Premier Foods plc (PFD) Q1 2022 Earnings Call Transcript

Premier Foods plc (OTC:PFD) Q1 2022 earnings call dated Jul. 23, 2021.

Corporate Participants:

Alex Whitehouse — Chief Executive Officer

Duncan Leggett — Chief Financial Officer

Analysts:

Charles Hall — Peel Hunt — Analyst

Martin Deboo — Jefferies — Analyst

Nicola Mallard — Investec — Analyst

Doriana Russo — HSBC — Analyst

Darren Shirley — Shore Capital — Analyst

Clive Black — Shore Capital Markets — Analyst

Bodlen — — Analyst

Presentation:

Operator

Good day. Thank you for standing by. Welcome to the Premier Foods Quarter One Trading Update Analyst Conference Call.

[Operator Instructions] And I would now like to turn the conference over to your first speaker today, Mr. Alex Whitehouse. Thank you. Please go ahead.

Alex Whitehouse — Chief Executive Officer

Thank you and good morning, everybody and thanks for joining this quarter one trading update call that covers the 13 weeks to the 3rd of July and 2021. So I’ll give a brief introduction to our first quarter trading before opening up the call to questions. And I’m joined of course this morning as always by Duncan Leggett, our CFO. So I’ll start by giving a few headlines on our trading in the quarter. I’ll then dive into a few key areas to provide a little bit more detail. And then I’ll hand over to Duncan, who can give you a brief reminder of the refinancing that we completed in the quarter as well. And then as usual, let’s — will pass it to question.

As a reminder by the way, today, we’re also holding our AGM and that is at 11:00 AM and we’ll be holding that virtually again this year. So if any shareholders on the call who would like to attend, and Duncan has the details, please do contact Richard Godden, the Investor Relations for details on how to attend this year’s meeting. So, then to the quarter one results. And overall, I’m really pleased to say that we’ve had an encouraging start to the year. We’ve carried on the trading momentum from last year into the first quarter and that is combined with the significantly reduced interest costs means that we’re now seeing our adjusted PBT and to be at the top end of our expectations to this financial year.

Now, when we spoke back in May, we set out a couple of things in terms of how we’ll be measuring our progress this year and I think, first of all, and given the exceptional circumstances this time last year when the UK was in that first and quite strict national lockdown during the quarter and our volumes were equally exceptional, particularly in our grocery business, so we said it would be sensible and appropriate to review our sales performance this year compared to two years ago as well as compared to one year ago.

So for this quarter that means we’re comparing against the quarter to the end of June 2019. And also, if you remember, we provided better range of where we expected our Q1 sales were likely to land and that range was between 5% and 6% growth compared to a couple of years ago. And so we’re very pleased therefore that we’ve come in at the top end of that range with growth of 6.3% compared to the same quarter, two years ago for the total growth. And when we look at our retail grocery sales and by that I mean if we exclude the out-of-home channels and then these were up 13% during the same period, which compares quite favorably, I think to have our retail partners have performed over a similar timeframe.

But for me most importantly is our branded sales, and our branded sales have performed really strongly up 9.3% on a two-year basis. And when you look at our grocery business, branded sales were up 12% versus two years ago. So essentially, the equivalent of two years of 6% back to back growth which is clearly well ahead of the historical growth rates of our categories. Now obviously that strong branded sales performance is a direct result of us continuing to deploy our branded growth model and that remains at the heart of what we’re doing. And so, as a reminder, of course, we start with a portfolio of brands, which are — are leaders in their categories and with very high household penetration, and we can bring to market insightful new products, which is based on the current consumer needs and trends. And we support all major brands with emotionally engaging and meaningful marketing and TV advertising campaigns.

And then finally, very importantly, we work closely in partnership with our key retail partners and delivering an excellent in-store execution to the brands. And so during the quarter therefore, we continue to execute the growth level and with pace and with energy and three of our major brands Sharwood’s, Mr Kipling and Batchelors received advertising during the quarter. And again we brought a number of new products to market. In fact you might remember that due to the challenges of COVID last year, there were delays to many of the retailer’s range reviews and the range reviews, obviously, those are the windows where we get our new products listed into store and that resulted in some delays in the introduction of some of our new products on last year.

So, I’m pleased to say those retailer range reviews are now taking place and we’ve seen some really very positive outcomes for our brands into the distribution of our brands with much of the delayed, new product from last year [Phonetic] now coming through into store. And in fact, we’ve seen a rapid step-up in the percentage of sales that we derive from new products, which for the quarter was well ahead of how we ended last year. I mean the — how we ended the year before. So that’s been all very positive. And as a result of the latter, we continued therefore to perform ahead of the market in the quarter increasing our volume share versus last year.

If we look at the brands that saw the strongest two-year growth in the quarter. And there weren’t quite a large number of them actually but in particular, I’d call out Sharwood’s, Ambrosia, Bisto, Oxo and Paxo and all these brands grew in double-digit percentages compared to two years ago. And when you think again about the average set of growth rates over a longer period of time, they’re clearly very strong performances. And additionally, all these five brands had higher household penetration than the same period in 2019, which demonstrates clearly that some of those new consumers who tried our brands last year during lockdowns are continuing to buy them again this year.

In terms of some individual performances, I’d call out Sharwood’s. Sharwood’s was again a standout performer for us in the quarter. And sales were up 25% compared to the same period in 2019 and Sharwood’s received further TV support in Q1 and that was a continuation of the new — the new TV campaign we started at the end of last year and we also launched, of course, sort of new products that have included vegan versions of our Korma and Tikka Masala cooking sauces and that as we extend our plant based eating options across the business. And another brand that had an excellent quarter one was Nissin noodles and when we took on the distribution of Nissin products over three years ago, sales were pretty modest. But since then we’ve taken this premium authentic Nissin brand and with the strength of our retail customer partnerships, we’ve built it into the clear leader in premium cup noodles in the UK with now almost GBP20 million of annual retail sales value.

And sales over the last two years went up a very significant 168% and grew 30% compared to last year. And if we move on to Sweet Treats, now Sweet Treats we experienced very different trends to what we saw in grocery categories over the last year. So, consumer patterns in buying cake was not as heavily impacted during the lockdown restrictions. And so, accordingly we do not see the exceptional volumes in cake at this time of — at this time last year, like we did in our grocery categories. And so in the first quarter, this year, branded Sweet Treats were actually up by 3.2% versus year ago and that been driven by Mr Kipling, which had a very strong start at 7.5% growth in the quarter. And that’s coming from things like the low sugar options such as the 30% less sugar Angel and Lemon Slices and further success from the new premium range of Mr Kipling signature range.

In terms of key consumer trends we are seeing and obviously we are seeing people transitioning back towards eating at home more than they were earlier in the year and we’re also seeing — people trying to maintain some of the good habits that they picked up last year and I’m particularly talking them about eating more healthily and most consumers are also telling us they still want to try and hold on to the enjoyment they get from cooking at home and eating around the table together as a family.

And if we move on to the online channel, and by that again, I mean sales that we make via our retail partner’s online platforms. I know we’re all aware that this channel saw a very significant growth last year and with lots people moved to shopping for their groceries online during the most of the pandemic, and you might remember that following the great deal of effort we’ve been putting into developing our business in this channel for a few years now, and then the last year when that category — when the channel went through that incredible growth phase, we were able to grow even faster on the channel and increase our online market share.

And so now, I would expect that as we start to anniversary that period from last year, what we’re seeing is that most of the people who moved to buying their groceries online last year are sticking with it. And so our business through the online channels is nearly double than the level it was two years ago and that’s in line with the market.

And we’re also now providing our consumers with a range of healthier options to choose from is very much core to our strategy and healthy nutrition is incredibly important to us and we’ve been doing a lot of work over a number of years now to bring more healthier ranges to market for our consumers and so I’m particularly pleased to see that our healthy option ranges in the quarter grew by twice the rate of our branded portfolio versus two years ago. So that includes products like our healthy cooking sauces, things like the Sharwood’s 30% less fat, Korma and Madras sauces and things like Loyd Grossman no added sugar bolognese sauces.

If we move now on to our International business and you would remember that this is a key strategic growth pillar for the Group looking forward, that enjoyed a very strong year last year with growth of 23%. But I’m pleased to say, we’ve carried that momentum forward into the current year and with sales on a two-year basis, up 17% in the quarter and holding on to all the guidance that it made last year.

And I talked before about our strategy for our overseas businesses, which is focused on building sustainable profitable businesses of scale and in selected markets and we’re doing this by applying the same proven branded growth model that we’ve got in the UK, but adapting it then to the local market conditions and environment.

So for example in Ireland, where we’ve always got an established business, we’re launching a series of new products that have already been successful in the UK, so things like the Bisto, southern style gravy or the Oxo meat-free stock cubes and the Mr Kipling signature range of premium cakes. And we will also be supporting our brands in Ireland with advertising again later this year. So that’s for the second year running. And this approach in Ireland has led to our biggest brands in Ireland, Bisto, Sharwood’s and Mr Kipling, all increasing their market shares over the last 12 weeks and Bisto sales in fact were up by a very stronger 11% year-on-year and also it took a 180 basis points of share, so it was pretty clear to us that adopting that same brand building strategy in Ireland is now starting to work really well for us.

And we’ve also expanded our category presence in Ireland through entering both the quick meals, snacks and soups category and also home baking and these are categories where we have not historically been present in Ireland. So, and it represents whitespace for us. And then in Australia, Mr Kipling and Cadbury cakes, which are the market leaders of branded cake in Australia both delivered double-digit sales growth compared to last year.

Now, one of the key markets we’re looking to expand the business in is North America and we previously mentioned that we’ve been running the trial to Mr Kipling in Canada and that’s given us some really promising results. We’re making some tweaks to the model based on what we’ve learned and then we’ll move to a full national rollout in the second half of this financial year.

And then looking to the USA is clearly a much bigger market than Canada, we’re continuing to work with our partner, Weston Foods and preparing a similar launch of Mr Kipling into the US market and we will have the benefit of course of taking some of the learnings from that Canadian trial forward into our US model.

Now, another of our strategic growth pillars is taking the brand building capabilities that we’ve demonstrated in our core categories in the UK and expanding into new categories. And so we already have five — four sorry, four live initiatives in markets that take us out of our traditional categories and into what I would describe as logical adjacent categories and in fact, these have already delivered over GBP6 million of sales in the last 12 months in what perhaps are the early stages of this strategy and in most cases this involves utilizing the strong brand equities that we’ve got available to us in our portfolio and expanding their presence into those adjacent categories.

So for example, we’ve launched Mr Kipling and Cadbury into baking mixes of some very logical extensions of leading cake brands in cake baking mixes as well. We’ve also introduced a range of Rubs and Marinades under the Oxo brand and we brought Cape Herb & Spice to market, so again this white space category for us in the UK, and there are further initiatives in the pipeline for the second half of the year and that also includes a significant expansion in our plant-based offerings.

Now, I’d just like to touch quickly on non-branded sales. And so overall revenues were 10.9% lower than two years ago, but there are a few moving parts going on in here, so in the grocery business, sales were down 10.1% compared to two years ago and that was due to declines in our business to business volumes, that supply out of home eating, so you know unsurprisingly about down versus two years ago, but promisingly now starting to recover versus year ago.

I should also point out that this was partially offset by stronger demand for the non-branded grocery products that we sell into our retail customers, which in fact were up just over 10% over the same time period. And then in Sweet Treats non-branded sales were down 14.9% and that’s due to the rollover impact of low margin contract exits, which were, you might remember decisions that we took last year.

So with that being a review of the first quarter’s trading, I will pass over now to Duncan to cover the refinancings that we completed in the quarter.

Duncan Leggett — Chief Financial Officer

Thanks, Alex. Good morning, everyone. So just to remind that when we announced our full year results back in May, we announced the new revolving credit facility that’s GBP175 million with a new refreshed bank group which we think is best place to support us to the quarter through the next phase of our strategy. That matures in 2024 and its got two, one-year extension options beyond that. We also announced issuance of new bonds.

The process is really strong and actually — we actually chose to upsize the size of the bond to GBP330 million and following lines that are being two upgrades from credit ratings agencies in nine months, which is really strong recognition of our progress and our strong financial results. We price them at 3.5%, which we think is a great result and one frankly that we’re very pleased with.

And then if you take the GBP300 million of fixed rate note which were priced at 6.25%. So, significant improvement on interest and with bond refinancing together with the retiring of the final GBP20 million of the GBP210 million floating rate notes will reduce our interest cost by nearly half compared to two years ago. And this was the key part of our expectations for adjusted PBT this year.

So that’s brief overview, I’ll hand back to Alex to wrap up.

Alex Whitehouse — Chief Executive Officer

Thank you, Duncan. And so to wrap up, really, we’ve made a very encouraging start to the year and particularly in our branded business. And I will also say now that quarter two is also off to a good start. So looking forward to the rest of the year and, as you’d expect, we will be bringing further new products to market and as last year supporting in total six of our key brands with advertising in the UK along with Mr Kipling and Bisto in Ireland, and we’ll also continue to focus on building our overseas businesses and expanding our UK presence into new categories. So I think, given the encouraging start to the year that the strong plans that we know we got in place and as Duncan mentioned, the significantly lower interest cost compared to last year, that means that we’re now seeing adjusted PBT at the top end of our expectations for this financial year.

So thank you for your time, I will now pass back to the operator and we’d be very happy to take your questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And your first question comes from the line of Charles Hall from Peel Hunt. Your line is now open.

Charles Hall — Peel Hunt — Analyst

Good morning, everyone.

Alex Whitehouse — Chief Executive Officer

Hi, Charles, good morning.

Charles Hall — Peel Hunt — Analyst

Obviously a really good start to the year with that 6.3% growth. Does that give you some confidence for the run rate for the remainder of the year. And is that sort of a good target level of growth that you might expect as we go through the quarters, that’s the first question. And secondly, obviously there is much more chat about inflation in the market, as well as labor shortages, do you want to just give your experience to date and how that might be impacting on margins or otherwise?

Alex Whitehouse — Chief Executive Officer

Yeah, sure. Thanks, Charles. So, look I think run rate, yes, you know we’re really pleased to have seen — it’s obviously a transitional quarter was net people returning to have to cope — returning to have anything and just don’t see to see how that settles down in the quarter. It played out in a pretty much exactly as we model little better as you’ve seen in the sense that we came out at the top end of where we expected to be, so that’s what’s giving us the confidence for the rest of the year. I think specifically looking at quarter two, given we’ve seen the start of that, I would say that we would expect quarter two trading fee and upside of 5% to 6% range and that we gave guidance for Q1. That’s as far as I probably want to look out at this moment.

And in terms of inflation, we’re in a very similar position to we were when we last talked about this that, I think we’re seeing low single-to-mid and single-digit input cost inflation and that’s in line with our expectations coming into the financial year. And so as a consequence, our plans that we put in place for the year are dealing with that. So it’s a combination of three things really, hedging and price increases that we already booked through to the market at the beginning of the calendar year and then internal cost saving measures. So you know I would say this and they will do no real new news there for us, and we’re quite comfortable that we’ve got it covered.

Charles Hall — Peel Hunt — Analyst

That’s helpful, thanks. And Just sticking on the sales line, obviously you gained share in every category last — in the quarter and last year, so that’s been really impressive. And maybe that was a bit helped by the pandemic and focus on the leading brands, do you want to just comment on what’s happening now with range reviews happening, new product launches, is that meaning that you will actually get to be able to grow on your existing position or may you have to give up a bit of shelf space to new competitors?

Alex Whitehouse — Chief Executive Officer

Thanks. Well, you know, I think the first thing to say, I’ll reiterate one of the comments I made earlier, is that rent reviews are happening now. We’re very happy with the outcomes that we’re seeing, they’re very positive for us and I think that’s in two respects. One is, the sort of new product pipeline that we built up during last year, not all of which make it to market for the pandemic reasons that we talked about and of course this year’s new products are all now going out the door and — and landing, we seem to be doing very well out of that in terms of initial distribution.

And then also as retailers look to optimize their range, we tend to be net beneficiaries of that. So as shelf space is given to the best selling SKUs in the category in order to make sure that they don’t run out of stock on a heavily shopped Saturday afternoon and that often means that more shelf space goes to our brands, because often we’re the — we’re the leader in the category and we often have the best selling SKUs. So net-net, we come out of these things and we are doing now in a positive position.

Charles Hall — Peel Hunt — Analyst

Makes sense. Thanks, Alex.

Operator

Thank you. And your next question comes from the line of Martin Deboo from Jefferies. Your line is now open.

Martin Deboo — Jefferies — Analyst

Yes, morning, everybody. Martin Deboo at Jefferies. I have similar questions to Charles. I won’t repeat them. Let me answer another — let me ask another one which is much more general reflect — trading is going well. So you’ve given us the luxury of just sort of looking a bit longer term, with the

Cash flow envelope now so much more relaxed, if I could use that word, obviously, we will push too hard on what you’re going to do an M&A and I’m not going to repeat that this morning.

But another potential avenue is, are there any bigger scale capital projects you would now be tempted to undertake, that will be transformational to the business either in top line or bottom line? In other words — in other words, organic expansion rather than more obvious one of M&A, because the problem going back five years was, you were just so cash constrained, you could only accept short payback projects, is that thinking, changing and evolving?

Alex Whitehouse — Chief Executive Officer

I mean it is not. I think one of the key things disclosed is actually investing back into our manufacturing infrastructure. So we run a pretty tight ship when it comes to capital investment buckets infrastructure and every year we sit and look at the list of projects, which go across three buckets really, so one is investing is the new capabilities for new products. Because obviously new products, new products are the lifeline of our growth strategy and network infrastructure maintenance. And then also cost reduction and efficiency improvement. And I think whilst interesting on particularly on the cost reduction and stroke efficiency improvement, is that for each of our manufacturing sites, we looked at the list and then draw the line and the line is driven really where the — where our cash and capital envelope has allowed us to do, as opposed to where the paybacks have attracted. So, what this means ultimately is that we can go further down the list. I don’t know Duncan, you want to talk more about capital allocation?

Duncan Leggett — Chief Financial Officer

Well, yeah, I mean obviously capex is a big part of it, Martin, as you rightly point out, as we’ve talked about before, obviously dividend plans very progressive and of the bolt-on M&A, which we look forward to sharing more thoughts on as we progress down the line, but I think Alex’s point on — on the capex is a really good one. And I guess your point, are there any big transformation ones, I think very much — very much further down the — the list of project that we’ve already gotten is quite some interesting technology around making countries greener, etc. that will, as you will see on the table as part of that.

Martin Deboo — Jefferies — Analyst

Okay, thank you.

Operator

Thank you. Your next question comes from the line of Nicola Mallard from Investec. Your line is now open.

Nicola Mallard — Investec — Analyst

Hi, good morning. Couple of questions really around labor, sort of Charles had touched on it and you covered it off with the general inflation comment, but obviously with the pandemic, as they’re now calling it. Is that an issue for you? I know you’re less labor intensive than some of our companies that we follow. So that’s one. But also I suppose with COVID costs, I mean are you now starting to take some of those additional practices in cost out of the factory or are you going to wait until later in the year?

Alex Whitehouse — Chief Executive Officer

Good morning, Nicola. Thank you, for that. Actually, yes. So, labor, I think particularly with reference to the pandemic, we of course have seen an increase in the number of people surviving I think over the last few weeks, just as everybody and everybody have. So to be honest, it’s tailed off a bit in the last week. So we have seen rates actually pull slightly in the last week. But we’re obviously quite heartened by the announcement from the government this morning, which does look as though there will be some room for us to make some changes there. But absentees is certainly well within what we saw last year and that we’re well within our proven capability to manage it. So it’s certainly not pricing is a specific issue about the site, we’re quite — we’re welcoming the news from this morning.

In terms of COVID costs, so I think we took out measures, so the — the distancing measures, the hygiene measures that we put in place last year, they all remain and we’ve made no changes. And we’ve got no immediate plans to make any changes. And that’s because we still think it’s the right thing to do to keep our colleagues safe and also from a business continuity point of view. In terms of costs, the biggest costs for us last year was essentially with labor, with assets and absence levels are, as I say, below year ago and we expect them to reduce ultimately as we go through the year. So that obviously is therefore a net reduction versus year-ago quarters, and not as bad.

Nicola Mallard — Investec — Analyst

Thank you very much.

Operator

Thank you. And the next question comes from the line of the Doriana Russo from HSBC. Your line is now open.

Doriana Russo — HSBC — Analyst

Thank you very much. Good morning, everyone. I just wanted to go back to your comments on current trading for Q2, you said that the spending in the same direction as Q1, so ending it’s a plus 6% year-on-year. I was wondering if you can make any comments on whether, during the course of Q1, you have seen any changes versus two years ago? So have you observed a consistent 6% increase, or is that changing, especially since the out-of-home trade channel is completely reopened? And my second question goes back to your new product launches, you said that there was an acceleration this year versus last year. So, can you give us a sense of how much sales from new products have been sold this year versus two years ago, please?

Alex Whitehouse — Chief Executive Officer

Hi, morning. Thank you. Yes. So, I mean if you look at the shape of Q1, I mean, clearly you would see people starting to return to eating out of — out of home, but it did happen quite quickly and I think once restrictions were removed, people were pretty, pretty desperate to get out and about. So I think you can think about the implications of that. But frankly outside of fluctuations across the — across the quarter we’re pretty slow, but obviously we don’t release individual numbers. But certainly what you — what we’re going to — what we are saying is that we’re comfortable with the run rate, and that’s why we’re saying that we expect to be in the same 5% to 6% range for Q2.

Sales from new products. So on a quarterly basis, it’s not number we would normally — normally talk about, but certainly the ratio of sales from new products is — is it really picked up very strongly in quarter one. And as I said it’s ahead of where we ended last year and it’s actually ahead of where we ended the year before as well, which in a pre-pandemic. So we’re really very pleased with the direction of travel and as I say, I think it’s largely linked to the of those range reviews and out and are happening, so we would, we expected to make good progress on our sales from new products this year.

Doriana Russo — HSBC — Analyst

Okay, thank you.

Operator

Thank you. And your next question comes from the line of Darren Shirley from Shore Capital. Your line is now open.

Darren Shirley — Shore Capital — Analyst

Thank you and good morning, gents. Good morning, everyone. A couple from me if you don’t mind. Firstly, on the pension, I think we’ve done about 15 months of away now from sort of your pension announcement in April last year. I mean is there any color you can give us on sort of progress? Can you confirm you’re sort of broadly on track with the guidance that you gave at that time? And then, are there any sort of stage post, we should be looking for over the next sort of 12 to 18 months in that process?

And then another one just on SKUs. I mean obviously when the COVID hit last year, we saw a lot of — a lot of SKU rationalization, basically retailers ensuring products were on the shelf, that would have brought some efficiencies, I would have thought. I mean, where are we now in terms of sort of SKU count, maybe relative to sort of pre-COVID levels, are we getting back to that sorts of the — that sort of ranges? Thank you.

Alex Whitehouse — Chief Executive Officer

I’ll let Duncan talk about pensions, that’s his specialty subject, and then I’ll pick up on the SKU.

Duncan Leggett — Chief Financial Officer

Good morning, Darren. Thanks for the questions. So, I mean on pensions that there is a lot of good progress we made by the trustees, and they are doing lots of good things behind the scenes, ranging from opportunistic why we got from the exercise that you might have read about in our — in our Annual Report, which reduces membership based in the Premier Foods scheme and also changes to the Premier Foods scheme investment trustees, which was always going to happen once the — the team that effectively run the RHM scheme got their hands around all three schemes.

So there has been changes to the Premier Foods investment trustee and in turn, we are targeting high returns from those assets as a result. So, as I said, lot of good things coming in terms of staging post. I think the main one is to try the evaluation next year. So that’s April 2022, there is a more technical evaluation in the Premier Foods sections going on at the moment, so that’s at March 21, that is a requirement of the merger and we know more about that in the autumn, but the main staging post will be next — will be next year.

So I think some — a lot of good progress they made, nothing suggests that what we said previously will change, but obviously, with pensions as we know there is a lot of factors that’s out of our control that we can’t have further visibility open putting in this of low, medium and high case that we announced set last year. Now hopefully that helps.

Darren Shirley — Shore Capital — Analyst

Yes. Thanks, Duncan.

Alex Whitehouse — Chief Executive Officer

Let’s say, Darren, coming to SKU count. So we — you’re absolutely right. When we were in the midst of course 1, course 2 last year where it was essentially all hands on deck from both those on the retailers just keeping — keeping cool lines on discounts, we gave in conjunction with our retailers, it will suspend some of our, you know, some of the more periphery SKUs, if you like, and to make sure the main ones were in stock. But actually that we do very quickly. So we never — they were never taken out the range, they were only sort of suspended and so quite quickly, I would say back end of quarter two, last year those products all sort of came back into, distribution. So they were never really removed from the range, they were just sort of put on hold, if that make sense.

Darren Shirley — Shore Capital — Analyst

Yeah. All clear, thank you. Cheer gents.

Alex Whitehouse — Chief Executive Officer

Thanks, Darren. Bye.

Operator

Thank you. And your next question comes from the line of Clive Black from Shore Capital Markets, your line is now open.

Clive Black — Shore Capital Markets — Analyst

Yeah. Thank you, good morning, guys. And well done on your Q1. Just a couple of quick ones from me. Firstly, can you give an indication of how you see the cost of advertising at the moment, is that something that is becoming a little bit more challenging. Now, we’re out of the range of lockdown one in particular. And secondly also, just any indication of where sustainability fits in with your Q2, H2 plan for this year, please. Thank you.

Duncan Leggett — Chief Financial Officer

Yeah, so morning, Clive. So cost of advertising, I mean, the first thing and you’ll be very well aware that as we went through, particularly the first half of last year, cost of advertising, you know, it was very low and we took full advantage of that and we actually increased our investment level as you will remember.

And we essentially got a double benefit because the cost was lower and the number of people watching at home was much higher, because frankly [Indecipherable]. So that benefit really was in the — mainly in the first half of last year, a bit into the second and we saw advertising costs normalize really at the back end of last year and that sort of where we are now really, so no real news of notes I don’t think in the area. Moving on to sustainability, again it’s a big question. So there are a number of key areas, here. I mean we’ve got as you’ll be aware, it’s in the — on report we’ve got five pillar of sustainability strategy and we continue to work on all those pillars and niche.

At this time, I will not go through them all now and all the different things we’re doing, but key — for those are things like packaging, focusing on encouraging consumers to eat more healthily and you’ve seen that in our NPD plants bringing more plant-based options, more low salt, low sugar, low fat products to market and that continues to be the key focus within our NPD pipeline and then there are number of other things we’re doing in terms of reducing our environmental footprint etc. But it would take a long time to go through them all, Clive.

Clive Black — Shore Capital Markets — Analyst

Okay, and just whether were there was any specific initiatives we should be looking out for in the next three to nine months, in that respect, just where we have a supplementary. Did you have any particularly strong views on Bumble Bee’s national food strategy has been good, bad or ugly for Premier Foods.

Alex Whitehouse — Chief Executive Officer

Well, I think we’ve been clear, you know for a long time. We fundamentally support the government’s intents and to encourage people to eat more healthily, and we think that as a major UK food manufacturer we got an important moral responsibility to — to help deliver that.

But I’d also point out to everybody as well that this is also a commercial opportunity for us because the success of the business over the last few years has been fundamentally based on the fact that we listen to our consumers and we provide new products that are in line with where they’re going, their cooking and eating trends and the single biggest trend in cooking and eating is people trying to eat more healthily, so by fulfilling our moral obligation to help people, we’re also actually delivering commercial benefit to the business. Because that’s what the consumer wants to hear from us. So it remains absolutely center stage for us as we go forward.

Clive Black — Shore Capital Markets — Analyst

Excellent. Thanks, very helpful. All the best.

Alex Whitehouse — Chief Executive Officer

Thanks.

Operator

Thank you. And your next question comes from the line of Bodlen [Phonetic]. Your line is now open.

Bodlen — — Analyst

Thank you. Good morning, Alex, Duncan. Thank you for the great trading update. I just got two questions. First one is, is there any progress on the bolt-on acquisitions. Rumors are that Unilever are looking to offload some savory brands. Is Premier looking to acquire say the Oxo — like to the Oxo brand in other countries so to Canada and South Africa. If this is available. And the second question is what is the cost of the refinancing, was it in line with the estimates? Or was there any improvements in the cost, thank you.

Alex Whitehouse — Chief Executive Officer

Thank you. So I didn’t catch that, can I just check, which institution do you represent?

Bodlen — — Analyst

Sorry, yeah, a Private Investor.

Alex Whitehouse — Chief Executive Officer

Okay, right. And so in terms of bolt-on acquisitions, I think we’ve been quite clear on this one. I mean the good news is that we are in a financial position that should the right bolt-on acquisition come along then it’s now something that we can entertain, which is clearly different from where we’ve been historically. There is nothing specific that I really wanting to talk about today, but I will remind everybody that fundamentally, we see ourselves as brand builders, our core skill set is how we build brands and generate value from brand, that’s how we made the business successful and turned it around.

And our core focus is on delivering brand both from our existing core business and from expanding into new categories which I talked about today and from expanding overseas, all deploying the same brand based principles. Now, if it made sense to acquire a brand, which gave us presence in additional category and particularly one that we felt we couldn’t do organically then that would make a lot of sense but there is nothing specific that I’m drawing on attention to at the moment. And Duncan, do you want to talk about cost of refi?

Duncan Leggett — Chief Financial Officer

Yeah, I mean we set out exactly refinancing cost in our guidance for the year at the prelims and there’s nothing to call out in terms of major differences there.

Bodlen — — Analyst

Thank you.

Operator

Thank you. And your next question comes from the line of Doriana Russo from HSBC.

Doriana Russo — HSBC — Analyst

Yes. So Doriana again, I just have a follow-up question. First of all, I wanted to understand a little bit better what’s your current take on your international strategy. There has been some mentioning earlier in the call in terms of moving into different categories. And I was wondering whether this is going to be like the wider strategy that you are going to look at in the future. And secondly, a question on the competitive environment, if you’ve seen post-pandemic.

As the market reopen, have you seen any of your previously player moving more aggressively into the categories or out of the categories and how are you looking at the private label participation within your key areas. If you can make a comment on those one too.

Alex Whitehouse — Chief Executive Officer

Yes. Very clear. Okay so our international strategy has not changed since we went through at prelims and we continue to vigorously execute that. I think your question might have been specifically about new categories, overseas. And I would point us to the fact that we would focus always first ongoing into categories where we already got expertise from the UK because if you think about it, it’s categories we know, we know how they work. We know the dynamics. We’ve already got the NPD pipeline.

So, our primary focus is taking our existing brands, our existing products into that focus list of new markets and essentially as I said earlier, using the same skills that we got in brand building but of course you then have to adapt to the local market environment, so I think by promotional techniques, we will change a little bit and price points will be different, etc.

So you have to adapt to the local environment, but the fundamental way in which one builds brands and generates brand value are fairly universal too, and that’s the skill set that we are deploying. In terms of competition, post pandemic, I would say, no real challenge to be honest with you. I mean, it’s — most of our categories were — all our core categories were strong market leaders well that always is a great advantage of course and then I think, specifically private label, I would say that — the dynamics are pretty much as they’ve been for the last few years.

And I think the key thing that brand owners always have to remember is your job is to stay ahead of private label, that means you’ve got to innovate, you’re obviously more in tune with where the consumers need to go in. And you’ve got to make sure that you are bringing a product that offers genuine benefits and value to the consumer.

And if you do that you will be successful, but as I say that’s fundamentally core to our model and fundamentally core to our say the business successful over the last two or three years. So I’d say, no change.

Doriana Russo — HSBC — Analyst

Okay. Sorry, but coming back to the international strategy, then did I understand correctly that you were opportunistically getting into cake baking and other adjacent categories that perhaps are not core for you in the UK.

Alex Whitehouse — Chief Executive Officer

Yes, that’s correct.

Doriana Russo — HSBC — Analyst

Okay. And was that just a business opportunity or is that more broadly the way you want to go about it in the future?

Alex Whitehouse — Chief Executive Officer

I think this is as we set out in prelims, so one of our core strategies is to expand into logical adjacent categories in particular where our existing brands have got relevant brand equity for consumers. So the example I gave earlier, it makes perfect sense doesn’t it if you’ve got the leading brand of cake in the UK to launch a home baking cake mix because it’s instantly credible to the consumer.

So that’s a very good example of where an adjacent category extension works really well. Likewise, we’ve launched Oxo rubs and marinades which gives us exposure to again another category and then in particular the barbeque foods and again Oxo is instantly credible when it comes to flavoring and seasoning product — their seasoning process.

So clearly, our extension makes perfect sense in terms of consumer accessibility. And so those are the things that we will look to do. Occasionally, where we think it might be beneficial, as we’ve done with Cape Herb & Spice, we brought in a new brand and that — a brand that we are distributing and that gives us presence in herbs and spices, where we historically have not be present. So again another example of white space, where it’s all on top for us in terms of growth.

Doriana Russo — HSBC — Analyst

Okay, excellent. I think I was trying to understand whether you might be doing the reverse and therefore if cake baking works internationally, you might bring that in the UK and likewise with some of the other example that you gave.

Alex Whitehouse — Chief Executive Officer

Yeah, sure. Well, we actually launched that in the UK first. So actually came into the UK just over a year ago, it’s done very well, and we’ve now extended into Ireland and it’s not entirely unreasonable to think we might do so in other market.

Doriana Russo — HSBC — Analyst

Okay, excellent. Thank you for claris on that.

Operator

Thank you. [Operator Instructions] There are no further question at this time, please continue.

Alex Whitehouse — Chief Executive Officer

I think that wraps everything up. Everybody, thank you very much for investing time with us again this morning. As you see, we’re feeling pretty, pretty confident and on the front foot, we’ve had a good start and it’s given us a lot of confidence for the rest of the year, but, thanks very much for your time.

Operator

[Operator Closing Remarks]