Premier Foods PLC
LSE:PFD
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
128
193.6
|
| Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Premier Foods PLC
Earnings Call Analysis
Q4-2024 Analysis
Premier Foods PLC
The company reported a solid financial year with total revenue increasing by 15.1% to GBP 1.12 billion, primarily driven by a robust 13.5% growth in branded products, which are essential to the brand's growth strategy. Adjusted earnings before tax (PBT) rose by 15.1%, and adjusted earnings per share (EPS) saw a 6.4% increase, even in light of an increase in the corporate tax rate from 19% to 25%. Therefore, the resilience in core operations indicates effective management despite external economic pressures.
In a demonstration of financial strength, the Board proposed a 20% increase in the dividend, marking the third consecutive annual increase and a payout of GBP 1.72 per share, which corresponds to more than three times the EPS growth. This reflects a commitment to returning value to shareholders while maintaining a balance with ongoing reinvestments in the business.
Net debt decreased significantly by nearly GBP 40 million year-on-year to GBP 236 million. The net debt-to-EBITDA ratio currently stands at 1.2x, down from 1.5x, which strengthens the company’s financial position and reduces leverage risk. The suspension of pension deficit contributions will result in an annual cash saving of GBP 33 million, further improving the company's financial flexibility.
The grocery category remains the company’s central growth driver, with both total and branded grocery revenues rising over 16.5%. Key brands such as Nissin and Ambrosia demonstrated impressive performance, with Nissin growing by over 30%. New product development and expansion into new categories are crucial factors driving this growth, enabling Ambrosia to become the fourth brand within the company to reach GBP 100 million in sales.
Capital expenditures increased from GBP 20 million to GBP 33 million, reflecting the company’s focus on enhancing operational efficiencies and improving manufacturing output. Projects aimed at upgrading supply chain capabilities and automation are expected to yield strong returns on investment, with a significant impact anticipated in the second half of the financial year. The company also reported improved working capital performance and anticipates normalization going forward, which will contribute positively to cash flow.
Although value market share in grocery was flat at the end of the year, the company successfully transitioned to volume-led growth. Branded sales increased 4.2% year-on-year, particularly bolstered by promotions and strategic pricing adjustments. The company recorded a 35% growth in the U.S. market for its products, signaling effective expansion strategies abroad, and more distribution points were enabled for core brands.
The company expanded its portfolio by acquiring FUEL10K, contributing to an impressive growth rate of 30%. Continued search for M&A opportunities is indicated, with a strategic focus on brands that could integrate well with existing product lines. The Spice Tailor also showed double-digit growth, underscoring the company’s ability to leverage acquisitions effectively and enhance market presence.
The company reported significant progress on its sustainability targets, claiming a 14% reduction in Scope 1 and 2 emissions, and achieving a healthier product range with 44% of offerings now having an additional health benefit. These initiatives not only align with corporate social responsibility goals but also resonate well with changing consumer preferences for healthier products.
The company is well-positioned for future growth, given its strong financial results and solid operational strategies. In the coming year, management expects continued volume growth buoyed by effective promotional strategies, leading to a further capture of market share. The focus on improving brand portfolio and operational efficiencies indicates a proactive approach to navigating market challenges, making it an attractive consideration for investors.
You don't have any saved screeners yet
And welcome to this year's full year results announcement. That's for the year that ended on the 30th of March this year. So same format, as always, I'll just give us a bit of an overview of how we've been doing then Duncan will take us through the numbers, and I'll come back and take us through progress against the 5 pillars of our 5-pillar growth strategy. So to kick off, look, I'm really pleased to say that we've had a super year. So turnover was up 15.1% at GBP 1.12 billion. And then in our U.K. business, we continue to take market share, so 29 basis points of share gain during the year. Trading profit ahead of expectations, up 14%, so broadly in line with revenue growth and adjusted PBT at GBP 158 million exactly in line with revenue growth. Adjusted EPS, that's up 6.4%, and that's obviously taken into account the new higher rates of taxation. And then I think really interesting is net debt-to-EBITDA is now down to 1.2x. That is our lowest ever leverage and is, of course, now below our 1.5x target. So given the strength of performance and cash generation, the Board are proposing a 20% increase in the dividend, that's obviously 3x EPS growth. And then just as a bit of a reminder, of course, we already announced the suspension of those pension deficit payments, and Duncan will talk about that in a little while. But that does save us GBP 33 million of cash in the current financial year. And then the other thing that I'll come back to later is that what we also saw in the fourth quarter of the year, exactly as we expected, we saw a transition from value-led growth into volume-led growth. So we came out of the quarter with some volume growth, which put cash forward into this year. So as well as that strong financial performance, and we've made progress on all 5 pillars of the growth strategy and I'll come back to this in more detail later, but just quickly to walk through them. So U.K. branded revenue growth was up 13.6%, so very healthy indeed. We invested GBP 33 million back into our manufacturing operations, and that obviously makes us more efficient, improves margins and helps us manufacture the new products we bring to market. Our new category expansions are going really well indeed. So we have 72% growth from those new categories. And then the international business grew double digit again, so up 12% at constant currency. And then the fifth pillar, the inorganic opportunities. During the year, we continued to grow the spice tailor. Again, I'll talk about that in more detail later, but we also acquired Field 10-K. So you can see good progress, I think, across all of the 5 pillars. Now the other thing I just wanted to do is just put the numbers in a bit of context of the journey we've been on over the last 5 or 6 years. And if you start over on the top left there, that's a pretty consistent strong top line growth. You've got a bit of a peak from the pandemic, of course, in the middle, but that's a 6.4% CAGR revenue growth. And then if you look at trading profit over the same period, again, a nice strong trajectory and trading profit actually going just slightly ahead of revenue growth at 6.9% on a 5-year CAGR basis. Adjusted PBT is even stronger, of course, 12.3% 5-year CAGR, and that's of course because it benefits from the reduction in interest that we pay, and that's because we've obviously got a lot less debt than we had in 2018, '19, and that debt was refinanced at a much better rate. Which I suppose brings me on to net debt, which has fallen from 3.2x net debt to EBITDA down to that 1.16 that we're reporting today. So it's not just 1 year of good performance. There's a nice track record there as well. And we've also continued to make good progress against our emitting life plans is our ESG targets. There will be a lot more detail on this in the annual report in a couple of weeks or so because it's quite a big topic. But just to pull out a few of the highlights. Remember, we have 3 pillars: product, planet and people. On the product side, we've been working really hard to make our portfolio healthier. And I'm pleased to say now that 44% of the products in our range have an additional health benefit. So that might be is one of your 5 a day or it might be that it's got fiber in it or something like that as well as being of higher nutritional standard and our nutritional standard means less than 4 on the government nutrient profiling model, i.e., it's not classified as HFSS. And you can see that, that 19% statistic at the bottom is saying that that those healthier products are growing faster than our core, so they're becoming a bigger part of the portfolio, and that's partly due to growth, but it's also because we're reworking the recipes on some of our product ranges and also the things we bring to market, we're working really hard to make sure that they start off in a good place in the first place. On the planet pillar, a 14% reduction in our Scope 1 and 2 emissions, that's actually now brings us slightly ahead of our trajectory towards our 2030 targets and net 0. And one of the things we've started to do now is to put solar panels on to the roofs of our factories because obviously, they're quite big footprints and you can get quite a lot of sell panels on them. So we've done that first at our Stoke bakery, and that's up and running. And we're working on other factories that we can do that on when we get the right permissions and things through. As a reminder, on the people pillar, we now have 46% of our management colleagues are female. And then our long-term gravity partner, fair share, we donated fair share of almost 1 million meals to those in food poverty. So really good progress against the 2030 goals that we set ourselves. And with that, I'll hand over to Duncan who can take us through the numbers.
Thanks, Alex. Good morning, everyone. So I'm going to spend the next few minutes talking through the financial summary of the 12 months ending March 2024. And as Alex said, it has been a good year. Total revenue up 15.1%. And again, the branded part of our business, which is the key growth driver is up 13.5%. So that's really strong growth. I think good see growth across both Grocery and the Sweet Treats business. Long-branded revenue throughout the course of this year, we've seen reasonably strong increases, although it's a much smaller part of the business through pricing, some recovering the input cost inflation we've seen across the non-branded business and also some new contract benefits, particularly in Sweet Treats. So moving now to divisional contribution. So you can see margins moving forward. I mean we do have a, I guess, a financial strategy of moving forward our gross margins. How do we do that? We do that through supply chain efficiency. We can see the benefits of our CapEx, our increased CapEx in here. And obviously, we do that so we can fund the investment in the brands. So you can see some cost savings going in there, moving margin forward even after having spent a bit more consumer marketing. So that takes the original contribution to GBP 254 million. Group and corporate costs are up 26%. That's the 3 reasons. So the first one is, you may remember we had a fairly chunky credit to the best part of GBP 4 million in last year. That was a one-off insurance recovery. We've got inflation in there, as you'd probably expect. That's both across people costs and also certain of our contracts. And again, we are here to grow the business. We're here to invest in the business to make things work better for automate things and make things more efficiently. I might have mentioned this before, but we've got an ongoing project to improve our factory supply chain planning system. So that's a really compelling payback project actually. But we see the benefits elsewhere in the P&L, we just we see the chunk of costs sitting in group and corporate. So what does that leave us? So trading profit, GBP 180 million. That's up 14%. So you can see trading profit margins pretty much in line with prior year. Adjusted PBT is up even more strongly at 15.1% and adjusted earnings per share. So we've got a reminder we've got an increase in tax rate, so we use a notional rate of tax for our EPS. And the corporation tax rate is 25% this year versus 19% last year. So adjusted EPS is up 6.4%. And as Alex has mentioned, really pleased to be proposing another 20% increase, which I think by my math, that's more than 3x earnings to 1.72. So grocery is once again our growth driver and the growth engines. You can see both total revenue and branded revenue up over 16.5%. I think really good to see all our major brands in growth. Alex will talk shortly about how a combination of new product development and expanding into new categories has helped Ambrosia become the group's fourth GBP 100 million brand. Nissin continues to do well. We'll talk a bit about that shortly as well. But Nissin product growth of over 30% as well within these numbers. And obviously, this reflects the benefit of the international business growth as well. Non-branded revenue, again, as I just touched upon, we've got price increases in there. Volumes on our Tamworth business are down in the year. You may have seen that we announced the closure of that site, so a difficult decision to close a site, and we'll be exiting that during the first half of this year. Food divisional contribution, you can see margins pretty much in line with prior year, again, having moved toward margin and using that to upweight our brand investment, which is what we're trying to do here. And then Sweet Treat. I guess, Sweet Treats had a bit of a difficult year last year. We had some unscheduled maintenance at one of our Capri's production lines. And at the beginning of this year, we talked about expecting an improvement in Sweet Treat's performance and profitability and also that being more weighted towards the second half of this year. You might remember, you might remember half 1 branded sales were slightly down. I think here you can see branded sales for the year are up 4.2%. So H2 has been strong. I think branded revenue has been up just under 11%. And in the fourth quarter, up about 5%. So really good to see, I guess, the recovery playing out as we expected.Non-branded revenue, again, we got contract wins in there and some pricing. Again, I think with no branded revenue, both in Sweet Treats and in grocery, I'd expect we pretty much cycled through both the elements of pricing and also the cycling of when we won the contract, so I expect that to be a much sort of normal level going forward. And as you'd expect, the higher branded revenue, the more volumes going through the site and investor manufacturing performance compared to last year, all leveraging through the P&L quite nicely. So you can see divisional contribution is up nearly 25% and margins up about 130 basis points compared with prior year. As has mentioned, we've reached our lowest ever leverage, which is great to see at 1.2x. Now I guess, how have we got there. We started the year at 1.5x. Obviously, EBITDA and profit and turning that into cash has really helped. In terms of the other components. So working capital, we've invested a bit into working capital over the last couple of years. That's mainly due to higher values of stock because the ingredients and materials we're buying that go into that stock are obviously more expensive. We've seen that dissipate a bit during the year. So we've got an improved working capital performance year-on-year. And you can see from a guidance perspective, we're expecting that to normalize as we go into this year. So we're guiding to broadly neutral for working capital. CapEx, we'll touch on shortly about some examples of how we spent it during the year, but we've increased it from GBP 20 million to GBP 33 million. That's in line with guidance. And I think this underpins again the level of opportunities we've got. And I think reflecting that we're planning to spend between GBP 40 million to GBP 45 million this year. Pensions of GBP 39 million. We know it's been a fairly significant use of our cash over many years with a suspension, which I'll talk about shortly coming through, we'll be limited to just paying up in costs and government levies next year, so that's going to be more like GBP 5 million to GBP 6 million and then restructuring of GBP 14 million. That's largely related to the cost of closure of our night in sight that we've talked about. There's also some M&A fees in there as well. Again, we will be much lower this year, around GBP 5 million, half of that is just the tail end of closing Nissin and cutting out the site and about half of that is related to the closure of our [ Charnwood side ]. So where does that leave us? So net debt of GBP 236 million. That's nearly GBP 40 million down year-on-year, and that's after having spent GBP 30 million acquiring Fuel 10-K. So I talked a bit about pensions. And you can see here, it's clearly it's been important that we've supported the pension scheme, but it has consumed GBP 40 million of cash over the last few years. We talked about progress since the merger we did about 4 years ago and a couple of months ago, that culminated in agreeing with the trustees to suspend pension contributions. So effectively the GBP 33 million of cash that we were due to spend this year, we will be no longer putting into the scheme. Why is that? I think it really is just great continued performance. I think the trustees have done a fantastic job since they got their arms around all 3 of the big U.K. schemes in terms of managing risk, changing investment strategy. So a combination of hedging and whilst driving decent asset returns, I think it really just shows the strength that the pension schemes are in. That takes us to the valuation, which is end of next March. Obviously, I can't really sit here and predict exact I think what's going to happen, but we do see where we get to you there. But I think sitting here today, based on what we know, we wouldn't expect contributions to restart at that date. And looking a bit further ahead, we still talked about full de-risking of the scheme of what you mean by that is effectively making sure that we lock in our financial position of the scheme could be through a buy-in transaction. And still, we still think just over 2 years to get that done, we'll be sensible. But I guess the way I think about the scheme at the moment is we are already running very low levels of risk. We'll continue to reduce that further over the next 12 or 18 months. We've got a good investment strategy and we're generating some returns, and we're not paying any cash into the scheme now. So actually, our view ourselves as pretty well progressed on that de-risking journey even sitting here today. So clearly, without any pension contributions this year, we've got a bit more cash to put to work. And we've talked about before, having no shortage of opportunities to invest in the business. We know we've got whether it's automation, whether it's energy efficiency, whether it's line renewal, investing on our sites remains a great source and a home for high returning capital projects. We know from an M&A perspective, we've done a couple of deals, both were turning ahead of plan. Obviously, fuel 10-K is early days, but progress has been good. And my status performing extremely well. Alex will talk a bit about, I guess, our overall approach, and I'll remind you of that shortly. But we are firstly we apply strict commercial and financial hurdles. That will very much continue to be the case. Maybe the M&A gets a bit bigger over time, but I think we need to wait and see. We could easily do another bolt-on if we find one that we find appropriate. So I think very much a good opportunity there. And I think really pleased we've talked about paying a progressive dividend. I think really pleased to be announcing, proposing our third successive 20% increase today in line with what we said and we're saying here that we'll continue to grow ahead of earnings going forward. The leverage target, I won't escape you that we're actually below our leverage target certainly here today, and it may be that we go even further below it until we can find a use for some of the capital. I think the way to probably think about it is we will oscillate a bit below, in line, a bit above probably depending on the M&A opportunities that come along, but I still view as 1.5x is a good medium-term target in terms of how we're thinking. Like that's all for me. I will hand back to Alex.
Thanks, Duncan. So what I'd just like to do is just walk us through progress against the 5 pillars of the growth strategy over the last year. And just as a reminder, what the strategy does is it says, well, basically, if our core skill set is in building brands and growing brands in a sustainable and profitable way, if we take that capability and spread it more broadly than just our core brands in our U.K. core categories, then in principle, we can generate more growth, we can generate more value and build a bigger business. So obviously, starting on the left. Having said that, the central gravity of the business at the moment is very much in our core categories in the U.K. and therefore, continuing to make that grow and nurture that is very important. And then pillars 3, 4 and 5 are really saying, well, what are the other places that we could play. So taking our brands into new categories within the U.K., where historically, we've not generated revenue before. So that's all incremental white space building the business overseas. And then obviously, as Duncan talked about, buying brands that we can then bring into the business and grow. Pillar 2 is I call it a facilitation strategy in a sense, it's that investment back into the supply chain. So taking some of that cash, investing it back into the ability to make new products and also in making ourselves more efficient and that efficiency obviously flows through to margins, which helps fund the investment behind the brands. And so the strategy is working really well for us, and we're continuing to pursue it really aggressively and let's just look at how that's played out through the year. And it's founded, of course, in this, what we call the branded growth model. This is how we build our brands and make them grow consistently over time. On the top left really points to the fact that in the U.K., we start from a really great strong position. Don't we? Because we've got really well-known brands. They're known by pretty much everybody in the U.K. They're in almost everybody's covered at home. In fact, most households will have more than one of them in the covered at any one time. And there's a lot of warm affection for the brand. When we talk to consumers, there's a really nice emotional proximity to the brand, which is a really great start point. But as I've said many times, that doesn't give you any growth. That just gives you some where to start. And the way you get growth are through the other things that you do. And one of the things we know is that the long-term health and growth of FMCG brands tends to correlate really strongly to new product development. So constantly bringing to market new products that serve consumers' changing needs is a way in which you lock in that long-term growth. And so that's why that's core to what we do, and that's why we put so much focus on new product development. And we base that on what I consider to be a really in-depth from the standing of consumer trends. So we spend a lot of time understanding how people are shopping, how they're cooking, how they're eating at home and how that's changing over time because if we can understand those things, we can bring new products which fit with those changes and therefore, get great traction with consumers. And then we've got those really strong brands, of course, but we need to keep nurturing them and keep building them. So we invest in marketing and advertising campaigns and which build the brands. It keeps the awareness high. It keeps them contemporary relevant for consumers. And a lot of what we do with our media investment while advertising investment is really about building emotional connections, emotional bonds with consumers. And then finally, the fourth part of the model, but very importantly is the way in which we try to build strategic partnerships with our key retailers. We know that, that delivers outstanding in-store execution. But if we work with them together on building category growth, mutual category growth for both of us, we will tend to benefit disproportionately. And the reason for that is, of course, is that we've got usually the biggest brands in the category. So if we grow the category together, we'll tend to get the biggest benefit from it. So it's a really well-proven model. It's what we've been running for a number of years now. It's not dissimilar a tool to some of the big multinational branded manufacturers either. But as I say, it works really well for us, and it's a classic case of the total model is greater than the sum of the parts. And if we look at how that's played out on our U.K. brands over the last 6 years. On the left-hand side, that is the revenue trend from our U.K. brands, and you can see consistent strong growth with that blip in the middle that I mentioned earlier when everyone was eating at home because of the pandemic. If we look at our grocery brands and look at our market share, we've consistently increased market share year after year after year, and that's 200 basis points of market share gain in our grocery brands over the last 3 years. So over the last year, we continue to work on those key 5 consumer trends that I've talked about before, with health and nutrition again being the most important. And we brought a whole series of brands to market, a whole series of new products under our brands to market during the year. There's just a couple of examples here. So Ambrosia Deluxe is based on that fourth trend, which is indulgence. And we know what consumers are telling us is, "Look, I'm trying to be healthy, but when I do want to be indulgent, it's got to be worth it. So make it worth my while, please." And this is Ambrosia having a deluxe version of its costed and rice puddings. But actually, interestingly, these score less than 4 on the government nutrition profiling model, so they're not classified as HFSS even though they're creamier than our core costed range. The cost that we launched a couple of years ago, it did really well. Last year, we launched Lyons as well. These now represent 7% of the Ambrosia core business. Last year, they grew 155%, and we're supporting that now with out-of-home media as well as in-store support. Another good example also on the indulgence trend is Mr. Kipling's best ever mince pies. I don't know if you saw these over Christmas. So this was really our chef sort of getting right down to basics and what would it be if you could build a perfect mince pie. And so working really closely with consumers saying, "Okay, what would it look like? What would the past be like, what shape would it be? How big would it be? What would the fruit be like?"And constructing something which is as close to perfect as we could possibly get. And if you look online, the consumer reviews are outstanding, they're nearly all 5 stars. And this contributed to Mr. Kipling share growth in mince pies versus a year ago. I think I was probably one of the main drivers of that personally actually because they are really, really good at good, although I don't think I fit into the fact that they attracted a younger demographic. And then what we've done on the right-hand side, of course, is we continue to invest in the brand. That's say, very much part of our model. We have 7 of our major brands on TV, including supporting that best restaurant in town campaign. And of course, we also use digital and we use more and more out of home as well, particularly to drive awareness of the new products. As I said, in-store execution was really important. So we've continued to drive that, some great stats over on the left-hand side there. So we actually managed to get more products into more stores this year or last year than we did the year before. In fact, if you think about all the products we've got across all the stores, a huge number and that improved by 1.2%. So really, really great performance. And it was particularly strong in the second half of the year after the main retailers have done their annual range reviews, and we just got more products into those ranges. And then getting that visibility, those big displays, the gondola ends, also very important. And actually, our grocery brands have 34% more off-shelf exposure last year than in the prior year, and that was already off a pretty high base. And that includes things like the example here, the brands partnering up with movie franchises and gaming franchises. So this was Bachelors partnering with the launch of the Aquaman movie. There's an unpack offer where consumers can win prizes. And then from a retailer point of view, you get these enormous displays in store. And I can tell you the amount of volume you move off those displays is really quite impressive. Another really nice example comes out of our partnership with FareShare and then this is a promotion. We've ran it the year before last, but it wouldn't say, well, we ran it again last year. And it's called Win A Dinner Give A Dinner. And the idea is there's an on pat promotion across a number of our brands, and you can win a shopping voucher to essentially cook a meal for your family. But if you win, you also simultaneously win the same for somebody in food poverty via the FareShare charity. And then working closely with retailers, it means we're able to get displays like this. So this is an entire gondola end in Tesco with [ Jos ] Premier Foods brands on it. You've got Bistro, [ Paxon Sherwood's, Logos ] and Ambrosia, all the brands participating in that promotion all on gondola end at the same time. So absolutely fantastic exposure for the brands and drives a lot of incremental volume. I also thought it would be worth mentioning just how strong our Nissin partnership is, which just continues to go from strength to strength. On the left-hand side, you've got the revenue we generate from sale of Nissin branded products in the U.K. And it started in '18 '19, very, very small piece of business, low double digit low single-digit millions. And then you look at that trajectory, we're almost getting to GBP 40 million of turnover with this in the last year. That is a 54% 5-year CAGR, which is not something I don't think I've ever seen before. And we now have a 68% market share of the authentic noodle category in the U.K. So really just tremendous trajectory driven initially by Soba, the Soba pot noodles and then we extended out into the block or bag noodles, which is this product here. And we've also launched Nissin's Cup noodle, which is their global brand. And then also, it's not included in those numbers, but also as a reminder that Nissin make for us are Bachelors noodle parts as well using their incredible noodle wizardry, they're really what they don't know about noodles is not worth knowing. But there's more to come. So we'll take over the distribution of their authentic Demae Ramen product this year, and that will happen later on in the year. And we believe there's opportunity there to extend that out into more retailers, just like we did with Soba. And we're working closely with Nissin now on other things that we might bring to market. So I was out in Tokyo a couple of weeks ago with our Chief Marketing Officer, working with the team at Nissin looking at all the things that they make. And I can say we add a lot over those few days, trying all the different things that we could possibly bring into the U.K. So a great relationship, and it just keeps going from strength to strength. And then obviously, a quick word on inflation. On the left-hand side, you've got the ONS inflation for food and nonalcoholic beverages. And you can see that huge spike that was peaked around this time a year ago and the way that's fallen back down to something as starting to approach normality. What in fact I find interesting is what's happened during the last year to our volume and price dynamics as they contribute to our growth. So the light and green colored line is price. So we started the year with compared to the year ago base. We've got 2 big price increases in those numbers. So that was driving a lot of value. And as I said, obviously, we're losing some volume because of price elasticity, but the volume loss was a lot less than we expected, particularly on the grocery side of the business. And as we went through the year, you can see we start to lap some of the pricing. So therefore, the price element starts to fall and the volume trend improves. And I always said that quarter 4 was going to be a transitionary quarter, and you can absolutely see that. We went into the quarter with higher value per unit and actually a little bit less on volume, and we exited the quarter with volume-driven growth, a slightly lower price per unit because, of course, we sharpened some of our promotional prices. And really, it's that exit rate out of the end of Q4 is what we expect to flow through into this financial year and is actually broadly what we're seeing as well. The other thing that might be useful is just looking at our U.K. branded business and looking at the 3-year growth CAGR split over '17 to '20 and '21 to '24. So during that inflationary period, we've got a 3-year growth CAGR of about 5%. And in the periods before it, it's more like 3%, and it might also be helpful to remember that, that 3%, we said before, was broadly made up of about half volume and half price mix. So you might find that helpful in terms of thinking forward. Moving on to the second strategic pillar. So this is our infrastructure investment, and we love the virtuous cycle you get here. We invest some of the cash in our manufacturing operations. It improves our margins. We invest some of that back into our brands, and that drives more growth and fuels more brand growth and cash generation. We've still got a really great list of projects that have got relatively short paybacks in that 3- to 4-year time frame. So hence, why we've increased our capital investment for this last year. A lot of focus is on efficiency, as I say, and in particular, energy reduction. Any reduction investment is great because given the cost of energy, we have relatively short payback periods and they were a great way of saving costs. But at the same time, we're also reducing our Scope 1 and 2 emissions. So we're meeting our obligations on our net zero road map. One little example through the year was we started replacing our air compressors. We use a lot of compressed air in some of our manufacturing processes. We've replaced 6 of the 8 so far across a number of the sites. And the interesting thing here is the new technology is just so much more efficient that we lose a lot less electricity, reduces our Scope 2 emissions paybacks less than 3 years. And what we've also now worked out what we can do is because these things generate heat when they're working, we can flow water through them, and it comes out as hot water, which we can then use in the washrooms, and things which obviously, again, is saving you on Scope 2 and also on the heating costs. I talked about the solar panels on stoke. Again, strong payback, less than 4 years. Essentially, it's free electricity from that point and so reduce Scope 2. And we're working on the rooms across the rest of the sites as well to see what might be possible. And then this one on the right-hand side is a really nice example of investing in automation. So this is Phase 2 of the automation of our sponge puddings line, where we've automated the retro retake where we cook the product at the end of the process. This was a very manual process before. So automating has done 2 things. It's increased capacity, which is very helpful, but it's also significantly improved efficiency and made it a lot lower cost to produce. What we've done with some of that cost is we've been able to compete, be more competitive in our promotional pricing. And what that's done is it's actually led to a significant increase in volume. So sales of Mr. Kipling sponge puddings last year increased by 26% and did so at a higher margin than the prior year. So I think that's just a great example of where investment in automation can be a real win for us. Moving on to the third pillar. This is our new categories. So still a fairly modest base, but really fantastic trajectory, 72% growth. You might remember, last year, we were very excited. Porridge was doing really well. We've got to a 5% market share of what was already a double-digit growth segment of breakfast. Well, I'm pleased to say that we more than doubled our sales of porridge in the last year, and we've now got over 10% share of that category. And in the first retailer we launched in, we've now got a 20% market share, which gives you an indication of the direction of travel. And we've actually now started to include that in our marketing. And so the image you see there is taken from the end of the Ambrosia TV ad, which we've now included Porridge into. Ice cream sales were up 56%, particularly strong growth in half 2, and that's actually now we've taken that from just being in Iceland. You might remember that was an experiment originally just in Iceland, and that's now in Asda and Morrisons and doing really very well actually. And we've got an extension that's literally just come to market this year to go into handheld ice creams with Angel Delight. Ocado [ monde ] is working really well. 92% growth. We've now got 5 flavors of that. It started off as an experiment in Asda. It's now in Asda/Ocado, Tesco, and we've just agreed it's going into Sainsbury's. So that continues to do very well. And one of the reasons we really like this is it helps to de-seasonalize OXO. So OXO tends to be used in meals that we make when the wet's cold. And this will tend to be used when the weather top on barbecue just starts to balance the brand out a little bit. And also, Cape Herb & Spice doing really well. It's now in all the major retailers and growing at 7%. And the international business, as I said, grew by 12%. Ireland had a really cracking year, 17% growth. When we bought the Spice Tailor, it was only present in one retail in Ireland, we've now started to roll that out across the rest of the retailers. So Spice Tailor sales doubled in Ireland following that. Australia, we've got that strong market leadership position in cake. And I feel like I say this every year, but yet again, we had a record market share, a new record market share for cake in Australia and also now with the combination of Sharwood and the Spice Tailor we're the market leader in Indian sources too. Now that great performance in market, as I said earlier in the year, it didn't translate through into turnover because of a reduction in stock levels on the water between the U.K. and Australia and then in warehouse and in Australia. And bearing in mind that the retailer has titled to the goods once they leave the dock side in the U.K. Europe, Middle East and Africa, 28% growth. So another great performance and really Sharwood is our focus in that region, and that was all driven by incremental distribution. So we've got 4,700 more distribution points, which helped drive that number. And then similarly, in the U.S., 35% growth, and that was driven by more distribution of Sharwood's and more distribution of Mr. Kipling. With Mr. Kipling now up to 3,000 stores in the U.S. And actually also now we've started to roll the spice tailor out in the U.S. We've got agreement for 1,000 stores initially of the Spice Tailor and we'll continue to work on that, obviously, which brings me neatly actually to the Spice Tailor the fifth pillar of the growth strategy. The Spice Tailor performed very well. Good strong double-digit sales growth, increased market share and in fact, delivering returns ahead of our acquisition model. And this is playing out almost exactly as we expected, if not a little better, actually. So we expected that we could get more distribution for the Spice Tailor in the U.K. We felt that we deserve that and with our sales capabilities, we were able to secure that particularly significant gains in Asda and Morrisons. And we've also been able to get much bigger and much more impactful displays in the store as well, which we know helps drive trial by new consumers as does our initial steps into brand advertising. So we've now got a digital TV advert, if you like, for the brand, which we're trialing in the U.K. and in Australia with a view to, if that's successful, then we might look to put it on mainstream TV. And the logic there is we know that the Spice Tailor has a really, really high repeat rate. The number of people who try it, who then go on to buy again and again, and it becomes part of their routine is really as high as anything we've got in our portfolio. So if we can make more people aware of the brand, get more people to try it, then we'll build a bigger user base for the future. And while the commercial team have been doing all that, the chefs have been busy away, coming up with all sorts of new recipes, and you'll start to see those come to market over the next few months. So this year, in fact, one of the first, there is a range of premium stir fry sources which have just gone into market. And then from an overseas point of view, originally, when we bought this, as I say, it was present in strength in the U.K. and Australia. They had a little bit of presence in Ireland in Canada, but really quite small. And we've been able to expand that presence in Ireland. I've talked about and in Canada, but we've now got to the point where we're in 10 markets, and we'll continue to push that out into more stores in those markets and indeed probably more European markets as well. Field 10K, obviously, much earlier stage, fully integrated now into the business. Growth for the year was 30%. That's obviously on a pro forma basis, strong market share gains of 130 basis points. And again, initial returns ahead of our internal acquisition model. So very happy with the way that's going. And what we've been able to do so far is talk to retailers about FUEL10K and Ambrosia Police pots together, and we've been able to secure some really big impactful displays like you see there. And we've already got some new products coming to market. On the left there, this is a high-protein, 25-gram protein breakfast shake. This was something that was already in the Fuel 10-K team's pipeline, but we're now bringing to market. And then what we've got here is a range of nutritionally complete meals, either as a shake that you make up or as a rice-based product, and these are direct to consumer at this point. This is something we were working on in Premier Foods, but having bought Field 10-K, that was a stronger brand name for us to put it under, so we've done it under fuel 10-K. And that's literally just gone to market. I thought it might be worth a recap on what our M&A approaches nothing I haven't said before here, but just to bring it all in one place. So look, our core skill set is in building brands. So anything we buy, we're looking to buy brands. And when we're looking for brands that we think have got strong potential like the Spider and Field 10K have and brands which we believe that when we apply our branded growth model, we'll deliver disproportionately strong performance. And we're very choiceful, as you know, with what we're looking at. We're very fastly indeed, actually. And the 2 brands we bought neither of them were actually for sale. We'd identified them as things that we'd like to have in our portfolio and approach the owners. And frankly, we're looking all the time. So we're constantly looking for more brands that might be similar to FUEL10K or Spice Tailor, that might be a bit bigger, of course, because we've got the capital to do that now. But we're also looking at international targets because one of the things we could do here is buy a branded business in an overseas market and use that as a bridgehead by which then we can bring the Spice Tailor, FUEL10K, Mr. Kipling, et cetera, into market in an accelerated way, do that much quicker than we can do just ourselves. And as Duncan said, strong financial discipline will remain a focus on ROI, actually.And as Duncan also said, at the moment, we're obviously in a cash building phase when we find an acquisition, leverage will pop up a little bit, and then we'll generate cash and bring it back down, so you'll get this oscillation effect. So if I move on, just very briefly to talk about the current year. So as you would probably anticipate, we'll be driving all the pillars of the strategy. So U.K. branded core, there's lots of new products coming to market. This is just a little snapshot of things that are happening right now. So extensions on the Spice Tailor on Loyd Grossman actually moving into pesto and we're a really high-quality genuine Italian style pesto, which is slightly different from what you can get generally in the U.K. market.Does the domain products from Nissin we talked about and then some very, very indulgent and delicious Mr. Kipling chocolate cake there as well. In terms of infrastructure investment, we'll be investing in growth and efficiency. One of the growth investments we'll make is we're expanding capacity for the Ambrosia porridge pots. That does 2 things. That allows us to continue to support the growth that we're seeing in the U.K., and it opens the door to us to start selling it in some overseas markets as well. From an efficiency point of view, there's an awful lot going on. The one example I've pulled out because we're really pleased with this because it's a great example of innovation in process engineering as opposed to innovation in products. And this is our engineers came up with a completely new way to make icing at large scale, which significantly decreases energy utilization and so therefore, saves us quite a lot of money, but also, of course, therefore, reduces our Scope 2 emissions. In terms of new categories, you've got the extension of Angel Delight into handheld ice cream. So that picture there is an Angel Delight butterscotch flavor ice cream dipped in chocolate. What's not to like about that really. And then we'll continue to drive, of course, the porridge pots. So that's very much our lead horse in new categories. And then from an overseas perspective, Mr. Kipling, it's really about driving the sales of Mr. Kipling now in North America. We've got those 4,000 stores now across North America, so really driving volume sales through that, continuing to build the leadership position in Australia and driving hard the rollout into New Zealand. Sharwood's continues to be about distribution in Europe and distribution in North America. And the Spice Tailor as you've seen, we've got 10 markets now, and we'll continue to push that forward with more European markets, and we'll build a store count across those as well. So plenty going on. And where does that leave us? Look, I think in summary, it's been another really strong year for the business. It's ahead of expectations, including ours. And I think that return to volume growth in Q4 was really important and played out exactly as we expected it to. As well as the financial performance, of course, strong progress against all 5 of the strategic pillars. And what we'll see this year is that return to volume growth as we saw in Q4, accompanied by that lower price per unit as we've sharpened some of those promotional pricing. And we'll continue to drive the 5-pillar growth strategy, leveraging, of course, our brand-building capabilities. And so based on what you've already just seen, we'd expect to make further progress this year and our full year expectations are on track. And with that, of course, continued strong cash generation.And given the suspension of the pension deficit contributions, it means we've got increased capital to allocate against things like CapEx and M&A and dividend. So that's it for me, and we'd be very happy to take any questions.
Believe there's a roaming mic as well. Maybe question asks can wait for that. Thank you.
Andrew Ford from Peel Hunt. Firstly, well done Nissin set of figures. Can we then talk about some consumer trends in the U.K. Obviously, we've had a couple of years of high inflation, and that's been the focus for both the food producers and the retailers? Are you seeing changes now in how consumers are thinking about price and product range? And I think the cooking sources have done particularly well because of a trend towards meeting. What are you seeing and we're thinking it's going to happen over the year ahead and how you're responding to it?
I think in recent months, it's been relatively stable. So we did see this move from people eating out and having takeaways a little bit less often. And of course, that brings it into cooking at home, which is obviously where our sweet spot is. And so that was a trend we've definitely seen over the last couple of years, but I think that's pretty stable now. We're not seeing any dramatic changes in consumer habits at the moment.
And secondly, in North America, can you just give an update on the product range you've got in Mr. Kipling and also what you're now putting in into Spice Tailor. And what sell-through now you're lapping some of the trial areas? How is the sales building in the existing distribution?
Yes. So the core range for Mr. Kipling is the initial slices range that we launched with. So 4 key flavors of slices. Although we now have started to do some seasonal products. So one of the things that you may know about the states is they're very good at celebrating different seasons at different times of the year. So we've got Halloween range that will come later in the year. There's a Valentine's pink cakes range. And so we're trying to key into some of those seasons. And this actually is quite interesting because that's one of the ways in which we originally built the Australian business. So the Australian business was built initially across a series of seasonal products that then became available as an all-year-round proposition. So we'll continue to do that. And I think we've also now launched [ Spice Tailor ] into the U.S. as well. So it's important we don't get to come it away with the breadth of product range because when a brand is in its early stage, you want to keep the velocities of the individual products, how quickly they sell at a reasonably good level. What you don't want to do is fragment it too much too quickly. So we have to sort of see how things go and just gradually expand the range. So that's basically where we are. Shelf rotations are good. And one of the things we'll be doing, focusing on over this next year is how we use tailored localized marketing programs in order to build those velocities because obviously, it's 4,000 stores, but it's 4,000 stores across the whole of North America means it's pretty scattered. And so you've got to be very choiceful in your techniques that you use in order to build it. Yes. And then Spice Tailor, I'd say first 1,000 stores in the U.S. coming on stream. The range is obviously a shorter or range sort of 3 to 5 SKUs in most retailers. And one of the things we're doing is we're not being as focused on Indian as we are in the U.K. We're using a broader East Asian range because that's got broader appeal in that market because obviously, it's got a different history to the U.K. So the range as we roll out across different markets will be slightly different.
Clive Black from Shore Capital. Firstly, just in terms of plant investment, where does capacity increase feature in the next few years for you another way, what sort of capacity utilization are you looking at the moment in terms of spare space?
Broadly speaking, across the range, we don't have any significant glass ceilings on capacity or at least not that it's going to cause us a problem in the near future. Obviously, porridge pots was slightly different because it was a new product where we're making that on some adaptive existing kit and it's just got so big. It needs its own. So that's the change there. But broadly speaking, we're not sitting here thinking that there's [ lines ] that we've got to add into the business for capacity reasons, it's just not the case. Now there may be lines we choose to be placed to make them more efficient, but that's a different kind of decision.
And then I've got 3 questions. Secondly, could you just say something Capes it's a third-party relationship, but you haven't really said much about that today?
Yes, so Capes continues to do well. Obviously, we had that issue a year ago. And so the year-on-year performance has been very strong in the back half of the year, but a large part of that is because of that year-on-year impact. We've got a number of new product ranges, particularly seasonal ranges around Easter and Christmas in the works. And yes, it's a good strong relationship we've got with the guys at Mondelez.
And then lastly, you talked about a more normal sales picture going forward in terms of inflation Am I correct in saying though that you're looking at low level or disinflation year-on-year with volume growth? And any deflation is your own if you get my drift in terms of investing in promotions?
Yes, that's absolutely the case. Yes. And what we're doing there is one of the things you'll know is that we're quite analytical in how we look at these things. We've got a team that really works hard on the modeling of all this. And what we're doing now is we're trying to balance volume growth, value and profit delivery in a new pricing environment. Historically, pre-inflation is something we knew and understood in great detail across all our -- in fact, actually all the sub-ranges within the brands. We had to recalibrate quite significantly during inflation because the point of equilibrium where you're optimizing your delivery changes quite dramatically. And then we've got to go through that process again now because it looks very much from what we've done so far is that being slightly sharper on our promotional pricing, given we've got that space from a falling commodity basket is allowing us to optimize that at a slightly higher volume at a slightly lower price.
Just to follow up on that then. The underlying case price, excluding operations is still creeping up in terms of low-level inflation.
I'd say it's pretty flat, actually, underlying case prices are flat.
James Edwards Jones from RBC. A couple of questions. Why are you closing Charnwood, it seems like a decently profitable factor, you're taking an asset write-down? Doesn't seem to a obvious financial sense. Saying Duncan, getting into wet the cash flow, there's a big increase in nontrading items, I think, up to GBP 14.4 million or something. Can you just say what that was?
I'll take first. Charnwood makes a nonbranded essentially commoditized ingredients. It makes frozen pizza bases that get sold to pizza restaurants and things. So it's really not on strategy for us at all if you think about building consumer brands that sell through retailers. Historically, we've kept it because it's been a profitable business, but the trajectory is very much a downward one. So the combination of the fact that this is going to get to a point relatively soon where it is not economically viable, and it is our strategy and consuming an awful lot of management time. It means it's a difficult decision, but it's the right one to close it and shift that energy and investment and effort into the brands, which we know we've had great success in driving. And in terms of the restructuring costs, James, say this was largely closure of the Nissin site. So we took the P&L charge in the previous financial year and then the cash, which is mainly redundancy has flowed through this year. But as I said, we're expecting going forward to be much smaller, probably about GBP 5 million, which includes time within the tail end of '19.
Matthew Webb from Investec. Can I start off by asking about market share trends? I mean you set out the long-term picture of market share gains, which was obviously the right way of looking at it. But I think in the fourth quarter in grocery, your value market share was, give or take, flat. And I just wonder how we should think about that. Is that in the context of the shift from price led to volume-led growth? And what does that then mean in terms of your expectations for the year to come? That's the first question.
Yes. And it's a really good one actually because you're absolutely right. What happened with grocery just at the back end of the quarter as we shifted to that volume-led growth is something we don't talk about very often, which is volume market share. And so what happened is we then started to take quite a considerable amount of volume market share, but that doesn't necessarily move your value share if you're doing it at a lower price. So I think that's going to be quite an important internal indicator for us this year. It's seeing how our volume share moves as well as just value share because this is going to be a volume growth phase for us this year.
Got it. And then the second question, I think last time I asked you with reference to the U.S. rollout, whether you would be pausing 2,000 stores and you're obviously now at 3,000 stores. Once that was not. I suppose I'm really asking the same question again at 3,000. I mean, do we slow down there? Or do we keep going?
We keep going. But I think we've also got to make sure that we are not just building distribution and moving on because obviously, we then got to make sure we nurture the distribution we've got, make sure that the products drive value for the retailer and that we get growth. So there's a bit of a balance to be had here, I think, rather than just bolting on more and more stores, we've got to make sure that we drive what we've got as well.
Okay. And then sorry, final question for Duncan just on the pension. Now that you've got to the point that where you are not making any cash contributions, I just wondered what else needs to be done before we get to the full resolution because I think you've indicated end of FY '26. So it's still a little way alone. What are the staging posts that we need to get past.
Yes, probably a couple of main months, Matthew. It's a really good question. I think, first of all, we need the combined scheme to reach buyout surplus. We know we've had a surplus building on the RHM scheme. And clearly, the whole benefit of the merger was to use that surplus to help fund the deficit in the Premier Foods scheme. We are making great for ages and the suspension of deficit contributions, probably shows the combined confidence on our side in the trustee side, but we are now yet. So we need the scheme to continue to build, build the surplus, get the asset returns to get to a buyout threshold, if you like, when looking at all 3 of them, getting closer, but not quite there. And then as you probably appreciate, as lodestar under the bonnet, we need to do. We've been doing it for a number of years. We still need to do it, and that's all about maximizing value.
And then just final follow-up question on that. Is that then the point where you would no longer need to dividend match in terms of cash contribution?
Yes. I think that's one of the many topics we visit at every valuation. But for now, I'd assume that at that point, that will be on the dividend that falls away in the administration costs fall away here.
Daren Shirley, Shore Capital. Just a question on M&A, thinking with the extra resource, does that change your thinking about the scale of M&A you're willing to do or the frequency of M&A?
I think it might change scale in the sense that we can afford to do things a bit bigger if that's what we find. I don't think it necessarily changes frequency because, obviously, what you don't want to be putting your core business at any sort of risk because you're focusing parts of management on integrating a new business, you don't want that to be a distraction from driving your core. So you've got to get a balance right in terms of frequency. But certainly, yes, we're in a position where we could afford to do bigger if that's what we found.
In terms of frequency then, what do you think the business will be comfortable?
To be honest, it's more a function of how often we can find something that's ticking all our boxes. As I said, we are very fussy and we'll continue to be so. And it's difficult to find targets that, as I say, ticking all the boxes for us. So they'll only come around every now and again.
Would you be willing to move into new categories? Or do you think it's core cost?
Yes, absolutely. I think the first question we ask is, is this a brand with lots of growth potential if we were to apply our branded growth model. And if that's in a different category, there isn't a different category. In fact, actually, to some extent, FUEL10K wasn't entirely new category to us, but we've only got Ambrosia of breakfast pots in Ambrosia porridge pots in breakfast. So essentially, that opens up breakfast for us and if we found something that opened up another category for us than all the better.
So I think just to build on that down, I suppose, when talking about that, it probably means in the U.K. So new category in a market we're in or we know well or a new market with a category that we know well, it's sort of unlikely at this stage we do a brand new category and a brand market that we don't understand.
Okay. Look, thanks very much, everybody. As you say, we've had another really good year, and I think we've got a lot of exciting things to come for this year. So we'll see at the half year.