Glanbia plc 2019 Half Year Results Presentation - 31st July 2019
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Glanbia plc 2019 Half Year Results Presentation 31st July 2019
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.
2
HY19 EPS 36.69c, down 10.8% cc versus prior Updated FY19 guidance of
year Reported Adj EPS of 88c to 92c
Challenging HY for Group driven by GPN Improving momentum in H2
Wholly-owned +12.0% cc
Revenue growth driven by GN & acquisitions Total Group +11.1% cc
Strong volume progression in NS +12% growth cc
Acquisitions performing well
Interim dividend increased by 10% 10.68 cent per share
cc – Constant Currency
4 Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Interim Financial
Statements and Glossary
Summary
Challenging Half Year on organic
Growth Performance revenue and EBITA margin
SlimFast revenue growth of 21% on a
LFL basis
Revenue EBITA
€620.1m €46.9m Body & Fit platform upgrade
+13.4% cc -30.2% cc delivering good growth
Innovation ahead of target
Volume -8.2% EBITA margin
Price -2.7% 7.6% Margin decline primarily related to
Acq. +24.3% -470 bps negative operating leverage and
brand/infrastructure investment
Revenue & EBITA margin expected to
improve significantly in H2
cc – Constant Currency
6 Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Interim Financial
Statements and GlossaryFull Year NA Branded Revenue expected to
be broadly in-line with prior year
H1 2019
Sports Nutrition brands International GPN Revenue
33%
- Q1 seasonality rebalancing through the year North
- Challenges in Specialty channel, but good America
67%
consumption growth in Online & FDMC
- Price increases implemented in Q3
Lifestyle brands
- Strong momentum in SlimFast H1 2019
- think! re-launch in H2 North America
- Good revenue growth in Amazing Grass Revenue
Lifestyle Sports
43% Nutrition
57%
Innovation focus
7Full Year Revenue expected to decline low
double digit
Geopolitical and global trade disruption
- Impacting markets in Middle East, India and LATAM
- Loss of revenue in high margin markets
- Further margin compression from tariffs and negative operating leverage
Important long term growth opportunity
Growing our DTC capability in Europe to address channel shift and
diversifying portfolio
Good overall growth in Asia region – ex India
8Revenue Margin
Priorities Priorities
• Re-establish growth in challenged international • Drive volume growth to enable operating leverage in
markets H2
• Align EU omni-channel strategy behind growing • Sustain focus on pricing
channels
• Optimise global supply chain
• Build out D2C capability
• Optimise organisational operating model
• Investing for long-term sustainable growth
9Revenue Margin
GPN branded LFL revenue expected to Full year margin c.400 to 450 bps
decline low-to-mid single-digits improvement on HY 2019
GPN revenue growth driven by acquisition
Drivers Drivers
• Good consumption growth in key North American • Price increases in place
channels • Improved operational leverage
• Improved momentum in H2
• Continue to grow the lifestyle brand portfolio
• Continue to drive innovation targeting > 15% of sales
from products launched in the last 3 years
Long-term strategic growth ambitions intact
10All numbers and prior year comparatives prepared on an IFRS 15 basis
Nutritional Solutions (NS) delivered volume
Growth Performance growth across its Dairy & Non-dairy
platforms
Nutritional
Revenue
Solutions
EBITA
€369.6m NS margin decline related to product mix and
+27.0% cc
€50.5m tariff costs
-1.4% cc
Volume +12.0%
Price +3.5% Margin 13.7%
Acquisition +11.5% Watson acquisition performing to plan
Revenue EBITA
US Cheese
US Cheese growth driven by capacity
€768.7m €14.0m expansion
+4.9% cc +6.1% cc
Nutritional Solutions expects to deliver full
Volume +4.8% Margin 1.8% year EBITA growth
Price +0.1%
US Cheese EBITA expected to be broadly in-
line with prior year
cc– Constant Currency
11 Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the Interim Financial
Statements and GlossaryReady-to-eat snacks
Beverages
Additional supply chain
Ready-to-mix products capacity
Capsules & tablets
Gummies
Added capability
With global customers Oral Hygiene
Oral hygiene & Film Technology
local & regional players Encapsulation
12HY 2019 results summary
Pre-exceptional Constant
€’m Reported currency currency
HY 2019 HY 2018 Change Change
Revenue (Wholly-owned) 1,758.4 1,477.8 +19.0% +12.0%
EBITA (Wholly-owned) 111.4 123.7 -9.9% -15.3%
EBITA margin 6.3% 8.4% -210 bps -210 bps
Amortisation (28.9) (21.5)
Net Finance Costs (13.3) (7.6)
Share of Joint Ventures 26.8 17.8
Income Tax (9.2) (14.2)
Profit for the period (pre-exceptional) 86.8 98.2
Adjusted EPS* 36.69c 38.83c -5.5% -10.8%
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the
Interim Financial Statements and Glossary
14HY 2019 Wholly Owned Revenue Constant
€’m Reported currency currency
HY 2019 HY 2018 % Change % Change
Glanbia Performance Nutrition 620.1 519.6 +19.3% +13.4%
Nutritional Solutions 369.6 274.6 +34.6% +27.0%
US Cheese 768.7 683.6 +12.4% +4.9%
Glanbia Nutritionals 1,138.3 958.2 +18.8% +11.2%
Wholly Owned Revenue 1,758.4 1,477.8 +19.0% +12.0%
Definitions and reconciliations of non-IFRS metrics can be found in the Appendix of this presentation and further information can be found in the
Interim Financial Statements and Glossary
15€18.9m €16.1m €37.0m 10.68c
Strategic +10%
€30.0m
Operating Cash Flow Dividends from JVs Capital Expenditure Interim Dividend
FY19 OCF on track for >80% conversion of adjusted EBITDA
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
Interim Financial Statements and Glossary
16Balance Sheet HY 2019 HY 2018 FY 2018
Net Debt €778m €402m €577m
Net Debt / Adj. EBITDA 2.1x 1.2x 1.5x
Adj. EBIT / Net Financing Costs 10.5x 7.3x 14.8x
Net debt increased by €376m on prior year, raising
the Net Debt to Adjusted EBITDA ratio to 2.1 times, Net pension obligations of €36.8m at HY 2019,
mainly due to the acquisitions of SlimFast & decreasing from €38.7m at HY 2018
Watson
Total available Banking Facilities €1.1bn with average 2019 ROCE expected to be in the range of 10%
maturity of 3.3 years (HY 2018: 2.0 years) to 13%
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
Interim Financial Statements and Glossary
172019 – Full year adjusted EPS expected to be 88c to 92c
Positive momentum in H2
Clear initiatives in place to address challenges in certain
markets in GPN
Long term ambitions to 2022 remain in place
- Average growth in adjusted EPS of 5% to 10%
- Operating cash conversion > 80% of EBITDA
- ROCE 10% to 13%
- Dividend payout ratio 25% to 35%
19The 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. 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 of software
costs), net of related tax, divided by the weighted average number of ordinary shares in issue during the year. The calculation of Adjusted Earnings Per Share excludes the cost of
software amortisation within the earnings calculation. The Group believes that adjusted EPS is a better measure of underlying performance than Basic EPS as it excludes exceptional
items (net of related tax) that are not related to on-going 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 excluding debt issue costs
less cash and cash equivalents. 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 in the 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
219. 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 12 month 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 restructuring, 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 in
assessing 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. 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.
15. 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.
16. Operating cash conversion is defined as Operating Cashflow (OCF) divided by pre–exceptional EBITDA. Cash conversion is a measure of the Group’s ability to convert trading profits
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 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.
18. Dividend payout ratio is defined as the annual dividend per ordinary share divided by the Adjusted Earnings Per Share. The dividend payout ratio for 2017 is defined as the annual
dividend per ordinary share divided by the pro-forma Adjusted Earnings Per Share as the Group believes it is more reflective of the revised and ongoing structure of the Group following
the disposal of 60% of Dairy Ireland and related assets in 2017. The dividend payout ratio provides an indication of the value returned to shareholders relative to the Group’s total
earnings.
22Constant
€’m Reported Currency
Adjusted Earnings Per Share HY 2019 HY 2018 HY 2018
Profit attributable to the equity holders of the Company – pre-
86.8 98.2 104.0
exceptional
Amortisation (net of tax)* 21.5 16.4 17.4
Adjusted net income 108.3 114.6 121.4
Weighted average number of ordinary shares in issue (millions) 295.2 295.2 295.2
Adjusted Earnings Per Share (cent) 36.69 38.83 41.13
Constant currency growth -10.8%
*Amortisation and impairment of intangible assets (excluding software amortisation) net of related tax of €3.9 million (HY 2018: €2.9 million, FY 2018:
€6.1 million)
23Constant
€’m Reported Currency
HY 2019 HY 2018 HY 2018
Glanbia Performance Nutrition 620.1 519.6 546.6
Nutritional Solutions 369.6 274.6 291.0
US Cheese 768.7 683.6 732.6
Glanbia Nutritionals 1,138.3 958.2 1,023.6
Wholly-owned Revenue 1,758.4 1,477.8 1,570.2
Constant Currency growth 12.0%
Joint Ventures 460.0 425.6 426.2
Total Group 2,218.4 1,903.4 1,996.4
Constant Currency growth 11.1%
*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 by €365.8 million in H1 2018; there was no change to EBITA following this restatement
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