Glanbia plc 2017 Half Year Results Presentation 10 August 2017 - - PowerPoint PPT Presentation

Siobhan Talbot Group Managing Director

10 August 2017

Mark Garvey Group Finance Director

Glanbia plc 2017 Half Year Results Presentation

Cautionary Statement

Pro-forma adjusted EPS guidance of 7-10% reiterated for full year Transaction completed on 2 July 2017 and Glanbia Ireland is now operational

Half Year 2017 Performance Summary

2017 Half Year Results | Slide 3

Adjusted EPS

48.04c

+6.5% (cc ) +9.3% (rc)

Glanbia Ireland

46.09c

+10.1% (cc ) +13.2% (rc)

1. CC denotes constant currency; RC denotes reported currency 2. Pro-forma adjusted EPS for continuing operations assumes that the Dairy Ireland transaction occurred at the beginning of FY 2016 3. To arrive at the constant currency change, the average FX rate for the current period is applied to the relevant reported result from the same period in the prior year. The average Euro US Dollar FX rate for the first half of 2017 was €1 = $1.083 (HY 2016: €1 = $1.116).

• This presentation contains certain alternative performance measures. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found in the

appendix of this presentation.

Dairy Ireland transaction Pro-forma Adjusted EPS

3 3

2

€37.3m

+48.0% (cc) +48.6% (rc)

€1,185.7m

+7.3% (cc) +10.0% (rc)

Pro-forma Continuing Group progression

2017 Half Year Results | Slide 4

Revenue EBITA

JV&A’s Wholly owned

• CC denotes constant currency; RC denotes reported currency
• The figures displayed are on a pro forma basis which assumes that 40% of Dairy Ireland results are captured in JV&A’s

from the beginning of 2016

• Wholly owned continuing operations include the Glanbia Performance Nutrition and Glanbia Nutritionals segments

€1,805m €186m

€148.3m

+3.5% (cc) +6.6% (rc)

€618.9m

+17.0% (cc) +17.0% (rc)

2017 Half Year Results | Slide 5

Pro-forma continuing Group EBITA margin

HY17 HY16 Growth

Wholly owned 12.5% 12.9%

• 40 bps

Joint Ventures & Associates 6.0% 4.7% +130 bps Pro-forma Total Group 10.3% 10.2% +10 bps

Pro-forma Continuing Group EBITA margin profile

• Pro-forma above assumes 40% of Dairy Ireland results are captured in JV&A’s from the beginning of 2016

Strategic Highlights – Acquisitions H1 2017

2017 Half Year Results | Slide 6

• Leading plant-based nutrition brand
• Increases GPN’s position with lifestyle

consumers

• Leading European online brand
• Opportunity to build DTC* platform in Europe

*Direct-to-consumer

2017 Half Year Results | Slide 7

Glanbia Ireland

• Creation of Glanbia Ireland on 02 July 2017

encompassing the businesses of Glanbia Ingredients Ireland and Dairy Ireland

Strategic Highlights – Joint Ventures & Associates

Southwest Cheese

• 25%

increase in capacity expected to be commissioned in H1 2018

Michigan JV – New US cheese/whey plant

• Plans on track for 2020

Operational Review

Glanbia Performance Nutrition

2017 Half Year Results | Slide 9

Performance Growth Earnings Innovation

Solid performance - Improved momentum in Q2 Good revenue growth in LAPAC & EMEA

REVENUE

€54 543.5m 3.5m

+5.4% (cc) +7.6% (rc)

Lfl* branded growth

+0 +0.7% .7%

EBITA

€83 83.9m .9m

+0.2% (cc) +3.1% (rc)

EBITA margin

15.4% 15.4%

• 80 bps (cc)
• 70 bps (rc)

Robust margins given increased input costs Strong performance in ready-to-eat format

*Lfl: Like-for-like Branded

Glanbia Nutritionals

2017 Half Year Results | Slide 10

Performance

Good revenue and EBITA progression

Growth

8.1% EBITA growth driven by Nutritional Solutions

Added-Value Expansion

Good business development across dairy and non-dairy systems Broad-based growth across customers & geographies

REVENUE

€642.2m .2m

+9.0% (cc) +12.2% (rc)

EBITA

€64 64.4m .4m

+8.1% (cc) +11.6% (rc)

EBITA margin

10 10.0% .0%

• 10 bps (cc)
• 10 bps (rc)

JVA’s & Dairy Ireland

2017 Half Year Results | Slide 11 *Dairy Ireland and related assets are classified as discontinued operations as a result of disposal of 60% of Dairy Ireland

JOINT VENTURES & ASSOCIATES (Glanbia share) DAIRY IRELAND – (Discontinued Operations*)

REVENUE EBITA EBITA margin REVENUE EBITA EBITA margin

Sale of 60% of Dairy Ireland completed on 2 July 2017 Margin compression as a result

• f increased dairy input costs

Strong performance driven by improved dairy markets EBITA growth across all three strategic Joint Ventures & Associates

Finance Review

Pro-forma adjusted EPS progression

2017 Half Year Results | Slide 13

CC denotes constant currency; RC denotes reported currency *Pro-forma adjusted EPS for continuing operations assumes that the Dairy Ireland transaction occurred at the beginning of FY 2016

+7-10%(cc)

Half Year Full Year

Summary Income Statement

2017 Half Year Results | Slide 14

Reported currency €'m HY 2017 HY 2016 Change

Wholly owned Continuing* Revenue 1,185.7 1,077.9 +10.0% EBITA 148.3 139.1 +6.6% EBITA margin 12.5% 12.9%

• 40 bps

Amortisation of intangible assets Net finance costs Share of JV&As Income tax (21.8) (11.8) 22.3 (20.5) (18.2) (11.6) 11.1 (19.4)

Profit from continuing operations 116.5 101.0 *Profit after tax from discontinued operations 9.3 16.0

• 41.9%

Adjusted EPS 48.04c 43.96c +9.3%

Constant currency Change

+7.3% +3.5%

• 50 bps
• 41.9%

+6.5%

HY 2017 results summary pre-exceptional items

*Wholly-owned continuing operations exclude the results of Dairy Ireland and related assets. The results of Dairy Ireland are presented within the profit after tax from discontinued operations

Segmental Summary – wholly owned continuing operations

2017 Half Year Results | Slide 15

Good performance driven by Glanbia Nutritionals

HY 2017 €'m Revenue EBITA Margin

Glanbia Performance Nutrition 543.5 83.9 15.4% Glanbia Nutritionals 642.2 64.4 10.0% Wholly owned continuing operations 1,185.7 148.3 12.5%

Constant currency change Revenue EBITA Margin

+5.4% +0.2%

• 80 bps

+9.0% +8.1%

• 10 bps

+7.3% +3.5%

• 50 bps

Revenue Growth by Segment - GPN

2017 Half Year Results | Slide 16

€400 €420 €440 €460 €480 €500 €520 €540 €560

HY16 FX Volume Price Acquisitions HY17 €505m 2.1% (0.8)% 0.0% 6.2% €544m Million

Glanbia Performance Nutrition Revenue growth +7.6% (+5.4% CC*)

*Constant currency (CC) excluding the impact of FX

€0 €200 €400 €600

HY16 FX Volume Price HY17

Revenue Growth by Segment - GN

2017 Half Year Results | Slide 17

US Cheese €338m Nutritional Solutions €235m

Glanbia Nutritionals Revenue growth +12.2% (+9.0% CC*)

*Constant currency (CC) excluding the impact of FX

Million €573m 2.9% 3.1% 5.9% €642m HY16 HY17

US Cheese €357m Nutritional Solutions €286m

Dairy Ireland transaction update

2017 Half Year Results | Slide 18

• Transaction closed on 02 July 2017
• Total proceeds expected to be c.€200m:

– €112m received prior to half year – Working capital proceeds of €90m - €100m to be received by end October 2017*

• Glanbia Ireland comprises Glanbia Ingredients Ireland and Dairy Ireland:

– 40% owned by Glanbia plc – 60% owned by Glanbia Co-operative Society Limited

*Final working capital amount subject to agreement of completion accounts

Exceptional Items Summary

2017 Half Year Results | Slide 19

HY 2017 HY 2016 FY 2016 Organisation redesign costs

• (6.2)

(11.3) Acquisition integration costs

• (1.9)

(3.1) Exceptional (charge) pre-tax

• (8.1)

(14.4) Taxation credit

• 1.5

2.3 Net exceptional (charge)

• (6.6)

(12.1)

*The Dairy Ireland transaction completed after the period end. As a result the gain arising on disposal has not been reflected in the H1 results. This will be reported in the 2017 full year financial statements

Dairy Ireland transaction related costs (13.0)

• Rationalisation costs
• (0.8)

(3.0) Exceptional (charge) pre-tax (13.0) (0.8) (3.0) Taxation credit 2.1 0.1 0.4 Net exceptional (charge) (10.9) (0.7) (2.7) Total exceptional (charge) (10.9) (7.3) (14.8) €’m Discontinued Operations €’m Continuing Operations

Balance Sheet

2017 Half Year Results | Slide 20

Financing KPI's HY 2017 HY 2016 FY 2016 Net Debt €608.4m €644.3m €437.5m Net Debt / Adjusted EBITDA¹ 1.63 times 1.83 times 1.19 times Adjusted EBIT¹ / Net Finance Cost 11.4 times 11.4 times 11.5 times

• 1. The definition of adjusted EBITDA and adjusted EBIT are as per our financing agreements and include dividends from Joint Ventures & Associates
• Available bank facilities of €1bn
• Increased investment in working capital expected to substantially unwind by year end
• Capex of €33.3m – €19.1m strategic
• Pension liabilities of €45.6m – a reduction of €64.9m on FY 2016

*on an IAS 19 basis

Summary & Outlook

Summary & Outlook

2017 Half Year Results | Slide 22

CC denotes constant currency; RC denotes reported currency *Pro-forma adjusted EPS for continuing operations assumes that the Dairy Ireland transaction occurred at the beginning of FY 2016

+7-10%(cc)

Half Year Full Year

Pro-forma adjusted EPS

Questions & Answers

Appendix

2017 Half Year Results | Slide 25

Appendix – Contents

1.Non-IFRS Performance Measures definitions 2.Pro-forma impact of Dairy Ireland divestment 3.Results of discontinued operations 4.Reconciliation of reported revenue to constant currency 5.Reconciliation of reported EBITA to constant currency 6.Total Group EBITA margin 7.Net Debt ratio & finance costs reconciliation 8.Adjusted EPS HY 2017 -V- HY 2016

2017 Half Year Results | Slide 26

1 - Non IFRS Performance Measures definitions

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. Total Group has a number of strategically important Equity accounted investees (Joint Ventures & Associates) 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 Joint Ventures & Associates 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 excluding exceptional items. 5. EBITA margin is defined as EBITA before exceptional items as a percentage of the revenue of the wholly owned businesses. Total Group EBITA margin is defined as Total Group EBITA as a percentage of Group revenue 6. 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. During the current year the calculation of adjusted Earnings Per Share was amended to exclude 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 that are not related to on-going operational performance and intangible asset amortisation, which allows better comparability of companies that grow by acquisition 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

• perating performance of the Group.

2017 Half Year Results | Slide 27

7. Pro-forma adjusted Earnings per share 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 amortisation of software costs) net of related tax plus the Group’s share (40%) of the profits after tax of Dairy Ireland and related assets, before exceptional items and intangible asset amortisation (excluding amortisation of software costs) net of related tax 8. 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 9. Net debt : adjusted EBITDA is calculated as net debt at the end of the year 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 (as defined under operating cash flow) plus dividends received from Joint Ventures & Associates, 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.

• 10. Volume represents the impact of sales volumes within the revenue movement year-on-year from wholly owned businesses, excluding volume

from acquisitions, on a constant currency basis

• 11. Pricing represents the impact of sales pricing within the revenue movement year-on-year from wholly owned businesses, 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. Contract revenue is also disallowed.

• 13. Pro-forma revenue is defined as the revenue of Glanbia Ireland if the Dairy Ireland transaction had occurred on 3 January 2016
• 14. The average interest rate is defined as the annualised net finance costs (pre-capitalised borrowing costs) divided by the average net debt as at

the reporting period

1 - Non IFRS Performance Measures definitions

2 – Pro-forma impact of Dairy Ireland divestment

2017 Half Year Results | Slide 28

HY 2017 HY 2016

€'m Reported *Adjustment Pro-forma Reported *Adjustment Pro-forma

Wholly owned Revenue continuing

• perations

1,185.7 1,185.7 1,077.9 1,077.9 Revenue discontinued operations 357.9 (357.9)

• 356.9

(356.9)

• Total wholly owned

1,543.6 1,185.7 1,434.8 1,077.9 Share of JV&A’s – Revenue Revenue continuing 475.7 475.7 386.3 386.3 Revenue discontinued 28.6 (28.6)

• 16.0

(16.0)

• Share of Dairy Ireland Revenue as a JV

143.2 143.2 142.8 142.8 Total JV&A’s 504.3 618.9 402.3 529.1 Total Group Revenue 2,047.9 1,804.6 1,837.1 1,607.0 Wholly owned EBITA continuing 148.3 148.3 139.1 139.1 EBITA discontinued 11.1 (11.1)

• 18.3

(18.3)

• Total wholly owned

159.4 148.3 157.4 139.1 Share of JV&A’s – EBITA EBITA continuing 32.9 32.9 17.8 17.8 EBITA discontinued 0.5 (0.5)

• 1.3

(1.3)

• Share of Dairy Ireland EBITA as a JV

4.4 4.4 7.3 7.3 Total JV&A’s 33.4 37.3 19.1 25.1 Total Group EBITA 192.8 185.6 176.5 164.2 Wholly owned continuing EBITA margin 12.5% 12.9% JV&A continuing EBITA margin 6.0% 4.7% Total Group EBITA margin 9.4% 10.3% 9.6% 10.2% Adjusted EPS 48.04c (1.95c) 46.09c 43.96c (3.25c) 40.71c

*Adjustment to reflect Dairy Ireland as a Joint Venture from the beginning of FY 2016 On a full year pro-forma basis FY 2016 Adjusted EPS for continuing operations would have been 80.40c excluding software amortisation

3 - Results of discontinued operations*

2017 Half Year Results | Slide 29

€'m HY 2017 HY 2016 FY 2016 Revenue 358.4 357.3 616.8 EBITA 11.1 18.3 31.8 Intangible Asset amortisation (0.7) (1.2) (2.3) Operating Profit 10.4 17.1 29.5 Finance costs (0.1)

• (0.0)

Share of JVA’s 0.4 1.2 1.6 Exceptional items (13.0) (0.8) (3.0) Profit Before Tax (2.3) 17.5 28.1 Income tax on discontinued operations 0.7 (2.2) (3.6) Profit/(loss) from discontinued operations for the period, net of tax (1.6) 15.3 24.5

*The disposal of 60% of Dairy Ireland and related assets was completed on 02 July 2017. As a result, Dairy Ireland reported results for the first half of 2017 are reclassified as discontinued operations (with 2016 comparatives changed accordingly) with all related Dairy Ireland assets and liabilities being reclassified on the Group Balance Sheet as held-for- sale

4 - Reconciliation of reported revenue to constant currency

2017 Half Year Results | Slide 30

Total Group Revenue

HY 2017 €’m HY 2016 – Re-translated to constant currency €’m HY 2016 – Reported €’m % growth -v- Prior year (reported) % growth -v- Prior year (*constant currency) HY 2017 vs HY 2016 Continuing Operations Glanbia Performance Nutrition 543.5 515.7 505.3 7.6% 5.4% Glanbia Nutritionals 642.2 589.1 572.6 12.2% 9.0% Wholly owned 1,185.7 1,104.8 1,077.9 10.0% 7.3% JV&A’s 475.7 386.2 386.3 23.1% 23.2% Total Group 1,661.4 1,491.0 1,464.2 13.5% 11.4%

• 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. The average Euro US Dollar FX rate for the first half of 2017 was €1 = $1.083 (HY 2016: €1 = $1.116)

• Total Group has a number of strategically important equity accounted investees (Joint Ventures & Associates) 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 Joint Ventures & Associates

• Revenue comprises sales of goods and services of the wholly owned businesses to external customers net of value added tax, rebates and discounts

Wholly owned 357.9 356.9 356.9 0.3% 0.3% JV&A’s 28.6 16.0 16.0 78.8% 78.8% Total Group 2,047.9 1,863.9 1,837.1 11.5% 9.9% Discontinued Operations

5 - Reconciliation of reported EBITA to constant currency

2017 Half Year Results | Slide 31

Total Group EBITA

HY 2017 €’m HY 2016 – Re-translated to constant currency €’m HY 2016 – Reported €’m % growth -v- Prior year (reported) % growth -v- Prior year (constant currency) HY 2017 vs HY 2016 Continuing Operations Glanbia Performance Nutrition 83.9 83.7 81.4 3.1% 0.2% Glanbia Nutritionals 64.4 59.6 57.7 11.6% 8.1% Wholly owned 148.3 143.3 139.1 6.6% 3.5% JV&A’s 32.9 17.9 17.8 84.8% 83.8% Total Group 181.2 161.2 156.9 (39.3%) (39.3%)

• 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. The average Euro US Dollar FX rate for the first half of 2017 was €1 = $1.083 (HY 2016: €1 = $1.116)

• Total Group has a number of strategically important equity accounted investees (Joint Ventures & Associates) 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 Joint Ventures & Associates

• EBITA is defined as earnings before interest, tax and amortisation excluding exceptional items

Wholly owned 11.1 18.3 18.3 (39.3%) (39.3%) JV&A’s 0.5 1.3 1.3 (61.5%) (61.5%) Total Group 192.8 180.8 176.5 9.2% 6.6% Discontinued Operations

6 – Total Group EBITA margin

2017 Half Year Results | Slide 32

EBITA margin

GPN €’m GN €’m Continuing

• perations – wholly
• wned

€’m Continuing

• perations – Joint

Ventures & Associates €’m Discontinued

• perations

€’m Total Group €’m HY 2017 Actual HY 2017 EBITA 83.9 64.4 148.3 32.9 11.6 192.8 HY 2017 Revenue 543.5 642.2 1,185.7 475.7 386.5 2,047.9 EBITA margin 15.4% 10.0% 12.5% 6.9% 3.0% 9.4%

• EBITA margin is defined as EBITA before exceptional items as a percentage of the revenue of the wholly owned businesses. Total Group EBITA margin

is defined as Total Group EBITA as a percentage of Total Group revenue

7 – Net Debt ratio & finance costs reconciliation

2017 Half Year Results | Slide 33

Net debt : Adjusted EBITDA

HY 2017 €’m HY 2016 €’m Financial liabilities 906.3 739.2 Cash and cash equivalents (297.9) (94.9) Net debt 608.4 644.3 Adjusted EBITDA (last 12 months) 374.2 352.0 Net debt : Adjusted EBITDA 1.63 1.83

Adjusted EBIT : Net finance costs

HY 2017 €’m HY 2016 €’m Operating profit – pre-exceptional 264.3 255.0 Dividends received from Equity accounted investees 14.3 13.9 Adjusted EBIT 278.6 268.9 Net finance costs 24.5 23.6 Adjusted EBIT : Net finance cost 11.4 11.4

• EBITDA & EBIT calculations are based upon financing agreements

8 - Adjusted EPS HY 2017 -V- HY 2016

2017 Half Year Results | Slide 34

Adjusted EPS

HY 2017 Reported €’m HY 2016 (Re-presented) (*cc) €’m HY 2016 Reported (Re-presented) €’m Total Continuing and Discontinued Operations Profit attributable to equity holders of the company 114.9 112.1 109.4 Amortisation and impairment of intangible assets (excluding software amortisation and net of related tax) €3.8 million (2016: €3.6 million) 15.9 13.5 13.1 Exceptional items (net of related tax) 10.9 7.5 7.2 Adjusted net income 141.7 133.1 129.7 Weighted average number of ordinary shares in issue 295,021,165 295,127,674 295,127,674 Adjusted Earnings per Share (cent) 48.04c 45.10c 43.96c

• *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. The average Euro US Dollar FX rate for the first half of 2017 was €1 = $1.083 (HY 2016: €1 = $1.116)
• 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

• During the current year the calculation of adjusted Earnings Per Share was amended to exclude 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 that are not related to on-going

• perational performance and intangible asset amortisation, which allows better comparability of companies that grow by acquisition

+

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