Glanbia plc 2018 Half Year Results - Seeking Alpha
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Glanbia plc 2018 Half Year Results
Cautionary Statement 2
HY 2018 Highlights
Revenue +3.6%
Results in line with expectations Pro-forma Adj. EPS*
-7.1%
Wholly owned volume
Volume momentum in GPN & GN +5.7%
Operating cash flow
Strong cash performance
+€93 million
Pro-forma Adj. EPS*
Reiteration of FY 2018 guidance growth
5% to 8%
All percentage movements quoted above are in constant currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
*Pro-forma Adj EPS eliminates the impact of discontinued operations
3
Operational
Review
4
Good volume performance - margins to recover in H2
Growth €519.6m Revenue
+5.0%
LFL Branded Volume
+4.9%
Performance €63.3m EBITA 12.2% EBITA margin
-16.4% -310 bps
Mid-to-high single digit LFL branded volume growth
FY 2018 Strong margin and EBITA growth in H2 2018
Outlook Full year margins in line with 2017
All percentage movements quoted above are in constant currency
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
5
Good volume momentum and earnings growth
US NS
Cheese €254m GN Revenue US NS GN volume
Growth €339m -2.2% €592.4m Cheese +5.9%
+6.1% +8.1% +3.1%
Performance €60.4m EBITA 10.2% EBITA margin
+4.5% +20 bps
FY 2018 Mid-to-high single digit volume growth in NS
Outlook Full year margins in line with 2017
NS – Nutritional Solutions
All percentage movements quoted above are in constant currency
6 Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
Strong volume momentum - performance impacted by relatively lower dairy markets
Growth €625.1m Revenue
+7.3%
Volume
+4.7%
Performance €26.8m EBITA €17.8m PAT
-25.6% -29.4%
FY 2018 Full Year Glanbia share of JVs PAT expected to be lower than PY driven by
relatively lower dairy markets
Outlook
PAT – Profit after tax
All percentage movements quoted above are in constant currency
7 Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentationJoint Ventures - Strategic Highlights
Constant
Constant New JV in Michigan
Glanbia Cheese onCurrency
track to be
Currency
announced plans to commissioned
build a new €130m by 2021
facility in Ireland
Constant Constant
Southwest Cheese Investment
25%Currency
expansion Currency to
programme
commissioned in support Glanbia
H1 2018 Ireland expansion
on track
8Finance
Review
9Summary Income Statement - Continuing Group
HY 2018 results summary Constant
Reported Currency
Pre-exceptional items Currency
€’m HY 2018 HY 2017 Change Change
Revenue 1,112.0 1,185.7 (6.2%) 3.6%
EBITA 123.7 148.3 (16.6%) (7.3%)
EBITA margin 11.1% 12.5% -140 bps -130 bps
Amortisation of intangible assets (21.5) (21.8)
Net finance costs (7.6) (11.8)
Share of results of JVs 17.8 26.0
Income Tax (14.2) (20.5)
Profit – pre exceptional 98.2 120.2
Pro-forma Adjusted EPS
38.83c 46.09c (15.8%) (7.1%)
Continuing Operations
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
10Continuing Wholly Owned Revenue
Reported Constant
Continuing Wholly Owned HY 2017 Reported
HY 2018 Actual Currency Currency
Revenue (€’m) (Continuing Operations)
Growth Growth
Glanbia Performance Nutrition 519.6 543.5 (4.4%) 4.9%
Glanbia Nutritionals 592.4 642.2 (7.8%) 2.4%
Wholly Owned Revenue 1,112.0 1,185.7 (6.2%) 3.6%
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
11Revenue growth by segment – GPN (+4.9%)
€700m
€600m
5.4% 3.6%
€500m
(8.9%) (4.1%)
€400m
€300m
€544m €520m
€200m
€100m
€0m
HY17 FX Volume Price Acquisition HY18
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
12Revenue growth by segment – GN (+2.4%)
Nutritional Solutions (-2.2%)
€400m
€300m 3.1%
€200m (9.1%) (5.3%)
€286m €254m
€100m
€0m
HY17 FX Volume Price HY18
US Cheese (+6.1%)
€500m
€400m 8.1%
€300m (2.0%)
(10.6%)
€200m
€357m €339m
€100m
€0m
HY17 FX Volume Price HY18
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
13Cash Flow
Constant
Dividends Constant
Capex
from JVs
Currency €25.9m
Currency
€15.4m Strategic €18.9m
Constant Constant
FCF Constant
Interim dividend
OCF
Currency
€59.8m €58.2m
Currency Currency
9.71c
+€93.1m +€119.1m +64%
FY18 OCF on track for >80% conversion of adjusted EBITDA
OCF – Operating cash flow
14
FCF – Free cash flow
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentationBalance Sheet
Balance Sheet HY 2018 HY 2017 FY 2017
Net Debt €402m €608m €368m
Net Debt / Adj. EBITDA 1.2x 1.6x 1.1x
Adj EBIT / Net Financing Costs 7.3x 11.3x 7.0x
• Strong financing capabilities
Net Debt /
EBITDA • Net pension deficit of €38.7m – a reduction of €3.2m on FY 2017
1.2x at HY18 • 2018 ROCE expected to be in the range of 10%-13%
ROCE – Return on Capital Employed
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
15Strategy
& Outlook
16Refreshed Group Strategy
Our Purpose Our Vision
To deliver better To be one of world’s top
nutrition for every step performing nutrition companies
of life’s journey trusted to enrich lives every day
Global Macro Trends
Health and On-the-go food Digitally Clean
wellness and beverages connected labelling
Strategic Pillars
Protect and grow Selectively build and Embed enablers
the core scale beyond the core across the business
Concentrate our focus in growing markets where Invest to drive organic growth across key Focus on:
we have market leading capability and right to win adjacencies to current platforms Leveraging the operating model
Build scale internationally Driving customer and consumer engagement
Invest in capability to capture market
opportunities Developing and retaining top talent
Deliver complementary M&A Rigorous cost management
*The Group’s refreshed strategy to 2022 was published at its capital markets day on 23 May 2018
172018 to 2022:
Growth, Performance & Returns targets
Constant
Cash conversion Constant
Dividend
Currency payout
Currency
>80% 25% - 35%
Constant Constant
ROCE Constant
Total Group
EPS Revenue by 2022
Currency Currency
10% - 13% Currency
5% - 10% €5bn
ROCE – Return on Capital Employed
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
Average adjusted EPS on a constant currency basis over the 2018 – 2022 period
18Outlook 2018
Reiterating FY 2018 Guidance
Growth Performance Earnings Returns
Mid-to-high single GPN & GN margins Pro-forma adjusted 2018 ROCE expected
digit like-for-like expected to be in line EPS is expected to to be
volume growth with 2017 grow by
expected across both
the branded portfolio of 5% - 8% 10%-13%
GPN & Nutritional
Solutions
constant currency
80%+
OCF conversion based
on current activity
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation
19Questions 20
Appendix 21
Non IFRS performance definitions 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 Glanbia Operating Executive in assessing performance and for reporting both internally and to shareholders and other external users. The Group believes that the presentation of these non–IFRS performance measures provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides readers with 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 is used 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 year are 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 important indication 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. Pro-forma Adjusted EPS has been provided as the Group believes it is more reflective of the revised and on-going structure of the Group following the disposal of Discontinued Operations in 2017. It is defined as the net profit from continuing operations attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation (excluding software amortisation), net of related tax, plus the Group's share of the profits after tax for Continuing Joint Ventures before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax. 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 cash equivalents. Adjusted EBITDA is calculated in accordance with lenders’ facility agreements definition which adjust EBITDA for items such as dividends received from Equity accounted investees and acquisitions or disposals. Adjusted EBITDA is a rolling 12 month measure, therefore for half year 2018 and half year 2017 it is calculated as the Adjusted EBITDA for the preceding 12 months ending on the relevant reporting dates. 9. Adjusted EBIT: net finance cost is calculated as 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 Condensed Group income statement plus capitalised borrowing costs. Adjusted EBIT and net finance cost are rolling 12 month measures, therefore for half year 2018 and half year 2017 are calculated as the Adjusted EBIT and net finance costs for the preceding 12 months ending on the relevant reporting dates. 22
Non IFRS performance definitions 10. Volume increase/(decrease) represents the impact of sales volumes within the revenue movement year-on-year, excluding volume from acquisitions made within the prior 12 months, on a constant currency basis. Pricing increase/(decrease) represents the impact of sales pricing within revenue movement year-on-year, excluding acquisitions, on a constant currency basis. 11. Like-for-like branded volume growth represents the sales volume growth / (decline) year-on-year on branded sales within revenue movement, excluding acquisitions, on a constant currency basis. 12. 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. 13. The Group defines business sustaining capital expenditure as the expenditure required to maintain/replace existing assets with a high proportion of expired useful life. This expenditure 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 with regulatory and environmental changes as well as complying with new requirements from existing customers. 14. The Group defines strategic capital expenditure as the expenditure required to facilitate growth and generate additional returns for the Group. This is generally expansionary expenditure beyond what is necessary to maintain the Group’s current competitive position. 15. Operating cash flow is defined as pre-exceptional EBITDA of the wholly owned businesses net of business sustaining capital expenditure and working capital movements, excluding exceptional cash flows. Operating cash flow is one of the Group’s Key Performance Indicators. Operating cash flow is one of the performance conditions in Glanbia’s Annual Incentive Plan. Free cash flow is calculated as the net cash flow in the year before the following items: strategic capital expenditure, acquisition spend, proceeds received on disposals, loans to Equity accounted investees, equity dividends paid, exceptional costs paid and currency translation movements. 16. Dividend payout ratio is defined as the annual dividend per ordinary share divided by the pro-forma Adjusted Earnings Per Share. The dividend payout ratio provides an indication of the value returned to shareholders relative to the Group's total earnings. 17. ROCE means return on capital employed and 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 and tax 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 tax liabilities 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. In years where the Group makes significant acquisitions or disposals, the ROCE calculation is adjusted appropriately, to ensure the acquisition or disposal are equally time apportioned in the numerator and the denominator. 23
Pro-forma Adjusted EPS Reconciliation
HY 2017
Adjusted Earnings Per Share (€’m) HY 2018 HY 2017 (constant FY 2017
currency)
Profit attributable to the equity holders of the company 98.2 114.9 103.9 329.4
Amortisation net of related tax (excl. software amortisation) 16.4 15.9 14.3 31.7
Exceptional items (net of related tax) 0.0 10.9 10.9 (98.0)
Adjusted net income 114.6 141.7 129.1 263.1
Discontinued operations 0.0 (9.6) (9.6) (10.1)
Pro-forma share of Continuing Joint Ventures PAT 0.0 3.9 3.9 4.0
Pro-forma Adjusted net income 114.6 136.0 123.4 257.0
Weighted average number of ordinary shares in issue 295.2 295.0 295.0 295.0
Pro-forma Adjusted Earnings Per Share 38.83c 46.09c 41.82c 87.11c
Constant currency growth / (decline) (7.1%)
24Segmental Analysis
HY 2018 HY 2017 Reported Currency Constant Currency
Glanbia Performance Nutrition (€’m) Actual Reported Change Change
Revenue 519.6 543.5 (4.4%) 4.9%
EBITA 63.3 83.9 (24.6%) (16.4%)
EBITA 12.2% 15.4% -320 bps -310 bps
HY 2018 HY 2017 Reported Currency Constant Currency
Glanbia Nutritionals (€’m) Actual Reported Change Change
Nutritional Solutions Revenue 253.9 285.5 (11.1%) (2.2%)
US Cheese Revenue 338.5 356.7 (5.1%) 6.1%
Glanbia Nutritionals Revenue 592.4 642.2 (7.8%) 2.4%
Glanbia Nutritionals EBITA 60.4 64.4 (6.2%) 4.5%
Glanbia Nutritionals EBITA margin 10.2% 10.0% +20 bps +20 bps
HY 2018 HY 2017 Reported Currency Constant Currency
Joint Ventures (Glanbia share) (€’m) Actual Reported Change Change
Revenue 625.1 618.9 1.0% 4.7%
EBITA 26.8 37.3 (28.2%) (25.6%)
EBITA margin 4.3% 6.0% -170 bps -170 bps
Share of JVs PAT pre-exceptional items 17.8 26.0 (31.5%) (29.4%)
To arrive at the constant currency change, the average exchange rate for the current period is applied to the relevant reported result from the
25 same period in the prior year. The average Euro US Dollar exchange rate for the first half of 2018 was €1 = $1.211 (HY 2017: €1 = $1.083).You can also read
