Britvic — H1 2013 Earnings Presentation
45 slides from Britvic's earnings presentation, May 22, 2013
Slide 1: Britvic plc Interim results May 2013
Britvic plc Interim results 22 May 2013
Slide 2: Gerald Corbett, Chairman
i Gerald Corbett Chairman pnog wend Ry a7 Eas
Slide 3: Agenda
Agenda Financial performance & guidance John Gibney A new strategy to deliver long-term sustainable shareholder returns Simon Litherland
Slide 4: John Gibney, Group Finance Director
John Gibney Group Finance Director
Slide 5: Group performance
Group performance +0.4% +27.6% +180bps + 47.6% +48.2% +5.7% +1.9% +0.4% 180bps 46.4% 46.7% £29.4m 1.9% Group Group Group EBITA Adjusted Improved Reduction in Half year revenue EBITA margin EPS of FCF net debt to dividend of 5.4p £639.2m £53.6m 8.4% 12.4p (£24.4m) (£503.7m) Underlying EBITA growth of
Slide 6: GB stills
GB stills 2013 2012 % £’m £’m Change Volume (m. litres) 192.9 211.4 (8.8) ARP per litre (pence) 84.9p 79.8p 6.4 Revenue 163.7 168.8 (3.0) Brand contribution 81.4 74.2 9.7 Brand contribution margin 49.7% 44.0% 570bps Underlying brand margin Strong ARP growth growth of 350bps Note: All numbers are on
Slide 7: We are on track to re-establish Fruit Shoot's market leadership in GB
We are on track to re-establish Fruit Shoot’s market leadership in GB • The category contracted whilst Fruit Shoot was unavailable • No long term impact on brand health • “Happy to give to my child” at pre-recall levels* • Core distribution back to pre-recall levels** • Full promotional plan for the
Slide 8: GB carbonates
GB carbonates 2013 2012 % £’m £’m Change Volume (m. litres) 580.9 595.0 (2.4) ARP per litre (pence) 45.9p 44.1p 4.1 Revenue 266.6 262.1 1.7 Brand contribution 100.2 91.1 10.0 Brand contribution margin 37.6% 34.8% 280bps Strong brand contribution growth Revenue growth of 1.7% in a competitive market
Slide 9: International
International 2013 2012 % £’m £’m Change Volume (m. litres) 18.6 19.2 (3.1) ARP per litre (pence) 96.8p 75.0p 29.1 Revenue 18.0 14.4 25.0 Brand contribution 6.9 3.7 86.5 Brand contribution margin 38.3% 25.7% 1,260bps Margin improvement primarily Successful return of Fruit Shoot from growth in US to
Slide 10: Ireland
Ireland % Change 2013 2012 % constant £’m £’m Change currency Volume (m. litres) 98.7 104.5 (5.6) (5.6) ARP per litre (pence) 55.7p 54.4p 2.4 4.7 Revenue 67.2 72.7 (7.6) (5.5) Brand contribution 24.2 22.1 9.5 12.0 Brand contribution margin 36.0% 30.4% 560bps 560bps Licensed wholesale continued to Un
Slide 11: France
France % Change 2013 2012 % constant £’m £’m Change currency Volume (m. litres) 136.7 142.3 (3.9) (3.9) ARP per litre (pence) 90.5p 86.5p 4.6 7.0 Revenue 123.7 123.1 0.5 2.7 Brand contribution 28.9 27.1 6.6 9.1 Brand contribution margin 23.4% 22.0% 140bps 140bps Core brands continued Fruit Shoot in
Slide 12: Soft drinks market YTD - overview
Soft drinks market YTD - overview GB • Market volume down 1.7%, value up 0.9% France • Market volume down 0.7%, value up 1.1% Ireland • Market volume down 7.8%, value down 4.9% with Q2 worse than Q1 Source: Nielsen GB take-home scantrack 13 April 2013 Pubs and Clubs CGA data 23 February 2013. Nielse
Slide 13: A&P and fixed costs
A&P and fixed costs 2013 2012 % £’m £’m Change Total A&P spend 22.0 33.0 33.3 A&P as a % of revenue 3.5% 5.3% 180bps Non-brand A&P 4.3 5.2 17.3 Fixed supply chain 59.6 59.5 (0.2) Selling costs 64.5 63.3 (1.9) Overheads & other 61.2 49.8 (22.9) TOTAL FIXED COSTS 189.6 177.8 (6.6) Overheads increased
Slide 14: EBIT to earnings
EBIT to earnings % Change 2013 2012 Constant £’m £’m Currency EBIT 52.0 40.4 28.1 Interest (14.5) (15.6) 7.1 Profit before tax 37.5 24.8 50.0 Tax (9.0) (6.1) (47.5) Effective tax rate 24.0% 24.6% 60bps Profit after tax 28.5 18.7 50.8 Lower interest reflected Effective Tax Rate debt reduction lower b
Slide 15: Cash flow
Cash flow 2013 2012 % £’m £’m Change EBIT 52.0 40.4 28.7 Depreciation & amortisation 25.4 23.3 9.0 EBITDA 77.4 63.7 21.5 Working capital (57.4) (49.7) (15.5) Capital expenditure (17.1) (20.4) 16.2 Pension contributions (13.9) (10.8) (28.7) Other (13.4) (29.9) 55.2 Underlying free cash flow (24.4) (4
Slide 16: 2013 Guidance
2013 Guidance • EBIT to be towards the upper end of the range of £125m to £131m • including the remaining £8m cost associated to Fruit Shoot recall • and £2m incremental franchise investment • Full Year A&P spend ahead of last year by 25 basis points of revenue • Raw material inflation will be low s
Slide 17: Summary
Summary H1 profitability significantly ahead of last year Margin and pricing growth in every business unit Increased cash generation and further reduction in net debt Full year EBIT towards the upper end of £125-131m guidance
Slide 18: Simon Litherland, Chief Executive
Simon Litherland Chief Executive
Slide 19: Introduction
Introduction • Joined Britvic October 2011 as GB MD • 20 years at Diageo • MD of Diageo GB • MD at Brandhouse – South African JV • Diageo MD in Ireland and Central Europe • Finance Director in a number of senior international finance roles
Slide 20: A significant turnaround in the business performance
A significant turnaround in the business performance • Fruit Shoot strong return back to market • GB performance accelerating • Margin and pricing growth in every business unit • Acceleration of the US Fruit Shoot business • Strong earnings growth, increased cash generation and paid down debt
Slide 21: H2 will see a substantially stronger marketing and customer programme
H2 will see a substantially stronger marketing and customer programme to continue the momentum Innovation highlights: • Robinsons 500ml double concentrate • Teisseire Fruit Shoot Syrups • Mountain Dew “Amp” • J2O Pear Gold Strong marketing programmes including: • Pepsi Beyonce & Dynamo • Robinsons W
Slide 22: Strategy
Strategy & wa aa BRITVIC
Slide 23: An opportunity to rethink the business has identified:
An opportunity to rethink the business has identified: • Some immediate issues to address • Excessive organisational complexity • Many cost reduction opportunities • Potential to accelerate revenue growth in core & international markets Opportunity to unlock substantial value
Slide 24: Britvic has the potential to become one of the world's most admired soft drinks businesses
Britvic has the potential to become one of the world’s most admired soft drinks businesses by: • Becoming the benchmark integrated branded soft drinks business for both PepsiCo and our own brands in GB & Ireland • Fully exploiting global category opportunities in Kids, Family and Adult • Creating a
Slide 25: Our new strategy has two distinct legs
Our new strategy has two distinct legs Full portfolio markets (GB & Ireland) International • Leverage scale and a common strategy • Focus on the Kids, Family and • Innovate and invest in our own- Adult categories brand portfolio • Accelerate Fruit Shoot • Maximise potential of the Pepsi • Develop fr
Slide 26: Simplicity Focus Accountability
This strategy requires a different organisational model based on the principles of Simplicity Speed up decision making, reduce cost Focus Fewer strategic priorities Accountability Ownership to deliver performance A lower cost organisation focused on the growth opportunities
Slide 27: Transitioning to a simplified organisational model
Transitioning to a simplified organisational model From To Group Group GB Ireland France BWB GB & International Ireland & France Supply Chain Britvic International Overly complex Full BU accountability Unclear accountability Clear focus High cost Lower cost
Slide 28: The GB and Ireland strategy
The GB and Ireland strategy Full portfolio markets (GB & Ireland) • Leverage scale and a common strategy • Innovate and invest in the own- brand portfolio • Maximise potential of the Pepsi partnership • Category leadership of “Kids, Family & Adult” Sustainable market leading value growth
Slide 29: Four transformational initiatives to step change the cost base & profitability
Four transformational initiatives to step change the cost base & profitability in GB & Ireland 1. Increase operational leverage through fewer manufacturing sites 2. Fundamentally change the Irish operating model 3. Transform our procurement and product optimisation initiatives 4. Implement a commerc
Slide 30: Increase operational leverage through fewer manufacturing sites
1.Increase operational leverage through fewer manufacturing sites • Today we have announced the following proposals: • Chelmsford and Huddersfield (water) manufacturing sites to close in calendar Q1 2014 - Employee consultation has started today • Ballygowan to replace current GB water brands, sourc
Slide 31: Fundamentally change the Irish operating model
2. Fundamentally change the Irish operating model • Create a combined GB & Ireland business unit • Single leadership team • Commercial in-market focus • Simplify support structures • Proposed separation of Licensed Wholesale from the core branded business • Optimise our route to market and customer
Slide 32: Transform our procurement and product optimisation initiatives
3. Transform our procurement and product optimisation initiatives • Investment in resources, upgraded capability and insight systems • Development of global sourcing strategy, aligned to complexity reduction programme • Building stronger direct relationships and longer term visibility • Combined pro
Slide 33: Implement a commercial change programme
4. Implement a commercial change programme • Industry leading insight into the soft drinks market • Increased investment in higher quality consumer and shopper activity • Optimise revenue and promotion management • Strengthen market coverage and routes to market
Slide 34: Realising the international opportunity
Realising the international opportunity International • Focus on the Kids, Family and Adult categories • Accelerate Fruit Shoot • Develop franchise model • Asset-light approach Rapid revenue growth that will be margin accretive
Slide 35: The international opportunity is huge
The international opportunity is huge • Kids juice drinks market • Fruit Shoot - “Appealing to kids c.$10bn globally Strong and welcomed by parents” Large and brand • Liquid dilutes market c.$11bn • Robinsons and Teisseire – attractive and c$10bn for powder attributes established category leaders ma
Slide 36: In Fruit Shoot we already have an international brand
In Fruit Shoot we already have an international brand and we now have many more reasons to believe in its full potential A unique proposition: +20% share and double- 30% of Fruit Shoot Trusted by parents digit growth in established revenue is non-GB and Seen as cool by kids US states growing rapidly
Slide 37: A new agreement for Fruit Shoot in the US
A new agreement for Fruit Shoot in the US • Agreement signed with the Pepsi Cola Bottling Company of Pittsburgh to distribute Fruit Shoot in the states of Kansas and Missouri • Increases distribution to 32 states • Further evidence of the potential for Fruit Shoot in the US
Slide 38: Agreement reached for national distribution of Fruit Shoot in India
Agreement reached for national distribution of Fruit Shoot in India • Agreement reached with Narang Group for the national sales & distribution of Fruit Shoot in India, commencing mid-2014 • Narang Group has a strong national presence in consumer goods in India • Joint ventures with Suntory and Dano
Slide 39: The next steps to realise the international potential are clear
The next steps to realise the international potential are clear • Establish a fully resourced business unit with the right talent and capabilities • Accelerate early successes and partnerships with Pepsi in the US • Nurture and grow our European markets • France, Netherlands and Spain • Scale up ide
Slide 40: Summary
Summary & wa aa BRITVIC
Slide 41: £30m cost savings by 2016 - £10m reinvested to grow international
£30m cost savings by 2016 - £10m reinvested to grow international P&L FY13 FY14 FY15 FY16 Cost savings 0 13 25 30 International (2) (5) (10) (10) investment EBIT Impact (2) 8 15 20 Capital (8) (13) 0 10 Exceptional cash (12) (17) 0 0 costs Cash impact (20) (30) 0 10 £30m annual return for a net £40m
Slide 42: This strategy will build a better Britvic
This strategy will build a better Britvic • Builds on current market positions, brands and capabilities • Supports on-going profitable growth in GB and Ireland • Asset-light model, enabling access to growing international markets • Establishes a simpler, more focused and profit accountable operating
Slide 43: Leading to a stronger financial performance
Leading to a stronger financial performance • Faster revenue growth in core and international • Lower fixed costs and higher ROCE • Accelerated margin improvement • Greater diversification of profit base • Improved cash conversion • Reduce net debt /EBITDA to 2.0X to 2.2X by 2014 • Progressive divid
Slide 44: Summary
Summary Impressive first half with full year guidance towards the upper end of the range £30m costs savings delivered by 2016 Investing to realise significant international opportunities A vision and strategy to unlock significant shareholder value
Slide 45: isdde “Pave wese
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