26 february 2020 siobhán talbot mark garvey · eps 88.10c; in line with guidance but below...
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Siobhán Talbot
Group Managing Director
Mark Garvey
Group Finance Director
26 February 2020
Glanbia plc FY 2019 Results2
This presentation contains forward-looking statements. These statements
have been made by the Directors in good faith based on the information
available to them up to the time of their approval of this presentation.
Due to the inherent uncertainties, including both economic and business
risk factors underlying such forward-looking information, actual results may
differ materially from those expressed or implied by these forward-looking
statements. The Directors undertake no obligation to update any forward-
looking statements contained in this presentation, whether as a result of
new information, future events, or otherwise.
Glanbia plc FY 2019 Results3
EPS 88.10c; in line with guidance but below ambition
Revenue growth driven by GN & acquisitions
Earnings impacted by challenges in GPN
Seeking authority for Share Buyback Programme
Full year dividend increased by 10%. Payout ratio 30%
Executing a clear strategy to address
GPN challenges, drive top & bottom
line momentum Operating cash conversion 86%
Continuing evolution of
GN Nutritional Solutions
through organic growth &
strategic acquisitions
Ongoing execution
Organisationalreview
Completed comprehensive
review of GPN strategy
across Brand, Geography
& Operational model
Regain growth momentum in GPN
4
Actions
Glanbia plc FY 2019 Results
JVs executing planned
strategy
Group-wide projects
initiated to target
productivity benefits from
leveraging scale
Series of initiatives
underway to deliver top-
line momentum & margin
improvement
Glanbia plc FY 2019 Results6
Revenue
€1,363.8m+11.0% cc
EBITA
€146.4m-19.6% cc
Growing consumer reach
Driven by
Slimfast
Margin
10.7%
-410 bps
Challenging year on organic revenue & EBITA margin
Revenue growth driven by Slimfast
Margin decline driven by mix and negative operating leverage due to lower LFL revenue
cc – Constant Currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial
Statements and Glossary
ON & Slimfast key platform
brands, 69% of branded
portfolio
Exiting US Contract business
Streamlining product portfolios
– SKU rationalisation
Refining approach to
innovation
Business re-organised
• NA Performance Nutrition
• NA Lifestyle
• International
• DTC
Talent investment across
the business
Detailed market-by-market
review completed
Responding to changing
market dynamics
Improving routes-to-market
in India & Brazil
Optimising the supply chain
7
Plan to drive revenue growth & margin improvement
Glanbia plc FY 2019 Results
Regaining growth momentum in the branded business
Targeting 200+ bps margin improvement by 2022
Brand Route-to-marketRe-organisation
NA – North America
DTC – Direct-to-Consumer
Glanbia plc FY 2019 Results8
GPN’s platform brands which are key category players
$655m brand - Globally
GPN’s platform Performance Nutrition
brand Globally
Key formats - RTM Protein & Energy
$325m brand – US & UK
GPN’s platform brand in US and UK
lifestyle nutrition
Key formats – RTD & RTE
Glanbia plc FY 2019 Results9
39% of total GPN sales (€538m)
ON key platform brand
ON consumption in 2019* mid-single digit growth
BSN & Isopure focused on specific channels & consumer segments
Positive pricing in H2
*NA measured channels captures 72% of total ON North America net sales
29% of total GPN sales (€392m)
Slimfast key platform brand
think! re-launched in RTE category
Slimfast 2019 consumption grew by 49% in measured channels*
Amazing Grass playing into Plant Nutrition trend
*NA measured channels captures 73% of total Slimfast North America net salesGlanbia plc FY 2019 Results10
26% of total GPN sales (€359m) (13% Europe / 13% RoW)
Double-digit decline in 2019
ON key platform brand
Business simplification commenced in 2019
Priority markets China, India, Oceania, UK and Western Europe
Glanbia plc FY 2019 Results11
Glanbia plc FY 2019 Results12
Engaging Consumers
Working with e-Commerce leaders
Building in-house DTC capability
ON campaign
1200 individual pieces of digital
content deployed across 25 markets
Online is GPN’s largest channel and digital capability is enabling growth worldwide
Installed Hybris e-Commerce platform
to enable scaling of business
Expanding in 2020 to be in a total of 14 markets
6% of total GPN sales
Other channels
74%
Online26%
2019
GPN Revenue
GN Operating Review
Glanbia plc FY 2019 Results14
Expanding portfolio
Revenue
€744.9m+23.4% cc
EBITA
€100.0m+7.1% cc
Driven by organic growth & acquisition
Margin
13.4%
-210 bps
Revenue growth driven by premix in Asia, healthy snacking solutions & Watson acquisition
EBITA growth driven by volume
Strong growth in value-added functional ingredients
EBITA margin impacted by sales mix & tariff headwinds
Innovation continues to be a key driver of growth
cc – Constant Currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
Glanbia plc FY 2019 Results15
Acquired in Q1 2019
Complementary technologies &
supply chain to Nutritional Solutions
Customers across personal care
and food sectors
Integration on track
Healthy snacking technology
development
• High protein solutions
• Crisp technology
• Cereals & plant-based solutions
Enhanced solutions capability
Innovation
Driven by capacity
expansion
Margin
1.7%
+10 bps
Revenue
€1,767.0m+18.5% cc
EBITA
€30.4m+23.6% cc
Glanbia plc FY 2019 Results16
Scale dairy operations
Revenue growth driven by Southwest Cheese expansion and positive dairy markets
Margin expansion driven by good operating performance
Stable revenue & profit stream continued in FY 2019
Strong operational performance
cc – Constant Currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
JVs Operating Review
Glanbia plc FY 2019 Results18
Scale dairy operations
Revenue
€1,476.1m+12.9% cc
Share of PAT
€48.6m+€3.3m
Driven by capacity
expansion
PAT
€48.6m
+5.9% cc
Revenue growth driven by volume across all Joint Ventures
PAT growth of 5.9% driven by capacity expansion and good operating performance
New JV in Ireland to be commissioned by end of 2020
Revenue and margin growth
New JV in Michigan USA to be commissioned by Q3 2021
cc – Constant Currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
Glanbia plc FY 2019 Results20
2019 results summary
Pre-exceptional
€'m
Reported currencyConstant
currency
2019 2018 Change Change
Revenue (Wholly-owned) 3,875.7 3,170.5¹ 705.2 16.6%
EBITA (Wholly-owned) 276.8 284.9 (8.1) (7.8%)
EBITA margin 7.1% 9.0% -190 bps -190 bps
Amortisation (60.9) (45.9) (15.0)
Net Finance Costs (26.3) (17.5) (8.8)
Share of Joint Ventures 48.6 45.3 3.3
Income Tax (23.4) (32.8) 9.4
Profit for the period (pre-exceptional) 214.8 234.0 (19.2)
Adjusted EPS 88.10 91.01 (2.91) (7.7%)
Basic EPS 61.04 79.28 (18.24) (26.6%)
Drivers of wholly-owned
Revenue growth
• 9.9% contribution from acquisitions
• 6.6% increase in pricing
Effective tax rate of 12.3% (2018: 14.8%)
• Primarily driven by geographic mix of
profits
EBITA margin impacted by
• Negative operating leverage
• Impact of product mix
• Tariff headwinds
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
1 – Restated to reflect the adoption of IFRS 15
Glanbia plc FY 2019 Results21
€1,179.6m
€1,363.8m
FY18 FX Volume Price Acquisition FY19
Challenging markets impacting volume – Review completed, actions to address under way
4.2%
(9.0%) (0.6%)
20.6%
Glanbia plc FY 2019 Results
€577.0m
€744.9m
FY18 FX Volume Price Acquisition FY19
Nutritional Solutions
€1,413.9m
€1,767.0m
FY18 FX Volume Price FY19
US Cheese
22
Organic growth with strong benefit from Watson acquisition
4.6%7.0% 3.8%
12.6%
5.5%4.9%
13.6%
Glanbia plc FY 2019 Results23
Exceptional Items2019
€'000
Organisation redesign costs 12.7
Asset impairments 17.3
Acquisition integration costs 6.8
Brexit related costs 2.3
Total exceptional charge before taxation 39.1
Exceptional tax credit (4.5)
Total exceptional charge after taxation 34.6
Organisation Redesign
• To position GPN for future growth
Acquisition Integration
• Costs related to the integration of
Slimfast & Watson
Asset Impairment – Business
Simplification
• Rationalisation of 35% of GPN total
SKUs completed
Brexit mitigation
Initiatives commenced to restore growth in GPN
Glanbia plc FY 2019 Results24
Maintaining strong cash flow generation
FY19 EBITDA Working Capital Business SustainingCapex
FY19 Operating CashFlow
Net Interest & Tax Dividends from JVs Pension Other FY19 Free Cash Flow
€324.9m (€24.9m)
(€20.1m)
€279.9m (€74.1m)
€35.3m (€7.6m)(€2.0m) €231.5m
OCF – Operating Cash Flow
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
Glanbia plc FY 2019 Results25
€24m €16m €20m
€49m€46m
€56m
€168m
€313m
€61m
€42m
€48m
2017 2018 2019
Sustaining Capex Strategic Capex Acquisitions Investments in JVs
Strategic projects to benefit product and proposition
Investment in innovation
and online platforms to
enhance DTC offering
Expansion of manufacturing
facilities
ROCE
13.2% 10.9%2018 2019
€185m
€417m
€241m
Within target range of
10% - 13%
Acquisition of Watson
Glanbia plc FY 2019 Results
Balance Sheet KPI's FY 2019 FY 2018
Net Debt €614.3m €576.7m
Net Debt / Adj. EBITDA 1.71x 1.55x
Adj. EBIT / Net Financing Costs 9.3x 14.8x
26
Well positioned for future growth
Higher debt due to acquisitions
and investments
Well within covenants with
ample headroom to finance
further activity
Strong cash flow will enable
de-leveraging
ROCE – Return on Capital Employed
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
Glanbia plc FY 2019 Results27
Efficient Balance Sheet
Strong Operating Cash flow
Generation
ROCE Range of 10% - 13%
Capex
Dividend
M&A
Additional
Returns
Investments which
support growth
Complementary
businesses
Payout ratio in the range
25% - 35% Share Buyback
Glanbia plc FY 2019 Results29
Returning GPN to sustainable topline growth in 2020
Targeting GPN margin growth of 200+ bps by 2022
Focused on creating shareholder value
Commenced Group-wide productivity review
30
Avg. EPS Growth
5% - 10%
ROCE – Return on Capital Employed
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Financial Statements
and Glossary
Average adjusted EPS on a constant currency basis over the 2020 – 2022 period
2020 - 2022
Cash conversion
>80%
ROCE
10% - 13%
Dividend payout
25% - 35%
Total Group Revenue by 2022
€6bn
Glanbia plc FY 2019 Results
Earnings
Operating Cash Conversion
Adjusted EPSBroadly in line with prior
year on a constant
currency basis
Greater than
80%
31
Rebuilding Growth Momentum
Glanbia plc FY 2019 Results
Questions
Glanbia plc FY 2019 Results34
The Group reports certain performance measures that are not defined under IFRS but which represent additional measures used by the Board of Directors and the GlanbiaOperating Executive in assessing performance and for reporting both internally and to shareholders and other external users. The Group believes that the presentation ofthese non-IFRS performance measures provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides readerswith a more meaningful understanding of the underlying financial and operating performance of the Group.
1. While the Group reports its results in euro, it generates a significant proportion of its earnings in currencies other than euro, in particular US dollar. Constant currency reporting isused by the Group to eliminate the translational effect of foreign exchange on the Group's results. To arrive at the constant currency year-on-year change, the results for the prior yearare retranslated using the average exchange rates for the current year and compared to the current year reported numbers
2. The Group has a number of strategically important Equity accounted investees (Joint Ventures) which when combined with the Group’s wholly-owned businesses give an importantindication of the scale and reach of the Group’s operations. Total Group is used to describe certain financial metrics such as Revenue and EBITA when they include both the wholly-owned businesses and the Group's share of Equity accounted investees
3. Revenue comprises sales of goods and services of the wholly-owned businesses to external customers net of value-added tax, rebates and discounts
4. EBITA is defined as earnings before interest, tax and amortisation
5. EBITA margin is defined as EBITA as a percentage of revenue
6. EBITDA is defined as earnings before interest, tax, depreciation (net of grant amortisation) and amortisation
7. Adjusted EPS is defined as the net profit attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation (excluding amortisation ofsoftware costs) net of related tax, divided by the weighted average number of ordinary shares in issue during the year. The Group believes that adjusted EPS is a better measure ofunderlying performance than Basic EPS as it excludes exceptional items (net of related tax) that are not related to ongoing operational performance and intangible asset amortisation,which allows better comparability of companies that grow by acquisition to those that grow organically
8. Net debt : adjusted EBITDA is calculated as net debt at the end of the period divided by adjusted EBITDA. Net debt is calculated as total financial liabilities less cash and cashequivalents. Adjusted EBITDA is calculated as EBITDA for the wholly-owned businesses plus dividends received from Equity accounted investees, and in the event of an acquisition inthe year, includes pro-forma EBITDA as though the acquisition date had been at the beginning of the year. Adjusted EBITDA is a rolling 12 month measure
Glanbia plc FY 2019 Results35
9. Adjusted EBIT: net finance cost is calculated as pre-exceptional earnings before interest and tax plus dividends received from Equity accounted investees divided by net finance cost.Net finance cost comprises finance costs less finance income per the Group Income Statement plus capitalised borrowing costs. Adjusted EBIT and net finance cost are rolling 12month measures
10. The Group has adopted an income statement format that seeks to highlight significant items within the Group results for the year. Such items may include impairment of assets,adjustments to contingent consideration, material acquisition integration costs, restructuring costs, profit or loss on disposal or termination of operations, material acquisition costs,litigation settlements, legislative changes, gains or losses on defined benefit pension plan restructuring and profit or loss on disposal of investments. Judgement is used by the Group inassessing the particular items which by virtue of their scale and nature should be disclosed in the income statement and notes as exceptional items
11. Volume increase/(decrease) represents the impact of sales volumes within the revenue movement year-on-year, excluding volume from acquisitions, on a constant currency basis.Pricing increase/(decrease) represents the impact of sales pricing within the revenue movement year-on-year, excluding acquisitions, on a constant currency basis
12. Like-for-like branded revenue growth represents the sales growth / (decline) year-on-year on branded sales, excluding acquisitions, on a constant currency basis
13. The effective tax rate is defined as the pre-exceptional income tax charge divided by the profit before tax less share of results of Equity accounted investees
14. The Group defines business sustaining capital expenditure as the expenditure required to maintain/replace existing assets with a high proportion of expired useful life. Thisexpenditure does not attract new customers or create the capacity for a bigger business. It enables the Group to keep running at current throughput rates but also keep pace withregulatory and environmental changes as well as complying with new requirements from existing customers
15. The Group defines strategic capital expenditure as the expenditure required to facilitate growth and generate additional returns for the Group. This is generally expansionaryexpenditure beyond what is necessary to maintain the Group’s current competitive position
16. Operating cash conversion is defined as Operating Cash Flow (OCF) divided by pre-exceptional EBITDA. Cash conversion is a measure of the Group’s ability to convert tradingprofits into cash and is an important metric in the Group’s working capital management programme
17. ROCE is defined as the Group’s earnings before interest, and amortisation (net of related tax) plus the Group’s share of the results of Equity accounted investees after interest andtax divided by capital employed. Capital employed comprises the sum of the Group’s total assets plus cumulative intangible asset amortisation less current liabilities less deferred taxliabilities excluding all financial liabilities, retirement benefit assets and cash. It is calculated by taking the average of the relevant opening and closing balance sheet amounts
18. Dividend payout ratio is defined as the annual dividend per ordinary share divided by the adjusted Earnings Per Share
Glanbia plc FY 2019 Results36
€'m Reported Constant currency
Adjusted Earnings Per Share FY 2019 FY 2018 FY 2018
Profit attributable to the equity holders of the Company 180.2 234.0 245.5
Exceptional Items 34.6
Profit attributable to the equity holders of the Company – pre-exceptional 214.8 234.0 245.5
Amortisation (net of tax) 45.3 34.6 36.3
Adjusted net income 260.1 268.6 281.8
Weighted average number of ordinary shares in issue (millions) 295.2 295.2 295.2
Adjusted Earnings Per Share (cent) 88.10c 91.01c 95.49c
Glanbia plc FY 2019 Results37
€'m Reported Constant currency
Glanbia Performance Nutrition FY 2019 FY 2018 FY 2018 % Change
Revenue 1,363.8 1,179.6 1,228.7 +11.0%
EBITA 146.4 173.1 182.2 -19.6%
EBITA margin 10.7% 14.7% 14.8% -410 bps
€'m Reported Constant currency
Glanbia Nutritionals FY 2019 FY 2018 FY 2018 % Change
Revenue 2,511.9 1,990.9 2,095.4 +19.9%
EBITA 130.4 111.8 118.0 +10.5%
EBITA margin 5.2% 5.6% 5.6% -40 bps
Following implementation of IFRS 15 prior year revenue was restated to reflect the impact of recognising sales from Glanbia’s Joint Venture Southwest Cheese.
The impact was to increase prior year sales in Glanbia Nutritionals by €784 million in FY 2018; there was no change to EBITA following this restatement
Glanbia plc FY 2019 Results38
€'m Reported Constant currency
Nutritional Solutions FY 2019 FY 2018 FY 2018 % Change
Revenue 744.9 577.0 603.7 +23.4%
EBITA 100.0 88.6 93.4 +7.1%
EBITA margin 13.4% 15.4% 15.5% -210 bps
€'m Reported Constant currency
US Cheese FY 2019 FY 2018 FY 2018 % Change
Revenue 1,767.0 1,413.9 1,491.7 +18.5%
EBITA 30.4 23.2 24.6 +23.6%
EBITA margin 1.7% 1.6% 1.6% +10 bps
Following implementation of IFRS 15 prior year revenue has been restated above to reflect the impact of recognising sales from Glanbia’s Joint Venture Southwest Cheese.
The impact was to increase prior year sales in Nutritional Solutions and US Cheese by €50 million and €734 million respectively for FY 2018; there was no change to EBITA
following this restatement
Glanbia plc FY 2019 Results39
€'m Reported Constant currency
Total Group Revenue FY 2019 FY 2018 FY 2018 % Change
Glanbia Performance Nutrition 1,363.8 1,179.6 1,228.7 +11.0%
Glanbia Nutritionals 2,511.9 1,990.9 2,095.4 +19.9%
Wholly Owned Revenue 3,875.7 3,170.5 3,324.1 +16.6%
Equity accounted investees 1,476.1 1,283.8 1,307.3 +12.9%
IFRS 15 Consolidation adjustment (539.3) (415.1) (437.2)
Total Group 4,812.5 4,039.2 4,194.2 +14.7%
€'m Reported Constant currency
Joint Ventures FY 2019 FY 2018 FY 2018 % Change
Revenue 1,476.1 1,283.8 1,307.3 +12.9%
EBITA 73.6 65.8 67.1 +9.7%
EBITA margin 5.0% 5.1% 5.1% -10 bps
Share of JVs PAT 48.6 45.3 45.9 +5.9%
Following implementation of IFRS 15 prior year revenue was restated to reflect the impact of recognising sales from Glanbia’s Joint Venture Southwest Cheese.
The impact was to increase prior year sales in Glanbia Nutritionals by €784 million in FY 2018; there was no change to EBITA following this restatement
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