Glanbia plc 2016 Full Year Results Presentation 22 February 2017 Siobhan Talbot Group Managing Director Mark Garvey Group Finance Director
Cautionary Statement
Full Year 2016 Performance Summary Adj. EPS 87.66c +11.2% (cc*) +10.8% (rc*) Seventh consecutive year of double digit growth in adjusted EPS EBITA 305.1m +12.5% (cc*) +12.6% (rc*) Strong EBITA growth across the Group EBITA margin 10.7% +90 bps (cc*) +90 bps (rc*) Continued EBITA margin progression across the Group Free cash flow 311.0m +21.5% Strong cash conversion *CC denotes constant currency; RC denotes reported currency 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 2016 was 1 = $1.107 (FY 2015: 1 = $1.109). 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. 2016 Full Year Results Slide 3
Group EBITA progression Total group EBITA growth +12.8% (cc*), +12.6% (rc*) GLANBIA GROUP TOTAL 349.8m 162.6m 310.7m Commentary GLANBIA PERFORMANCE NUTRITION 135.6m GLANBIA NUTRITIONALS 111.8m 106.6m JVs & ASSOCIATES DAIRY IRELAND 44.7m 39.7m 30.7m 28.8m FY 2016 FY 2015 * CC denotes constant currency; RC denotes reported currency 2016 Full Year Results Slide 4
Strategic Initiatives Proposal to sell 60% of Dairy Ireland to Glanbia Coop JV&A s Proposed JV in Michigan GPN acquisitions Amazing Grass and Body & Fit 2016 Full Year Results Slide 5
Proposal to sell 60% of Dairy Ireland to Glanbia Coop Key proposals Non binding memorandum of understanding signed Expected consideration to plc of 112 million for 60% equity interest. Pension obligations to transfer to new entity and working capital to be acquired separately at completion New entity to be named Glanbia Ireland -Encompassing Glanbia Ingredients Ireland, Consumer Products and Agribusiness Ownership of Glanbia Ireland 60% Glanbia Coop 40% Glanbia plc Strategic rationale and timing Creates integrated Irish based business of scale largest Irish dairy processor Builds on the successful partnership of Glanbia plc and Glanbia Coop created in 2012 Strategic logic to create one integrated organisation to maximise opportunities from anticipated growth in Irish milk Investing 250-300 million in strategic investment projects to 2020 for future growth largely funded by JV bank debt 2016 Full Year Results Slide 6
New Development Project - Joint Venture 50/50 JV in Michigan Advanced discussions with three major Michigan Co-ops Commissioning expected in late 2019 Development will help Glanbia to maintain leadership position in US Cheese and advanced technology whey Project cost expected to be $400m to $425m with the majority of the cost to be financed through debt facilities within the JV 2016 Full Year Results Slide 7
Acquisitions announced in 2017 Plant-based nutrition, Greens & Super Foods Positions GPN within high growth category Distribution natural, online & FDM North America Direct to consumer DTC online brand Consumer base is largely in the Netherlands, Belgium and Germany Providing GPN with access to the rapidly developing DTC channel 2016 Full Year Results Slide 8
Operational Review
Glanbia Performance Nutrition Performance Growth Strong performance in 2016 Branded revenue growth 13.6% branded revenue growth REVENUE 1,007.5m +9.7% (cc) +9.1% (rc) lfl branded growth Rev. +2.6% Vol. +6.1% Earnings 20% Increase in EBITA Expansion Innovation 130 basis points margin expansion Successful launches across the portfolio in ready-to-eat EBITA 162.6m +20.0% (cc) +19.9% (rc) EBITA margin 16.1% +130bps (cc) +140bps (rc) 2016 Full Year Results Slide 10
Glanbia Nutritionals Performance Good Performance in 2016 Growth Value Expansion 4.5% EBITA growth with strong H2 Continued growth in valueadded Nutritional Solutions 30 basis points margin expansion Project to create one customerfacing organisation complete REVENUE 1,224.2m +0.4% (cc) +0.5% (rc) EBITA margin 9.1% +30bps (cc) +30bps (rc) EBITA 111.8m +4.5% (cc) +4.9% (rc) 2016 Full Year Results Slide 11
Dairy Ireland & JVA s DAIRY IRELAND JOINT VENTURES & ASSOCIATES REVENUE EBITA EBITA margin REVENUE EBITA EBITA margin Good performance driven by valueadded products Strengthening of margins as a result of cost improvements and increased value-added sales Strong performance driven by volume growth EBITA growth across all three strategic Joint Ventures 2016 Full Year Results Slide 12
Finance Review
Summary Income Statement Seventh year of double-digit earnings growth 2016 results summary pre-exceptional Reported currency 'm 2016 2015 Change Revenue (Wholly-owned) 2,847.9 2,774.3 +2.7% EBITA (Wholly-owned) 305.1 271.0 +12.6% EBITA margin 10.7% 9.8% +90 bps Constant currency Change +2.8% +12.5% +90 bps Amortisation of intangibles Net finance costs Share of JV&As Income tax (39.7) (22.8) 27.6 (43.3) (31.1) (21.1) 26.3 (37.3) Profit for the year 226.9 207.8 Adjusted Earnings per Share 87.66c 79.14c +10.8% +11.2% 2016 Full Year Results Slide 14
Segmental Summary Strong performance led by Glanbia Performance Nutrition FY 2016 'm Revenue EBITA Margin Glanbia Performance Nutrition 1,007.5 162.6 16.1% Glanbia Nutritionals 1,224.2 111.8 9.1% Dairy Ireland 616.2 30.7 5.0% Total wholly-owned 2,847.9 305.1 10.7% Constant currency change Revenue EBITA Margin +9.7% 20.0% +130 bps +0.4% 4.5% +30 bps -2.7% 6.6% +50 bps +2.8% 12.5% +90 bps 2016 Full Year Results Slide 15
Revenue Growth by Segment Wholly owned Revenue growth +2.7% (+2.8% CC*) Million 2,900 2,850 3.2% 0.2% (0.6)% 2,848m 2,800 2,774m (0.1)% 2,750 2,700 2,650 2,600 FY15 FX Glanbia Performance Nutrition * Constant Currency (CC) excluding the impact of FX Glanbia Nutritionals Dairy Ireland FY16 2016 Full Year Results Slide 16
Revenue Growth by Segment - GPN Glanbia Performance Nutrition Revenue growth +9.1% (+9.7% CC*) Million 1,050 1,000 5.0% (4.8)% 9.5% 1,007m 950 923m (0.6)% 900 850 800 750 FY15 FX Volume Price Acquisitions FY16 * Constant Currency (CC) excluding the impact of FX 2016 Full Year Results Slide 17
Revenue Growth by Segment - GN Glanbia Nutritionals Revenue growth +0.5% (+0.4% CC*) Million 1,400 1,200 1,000 800 1,218m 0.1% 3.2% (2.8)% 1,224m Nutritional Solutions 475m Nutritional Solutions 488m 600 400 200 US Cheese 743m US Cheese 736m 0 FY15 FX Volume Price FY16 * Constant Currency (CC) excluding the impact of FX 2016 Full Year Results Slide 18
EBITA Progression Wholly owned EBITA growth +12.6% (+12.5% CC*) 300 Million 27.1m 4.8m 1.9m 305.1m 280 271.0m 0.3m 260 240 220 200 FY15 FX Glanbia Glanbia Performance Nutritionals Nutrition * Constant Currency (CC) excluding the impact of FX Dairy Ireland FY16 2016 Full Year Results Slide 19
Exceptional Items Summary 'm 2016 2015 1. Organisation redesign costs (11.4) (7.0) 2. Acquisition integration costs (3.1) (2.9) 3. Rationalisation costs (3.0) (7.8) 4. Irish defined benefit pension plans - (5.0) 5. Disposal of Joint Venture - (3.6) Total exceptional charge before tax (17.5) (26.3) Tax credit on exceptional items 2.7 2.5 Total exceptional charge (14.8) (23.8) 2016 Full Year Results Slide 20
Cash Flow Progression Free Cash Flow +22% converting 88% of EBITDA to cash Million 32m (32m) 370 50m 354m (53m) 320 305m 14m (4m) 311m 270 256m 220 170 153m 120 2016 EBITA Depreciation* Working Capital Business Sustaining Capex 2016 Operating Cash Flow Net Interest & Tax Dividends from JV&A's Other 2016 Free Cash Flow FCF 2015 FCF 2014 * Depreciation includes Grant Amortisation NOTE: 2016 EBITA reflects the wholly-owned business 2016 Full Year Results Slide 21
Investment and Returns Total Capex Strategic Capex Bus. Sustaining Capex ROCE 12.9% -100bps 90m 57m 124m 86m 116m 73m 32m 37m 43m 2016 2015 2014 * Inclusive of estimated contingent consideration 2016 Full Year Results Slide 22
Balance Sheet Financing KPI's 2016 2015 Net Debt 438 million 584 million Net Debt / Adjusted EBITDA¹ 1.19 times 1.75 times Adjusted EBIT¹ / Net Finance Cost 11.5 times 10.8 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: - 722 million revolving credit facilities maturing January 2020 - $325 million private debt placement of senior loan notes, due June 2021 Net pension obligations of 110.5 million* of which approximately 60 million* relate to Dairy Ireland *on an IAS 19 basis 2016 Full Year Results Slide 23
Proposed sale of 60% interest in Dairy Ireland to Glanbia Coop Valuation Enterprise Value (EV of 100%)* 340m Equity value (100%)** 186m Expected consideration*** to PLC 60% equity interest 112m 3 year Avg. working capital 92.5m Process and financing Final agreements to be completed and shareholder approval required by plc and Coop Expected to close by mid 2017 100% of the actual working capital in Dairy Ireland will be acquired by Glanbia Ireland on completion Transaction expected to be 5% - 7% Adjusted EPS dilutive * Enterprise Value is an approximate amount based upon the total of Equity value plus 3 year average working capital plus pension liabilities associated with Dairy Ireland ** Equity value is net of pension obligations associated with Dairy Ireland and 3 year average working capital *** Note final consideration will be the total value of 100% of the actual working capital at completion plus equity value 2016 Full Year Results Slide 24
Summary & Outlook
Summary & Outlook *Pro-forma adjusted EPS of the continuing Group has been calculated assuming the Dairy Ireland transaction was completed at the start of FY 2016. **Continuing Group as used above includes Glanbia Ireland as a 40% associate ***The Dairy Ireland transaction is contingent upon agreement of legal transaction contracts and shareholder approvals 2016 Full Year Results Slide 26
Questions & Answers
Appendix
Appendix Non IFRS Performance Measures 1. 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. Revenue comprises sales of goods and services of the wholly owned businesses to external customers net of value added tax, rebates and discounts. 3. EBITA is defined as earnings before interest, tax and amortisation excluding exceptional items. 4. EBITA margin is defined as EBITA before exceptional items as a percentage of the revenue of the wholly owned businesses. 5. 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. 6. Adjusted EPS is defined as the net profit attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation, net of related tax, divided by the weighted average number of ordinary shares in issue during the year. 7. 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, equity dividends paid, exceptional costs paid, loans to Joint Ventures & Associates and currency translation movements. 8. 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. 9. ROCE is defined as the Group's earnings before interest, tax and amortisation (net of related tax) plus the Group's share of the results of Joint Ventures & Associates 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 but excluding all financial liabilities, retirement benefit assets, cash and deferred tax balances. 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. 2016 Full Year Results Slide 29
Delivering better nutrition for every step of life s journey Liam Hennigan Head of Investor Relations Glanbia plc Glanbia House Kilkenny, Ireland Email: ir@glanbia.ie Tel: +353 56 777 2200