Everyone, and welcome to Premier Foods quarter one analyst conference call. My name is Kiki, and I will be coordinating the call today. During the presentation, your line will be muted. After that, after the presentation, if you'd like to ask a question, please press star followed by one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. I will now hand you over to your host, CEO Alex Whitehouse, to begin. Alex, please go ahead. Thank you.
Thank you very much, and good morning, everyone. Thanks for joining this, our quarter one trading update call, and it covers the 13 weeks up to the 29th of June this year. I'm joined on the call this morning, as usual, by Duncan Leggett, our CFO, and I'll start by giving a few headlines of our trading in the quarter, and then dive into a few key areas to provide a bit more detail, before, as usual, passing to you for questions. Also, just as a reminder, we are today holding our AGM, that's at 11:00 A.M. this morning, and we'll be hosting that at our offices here in St. Albans, and also with an option of attending virtually, just like we've done last year.
So if there are any shareholders who would like to attend and don't yet have the details, then please do contact Richard Godden in Investor Relations for details of how to attend. So on then to the quarter one results, and I'm pleased to report that once again, we've had a very good start to the year. As you know, our business model is all about building and growing brands, and the shape of the numbers we've reported this morning certainly reflect that. So sales growth for the quarter was 5.3%, with branded sales growing 7.3%. And this was, of course, against some very strong year-ago comps, of +21% and +17.5% respectively. So overall, as I say, a very good start to the year.
Now, as we said back in May, that when we exited last year, we were back in branded volume growth and that we expected this to continue into this year, and that's exactly what's played out in this first quarter. And I'm pleased to say that we've delivered some very healthy volume growth in both our grocery and sweet treats businesses. And this is testament to both the strength of our brands and with our leading category positions, and the effectiveness of our well-proven branded growth model. We've also continued with the slightly sharper promotional pricing that we introduced towards the end of last year, which has been very successful in bringing more consumers into our brands. And we've also increased market shares across the board on both a volume and value basis.
You may also recall that back in May, we said that we've grown grocery market share by 200 basis points over the previous three years, so we're very pleased to have delivered further share growth on top of these already tough comparatives. But as we said before, not only is this due to the strength of our brands, but also, very importantly, down to us continuing to drive our branded growth model and delivering against our five-pillar growth strategy, but I'll come back to that shortly. In terms of strategic progress against the five-pillar growth strategy, you'll remember that one of those pillars is expanding our brands into new categories in the UK. I'm pleased to say that we've continued the strong momentum in those new categories, with sales up 68%.
And similarly, if we look at the strategic pillar of expanding overseas, we've also delivered a strong quarter with sales in our overseas markets, up 24%, constant currency. And so good progress on those strategic pillars, as well, of course, driving the core UK business. So with this very positive start, and with strong plans for the rest of the year, I'd say that we're on track at this early stage in the year, and so our expectations for the full year are unchanged. So let's take a look at some of the progress in this first quarter. But before I do, I'd just like to remind us of our branded growth model, which is at the core of what we do and is the reason why we've been able to deliver such consistent, strong performance over the last 5 years or so.
So we start with a portfolio of brands which are leaders in their categories and have got very high household penetration. And then we listen very carefully to our consumers to bring to market insightful new products, which are based on current consumer needs and trends. We then support many of our brands with emotionally engaging advertising and impactful marketing campaigns. And then finally, and importantly, we work closely with our key retail partners, delivering excellent in-store execution for our brands. So turning to our grocery business then, and as I highlighted at the start, the growth we've delivered this quarter was driven by our brands and very much volume-led. So a really good quality shape to the trading. And as I mentioned, we also grew both volume and value market share within this.
It was a very broad base and strong performance all around, and a similar pattern to that which we reported in quarter four. Total grocery sales grew by 7.1%, with branded up 8.6% in the quarter. Lots of very good performances across the brands, but I'd particularly call out Nissin and The Spice Tailor as doing particularly well. The Spice Tailor, in fact, continued to deliver some very strong growth, well into double-digit percentages, and towards the end of the quarter, we expanded the core Indian range with new Indian kits in Balti, Jalfrezi, Madras, and Mango curry variants. This is a significant expansion of that core The Spice Tailor Indian range.
But in addition, after some significant work by our chefs behind the scenes since we acquired the brand, we're now starting to expand the brand into different cuisines, and with this first step being into Chinese, with a new range of Chinese kits, which started to hit the shelves at the back of the quarter. Over the previous five years, sales of the Nissin brand have grown especially strongly, in fact, by 54% on average every year. And the brand is now as big as our Loyd Grossman sauces business in revenue terms. And this performance extended into quarter one with Nissin Soba noodle pots continuing to grow very well, with the larger pot formats a strong contributor to the quarter's sales.
As we look to quarter two, we'll also start distributing the Nissin Demae Ramen noodle range, which now gives us some presence in the world food aisle of the store. Elsewhere in grocery, we launched Loyd Grossman's tomato and mascarpone sauce, which has started very well. And we're also about to launch Loyd Grossman pesto in quarter two. Fuel 10K delivered very strong increased sales in its flagship chocolate granola in the quarter, due to continued good performance across the multiple retailers. As we look for the rest of the year, we've recently launched products, including a new 25-gram protein breakfast shake range, and also a range of nutritionally complete meal solutions, at the latter coming in both rice and shake formats. Non-branded grocery sales were 5.1% lower in the quarter, and this is due to a couple of things.
Firstly, we saw a decline in own label desserts, partially due to some switching from own label into our Ambrosia brand, as we sharpen those promotional prices on our core custard and rice pudding. Secondly, we made a conscious decision to exit a non-branded noodles contract with a customer, so these are the main drivers of the movements in the quarter. Moving then on to sweet treats. Growth was also volume and brand driven. So branded sales grew by 3.5%, with overall sales up 0.4%. Our Mr. Kipling Indulgence Signature Brownie Bites, which we originally launched just over a year ago, more than doubled sales compared to the same time last year. In the quarter, we also partnered with the Despicable Me 4 movie to deliver impactful in-store activity, together with on-pack promotions for Mr. Kipling's Snack Pack Slices.
And this is across all the Mr. Kipling Snack Pack Slice flavor variants, and also included the launch of banana slices. And this contributed to growth against a strong year-ago comparative, when we benefited from products and promotional activity associated with the King's coronation. And then Cadbury sales were in fact in line with last year, which is a good performance given the slightly earlier timing of Easter in 2024, meaning that some sales fell into our previous financial year, this time round. Non-branded sales in sweet treats declined by 16%, and this was down to some switching from own label into our brands, helped by the more competitive promotional price points that we introduced last year on Mr. Kipling and Cadbury. And there are also some conscious contract exits that we've made in Battenberg and Fancies in some customers.
So moving into our other strategic growth pillars, I'm sure you'll recall that one of these pillars is to deliver growth in our overseas markets. As I've said before, our focus markets are Australasia, North America, and EMEA. Within these target markets, we're currently focused on Mr. Kipling, Sharwood's, and The Spice Tailor brands. As I mentioned earlier, overseas sales of constant currency grew by 24% in quarter one. In North America, sales grew by 21%, as we rolled out Mr. Kipling cake slices to another 800 stores in Canada. While in the U.S., we launched the first Spice Tailor products, which went into Food Lion stores. Sales of Mr. Kipling in Canada are now building in Walmart and in 7-Eleven. Additionally, we're continuing to work on driving the rate of sale of Mr.
Kipling products in the U.S. We made further good progress in EMEA, as we continued to gain distribution of Sharwood's and The Spice Tailor. We've now achieved listings of The Spice Tailor in 11 countries, having added Germany to the list in the quarter. So in Europe, The Spice Tailor is therefore now listed in retailers in France, Belgium, Switzerland, and Germany. In Australia, sales were up quite substantially, with strong sales in both cake and cooking sauces. Sharwood's sales increased following the introduction of new family-sized Sharwood's Indian cooking sauces, as we cement our leading position in the Indian cooking sauces category. Cake continued to perform really well in market, helped by recent new product launches and a broader advertising campaign.
And also as a reminder, as we've mentioned before, a year ago, comps on cake are actually very soft, as this time last year, retailers were reducing stock levels of cake due to reduced shipping lead times. And given we've now got leadership positions in Australia in both cake and in Indian sauces, we're starting to expand our footprint into further categories. So in the quarter, we launched our Bisto Best gravy jars from the UK, although as we don't own the Bisto name down there, they're branded as Paxo, so it's Paxo Best Gravy. It's early days, but we've been pleasantly surprised by how well it's selling, and we're already looking to expand the range of flavors available.
Now, I mentioned that our sales in new categories increased by 68%, and you may recall this is very similar to the trend we delivered last year when revenues grew by 72%, although, of course, this is now off a larger base. In the quarter, we actually tripled sales of Angel Delight and Mr. Kipling ice cream as we further expanded the distribution, and the ice cream tubs have performed really well. And if you were to rank all the brands of ice cream tubs in the category by how fast they sell, then we are generally in the top half. So still early days, but really encouraging. We also saw the benefit of the recently launched Angel Delight handheld format, and this is in classic Angel Delight flavors, including butterscotch and banana, and then coated in chocolate....
So also in our new categories, we've talked a lot about Ambrosia porridge pots, which have become an established presence in the breakfast category, and they continue to grow very strongly, up 66% so far, this year, again, with a higher market share, than the same quarter last year, which is around the 10% share mark. Additionally, both OXO rubs and Cape Herb & Spice grew double digits in the period as well. And then just as a reminder, our final strategic growth pillar is to look for inorganic opportunities, which we can bring into Premier Foods and deliver further growth by leveraging the strength of our branded growth model. And that was a key principle we applied, when we assessed the fit of both The Spice Tailor and Fuel 10K.
As we've said before, we'll continue to explore further inorganic opportunities where we believe we can add value by applying our branded growth model. Of course, we've now got greater flexibility in terms of size of opportunities that we can consider, given the strength of our balance sheet. However, and also as we've said before, we are quite picky in this area, and we'll update you when we've got anything more we can share. With that summary of some of the main elements of trading in the quarter, I'm now going to hand over to Duncan, who's going to talk briefly about a change to our international reporting and also a favorable update to our financing arrangements.
Many thanks, Alex, and good morning, everyone. So as Alex said, just a couple of things from me. You may have seen from the RNS this morning that we've amended how we talk about our international business. So previously, Ireland was managed by the international team, but during Q1, we changed this, so Ireland now reports through our UK business. So the international team is now focused on growing in our current target markets of Australasia, North America, and EMEA, as Alex outlined a few moments ago. And we'll talk about performance on these spaces going forward. And as a result of this change, you know, really good news, Ireland will benefit from the roll through of some of our marketing programs from the UK, as well as the faster rollout of new products.
Now, just, just to be clear, just a reminder, this doesn't change our reported segments of grocery and sweet treats. International markets still will be reported as part of the grocery business, it just impacts when we talk about international overseas performance, the measure that we use. So secondly, really pleased to announce we've agreed a new revolving credit facility with our banking group that actually have more favorable terms than the previous facility. You may have seen this this morning, but this new agreement is a five-year agreement that gives us a nice platform of certainty. It attracts an initial margin of 2% above SONIA. It was 2.25% previously, and it's larger, so the facility increases from GBP 175 million to GBP 227.5 million.
So we really appreciate the support of our banking group in coming to this agreement. I think this really reflects the strong progress we've made as a business over the last few years, and of course, gives us more committed funds over a longer period as we continue to execute our strategy. We also know we've got our fixed rate bonds. They mature in October 2026, and you would have seen this morning that our cash guidance for the year is unchanged. So that's it for me, and I'll now hand back to Alex to sum up.
Thank you, Duncan, for that, really good news on the RCF. So look, in summary, we've had a really good start to the year with a strong quarter one, that sets us up nicely for the rest of the year. It's particularly pleasing to see the strong growth from our brands, and that turnover growth is being driven by some very strong volume growth, which is just as we'd expected. As we look forward to the rest of the year, we expect to see further volume-led growth, and of course, we'll be continuing to support our brands, bringing a number of new products to market, as well as building further distribution of our brands overseas. And so with this strong first quarter behind us, particularly for our branded portfolio, we're on track, and our expectations for the year are unchanged.
Thank you very much for your time. I will now pass back to the operator, and we would be very happy to take your questions. Thank you.
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask a question, please ensure your device is unmuted locally. First question is from James Edwardes Jones from RBC. James, your line is now open. Please go ahead.
Thank you. Morning, team. I've got three questions, actually, all around the promotional spending. What's happened to your, to your price gap, particularly with private label, as a result of the promotional spending increases that you've put through? Secondly, have any categories or brands shown particular price elasticity or responsiveness to this promotion activity? And third, have you noticed any response from competitors, either own label or branded, any increased promotional activity from others in response to your actions?
Morning, James, and thank you for that. So, price gap with private label. So, yeah, I mean, obviously, that has decreased, and that was very much the intent. So we've got a pretty good understanding, and this will probably actually dovetail into your second question. And one of the things that we see as a key strength is that we're quite analytical about all this stuff. It's very math-based. We're not making judgment calls on promotional activity. We're making very, you know, sort of math-based decisions. And we've got a really good understanding of where our price elasticities are across our brands. I suppose what's changed over the last couple of years is the extent of inflation in total over that two-year period.
meant that a lot of our models, our city models were broken, and we had to rebuild them in the new environment. But what we're seeing really is that as we've sharpened those promotional price points, we've done it where we know we're going to see the greatest price elasticity, and so therefore get the greatest gains, and also consequently, the greatest volume leverage back through our factories. So yes, that does manifest itself in a tightening of a pricing gap versus private label. And we are seeing exactly what we saw when we increased our prices, is that cake is a more price elastic category.
And that's one of the reasons why we're seeing, I think, quite a significant swing of volume back from private label into the brands, since we sharpened those, promotional price points. In terms of competitive responses, not a great deal to note, I think at this point. You've got to bear in mind, we don't necessarily have direct competitors in most of the categories we operate in. You know, our private label obviously always be as competitive as it possibly can be. There aren't that many categories where we've got a head-to-head branded competitor. But what we also know, and I've talked about this before, is that a number of the areas where we have got competitors, were still trying to recover pricing, and rebuild their margins, sort of behind us.
They were kind of sort of lagging behind, so we've still seen some slight increases coming through, in a number of categories. But hopefully that answers that, James.
Yep, very much. Thank you very much.
Thank you.
Thank you. The next question is from Andrew Ford, from Peel Hunt. Andrew, your line is now open. Please go ahead.
Morning, Alex and Duncan. Well done on a great first quarter. A couple from me, if I can. The exceptional branded growth number, you said it was broad-based across the brands, but I wondered just on the customer side, is there any particular ones that you're outperforming in? And can you give us a quick update on Fuel 10K? Still early days there, but just wondered if there was any early things you could tell us about what you're seeing. And lastly, in international, some impressive distribution gains in North America. I think you're up to 4,000 stores now from 1,400. How should we think about that over the next 12 months? Is the focus now on throughput in those stores?
And maybe at what point does the supply, your ability to supply, become an issue there and maybe limit your growth? Yes, those three from me. Thank you.
Morning, Andrew, and thank you very much for that. So, yeah, so broad-based growth across the brand, you're absolutely right. We don't, we don't specifically comment on individual customer performance, but probably the way to think about it is, I would say broadly in line with what you're seeing in terms of customers' performance in the market, if that helps. And then, FUEL10K, what do we see? Well, actually, a lot of excitement in the commercial team is probably the main thing I'm seeing. So obviously we, we've got, you know, great ambition when we, when we bought the brand, but I think what's, what's playing out in real life is actually that there's more opportunity here than we, than we even originally thought.
So, a lot of opportunity that's currently being pursued in terms of closing distribution gaps, so products that are performing really well, but haven't got the distribution they deserve for that level of performance, and so the sales team are all over that at the moment. There are some new products that are actually coming to market now or going to come to market later in the year. And those were things which the Fuel 10K team were already working on, and we will continue to pursue. And then a little bit further down the line, there's a lot more new product development going on, but that will not make it to market this year. Of course, that will be more the year after, and probably the year after that.
So plenty, plenty to, to go at. In addition, we're now starting to evaluate the possibility that FUEL10K could be launched into some of our overseas markets. That was not something that we assumed in our acquisition model, because we didn't have enough, enough data to validate it. So anything that we can do with the brand overseas will obviously there be, therefore be incremental to our, our, admittedly internal assumptions for when we bought the brand. So yes, lots of exciting stuff happening. International, yeah, 4,000 cake stores in the US now. I think this year, will we see more stores? Probably. But actually there's more focus now on making sure that we're getting all the locks and bolts right on a daily basis.
So have we got the right products, in the right stores, at the right price, with the right promotional frequency? And following that up, you know, making sure that all the execution is spot on, because, you know, we know that in FMCG, in-store execution is incredibly important, even if you've got a great product. So, what I'd much rather do is, have the team focused on that now and making it work, and then, you know, more stores will come afterwards, if that makes sense.
Great. And just on the ability or your limit on the supply side, is there... Yeah, I assume there's no sort of concerns around that if you're maintaining the 4,000 stores, but yeah.
Yeah, sorry, I've forgot to answer that part. Yeah. So, you know, this is something we did quite a bit of work on before we decided to take the brand into the States. And, we've got sufficient capacity that we can turn on in the UK, should we need it, and that would last us quite a long time. I think in some of our absolute best case scenarios, and I really mean best case scenarios, we could theoretically get to a point where we would need to put some extra capacity in somewhere, and then we'd have to have an interesting discussion about whether that's in the UK or whether it's somewhere in North America, but we are-...
You know, I would say best case scenarios and several years down the line anyway, so not something we need to think about right now.
That's really clear. Thank you. Thank you. The next question is from Damian McNeela, from Deutsche Bank. Damian, your line is now open. Please go ahead.
Hi, good morning, everybody. Thanks for taking the questions. Just a few from me, please. Firstly, on the Q1 performance, I was wondering whether you could indicate to what extent the poor weather trends aided the performance, or whether you believe it is all just down to the sort of the branded growth model, and the promotional campaign that you've been conducting? And then allied to that, whether you could sort of give us a sense of the shape of price and volumes for the remainder of the year, should we expect the sustained level of promotional activity for the remainder of the year?
Finally, on the international business, clearly, we've got some very good growth boosted by distribution, but I was wondering whether you could give us a sense of underlying rate of sale for the US business, please.
Morning, Damian. Yes, thanks for that. So, quarter one performance, was it affected by weather? Probably a bit. We know that we've got some weather sensitivity in our portfolio. We've always been very clear on that. You know, when it's cold, it helps us. And, you know, when it's warm, it has the opposite effect. The quarter was interesting, though, because, you know, May, for example, was the hottest May on record. So, you know, in that sense, that didn't help us at all. But then, June was obviously, you know, pretty wet, although warm and wet, so it's kind of interesting. You know, when you take it all into account, did it help us?
Probably a bit, but I wouldn't call it out as being a major driver of performance in the quarter, if that was what was behind the question. Shape and price and volume for the rest of the year. So yes, we expect that the strong volume growth will continue as we you know continue with those sharp operational price points, because they've worked very well for us. What you've got to bear in mind, though, as we go into the second half of the year, that's when we start to implement some of those shop price points on cake first, and then following on from that in quarter four on grocery.
So I'd expect to see some tapering off of the volume growth in the second half of the year, but at the same time, that reduction in price per unit will also fall away as well. So, you know, we've probably got, you know, first half driven by volume, and then that's starting to taper off in half two, if that makes sense.
Yeah. It's clear.
Sorry, the final question on the international business. Underlying rate of sale in the States, I cannot give you an easy answer on that, because it's very much a function of the individual stores, the individual store types. The U.S. retail market, as you probably realize, is incredibly fragmented and complicated. It's actually quite difficult even to get data out of a lot of the stores, to be honest with you. But, you know, what we do have is some data in some stores where we are able to track rate of sale compared to other cake products, and that's what the local team are using as a benchmark to measure themselves against.
But, other than that, there's not a lot more I can give you, I'm afraid.
Yep. Okay. Thank you very much, Alex.
Thank you. We've got next question from Darren Shirley from Shore Capital. Darren, your line is now open. Please go ahead.
Yeah, morning, all. First question is on acquisitions. I mean, obviously a key part of, of your growth strategy going forward. I mean, how would you guys sort of categorize the marketplace you're operating in, in that respect? I mean, in terms of, is there plenty of opportunities out there... How would you look at sort of vendor demands and requirements? Are they being sort of realistic? And then, how has sort of the flow into you evolved since Spice Tailor and 10K? Are you now a significant port of call for a lot of potential vendors? Any sort of thoughts on that would be good.
Yeah. Morning, Darren, thanks for that. Yeah, so you're absolutely right. It's a core part of our five-pillar growth strategy. I think it's an interesting question. Are there plenty of opportunities? Well, there's certainly plenty of things out there, but as we've said many times, we are pretty fussy, and we chose very, very carefully with both of the two acquisitions that we've made so far, and we will continue to be just as fussy. So whilst there's a lot of stuff out there, there's only a few things that are gonna frankly pass muster and make it onto the shortlist. So, we continue to sift through an enormous number of possibilities to get down to the few gems.
So that continues to be, you know, continues to be the game plan. Are we becoming a go-to place for vendors and advisors? I think so, yes, because we've been very clear what we're trying to do and very clear on what we're looking for. And so as things come up, we definitely hear about them. But also bear in mind that both the Spice Tailor and Fuel10K, neither of those were openly for sale. They were brands we liked and went and approached the owners and managed to convince them we'd be a good home. So we continue to take that approach as well. We're not just waiting to see what comes up, if you see what I mean?
Yep, yep, yep, yep. 'Cause I mean, I mean, our model, and I think sort of consensus suggests that, I mean, leverage is gonna fall quite nicely, and cash starts to build actually over the medium term. I mean, would you be comfortable to see that sort of dynamic play out if the right opportunity comes along? I mean, do you feel under pressure to do deals in any respect?
I think we feel under pressure to do deals, but, you know, at the end of the day, it is a core pillar of the strategy, so we continue to work very hard on it. But what we won't do is, we won't do the wrong deal just for the sake of it. And the, you know, the strengthening balance sheet position dialogue, obviously just means that the things we look at, we can consider things that are a bit bigger than we've been able to so far.
No, makes sense. And then, just within international, I mean, obviously, sort of mid-20s growth across the board is great, but I looked at the EMEA number at 6%, and you were talking about sort of extra distributions and that in there. Is there anything we should be aware of within that 6%, that looks a little bit subdued, can I say?
Yeah, you probably noticed, we used to talk about Europe, didn't we? And we've now started to talk about EMEA, and the reason for that is that we see some opportunity in the Middle East, and we've got a bit of Cadbury business down there. We're starting to take The Spice Tailor into EMEA as well. But it's really early days. And if you actually took that out and just looked at Europe under the measure we would have used historically, then it was now, in fact, double digit growth again.
Okay. Okay, that's clear. Okay, thanks, guys.
Thanks, and we're done.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. We currently have no further questions, so I shall hand back to CEO, Alasdair Whitehouse, for the closing remarks.
Well, thanks everybody for dialing in this morning, and thanks for the helpful questions. So, you know, as I said, look, in summary, we're off to a nice start. It's always good to be in a good position at the end of quarter one. But it is only quarter one, so we've still got the rest of the year to go. But as I say, it does set us up quite nicely for the rest of the year. And so as I said before, on track, and therefore, no change to outlook. But thanks again for everybody for dialing in.
This concludes today's call. Thank you for joining. You may now disconnect your lines.