Right, we're about ready? Good. Excellent. Well, morning, everybody, and welcome to Premier Foods full year results. That's for the year that ended on the 1st of April this year. I'm here with Duncan Leggett, our CFO, and Duncan obviously will take us through the numbers. Before that, I'll give us a quick overview of where we finished the year, and then I'll come back and give a bit of a strategy update afterwards. I'm pleased to say that the business had another really strong year. We crossed GBP 1 billion worth of sales. That's for the first time for the business in its current format, of course, with sales up 11.8%.
I mean, our grocery brands continued to increase their market share, up 64 basis points in the year. That actually strengthened as we went through the year. In fact, we're up over 90 basis points in quarter four. Trading profit at GBP 158 million was up 11.5%. That's 15.7% trading profit margin was bang in line with last year, therefore we recovered all the input cost inflation through combinations of efficiencies, cost savings within the business, and also obviously, some pricing. Adjusted PBT therefore GBP 137 million up 13%. I think importantly, net debt to EBITDA, actually we'd reduced further by 0.2x down to 1.5 x EBITDA.
That is now in line with our medium term target. Of course, remember that's after buying The Spice Tailor within the year. Essentially we funded The Spice Tailor from actually less than one year's free cash generation. The board's recommending a dividend that's up 20% versus year ago, that's ahead of earnings growth. I think importantly, is this box on the right-hand side at the bottom here, which is pensions. You remember the new pensions arrangement we put in place a couple of years ago. We're really starting to see the benefit of that flowing through now. In the latest triennial valuation, we've seen a 50% reduction in the NPV of pension deficit contributions going forward.
I'll let Duncan talk about that in a little bit more detail, but we see that as pretty significant. We've also made good strategic progress as well as the financial progress. Against the five pillars of the growth strategy, we've continued to grow the U.K. core. Our three-year average growth rate is now at +5.3. We've continued to invest back into our manufacturing infrastructure, both in terms of new product development capabilities, so the ability to manufacture the new products that we're launching, but also in terms of efficiency improvements and automation. We've continued to grow our new categories with 33% growth from those new category experiments. I'll talk a little bit more about those shortly.
Our international business continued to make good progress, 10% growth in turnover, but actually a lot more strategic progress, I think, under the bonnet there. The fifth pillar with the inorganic opportunities, so acquisitions, of course, we bought The Spice Tailor in the year. We've started to apply the Branded Growth Model to The Spice Tailor, I'm pleased to say that we're seeing an acceleration from an already high base, actually, in the growth rate of The Spice Tailor, so up 25% in the year. At the same time, we've also made good progress on the ESG strategy, which I'll come back to shortly. Before I do that, I'll hand over to Duncan, and Duncan can take us through the numbers in a bit more detail.
Brilliant. Thanks, Alex. Good morning, everyone. delighted to be here to present the full year results. I'll spend the next few minutes just talking through the numbers for the full year and also a bit of an update following our pension scheme triennial valuation. Starting with the group position. I mean, as Alex mentioned, it's been a pretty good year for us. Total revenue is up 11.8%. You can see that's pretty well spread between branded and non-branded. For the branded business is up 9.1%. Pretty good growth across all our major brands. And you can see that stepped up a bit in the second half. The equivalent number for H1 was about 4%. You can see a bit of acceleration through H2.
Non-branded revenue, I mean, that really reflects a bit of a trend we've been seeing during the year. That's up strongly at 28%. That's pretty evenly across grocery and sweet treats. And that's a combination of new contract wins, particularly in our sweet treats business, as well as the impact of pricing. Gross margin is back a little bit at 70 basis points. I mean, this is very much just the way the year has played out in terms of how the branded business has grown and how the non-branded business has grown. It's not something we're expecting to see going forward. It's just a function of the way this year has played out. But you can see further down the P&L, by the time it gets to division contribution, you know, really good control of costs.
We have spent more marketing year-over-year, we've got margins back in line. That's up 11.7% to GBP 216 million. Group and corporate costs are up, as you'd probably expect. We've got some wage and salary inflation in there. We've also recognized the cost of a bonus to our non-management grade colleagues to recognize their contribution towards this financial year. That's up 12%. Where does that leave trading profit? That's trading profit up GBP 157.5 million. You can see trading profit margins in line with the prior year. Going a bit further down the P&L, clearly seen quite high movements in interest rates this year. I'll comment on it shortly, we've been pretty well protected by that.
Slightly higher net regular interest, which leaves adjusted profit before tax and adjusted earnings per share up around 13%. Looking at the divisions in a bit more detail, starting with grocery, which includes our international business. You know, this has really been the sort of driver, key driver of our performance this year. Total revenue up 15% and particularly good performance from our branded business, which is up 13%. All our major brands are in growth. We've called out particularly Batchelors and Nissin. I mean, Batchelors has grown by more than 20% this year. And also Nissin continues to perform really strongly. I think what we're seeing here is these are resonating with the consumer trends that we're seeing, which Alex will talk about in a bit.
Non-branded revenue again, we've got a bit of a continued recovery from our out-of-home sector. We've also got the impact of pricing in there. Again, at division contribution, good cost control, particularly good cost saving and efficiency programs from the supply chain within grocery. You can see that flowing through division contribution and helping to tick margin forward year on year as well. Sweet treats. I mean, that's another year of growth for the business. That's up 2.7%. Slightly different picture, actually. You can see mainly the growth has been driven by non-branded and as we've seen through the year, you know, a combination of new contract wins, driving volume into the sites as well as the impact of price. Branded revenues, that's a picture of a story of two parts, really.
We've got Mr. Kipling that's in growth for the year. That continues to be the group's largest brand. That has been offset by lower Cadbury cake performance. You might remember as part of our Q3 announcement, we referenced some unscheduled maintenance at one of our Cadbury cake factories. That obviously had an impact in our ability to supply and impacted branded growth for Q3 and also the beginning of Q4 as well. An improving trend through Q4, but obviously it had an impact for the full year. Down at divisional contribution, I mean, very much similar story. You know, when you have a unable to produce at a factory, there's some fixed costs associated with that. That's obviously flows through divisional contributions. That's down 19% to GBP 27 million.
Although margins are back year-on-year, they are actually up 110 basis points versus two years ago. Really pleased to be able to share that we've hit our 1.5 x leverage target this year, and that's only even having made this acquisition of The Spice Tailor. How have we done that? I mean, EBITA is clearly a big contributor, as you can see. CapEx is a bit lower than we guided, that's GBP 20 million. That's purely our ability to get hold of bits of kit and components that go within kit to be able to spend the cash. Pensions I'll come back to shortly. The net debt before M&A, you can see, is actually as low as 1.3 x.
When you factor in the acquisition of The Spice Tailor back in August, we get to the 1.5 x target. With our leverage at our target of 1.5 x, you know, the business continues to generate a lot of good operating cash flow. Our credit facility was unused or undrawn at the year-end, and we have significant headroom still. You combine that with pretty much fixed interest costs. Obviously, the refinancing a couple of years ago fixed our interest for quite a while at 3.5%. We have been pretty insulated to the increase in rates during this year. We've still got, you know, three and a bit years to go on the bond there. Pleased we've got a bit of a runway.
Commodities and currency. Clearly, it's been a choppy couple of years, particularly for commodities. I guess just a reminder, you know, we have a broad-based spend when we come to commodities. We're not overly exposed to any particular one input. We do manage it in the ways you'd expect through forward contracts and hedging. Currency, it's been pretty volatile, particularly the US dollar. It's particularly during the middle part of this year. I guess just a reminder, we don't have any sort of direct exposure to the US dollar. We continue to have about EUR 50 million net exposure to the euro, which again, we manage in a normal way. Right. Pensions. You know, really happy to share the results of our triennial valuation here with pensions.
You know, following the merger three years ago, we've made some good progress, and I think this valuation confirms the continuation of this progress. What does it say? If you think about the net present value of our pension cash contributions, how we view our pensions debt, that's reduced from GBP 250 million down to GBP 125 million. That does include what is now a small surplus on the RHM scheme on a buyout basis. That's very much progressing in line with plan. 50% lower versus the last valuation and actually about 60% lower than it was pre-merger. If you remember the projections we set out at the time of the merger, our upside case in terms of NPV was forecasting about 45% reduction.
You can see at 60%, we are already higher than that, which is great news. It's really this performance that's allowed us to agree lower cash contributions with the pension trustees. We've got regarding to about GBP 6 million reduction from this year, and that's GBP 5 million of deficit contribution reduction, plus a small reduction in scheme expenses as well. Again, if we go back to where we were at the time of the merger, we were forecasting a lower ongoing level of contributions to the pension scheme. I think what we're saying today, I think with the, with the increased momentum and the way the schemes, the trustees have been managing the schemes, we're now targeting resolution, i.e., reducing contributions to zero.
These are quite difficult in terms of exactly how and when these will play out because there's a lot of things that impact the performance of a pensions scheme. We're targeting this in around three years. Thought we were spending a couple of minutes reflecting on our difficult decision we took to close our site at Knighton. I mean, just a reminder, you know, this is a site that produces mainly business-to-business products and also non-branded. Pretty low margin. Actually, was slightly loss-making. We tried for some years to try and make it viable. Unfortunately, we weren't able to, hence having to take a difficult decision to close it. We're gonna be exiting about GBP 30 million of non-branded revenue.
There are some costs associated with the closure that we've previously disclosed. We will be reporting this year excluding Knighton, and we've set out some comparatives in the deck to help you with that. We'll take the best part of the year to cycle through the closure, to exit the contracts. I think from FY25 onwards, you know, you can expect to see our branded mix increase, and also from an absolute and percentage profit basis, they should also nudge forward as well. Moving on to guidance. I mean, working capital, we continue to see the impact of inflation, particularly on our value of stock. Expect that to be an outflow. In CapEx, I talked about it being lower than we'd frankly want this year, 'cause we do have the cash to spend and the projects to spend it on.
Very much expecting that to step up back to, I guess, our view of where we see things on a, on a medium-term basis, about GBP 35 million for this year. Great to see the pension contributions. You can see the cash reductions that I've mentioned today, flowing through and then the cost of the proposed dividend at about GBP 16 million. Capital allocation, I mean, we've got our leverage down to target. Pension contributions have actually started to reduce now following the merger, which we're really pleased about. We expect those to get a lot lower or eliminate over time.
Again, very much as we've talked, I mean, Alex will talk about this in a bit, but capital expenditure. We continue to see masses of opportunity to invest within our business to generate, you know, to generate high returns, and we still think that's a really good home for our cash. M&A, you obviously know we've bought and integrated The Spice Tailor business this year. We've increased its growth from 20% when we bought it to 25% this year. We've unlocked more distribution. Again, Alex will talk about that in a bit. We continue to look at M&A and continue to look at brands that we think we can take, apply our model to, and create value. Then dividends, we've always said that we'll progress, you know, on a full year basis.
Hopefully evidence of that today with the dividends up 20%. That's the second consecutive year of 20% growth. We'll continue to progress that as we've set out. From a leverage target perspective, I mean, clearly it's 1.5 x now. If we do make a transaction, it will obviously go up, but we'll still be targeting getting it back down to 1.5 x in the medium term. Right. That's it for me. I'll pass back to Alex.
Thanks, Duncan. What I want to do is kick off by just reminding us what that five pillar growth strategy is. If we start on the left-hand side here, you've got continuing to grow the U.K. core. Obviously, that's still the majority of our business by a long way, continuing to apply our Branded Growth Model to drive the brands in the core U.K., key categories is obviously mission critical, and that creates the basis as well, the foundations on which we can do the rest. The second one, as Duncan's just been talking about, is investing back into the supply chain, both in terms of the ability to make those new products, but also in terms of efficiencies.
Those efficiencies ultimately lead to gross margin improvement, and that's what we use as fuel to invest back into the brands in order to drive further growth. The third pillar is expanding into new categories. We're the leader in our five core categories, this is actually all about then how we generate white space revenue from new categories by taking the strength of our brands and extending them into places where currently, you know, we've historically not derived any revenue. The fourth pillar is about building our international businesses to critical mass. We've got our focus geographies overseas. More and more, this is actually turning into how we build global brands.
How we turn Mr. Kipling into a global brand, Sharwood's into a global brand, now, of course, The Spice Tailor, as well. The fifth pillar is those inorganic opportunities. We continue to look for brands where we believe if we could apply our Branded Growth Model, then we will, you know, generate significant value just as is playing out with The Spice Tailor.
Really, if you look at this and stand back, what's actually happening here is we're taking our, what we believe our core skill set, which is building brands and driving profitable growth from brands, and then applying that not just to our existing home market and core categories, but looking at how we can use that skill set to build the business much bigger through new categories and new markets overseas and ultimately new brands that we don't even own yet. You know, as I've said before, the ambition here is to make the business a lot bigger than it is today over time through those brand building techniques. That's all obviously guided by our purpose, Enriching Life through food together with our ESG strategy.
I'll walk through where we've got to on each of these pillars, but before I do that, I just wanna give you a brief update on where we are with our Enriching Life Plan. We've made lots of progress against a lot of the KPIs, so I can only put a handful of them on here. The rest will be in the annual report, of course. But the plan has three pillars to it. You might remember product, planet, and people.
Some of the things I've just pulled out here on product is, one of the commitments we made was to help people who want to have plant-based diets, and we've increased our sales of plant-based products in the year by 34%, and that's helped by a number of launches under our Plantastic brand, so that's our plant-based brand, including the Millionaire Flapjacks, which you can see at the top there, which I thoroughly recommend by the way, if you get the chance to try those, protein pots, and creamy pasta sauces. Anyone who knows about these things is, it's actually really difficult to make a good creamy sauce without using dairy. I think that was actually a really big win by our, you know, our chefs and food technologists.
In terms of packaging, our goal obviously is to get to 100% of our packaging being recyclable by 2025. We're now at 96%, 4% left to go. I suspect that's going to be the most difficult 4%, but nevertheless, you know, really good progress to get to where we've got to. Under the planet pillar, actually in the last week or so, we've actually now had validation back from the Science Based Targets initiative on our goals in terms of greenhouse gas emissions to do our bit to try and, you know, limit to 1.5 degrees. We've got a series of comprehensive plans therefore, to get ourselves down to net zero on our Scope 1 and 2s by 2040.
Down the bottom there in the middle, is focusing on food waste. We've been reducing food waste, you may be aware, for a number of years now. We made a further 11% reduction in the year, but we also started to shift to working with our consumers to help them reduce their food waste as well. We've got a thing called Take a Fresh Taste Take on food waste, which is a website and features on a lot of our packs and gives consumers tips and hints on how they can reduce food waste.
If you think about it, a lot of our products, particularly cooking sauces, are actually really helpful if you're trying to reduce the food waste that you generate and the things in your fridge before they go off. You can grab those, put them in some pasta and put a sauce on it, and you've transformed a random set of ingredients into something which is actually quite tasty. The third pillar there is people, and one of the big things this year is that we entered into a five-year partnership with the FareShare charity, so working towards fighting hunger and tackling food waste.
Then one of the things that came out of that was a big promotional activity we did called Win a Dinner, Give a Dinner. The idea there we worked with FareShare and Tesco with a big piece of promotional activity. You could win. On pack, there was a code, you put it into a website, and you could win a voucher for, you know, buying things for a meal you could cook at home. The important thing is if you won, you also were donating a meal to someone in food poverty to do the same. That was really successful for everybody and actually we so much so we've repeated it again, so it's happened twice. Lots of progress on the inclusion and diversity agenda as well.
The one statistic we've pulled out there that if you look across all our management colleagues, we've now reached a point where 47% of them are female, so really good progress against that as well. It's also really nice to see a lot of this stuff getting recognized by the ratings agency. We're really pleased with the reduction in our Sustainalytics rating. By the way, if you don't know Sustainalytics, a low score is a good score, by the way, just for the avoidance of doubt. Overall, really pleased with the progress there and something we continue to drive really passionately within the business.
If we now go through those five pillars of the growth strategy, that first pillar on building the brands in the U.K. is all underpinned by this, which hopefully most people are now familiar with, which is our Branded Growth Model. As a reminder, we start from a really fortuitous place where we've got a portfolio of brands which are in the U.K., really well known. They're market leaders in their core categories. They've got high household penetration, and there's a lot of emotional affinity between consumers and our brands. That on its own is not gonna give you growth. It's a question of then what do you do with them.
This second bucket is one of the key drivers of our growth, it's really how we work with consumers to understand what's happening in their lives, understand how they're shopping, understand how they're cooking at home, and understand how they're eating. Because it's understanding that that allows us to develop new products which really resonate with them in terms of lifestyle, it's one of the reasons we believe why we've got a significantly more successful rate of our innovation and our new products than the average of our category. It's a significant growth driver for the business. The third box there is we also work really hard to keep the brands top of mind, to keep them relevant and contemporary for our consumers through a series of marketing and advertising campaigns.
We work really hard on reinforcing that emotional engagement that consumers have got with the brands. The fourth box is our retail partnership, so really important is that we look to build strategic relationships with our retailers, where we work together to drive category growth. That tends to translate itself into something that's very beneficial for us, of course, because we tend to be the leader in our categories. It tends to be a big win-win. Some examples of that through the year, of course, you would be very surprised if we hadn't had a whole series of new products that we brought to market. There's really only a handful of the examples on this chart.
Starting with health and nutrition remains a key consumer trend as people try to eat just that little bit more healthily. We continue to bring new products to market that are really designed to help people with that journey. We've also continued to work on convenience. Remember, convenience isn't just about speed anymore, it's also about ease because one of the things that we see is we see a long-term decline in people's core cooking skills, so people not as able to cook from scratch as previous generations were, we're helping people with that journey. What is sometimes slightly counterintuitive given the strong health trend is there is still an indulgence trend as well.
We put this down to the fact that you're trying to eat healthily through most of the week, and it gets to Friday, and you feel like you deserve a bit of a treat. What we realize is that if when you do break out of that and you want that treat, you know, people will describe it as it's gotta be worth it. Having some really indulgent products that fit with that is also really part of the plan. We continue to support the key brands with TV campaigns, digital campaigns, and also now some poster sites as well. The real new thing has been the campaign we've called The Best Restaurant in Town.
This came about because what consumers were telling us is that they were looking for ways to make tasty, nutritious, but at the moment, particularly low cost meals at home. If you think about it, the cheapest way to eat is to cook for yourself at home. Were lacking ideas and inspiration. We put together a series of short videos, which obviously featured our brands, and helped you to make something which was kind of quite healthy and quite low cost. They were so popular. We got 30 million views of the full, video end to end, on the website, which quite surprised us actually. We've actually extended the campaign.
In quarter four, we put it on mainstream TV, we're now extending it with more recipe ideas featuring more of our brands. I think that's going to be ongoing part of our overall marketing campaign. In-store execution's really important, this goes back to those strategic partnerships with retailers. One of the things we've been doing actually over the last year is also then linking up with major gaming franchises. You might remember we did some Batchelors work with Call of Duty. This is actually movie franchises are featured here. We had Ambrosia and Angel Delight link in with the Minions franchise. There's an on-pack promotion there. You can win cinema tickets. We linked up with one retailer on this, it was exclusive.
In exchange, in that retailer, we've got these really big, dramatic, displays. Very similar thing on the right-hand side there with Batchelors, linking up with the new Shazam movie. When we have these big, dramatic displays in-store or in-store theater, as some people call it, we see really significant incremental volumes. You know, this is, this is actually really beneficial to the, to the brands. Now how's all that working in terms of the Branded Growth Model delivering in the U.K.? On the left-hand side there, that's our U.K. branded sales over the last five years, and you can see there's good, strong progress year after year. There's a, there's a peak there in the middle, of course, that was COVID when we were all cooking all our meals at home and desperately running out of ideas of things to cook.
You can see then of course, in the last year we've now surpassed that peak, and the three-year average growth rate is now at 5.3%. Working really well for us. Of course, that's all happening in quite a difficult macro environment as everybody's very aware. Quite incredible levels of food inflation as we've seen, and some changes in consumer spending patterns because obviously, you know, consumers haven't just got food inflation to deal with. They've also got their energy bills and a whole bunch of other challenges. We're seeing this now start to translate in some changes in consumer purchase dynamics. One of the things we're seeing is we're definitely seeing more people eating at home.
As I go back to, it's the cheapest way to eat, is to cook for yourself at home. We're also seeing some changes in what people are buying. We're seeing people buying more noodles, for example. We think that's because noodles are a really, you know, low cost way of creating a base for a meal that you can add vegetables or whatever to and turn into something quite tasty. How does that leave us and our brand portfolio in this environment? I think, you know, the evidence is that, you know, we're in a good place here. We start with those strong brands that everyone's got a strong affection for. That's always a good start point. Ultimately, if you think about it, our products are really still quite affordable.
They might be more expensive than they were, but they're actually quite low price in absolute terms. You know, a pack of Super Noodles, you know, it's still only GBP 1 even after it's increased in price. We've got a number of products that really help people to put those low cost meals together. I think that's why we've seen such a strong performance from our grocery business. I think it's also underpinning those strong market share gains that we've seen as well. Of course, you've got the Best Restaurant in Town campaign, which is really designed to help people put those low cost meals together. A difficult environment, but one I think that we've navigated well and one in which our brand portfolio is probably well-placed to deal with.
I'll move on to the second pillar. Obviously this is investing back into our infrastructure. We've still got a lot of projects, as Duncan says, with quite short payback periods of 3 - 4 years, that's one of the reasons why we're going to be diverting more cash into investment in some of those automation projects. A few examples here. In our Stoke bakery, we put a new depositor on the cake slicers line. If you don't know what that means, I don't blame you. Really, all we're saying it's something that actually increases the speed and the efficiency of the line. It means that there's more consistency in the product delivery for the consumer, ultimately it generates less waste. It's actually quite a big efficiency improvement as well as improving quality.
I've mentioned these other two at the half years, but the middle one is an automatic case packing machine, so it's taking the boxes of cakes and it's putting them in the case and sealing it automatically. On the right-hand side, that big yellow robotic arm is an automatic palletizer, so it's taking finished boxes of French Fancies and it's stacking them into a pallet configuration ready to be taken away on a truck to the warehouse. Really quite modular payback, you know, periods on some of these efficiency improvements. I'll move on to the third pillar. This is driving sales from those new categories. You might remember that we had a handful of experiments over on the left-hand side.
Things like Ambrosia, ready-to-eat porridge, the OXO rubs and marinades. OXO rubs and marinades is quite interesting because of course, OXO is largely a seasonal brand towards the winter. Actually having a presence in barbecue actually helps balance that out a little bit over the summer. We've got a number of our brands that we're experimenting with ice cream, so there's Angel Delight ice cream there. We've got the Cape spices and rubs. All of those are performing pretty well and we're continuing to drive all of them. The one standout I want to pull out is the Ambrosia porridge pots, because this has really just taken us by surprise on how successful it's been.
I think what we've hit on here is something which is unique. Like, there's no other product like it out there and which is consumer preferred, which is exactly where you want to be, isn't it? You've got a product that no one else is making and consumers prefer it. What's preferred about it and what's different? Well, it's ready to eat. It's not, like all the other products in the category are dried powders in a pot, and you have to add water or milk and then mix them and microwave them. This is ready to eat and it uses our skills in making ambient stable dairy products for custard and for rice pudding. It's not just a convenience benefit though for the consumers.
What people are telling us is that actually it tastes better, it's smoother and creamier because it's already made and hasn't just been made out of, out of a powder. We're seeing really positive consumer results on that. Really high online ratings, 4.5 out of five stars. You know, tracking the stars is really important these days. Very high levels for the early stages of this of repeat rates. Repeat rate of course, is someone who buys the product and then goes on to buy it again 'cause they liked it so much. What's quite different about this compared to most of the products in our range where people might come and buy back and buy most of our products a handful of times during the year.
The people who like this, we're hearing people are buying five a week because they're taking one to work with them every day. That's quite different for most of our brands. This chart on the right-hand side shows actually what happened to our market share so far. When we started the experiment, just in a few stores, we had a 1% market share. We're now up to almost a 6% market share. We're not in all the customers yet. We're still in rollout mode. The first customer where we launched, we're now up to a 12% market share. Significant increases and ongoing increases in market share in a category that's growing by 19%. We're really quite excited about this.
So much so that we're looking to put more capacity in for it 'cause we think this is a real winner. It's no longer, you know, considered as a test within the business. This is now a, you know, a full-on product range that we're rolling out. I'll move on to our international businesses. Sales up again, double digit, 10%. I think standout performance was Australia, where we delivered again, record market shares from our, from our cake business and Mr. Kipling in particular. I'm gonna come back to that in a moment. We're now also, of course, the market leader in Indian cooking sources in Australia, because we've got the Sharwood's brand and we've also acquired The Spice Tailor.
Ireland had a really good year with broad-based growth across the brands, but it was Soba that stood out. Since we launched Soba, a year or so ago in Ireland, sales have more than doubled. That's very much following in the footsteps of the success that we've had with Soba in the U.K. In the U.S., I'm sure you'll remember we were experimenting. We had a test of Mr Kipling in the Target brand of stores. We were in 221 of their stores. That test has concluded. We were super happy with the results. All the cakes that we had in Target performed in the top 50% of all the cakes that they sell.
We are now happy to go ahead, and we're talking to other retailers about expanding distribution into the U.S., which is quite an exciting prospect. Canada, low base, but we doubled the size of the Canadian business in the year. That was due to a couple of things. A significant amount of new distribution in Walmart Canada, for Sharwood's, and also continued strong growth of Mr Kipling as we roll the brand out more in Canada. If you look overall at what's happened to the international business since we put this strategy in place, we've seen a 46% growth in our revenues from overseas. As you know, our ambition is to actually make that international business several times the size it is now.
That, you know, is all going in the right direction. I said I'd come back and talk about Australia and Mr. Kipling. On the left-hand side there, that's the market share of Mr. Kipling in Australia from just after it launched. Increases in share every year. A big step up in financial year 2020. That's when we put the strategy in place, and a new high this year as well. I think the interesting thing here is we've now reached a certain critical mass in Australia that we're able to fully apply the U.K. Branded Growth Model to the market. We're bringing new products to market. We launched Lemon Bakewell Tarts in Australia this last year.
We're starting to get the same quality of display and in-store visibility in Australia that we also expect to get in the retailers in the U.K. This year, the year we're in now, we will turn on TV advertising for Mr. Kipling in Australia. We're now it's the full U.K. Branded Growth Model being implemented. Also quite interesting is when you then start to look at this not just as Australia, but actually as a proof point for the global rollout of Mr. Kipling. All the I've said this before. The research we've got says that in most developed cake markets, there's a good chance Mr. Kipling is going to work. This, for me, is, you know, the proof of the pudding of this actually starting to play out.
The interesting thing is the Australian cake market is worth about AUD 300 million, of which we've got about 10% with Mr. Kipling. The U.S. cake market is worth $5 billion. You can imagine if we get even remotely close to the success that we've had in Australia or in the U.S., it's quite transformational for us. The one thing you do need to bear in mind, of course, that the retail environment is very, very different. In Australia, the majority of the market is by two customers. Actually getting distribution is two conversations. The U.S. retail market is highly fragmented, so that same sort of level of distribution is hundreds and hundreds of conversations. It's clearly going to be a bit of a journey and take a bit of time.
Nevertheless, I take this as an interesting proof point of what might be possible as we start to roll the brand out globally. I'll move on to the final pillar. The final pillar, of course, is acquisitions. We bought The Spice Tailor in the year. We liked it because it was a brand of business. It had got already a high growth level. What we saw in it was a real opportunity to drive the business harder through the application of our Branded Growth Model. Through an innovation pipeline, because we could see in our mind's eye what we would be able to do with the brand from an innovation point of view, but also, leveraging our commercial relationships and the other brands that we've got.
I think the really exciting thing for us in it is that that's starting to play out already. Even though we've only owned the brand for a few months, we've seen the growth step up from 20%- 25%. Some examples of here of some of the things we've been doing. We've been getting more in-store promotional space and more shelf space. Particularly there, that example is where we've linked up The Spice Tailor with Sharwood's and Loyd Grossman to do a full cooking sauce type promotion. We're starting to see more distribution coming online. We've gained distribution in Tesco, in Morrisons. We've now got agreements to go into Ireland with Dunnes and Musgrave, so they'll come on stream during the summer. We've got into Walmart in Canada.
There'll be more of this to come as we talk to more retailers in the U.K. and also overseas. Also just coming to market are some new flavors of the traditional heartland of The Spice Tailor as we start to expand the brand further. Would be very surprised if I didn't soon, so a strong innovation pipeline for the year, increased market sites, and as Duncan says, an accelerated level of capital investment of particular things like ice cream, where we were in Iceland as part of an experiment early porridge because that's, as I say, no longer a test. That's actually United States following that successful test in Target. In Target, actually, we're already starting to put more flavors in.
That's a strawberries and clotted and that TV advertising as we fully adopt the Branded Growth Model in us in England. Sharwood's is still just about building distribution pillars. Where does that leave us? Look, I think we go into this year with a lot of positive momentum, plans in place on all of those strategic pillars. As Duncan said, we expect to make further good progress this year. Thank you very much. I think with that, here we go.
Firstly, can we just talk a little bit about pricing and volumes and just discuss a little bit about how volumes performed when you were putting through price increases, what that did to promotional activity. Now looking forward, you've obviously put through prices earlier this year. Are you now largely done on pricing and it's about driving volume growth?
No. Thanks, Charles. Yes. I think I'll do the second part first. I think we're pretty much done on pricing. We think what we're seeing is the commodity prices and things have peaked. The pricing that we put in place in our back end of our quarter four is designed to cover us for the rest of the year, at least until we review it again in quarter four. I think, you know, hopefully all things being equal, we should be done on price. Yeah, price volume elasticity is a really interesting topic, and I think we talked about this before, that when we put our prices up in the summer, obviously we saw an immediate, you know, price elasticity impact and volumes negatively impacted by that.
As each week went past, we started to see the volumes improve until they were getting pretty close back to where they were. Of course, we put our prices up again and the whole cycle starts again. You know, we're now obviously after the quarter four pricing, we're working through that same journey again. And that's helped by, frankly, that recovery is helped by a lot of those activities that we've put in place, particularly that focus on those enormous displays in-store and those link-ups with films and with gaming franchises and things, 'cause they really do help volume recovery.
Secondly, on the sweet treats, obviously the branded sales went backwards a bit. You had the issues with Cadbury. How much impact did that have on the sales, and what's your outlook for sweet treats' branded sales this year?
Sure. Mr. Kipling grew in the year, and it actually grew faster in the second half than in the first half. Really what you're seeing there is that decline was Cadbury and driven by that, you know, that sort of manufacturing maintenance that we had to do. Kipling actually had a really good Christmas. And it's also just had a really good coronation as well, because we did a load of special cake packs around the coronation. It seems to have done really well from that as well. Look, we'll keep driving the model, and we'll keep working on those big displays and new products, and we'll expect, you know, the brands to do well.
Last question, the grocery market share obviously moved forward really nicely.
Yeah.
Was that because you're taking shelf space, or is that greater sell through on the existing shelf space or a combination of the two?
It's all of the thing. I mean, it's Yes, that's true, but it's all the elements of the model. It's the innovation, it's the brand support. There's clearly some consumer trend towards some of our categories because of people trying to, you know, cook low cost meals at home. But I can't pull the elements out because it's just continuing to drive our brand. The growth model delivers market share growth. I think Martin was that. Then we'll go to you, Clive. Yeah.
Alex, thanks. The first question is a lot of talk in the media about greedflation and profiteering.
Yeah
are the two words that have suddenly sort of come from nowhere. You know, and... Sorry. Thank you. Sorry, the question was around greedflation and profiteering, to use the media parlance. It's good to hear you've got your pricing, but what is the risk of a sort of change in the retail climate? We've seen Morrisons taking the first sort of price cuts on bread and things recently. What's the risk that if the commodity environment changes, you're pushed into a lot of increased promotion, we get a sort of promotional zoo? I'm just sort of trying to tease out.
Mm.
-where the climate is going in retail. Just to follow up on Charles's question on market share, just a very simple one. Does the 64 basis points include the benefit of The Spice Tailor or is it pure despite The Spice Tailor? What an interesting concept that would-
That is, yeah. I'll have a think about it.
Current climate. The Spice Tailor, or is it purely like for like?
Yeah. Let's take the first one first. I mean, look, you know, we, you know, we've been really clear that the amount of pricing that we've passed on to our retailers is less than the amount of general commodity and energy inflation and things. We've managed that through our normal hedging strategies and long-term volume commitments with our supply base, so working with them to keep our costs low, and then the internal efficiencies and cost saving measures that we put in place. We've worked really hard to limit the amount of cost that we've passed through. I think, you know, maintaining margin, whilst that's really important to us, has been really helped by those cost savings.
In terms of how we see things playing out, I think, you know, I don't think we're gonna be looking for any more price this year. You know, if we, you know, if we'd got it right in the pricing that we've pulled through in Q4, then, you know, we should be, we should be done now, to be honest. I think what we're probably gonna see is we're gonna see some commodities come off and start to decrease in price. I don't think we're gonna ultimately see absolute deflation, given when I look at the ingredients that we put into our products, you know, we don't really have any single ingredient products, do we?
We have multiple ingredients and multiple packaging components, and a lot of that is still, I think going to stay higher than it was before. I don't think we're going to be in a deflationary position at all. You know, if we did have the opportunity to sharpen some of our promotional prices, we would look at that as we always do. We analyze these things to death and make sure that every activity that we do has got a good return on investment associated with it. The second question was about the market share growth.
Is it like for like or-
Is it like for like? With that, I think this includes The Spice Tailor, Richard. Is that correct? To be honest, its overall impact on our total market share is not particularly significant. Clive.
Yeah. Thank you. Clive Black from Shore Capital. As Charles says, good effort. Two questions. First one, around marketing, I know you may not wanna give numbers, but year-on-year, what sort of change was there in 2023 versus 2022? You said it, there was more marketing. Where do you see that going in terms of direction of travel or proportionality? Secondly, in terms of CapEx, this year, it looks like you're gonna be spending on the U.K. plant. When you talk about the American opportunity in cake or, indeed, Ambrosia's porridge, what sort of cape-capacity do you have? I mean, are we looking at something much more significant in CapEx in the medium term to meet those market potentials, if that makes sense?
Yeah, sure. Let me take the CapEx question first. You know, as I say, a lot of that is all sitting behind our efficiency improvements and NPD capabilities, as we talked about. If I look specifically at U.S. cake, if we were to be really successful on the top end of our expectations, we would need more capacity. You know, it's probably some years down the line, but I think you'd be at a point there, well, certainly 'cause we've done the math, you know. You'd be at a point where you would have created a U.S. business that was so big, the cost of putting an extra production line in place would really not be, you know, not be a worry at that, at that point. We would probably look to site that in North America somewhere.
This is all very hypothetical at the moment. We're in 200 stores, so let's not get too carried away. Yeah, it's all manageable. Porridge, I think, you know, we're okay from a capacity point of view for the U.K. market, but we think we've got aspirations to roll that out into other countries. We're starting to think about what that would mean in terms of capacity requirements and how we'd go about putting that capacity in place. Not particularly significant in the grand scheme of things. Don't you want to add anything to that, Duncan?
I think that's well done. Yeah.
Yeah. Sorry.
Just to follow on then, in terms of your M&A, will that remain like the U.K. focus from what you've just said, or could you look at bolt-on acquisitions that actually involve a brand that's not U.K. based?
Yeah, it's not impossible. It's not impossible. I think, you know, The first and most important thing is if we apply our Branded Growth Model, will this brand deliver better performance? The obvious place to look is categories in the U.K. where we don't have presence, because then that's all white space. But another opportunity would be what we might call fill-in acquisitions, i.e., buying our way into the categories where we've got expertise in the U.K. in another market. That would definitely be on the horizon scan, I would suggest.
I think just building on that, I think it'll be, you know, if it's a market outside the U.K., it's more than likely to be a market that we are already in outside the U.K., or clearly anything else would be a bit, you know, a bit too much risk. Yeah.
Damian McNeela from Numis. Perhaps a question for Duncan. Just you sort of mentioned that your aspiration is to sort of neutralize the pension in around three years. What are the sort of moving parts that could make that sort of quicker or longer, please?
Yeah, sure. I mean, look, I mean, I guess when we set out at the time of the merger 3 years ago in terms of how we want to play out, in terms of recapping why we did what we did, it was all about harnessing the strength of the RHM scheme, which has always been in a pretty good position. The Premier Foods scheme has always, you know, struggled a bit in terms of pretty high deficits, and obviously that's where, that's where our cash goes. You know, the dream and the ambition is that the RHM went from a, you know, deficit on a buyout basis to neutral and then into surplus. Clearly that creates the sort of firepower to be able to fund within this trust that we've set up to fund the Premier Foods scheme.
That's, that was what, that was the vision when we set it out three years ago. I think what's really pleasing now is the RHM scheme is starting in a surplus on a buyout basis. Now it's about GBP 100 million, which is brilliant. We need that to grow. It has, you know, it has, like, but we now have a surplus, whereas we used to have a deficit, so we need the RHM scheme to continue to do what it's doing.
I think what's been particularly pleasing, Damian, is the performance of the Premier Foods scheme under its own steam and under the new, you know, under the new stewardship of the trustee group who've been running it since the merger, through investment strategy, through benefiting from some of the, you know, assets that used to be in the RHM scheme. It's been working well, that's been doing probably better under its own steam than we expect. That's, you know, I think from a, from an NPV, from a valuation perspective, that's best part of GBP 200 million lower than it was at the beginning of the merger. We sort of need both of those things to combine. We need continued improvement in the Premier Foods scheme.
We need the RHM scheme, you know, from an asset return perspective, to continue to build the surplus. Then we'll get to a point where the surplus is big enough to plug the complete hole in the Premier Food section, which will be when we, you know, when the scheme will start to be, you know, less or not reliant on the company at all. That's the point at which we'll be able to turn off contributions.
Thank you.
Matthew Webb from Investec. I wonder if you could just offer a bit of guidance on the margin on sweet treats. Obviously down 280 basis points in this period, which, if I understand it correctly, was primarily a mix effect with the very strong growth of non-branded. I see that you exited, well, Q4 non-branded growth up over 60%. Presumably there'll be further mix shift towards the non-branded in the year to come. Should I also note that you commented that although the margin was down year-on-year, it was still up versus two years ago.
Yeah.
Are you effectively trying to sort of guide us that there's potentially a little bit further margin attrition to come there?
Well, I think, no, I think what's happened this year, you know, it's probably more about the manufacturing interruption that we had during our quarter three. Clearly, if we're unable to produce, we've got a lot of a lot of factory costs that we're still incurring without the benefit of the volume. I think that that's really the driver behind the margin reduction year-over-year. Clearly, there's probably a bit of mix in there just the way it's grown. you know, a lot of that is new contract wins, which will start to cycle as we go into this year. I wouldn't see the mix in sweet treats as being a particular drag factor.
Clearly, we will be cycling the manufacturing interruption that we had during the second half of the year. I think I'd probably, you know, probably clearly we are always looking to move these things on. I think as we said, you know, we're looking to build volumes in the sweet treats business. Hard to build them back now following the, you know, following the pricing that we've put through. I'd expect to probably see a steadily improving trend through the year, particularly in the second half.
Also just to follow on from that, I mean, the obviously the U.S. has gone very well, which is great news. In terms of the investment that'll be required to move that on to the next level, is that something that you'd expect to be a little bit of a drag on the margin for the next 12 months?
No, yeah, it's a really good question. I mean, I guess starting off, the international business is profitable, and it's always been profitable. That's probably you know, that's probably point number one. It isn't a drag. From a margin perspective, you get slightly different dynamics because in the U.K., you get highly promoted. You know, we're in a highly promotional environment, and, you know, our customers are sort of next door. You know, in the U.S. and overseas, you get less promotional activity, but it costs us a bit more to sort of get it there. From a margin perspective, even high up the P&L international is in line with our grocery business pretty much. No. I think in terms, it is making profit.
I mean, it's mainly. The investment at the moment is mainly in, you know, people to sort of drive the growth. I think to Alex's point earlier, you know, if we get to a position where we're talking about investment from a capacity perspective, we'll be absolutely delighted 'cause that would be a great decision to have.
Yeah. Sorry, just final one from me. Are there circumstances in which you might subcontract your manufacturing into the U.S., you know, rather than going from, you know, straight from export to having your own-?
Highly unlikely.
local capacity?
Highly unlikely because we believe we've got some proprietary capability in the way in which we manufacture our cake. That's why they're quite different and I would say better than what you might buy elsewhere. That's part of the uniqueness of the brand, so we'll not want to give that expertise away. We would put our own kit in place and have our own people run it.
Thank you very much.
Sorry, couple of follow-ups. Just given the debate we've had on pensions, what's the likely future of the dividend match payment? Anything you can say on that? Secondly, what was it? I've forgotten what I was gonna ask. Never mind. Okay.
Why don't I start answering the first question, Martin?
Yeah.
If you remember...
Yeah, yeah.
If you remember, feel free to add on the end. Yeah, look, I think dividend match contribution, I mean, it's been in place for quite some time now. You know, it's in place, you know, all the contributions and dividend matched by sort of definition are in place until the next valuation. You know, there's a next valuation at March 25, so that will be the point at which we discuss everything again.
Thank you. The second one was as we think about the trading profit line for 2024, obviously the big issue is pricing versus your input cost position, which I won't ask you, but any obvious moving parts you should be cognizant of? I think Knighton is profit accretive, isn't it, on the trading profit line? You know, just anything else you wanna call out in terms of thinking about trading profit in 2024?
I mean, I think, you know, we see the slight beat that we've announced today as probably being our new base for growth into next year. You probably wanna think about that. I mean, Knighton, once it's fully cycled through, might add a small amount to profit, but I wouldn't expect anything during this year.
This year will be mainly, you know, it will take the best part of the year to fully close it and to fully realize the benefits. That's probably it. You know, we're clearly focused continuing on growing the top line and continuing to invest behind our brands.
Good. Any more or are we done? Going once. Going... Oh, yeah. No, hang on. We have a taker.
Just quickly, Alex. Sorry, Andrew Ford from Peel Hunt. Just quickly on M&A, you mentioned there's some category gaps potentially in the U.K. Has the success of some of your new products changed the way in which you're looking at those category gaps, and can you bridge that more yourself and now you're focusing a bit more on those regional targets? Has it not really changed at all, though some things are just unbridgeable with your current brand portfolio?
Yeah. I think the last thing you said is actually the key here. When we look at any category, we ask ourselves a couple of things. One, is this something we can do organically ourselves because we've got a great brand that's gonna translate really well into that category and is likely to be really successful? Or is there a brand out there which we could acquire, which will do a much better job? There are some categories where it's obvious we do it organically. There are some categories where you could do either, if the right brand was out there and it was available. There are some categories where, being honest, our brands just would not stretch, and therefore you'd be entirely reliant on buying in a brand.
You know, that would be based on a brand being available that was suitable. Yeah, it's a good question, and that's exactly how the lens we look at new category expansion through is what can we do, what can't we do, and therefore where are we better off looking at, you know, acquisition.
Thanks.
Good. That probably is it this time. Thanks very much, everybody. Thank you.
Thanks.