glanbia plc half year 2020 results...glanbia plc | half year 2020 presentation 4 consumers customers...

Glanbia plc Half Year 2020 Results presentation

Group Managing Director Group Finance Director

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.

Important notice

Glanbia plc | Half Year 2020 presentation

2

Strong position from outset of the crisis


3

Covid-19 – Delivering against our priorities

Protecting our people

Maintaining food supply

Maintain financial position

Managed health and safety of employees rigorously

Maintained production across the Group

throughout the crisis

Net debt: Adjusted EBITDA 1.95x

Evolving market dynamics


4

CustomersConsumers Our Communities

• Increased focus on health and wellness brands and ingredients

• Consumers loyal to established brands in performance nutrition and weight management

• Disproportionate impact to certain demographics

• Acceleration in growth in ecommerce and decline of specialty channels in GPN

• Retailers simplifying assortment and shelf space

• Strong demand for functional ingredients

• Our values came to life with multiple examples of community support across the Group

• Business sustainability and the health and wellbeing of employees paramount

• Strong liquidity and cash management meant no drawdowns of Governmental supports

Portfolio well positioned

-50%

-30%

-10%

10%

Q1 Apr May Jun Jul

GPN YoY revenue progression 2020

Implications for Glanbia in H1 2020


5

Joint Ventures –overall staple food demand goodSports &

Lifestyle Nutrition

Supplements/Immunity

Fortified Food & Beverage

Specialised Nutrition

US Cheese

Significant volatility in Q2

International & North America Specialty channel primary drivers of decline

Improving trends into H2

New JV projects on track

Trends improving Resilient through Covid-19


6

Our strategy is aligned to the new environment

Glanbia Performance

Nutrition

Glanbia Nutritionals

Group

• Streamline products, prioritiseON and SlimFast brands

• Reorganise and optimiseroute-to-market & supply chain

• Grow solutions capability across key platforms

• Expand into complementary adjacencies - Foodarom acquisition

• Maintain prudent capital deployment policy

• Continue JV developments

• Lean into Glanbia purpose to navigate crisis

• Evolve longer term ways of working to new environment

• Maintain customer relationships with new forms of engagement

• Support immediate customer needs for health & wellness products

• Further recalibration of International business

• Deepen NA review across demand & productivity

Existing strategy on track

Covid-19 response

Glanbia structured well to capture opportunities


7

Trends driving our business have grown more powerful

Health and wellness Digital Our Categories

Brand in performance nutrition & Brand in weight

management in the US

ON & SlimFastof GPN sales

of GPN sales now onlineProducer of protein

solutions for convenient nutrition category in US

Essential micro nutrients ingredients

supplier Globally

Protein category resilient

Weight management in growth

Immune enhancing ingredients and brands very ‘on-trend’

Reduced ‘food-to-go’ demand

Food staples demand strong

Now in markets + hosting ON DTC websites

Glanbia Performance Nutrition HY20 review

€620.1m

1.7%

(14.9%)

(0.7%)

€532.4m

HY19 FX Volume Price HY20

Revenue progressionNorth America Performance Nutrition

• Strong underlying branded performance in online and FDMC channels offset by weak specialty and distributor channels in Q2

North America Lifestyle

• Pantry loading at the outset of Q2 stabilised by the end of the period. RTE* category weak but improving as the period progressed

• Delivered volume growth overall in H1 due to a strong performance from SlimFast and Amazing Grass

International

• Severe disruption to demand as a result of lockdowns

• As lockdowns eased at the end of Q2 markets began to reopen

DTC

• Positive volume performance and expansion in H1 with dedicated teams now servicing 10 markets

EBITA

• International market disruption created negative operating leverage

• Underlying margins in line with PY pre-Covid-19 impact

GPN Half Year review


9

-59.1% cc€19.6m

EBITA

-390 bps3.7%MARGIN

*RTE – ready-to-eatImproving trends and margins into Q3

GPN transformation focused on revenue and margin growth


10

International route-to-market

Revenue growth management

Channel focus

Brand focus

Supply chain

Productivity

Global footprint

SKUs and contract exit

Dem

an

dE

ffic

ien

cy

Portfolio streamlined –35% of SKUs removed and ON & SlimFast now 69% of sales

GPN reorganisedinto 4 focus areas

New RTM partners in place in International markets

NA Contract exit on track

Scope increased as a result of Covid-19

• Recalibration of International

• Deepen review in NA across demand & productivity leveraging FDMC & online acceleration

Supply chain consolidation underway

Targeting EBITA margins of 12% to 13% by 2022

Significant position in growth channels – online and FDMC


11

Revenue by channel

FDMC34%

Online26%

Distributors20%

Specialty20%

FDMC40%

Online34%

Distributors12%

Specialty14%

Channel HY 20 Growth*

FDMC +1%

Online +11%

Distributors (46%)

Specialty (41%)

*Reported currency

North America Performance

Nutrition38%


29%

International27%

DTC6%

North America Performance

Nutrition37%


35%

International21%

DTC7%

GPN has a scale business in North America


12

Market HY 20 Growth

NA PN* (11%)

NA Lifestyle +2%

International (33%)

DTC (5%)

*LFL Branded

Revenue by market

• LFL Branded revenue declined by 11.4% in H1 due to challenging Q2

• ON measured consumption -4% in H1 with the trend sequentially improving during Q2

• Headwinds in H1 primarily due to challenges in the specialty and distributor channels which impacted branded and contract sales

• Majority of this business now oriented around online and club channels with growing presence in FDM and consumption trends improved at the end of Q2

• ON has a stronger competitive position in online and club versus specialty

North America Performance Nutrition


13

ON net promoter score increased and is the highest in the category

• Revenue grew 2% in H1

• SlimFast consumption growth of 13.0% in H1

• Majority of this business in FDM channels with a growing presence online

• Volatility in sales as a result of pantry loading in Q2 which stabilised by the end of the period

• Headwinds in RTE category expected to remain as long as mobility in NA remains below normal levels

• Strong alignment with consumer needs around weight management (SlimFast) as well as natural immunity (Amazing Grass)



14

Brand awareness

Household penetration up 60 bps to 5.0%

98%

• Revenue declined 33% in H1

• Route-to-market disrupted in many territories:

• Lockdowns shut down operations in some countries entirely

• Footfall in high street specialty stores down significantly

• Gym closures impacted demand

• Sales very volatile leading to significant negative operating leverage in H1

• Conditions improved in June/July as lockdowns eased

• Remain optimistic on selective growth opportunities

• Key route-to-market changes outlined in February now complete with clear brand focus, new team and new in-market partners in certain regions

• Covid-19 has further informed the business review; aim is to right size the organisation to the opportunity, scaling back footprint in certain markets while leveraging ecommerce capability across all markets

International


15

• DTC revenue declined 5% in H1

• Revenue trajectory improving

• H1 declines in key Benelux market as a result of gym closures

• Dedicated teams covering 10 markets in Europe and RoW

• DTC team commencing management of ON brand DTC website

DTC – eCommerce opportunity


16

DTC Brand.com

Russia

Sweden

Portugal

Italy

France

Spain

UK

GermanyPoland

Benelux

Existing markets

New markets entered in 2020

Glanbia NutritionalsHY20 review

Glanbia Nutritionals Half Year review


18

+12.0% cc

€1,304.3mREVENUE

-0.9% cc

€65.4mEBITA

-70 bps

5.0%MARGIN

Resilient performance in H1

€369.6m

2.0%

1.2% (1.8%)3.5%

€387.9m

HY19 FX Volume Price Acquisition HY20

Revenue progression

Non-dairy Ingredients• Strong underlying demand for essential micro nutrients

• Some volume headwinds in ‘food-to-go’ category due to Covid-19

Dairy Ingredients• Good demand for specialist dairy ingredient solutions

• Negative pricing due to pass through of commodity prices

Watson• Solid performance from Watson which was acquired in

February 2019

• Integration on track

EBITA• Some headwinds due to lower ‘food-to-go’ customer

demand

• Margins robust at 12.4%; H1 decline due to adverse product mix

Nutritional Solutions Half Year review


19

- 6.8% cc€48.1m

EBITA

-130 bps12.4%

MARGIN

Essential Micro

Nutrients

• Powerful trends driving end market growth

• Core solutions are essential micro nutrients and value-added protein ingredients

• Market leading positions in core solutions

• Customers range from global to regional brand owners in categories across mainstream food & beverage and specialised nutrition and supplements

• Scaling capabilities through acquisition

Nutritional Solutions Strategy


20

Core Solutions

Providing the building blocks for our customers’ brands in the following categories

Supplements

ClinicalNutrition

Early LifeNutrition

PerformanceNutrition

LifestyleNutrition

Protein Ingredients

Glanbia has agreed to acquire

‘Foodarom’, a c.CAD 34m

revenue flavors business

based in Montreal, Canada

Foodarom acquisition announcement


21

Foodarom has a strong flavor

formulation capabilityand is focused

on segments complementary to NS

Foodarom has manufacturing and

applications facilities in Canada,

the US and Europe

Foodarom is scalable and will

enable the further development of

flavor solutions within NS

Expected to complete in H2

2020 subject to the customary

closing conditions and be

earnings accretive from 2021

Purchase price is CAD 60m

plus contingent consideration

Description Strategic rationale Transaction details

€768.7m

2.5%

6.0%

10.3%

€916.4m

HY19 FX Volume Price HY20

Revenue progression

US Cheese Half Year review


22

+20.1% cc€17.3m

EBITA

+10 bps1.9%MARGIN

Volumes• Strong volume performance driven by

customers with retail end markets

Pricing• Pricing volatile in Q2; pass through model

operated with suppliers

Operations• Strong operating performance across all

plants which improved margin

EBITA• EBITA driven by revenue growth

* Includes Glanbia’s share of revenue from the Glanbia Ireland and Glanbia Cheese UK Joint Ventures

** Includes Glanbia’s share of profits from the Glanbia Ireland, Glanbia Cheese UK and Southwest Cheese Joint Ventures

Joint Ventures Half Year review


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-1.4% cc€453.6m

Revenue*

+17.3% cc

€31.8mShare of PAT**

JV business model• JV business models performed robustly in period of

unprecedented volatility

Revenue• Decline driven by negative market pricing in Europe

Profitability• All JVs delivered improved profitability

New JV projects• Scale projects in Ireland and USA on track

Half Year 2020 Finance reviewMark GarveyGroup Finance Director

Net debt to adjusted EBITDA 1.95 times

Wholly-owned Revenue growth of 2.3%,

constant currency

Adjusted EPS down 17.2% constant

currency due to Covid-19 related disruption

Strong performance by Glanbia Nutritionals offset by Q2 weakness in GPN

Interim dividend payment of 10.68c cent

GN & JVs continue to be resilient

Good operating cash flow performance

GPN improving after challenging Q2 with strategic initiatives

on track

HY 2020 – Resilient performance in a challenging environment


25

Growth Earnings Cash & Debt Dividends Current trading

GPN International disruption primary impact on earnings

Dividend payout ratio 34%

HY 2020 results summary pre-exceptional €'m

Reported currencyConstant currency

HY 2020 HY 2019 Change Change

Revenue (Wholly-owned) 1,836.7 1,758.4 4.5% 2.3%

EBITA (Wholly-owned) 85.0 111.4 (23.7%) (25.4%)

EBITA margin 4.6% 6.3% -170 bps -170 bps

Amortisation (30.5) (28.9)

Net Finance Costs (11.5) (13.3)

Share of Joint Ventures 31.8 26.8

Income Tax (4.9) (9.2)

Profit for the period (pre-exceptional) 69.9 86.8

Adjusted EPS 31.05c 36.69c (15.4%) (17.2%)

Basic EPS 18.73c 28.22c

Half Year Group Income Statement


26

• Revenue growth driven by GN

• EBITA decline driven by GPN International

• EBITA margins impacted mainly by negative operating leverage in GPN due to Covid-19 impact

• Good performance from JVs

• Reorganisation costs primarily relates to GPN transformation underpinning the margin growth ambition

• Covid-19 costs associated with increased payments to front line workers during the height of the pandemic and other incidental costs

Exceptional Items HY 2020 HY 2019

€‘m €‘m

Reorganisation costs 15.2 3.2

Covid-19 costs 3.5 -

Legal settlement gain (3.5) -

Brexit related costs - 1.1

Exceptional charge before tax 15.2 4.3

Share of results of Joint Venture – Covid-19 costs 1.2 -

Exceptional tax credit (1.8) (0.8)

Total exceptional charge after tax 14.6 3.5

Exceptional Items


27


28

Strong Cash Flow enabling investment & returns

€47m

OCF improved by €28 million

Operated to plan across the Group

throughout the crisis

FY20 capex expected to be in the €65m to

€75m range

€18mTotal capex

€29m 10.68c

Operating Cash Flow Dividends from JVs Capital Expenditure Interim Dividend

Targeting +80% OCF conversion for FY20

Dividend payout34%

Improving Balance Sheet


29

• Strong Balance Sheet to navigate the Covid-19 pandemic

• Net debt decreased by €127m on prior half year mainly due to strong cash generation

• New 11 year $175 million facility to be drawn down in December 2020

• Post-HY20 acquisition of Foodarom for CAD 60m

• Total committed facilities exceed €1.1 billion

Balance Sheet KPIs HY 2020 HY 2019

Net Debt €651m €778m

Net Debt / Adj. EBITDA 1.95x 2.14x

Adj. EBIT / Net Financing Costs 9.4x 10.5x

ConclusionSiobhán Talbot Group Managing Director

Conclusions


31

• Well positioned portfolio to capitalise on consumer trends

• Delivering against our priorities during Covid-19

• Trends improving into Q3 following a challenging Q2

• Strong financial position maintained

• Strategy on track with focus on GPN transformation

Questions

APPENDIX

Non-IFRS performance measure definitions


34

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 period-on-period change, the results for the prior year are retranslated using the average exchange rates for the current year and compared to the current period 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 amortization. EBITA references throughout the half year results are on a pre-exceptional basis unless otherwise indicated

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 amortization. EBITDA references throughout the half year results are on a pre-exceptional basis unless otherwise indicated

7. Basic Earnings Per Share is calculated by dividing the net profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares purchased by the Group and held as own shares

8. Adjusted EPS is defined as the net profit attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation and impairment (excluding software amortisation), net of related tax, divided by the weighted average number of ordinary shares in issue during the period. 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 ongoing operational performance and intangible asset amortisation, which allows better comparability of companies that grow by acquisition to those that grow organically

9. 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 pre-exceptional EBITDA for items such as dividends received from Equity accounted investees, acquisitions or disposals and to reverse the net impact on EBITDA as a result of adopting IFRS 16 ‘Leases’. Adjusted EBITDA is a rolling 12 month measure, therefore for half year 2020 and half year 2019 it is calculated as the Adjusted EBITDA for the preceding 12 months ending on the relevant reporting dates

10. Adjusted EBIT: net finance cost is calculated as earnings before interest and tax adjusted for the IFRS 16 ‘Leases’ impact on operating profit 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 and excludes Interest expense on lease liabilities. Adjusted EBIT and net finance cost are rolling 12 month measures, therefore for half year 2020 and half year 2019 are calculated as the Adjusted EBIT and net finance costs for the preceding 12 months

Non-IFRS performance measure definitions


35

11. The Group considers that items of income or expense which are material by virtue of their scale and nature should be disclosed separately if the Group financial statements are to fairly present the financial performance and financial position of the Group. Determining which transactions are to be considered exceptional in nature is often a subjective matter. However, circumstances that the Group believes would give rise to exceptional items for separate disclosure are outlined in the accounting policy on exceptional items in note 2 to the financial statement in the 2019 financial statements

12. Volume increase/(decrease) represents the impact of sales volumes within the revenue movement period-on-period, excluding volume from acquisitions, on a constant currency basis. Pricing increase/(decrease) represents the impact of sales pricing (including trade spend) within revenue movement period-on-period, excluding acquisitions, on a constant currency basis

13. Glanbia Performance Nutrition like-for-like branded revenue represents the sales increase/(decrease) period-on-period on branded sales, excluding acquisitions, on a constant currency basis

14. Glanbia Nutritionals like-for-like revenue represents the sales increase/(decrease) period-on-period, excluding acquisitions, on a constant currency basis

15. 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

16. The average interest rate is defined as the annualised net finance costs (pre-capitalised borrowing costs and excluding interest expense on lease liabilities) divided by the average net debt during the reporting period

17. 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.

18. 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. Free cash flow is calculated as the net cash flow in the period before the following items: strategic capital expenditure, proceeds received ondisposals, loans to / investments in equity accounted investees, equity dividends paid, exceptional costs paid, acquisition spend and currency translation movements

19. 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

20. 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

21. 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 trading profits into cash and is an important metric in the Group’s working capital management programme

22. The compound annual growth rate is the annual growth rate over a period of years. It is calculated on the basis that eachyear’s growth is compounded

23. Dividend Payout Ratio is defined as the interim dividend per ordinary share divided by the Adjusted Earnings per Share at the end of the current reported period. The dividend payout ratio provides an indication of the value returned to shareholders relative to the Group's total earnings

Adjusted EPS


36

€’m Reported currencyConstant currency

Adjusted EPS HY 2020 HY 2019 HY 2019

Profit attributable to equity holders of the Company 55.3 83.3 85.1

Exceptional Items 14.6 3.5 3.6

Profit attributable to equity holders of the Company - pre-exceptional 69.9 86.8 88.7

Amortisation (net of tax)* 21.8 21.5 22.0

Adjusted net income 91.7 108.3 110.7

Weighted average number of ordinary shares in issue (millions) 295.3 295.2 295.2

Adjusted Earnings Per Share (cent) 31.05 36.69 37.50

Constant currency growth -17.2%

*Amortisation and impairment of intangible assets (excluding software amortisation) net of related tax of €3.7 million (HY 2019: €3.9 million, 2019: €8.1 million)

Segmental Analysis


37

€’m Reported currency Constant currency

Glanbia Performance Nutrition HY 2020 HY 2019 HY 2019 Growth %

Revenue 532.4 620.1 630.6 -15.6%

EBITA 19.6 46.9 47.9 -59.1%

EBITA margin 3.7% 7.6% 7.6% -390 bps

€’m Reported currency Constant currency

Glanbia Nutritionals HY 2020 HY 2019 HY 2019 Growth %

Revenue* 1,304.3 1,138.3 1,165.0 12.0%

EBITA 65.4 64.5 66.0 -0.9%

EBITA margin 5.0% 5.7% 5.7% -70 bps

*As a result of the adoption of IFRS 15 in 2019, Revenue in Glanbia Nutritionals includes 100% of revenue from the Southwest Cheese joint venture. All comparisons are on a like-for-like basis

Segmental Analysis


38

€'m Reported currency Constant currency

Nutritional Solutions HY 2020 HY 2019 HY 2019 Growth %

Revenue* 387.9 369.6 376.9 2.9%

EBITA 48.1 50.5 51.6 -6.8%

EBITA margin 12.4% 13.7% 13.7% -130 bps


US Cheese HY 2020 HY 2019 HY 2019 Growth %

Revenue* 916.4 768.7 788.1 16.3%

EBITA 17.3 14.0 14.4 20.1%

EBITA margin 1.9% 1.8% 1.8% +10 bps

*As a result of the adoption of IFRS 15 in 2019, Revenue in Glanbia Nutritionals (Nutritional Solutions & US Cheese) includes 100% of revenue from the Southwest Cheese joint venture. All

comparisons are on a like-for-like basis

Segmental Analysis


39


Revenue HY 2020 HY 2019 HY 2019 Growth %

Glanbia Performance Nutrition 532.4 620.1 630.6 -15.6%

Nutritional Solutions 387.9 369.6 376.9 2.9%

US Cheese 916.4 768.7 788.1 16.3%

Glanbia Nutritionals* 1,304.3 1,138.3 1,165.0 12.0%

Wholly-owned Revenue 1,836.7 1,758.4 1,795.6 2.3%

*As a result of the adoption of IFRS 15 in 2019, Revenue in Glanbia Nutritionals includes 100% of revenue from the Southwest Cheese joint venture. All comparisons are on a like-for-like basis

Segmental Analysis


40


EBITA HY 2020 HY 2019 HY 2019 Growth %

Glanbia Performance Nutrition 19.6 46.9 47.9 -59.1%

Nutritional Solutions 48.1 50.5 51.6 -6.8%

US Cheese 17.3 14.0 14.4 20.1%

Glanbia Nutritionals 65.4 64.5 66.0 -0.9%

Wholly-owned EBITA 85.0 111.4 113.9 -25.4%

glanbia plc half year 2020 results...glanbia plc | half year 2020 presentation 4 consumers customers...

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