40 million. We can make this payment on the 16th of February, this will leave GBP 50 million of our floating rate note outstanding, down from GBP 210 million. .This will save us another GBP 2 million per annum in interest cost. So good progress continuing to reduce our financing costs and our leverage. And that making the benefit -- the interest benefit from the paydowns to date of GBP 8 million on an annualized basis, the effect of which, of course, we'll see next year. You may also have seen that we've held an EGM last Monday for shareholders to approve a capital reduction. Specifically, this involved giving the company authority to transfer balance from the plc company's premium account to the profit and loss reserve. I think better to view this as sort of sensible financial housekeeping, to enable greater flexibility for the Board going forward. This will include flexibility to pay dividends, should the Board determine it's appropriate to do so. But I would just remind an underlying fact that no decision has been made as to the use of realized profits.The resolution passed with an overwhelming majority of 99.99% of votes cast. And just a reminder, the next and final step in the process is confirmation by the court, which is expected in the middle of February.Just briefly on Brexit. So in advance of the end of the EU exit transition period, we developed comprehensive set of mitigation plans and preparations to ensure the continuity of supply of our products throughout the supply chain. We're pleased to see a free trade agreement being signed with EU, that's now in place, and we're not expecting any material impact from the updated tariff changes. I mean it is clearly early days. And you'd expect, there's a bit of pain we're going there in terms of admin and process, but nothing in terms of being able to get our product out and over borders. So far, new arrangements have not resulted in any major disruption to our supply chain.And last for me, just wanted to mention, this financial year will be a 53-week financial year. So we report the full P&L and our actual accounts on a 53-week basis and the balance sheet will be struck for April 2021. But to help with like-for-like comparative, we plan to provide a 52-week basis pro forma for revenue and trading profit to help, and just for the avoidance of doubt, the trading profit guidance we've given this morning and that we provided during the year, thus far, all relate to a like-for-like 52-week period.So with that, I'll hand you back to Alex.

[Alexander Whitehouse, CEO & Director]

Thank you, Duncan. So as we look forward now to quarter 4 and, in fact, beyond, we've got further new products planned, including Mr Kipling 30% less sugar Viennese Whirls and as the result of some excellent work done by our R&D teams, I know that was not at all an easy thing to achieve. In addition, we'll be significantly increasing our TV advertising with many of our major brands on TV again in Q4 as we reinvest for the future both in the U.K. and also now overseas.And so as we continue to drive our branded growth models and obviously with out-of-home eating essentially closed for now, we expect to see continued elevated levels of demand for our products in quarter 4. And after the further increase in investment behind the brands that I just mentioned, we now expect trading profit for the current year to be in that range of GBP 145 million to GBP 150 million and for year-end net debt to be below 2x EBITDA. And as I've said before, as our leverage levels normalize, that opens up more options for us in how we might think about future investment and growth opportunities and, in particular, how we start to move into the next phase of Premier Food journey without the constraints of the historic high debt levels and with the ability to invest back into the development and the expansion of the business to create further value for our stakeholders.And so thank you for your time, and I'll now pass back to the operator. And we'll be very happy to take your questions. Thank you.

[Operator]

[Operator Instructions] The first question comes from the line of Charles Hall.

[Charles Hall, Head of Research]

Well done on another good quarter. A couple of questions. Could you just comment about market share in the quarter? And secondly, could you talk a bit about what you're seeing on price inflation and your thoughts on raw material costs as we go through the year?

[Alexander Whitehouse, CEO & Director]

Charles, thank you. Yes, so market share, I mean, you'll remember that we increased our market share all through last year. And by that, I mean our previous financial year, so prior to COVID. We've continued to do so through the pandemic, whether it was lockdown periods or not-lockdown periods. So really, I think, driven by the support plans we have for our brands, both in terms of marketing and also in store, but also, of course, the new products that we bring to market. And I think this quarter was no real different from that and just the continuation of the same story. And as I've said, we've got strong plans going into quarter 4 and into next year, so we'd expect to continue to outperform the overall market.Price inflation, I mean, not a lot to report, really. We've seen a bit of price inflation, but nothing that's been particularly untoward and anything we've essentially dealt with through our normal methods of offsetting wherever we possibly can. And then where we can't passing that on in pricing to our retail partners, and we will continue to do so. But there's nothing particular of note there at the moment. And obviously, that's in the context of having reached a trade deal a few weeks ago, which otherwise would have been a very different story, I think.

[Charles Hall, Head of Research]

And just on the cost front, obviously, you alluded in the first half to additional costs due to COVID, I think they were roughly GBP 5 million in the first half, what's the trend line looking like at the moment? And are you having any issues in terms of absenteeism?

[Alexander Whitehouse, CEO & Director]

So yes, you're absolutely right. We definitely incur more costs as we deal with, obviously, extra hygiene measures and a whole bunch of other measures, which will be too long to go into now, which do have costs associated with them. But a big part of that is actually the cost of absence and therefore additional staff. The -- obviously, all that is much more than offset by what we see as we put additional volume through the factories. You obviously get some volume price leverage there. So that significantly offsets those additional costs.In terms of absence at the moment, I think I'll go back to what I said earlier. The measures we put in place earlier in the year or actually earlier our financial year, so last February, we're very confident in. I think they've significantly helped. And whilst we do see absence levels because, obviously, our colleagues are part of the communities in which they live, our current levels are, I would say, notably below some of the figures that we've seen in the press recently over the last few weeks.

[Operator]

The next question comes from the line of Martin Deboo.

[Martin John Deboo, Equity Analyst]

Martin Deboo at Jefferies. Two questions, please. One is, Alex, just want to go behind this phrase in the outlook of high levels of consumer demand for our products, just sort of how do you see the top line evolving into Q4? And if you're able to say, into FY '22? The second question is online. Remind me, I didn't think you disclosed the percentage of sales that are online. But of more interest to me is, what can you say about the composition of your online business in terms of the split between multichannel players like Tesco online and offline, sort of online specialists like Amazon and others and anything you're doing direct online? Those are the 2 questions.

[Alexander Whitehouse, CEO & Director]

Two questions on multiple parts, Martin. So I think if we look at the first part of the question, top line in Q4, what we see basically is once -- whether it's the tiered system or lockdown, once you get to the point where pubs, restaurants, cafes, bars, et cetera, are closed, and therefore, you can't buy food in those outlets, that's when we see the increase in demand really tick up for our products. And so clearly looking at what we know for the rest of this quarter, January, February looks pretty certain, as though these things will stay closed. And then presumably, we might get some sort of emergence into a tiered system in March. But who knows for sure. If we look at that in terms of what it means compared to a year ago, then you'd say we've got to take into account that we would see probably growth then in January and February, but you've got to bear in mind that last March was when the pandemic suddenly took off, and we saw panic buying, people stocking up their kitchen cupboards and things at the end of March. And that was really quite an extraordinary peak in sales. So you'd expect that in March we'll be below March a year ago. Does that answer that, Martin?

[Martin John Deboo, Equity Analyst]

Yes. Anything you can say into FY '22? Or is it too early?

[Alexander Whitehouse, CEO & Director]

I think it's a bit early. I mean, clearly, going into next year, we will have a set of comps, which are not repeatable. I think that's pretty obvious because, hopefully, we'll be out of this COVID situation by then and things will be hopefully getting back to normal. So continue to drive our growth models, we'll continue to invest behind the brands. We'll continue to bring innovation to market, et cetera. So we would continue to expect to make progress, but I think the way we'll be thinking about it is progress versus the last clean baseline we've got, which would being pre-COVID. And it's probably the way to think about that.In terms of online, our split is -- our percentage is probably not at all dissimilar to the online percentage that you would see in the total marketplace, although we continue to take market share. So we're taking that into account. We do trade a little bit with Amazon. We trade very strongly with Ocado. And obviously, online pure play. And we -- at the moment, we don't -- we've historically, anyway, let's say, not done any direct-to-consumer work, but we are just doing a test right now where we are looking at making Plantastic available on a direct-to-consumer basis. And that's actually -- I think it just went live last week, actually, but that's the only area where we do that.

[Operator]

[Operator Instructions] The next question comes from the line of Clive Black.

[Clive W. Black, Head of Research]

Very well done on your performance. Three questions from me, if I may. Firstly, Alex, do you think the comparative for the cake market is particularly challenging in FY '22, given 1.3% sales growth through the first 9 months of the present year? Secondly, could you give some color as to what you think the priorities for your marketing will be, elevated marketing in Q4?And lastly, just going back to your answer to Charles' question. How notable did you think the operational gearing was within the business in Q3 in terms of where your trading margins might settle at the end of the current year?

[Alexander Whitehouse, CEO & Director]

Clive, thanks, yes. So yes, you make a very good point on cake market. Actually, we've talked about this before, the impact of people eating more at home really is a driver of the grocery brands. That's where you see the shift as people prepare more meals at home. There is an interesting reverse dynamic on cake because a lot of the occasions when people enjoy cake are when they're with other people. That happens less often. We've seen downward pressure on the overall cake market. And I think it's credit to our brand support models that actually Mr Kipling continued to grow. And consequently, we've increased market share. But in terms of year-on-year comps for the overall market, then very different dynamic between grocery and cake.In terms of priorities for quarter 4 marketing, I mean, the main thing is that we will, in the U.K., continue to run our existing advertising campaigns behind the key big brands as we did through quarter 3. Obviously, a lot of our brands have got a seasonal bias to them. So it's still winter, and so continuing to drive those through quarter 4 makes a lot of sense. And then there's one more brand that we're planning to bring to air in the next few weeks, but I've kept quiet on that so far this year, and I'm going to continue to do so for competitive reasons.But the big change actually, though, is internationally because historically we've not supported any of our brands, certainly not with TV, in our international markets. But as you know, my aspiration is to build business units in our overseas market. It's the same sustainable growth model that we've got in the U.K. So we tested supporting Mr Kipling in Ireland earlier this year, and that worked extremely well. So we're going to put further investment behind that in quarter 4. And then we're going to do the same now and test Bisto in Ireland in Q4. So both well-established brands in Ireland, but which haven't had any above-the-line support. So we're quite excited about that. And then we've got the #1 branded cake position in Australia with Mr Kipling, and I think it makes sense now to test how we start to transition from selling really good-quality products in Australia to actually starting to build the Mr Kipling brand. So that's essentially where the focus is in Q4.In terms of operational gearing, I think that's a question to hand over to our CFO. So Duncan, do you want to come back on that one?

[Duncan Leggett, CFO & Director]

Thanks, Alex. Yes, I think we've seen increasing brand expansion all through the air versus normal, which clearly helps, as Alex mentioned earlier. I think Q3 was generally pretty flat out anyway. Being the peak season, clearly, our sales is higher than normal. So I'd say there's a modest benefit in Q3 closed, but certainly many more. And just to remind that we do start building some of our stocks for the peak season in our second quarter. So some of the benefit of that would have been in the first half numbers. But I think for Q3, obviously, once you take away some of the additional costs we're incurring, I'd assume any benefits would be modest.

[Clive W. Black, Head of Research]

Excellent. Alex, just one supplementary on your internationalization. Is it fair to say that if you do -- with the introduction into the U.S. and, I guess, the appraisal of the feasibility work in Canada, does that sort of represent the focus of the business on International for the next 12 to 15 months? Or would you have wider geographic ambition still?

[Alexander Whitehouse, CEO & Director]

Yes. So look, our international focus, as I've said before, I mean, we've got already a very well-established business in Ireland. So we will continue to look at how we build that, and that's one of the reasons why we're putting more above-the-line support behind the brands into Ireland. We've got a historically interesting, let's say, position in Australia, which we think can be expanded. We put people on the ground in Australia now, and we're looking at how we'll expand our business there.But clearly, North America represents a really exciting and interesting prospect. It's an enormous market. The cake market in the U.S. alone, we believe, is worth about $4 billion. So if we can take a piece of that, that would be very exciting. So what we want to do is work to validate whether or not we can translate the Mr Kipling brand and Mr Kipling support models into those territories. And we do trade in Europe, so we work for a distributor network in Europe. And we've got a small business, particularly in cooking sauces. That's growing very nicely. Thank you. But the key focus markets, I would say, at the moment, are in Ireland, Australia, New Zealand and North America.

[Operator]

Our next question comes from the line of Darren Shirley.

[Darren Shirley, Research Analyst]

Another one from Shore, if you don't mind. I wonder if you could give us maybe a little bit more granularity if possible in terms of your markets and spend? I mean, you've obviously increased it in Q3. It's going to go up in Q4. I mean, what sort of year-on-year change does that mean? Can you give us any color in terms of where you are now as a sort of a percentage of turnover?And just a second one, can you just remind us as well where you are now from a capacity perspective across your facilities? Is there any pressure points given the elevated volumes?

[Alexander Whitehouse, CEO & Director]

Darren, thanks for that. So on the marketing front, to be honest, we don't really share those specific numbers. But what I can say is that what we've been doing now over the last few years is as the U.K. business has performed consistently strongly, and I'm talking 2 years or so pre pandemic here, what we've been doing is we've been gradually notching up our brand support as the business performance has essentially allowed us to do it. And I think that's been a really important part of the overall growth model. .And we came into this year with plans to do exactly the same, which we have done so. But obviously, the performance is stronger than we expected, and that's allowing us to accelerate that a little further, which is really what you're seeing going into quarter 4. And it remains part of our future plans as well. So as the business continues to perform well, we'll continue to put more support behind the brands, essentially putting more gas in the tank as the business moves forward.In terms of capacity, we've been pretty much flat out in certain periods of this year. But at no point, has that caused us any significant issues. There is one particular product line where we walked away from a private label contract in order to create capacity for the brand. But that's the only one, and we continue to have space and capacity. And then my view at the moment is if we've managed to deal with the uplifts that we've had this year without any major problems, then we've clearly got plenty of place to grow from a more normalized base.

[Darren Shirley, Research Analyst]

And just on -- just asking, in terms of the guidance, you've given that GBP 145 million, GBP 150 million. I mean, what are you assuming there in terms of government policy on lockdown? Are you assuming we're in lockdown through to the end of March? Or is it sort of the middle of February?

[Alexander Whitehouse, CEO & Director]

Well, to understand, we've basically taken the only information we've got, which is what government has said. So lockdown through January, and we're assuming to end of Feb and then probably the emergence into some sort of tiered system. But I'll go back to one of my earlier comments, which is that, from a demand point of view, there is not an enormous difference between the higher tiers of the tiered system and there are -- from lockdown because the key determining factor for grocery product demand is people cooking at home. And people cooking at home changes as access to out-of-home meeting changes. So that's essentially what's sitting behind our assumptions for quarter 4.

[Darren Shirley, Research Analyst]

Okay. And just one last one, if you don't mind. Can -- you've obviously Ambrosia on television now for a couple of months. Is there any -- if any color you can give us in terms of the impact you're seeing from that above-the-line spend?

[Alexander Whitehouse, CEO & Director]

Yes, I can say that we've seen some very nice growth from Ambrosia in quarter 4 then.

[Operator]

[Operator Instructions] The next question comes from the line of [ Maryum Ali ].

[Unknown Analyst]

I'm sorry I missed some of the call, so apologies if this has already been asked. But are you able to give us any guidance on bond refinancing plans, please?

[Alexander Whitehouse, CEO & Director]

Well, that's definitely a question for the CFO. Duncan?

[Duncan Leggett, CFO & Director]

So no, I mean, we have -- it's not something that we've mentioned, so you haven't missed anything. But I think probably just refer that to previous comments on the topic. Obviously, pleasing progress on the part redemptions of the floating rate note during this year. Obviously, looking a bit further ahead, the fixed note, 6.25% feels pretty expensive to us where we are here. And we'd like to think if it is worth to look at. Clearly, it's callable now, but at quite a hefty premium. That premium reduces by half in the middle of this year. So middle of June-ish, though, it feels like that's probably an opportunity to have a look at the market where things are.

[Operator]

Next question comes from the line of Ben Hoskin.

[Ben Hoskin]

Sorry, apologies. It might have been answered now.

[Operator]

[Operator Instructions] The next question comes from the line of Nicola Mallard.

[Nicola Victoria Mallard, Consumer Analyst]

It's more of a bigger-picture question, I'm afraid. The government obviously sneaked through some news on their food policy for high in fat, salt and sugar. I'm just wondering whether you had any sort of early views on that because I'm guessing, as much as you're doing to take sugar out from some of your cakes and sauces, that there might be some impact in terms of what you can and can't market online, when and where it can be in-store.

[Alexander Whitehouse, CEO & Director]

Nicola, so yes, yes, we've had a look at that. We understand what the government is trying to do and the intent here, and we're pretty supportive of the direction of travel. You'll be aware that we've been working on healthy options for consumers for a number of years now and across the portfolio. But I think probably the most important thing to understand here is that, given the breadth of our product portfolio and the different brands and product performance we've got, that the vast majority of those are not within the scope of the government proposal.

[Operator]

[Operator Instructions] Dear speakers, there are no further questions at this time. I would like to hand over the call back to Alex.

[Alexander Whitehouse, CEO & Director]

Thank you very much. Well, thank you, everybody, for signing in this morning, and thank you for the questions. That's all from us. So have a great rest of the day. Thank you.

[Operator]

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.