Greencore Group Plc · LSE:GNC
Greencore — H1 2024 Earnings Presentation
39 slides from Greencore's earnings presentation, May 21, 2024
Slide 1: Results for the half year ended 29 March 2024
RESULTS For the half year ended 29 March 2024
Slide 2: Disclaimer ─ forward looking statements
Disclaimer ─ forward looking statements Certain statements made in this document are, or may be deemed to be, forward‐looking. These represent expectations for the Group’s business, and involve known and unknown risks and uncertainties, many of which are beyond the Group’s control. The Group has bas
Slide 3: Today's agenda
Today’s agenda 1. Introduction Dalton Philips, CEO 2. Financial Review Catherine Gubbins, CFO 3. Strategic & Operating Update Dalton Philips, CEO 4. Outlook Dalton Philips, CEO 5. Q&A Dalton Philips, CEO Catherine Gubbins, CFO H1 24 RESULTS | MAY 2024 3
Slide 4: Introduction
INTRODUCTION Dalton Philips, CEO
Slide 5: Accelerating profit recovery
Accelerating profit recovery Strong progress on returning the Group towards historic absolute levels of profitability and returns during H1 Delivery of Adjusted Operating Profit of £28.3m, a 140% increase YoY LFL Revenue Growth (+4.1%)(1) and LFL(2) growth in volume (+0.5%) – continuing to outperfor
Slide 6: Financial Review
FINANCIAL REVIEW Catherine Gubbins, CFO
Slide 7: First impressions and priorities
First impressions and priorities First impressions Near term priorities Medium term priorities • Strong underlying business, • Deliver on profitability and • Ensure an efficient platform expertise and customer base returns initiatives for growth • Manages complexity well • Implement cost base • Impr
Slide 8: H1 key financial metrics
H1 24 key financial metrics Group key financial metrics Adjusted Operating Profit Like for Like Revenue Growth(1) £28.3m 4.1% +140% vs H1 23 Reported Revenue Growth (6.4%) Adjusted EPS Free Cash Flow 2.8p (£26.5m) +2.3p vs H1 23 (£2.2m) vs H1 23 ND:EBITDA(1) ROIC 1.4x +0.5x vs H1 23 10.2% +270bps vs
Slide 9: Financial summary
Financial summary Like for Like £m unless otherwise stated H1 24 H1 23 Variance Revenue Growth Revenue 866.1 925.8 (6.4%) +4.1% Like for Like Revenue Growth 4.1% Adjusted Operating Profit growth Adjusted Operating Profit 28.3 11.8 +140% +140% Adjusted Operating Margin (%) 3.3% 1.3% +200bps Adjusted
Slide 10: LFL Revenue Growth driven by volume and inflation recovery
LFL Revenue Growth driven by volume and inflation recovery Reported (6.4%) Reported Revenue vs H1 23 (6.4%) • Disposal of Trilby Trading business accounts for a 4.6% reduction LFL Revenue Growth • Net business wins and exits, +4.1% including proactively resigning (4.6%) several low margin contracts,
Slide 11: Adjusted Operating Profit progression driven by continued focus on internal levers
Adjusted Operating Profit progression driven by continued focus on internal levers Adjusted Operating Profit + +140% LFL revenue and volume growth £28.3m • LFL volume growth, ahead of the wider market + Commercial Excellence across pricing, • Delivery of Commercial Excellence across pricing, product
Slide 12: Seasonal cash outflow driven by working capital
Seasonal cash outflow driven by working capital Free cash flow (£26.5m) Free Cash Flow Conversion (LTM)1 (43.2) 55.9 36.7% (10.1) Seasonal Working Capital Outflow (2.9) (14.3) (26.5) £43.2m (6.7) 3.2 (8.4) Maintenance capital expenditure Adjusted Net Maintenance Exceptional Interest Pensions Leases
Slide 13: Re-financing provides significant financial flexibility
Re-financing provides significant financial flexibility The Group further strengthened its Net Debt (excluding balance sheet in November 2023, lease liabilities) with the re-financing of the Revolving Credit Facility £198.0m 447 Net Debt : EBITDA Significant cash and undrawn committed facilities at
Slide 14: Capital allocation update, new £50m return launched
Capital allocation update, new £50m return launched £50m return over next 12 months, with £30m announced today in the form of share buyback and intention to declare dividend at full year • Capital expenditure investment split Organic Growth between maintenance and strategic (Capital expenditure) exp
Slide 15: Strategic & Operating Update
STRATEGIC & OPERATING UPDATE Dalton Philips, CEO
Slide 16: Three horizon framework for recovery and growth
Three horizon framework for recovery and growth 1 Stabilise 2 Rebuild 3 Grow Horizon 1 – FY23 Horizon 2 – FY24-26 Horizon 3 – FY24-28 Rebuild profitability and returns through: 1. Portfolio Optimisation 2. Commercial Excellence Exploring growth 3. Operational Excellence Completed opportunities 4. Pr
Slide 17: Applying a returns lens across nine portfolio categories
Horizon 2: Rebuild – Portfolio Optimisation Applying a returns lens across nine portfolio categories Portfolio categories Strategic highlights Sandwiches Pursue robust commercial pipeline to drive volume and enhance profitability Sushi Rebuild volume through targeted business wins Food to Go Salads
Slide 18: Focused approach to Commercial Excellence delivering results
Horizon 2: Rebuild – Commercial Excellence Focused approach to Commercial Excellence delivering results Application of latest consumer and market insights Insight 184 new products launched in H1 Supply Volume Robust Continued outperformance against market chain product expertise 169 lower performing
Slide 19: Continued strong performance against the market
Horizon 2: Rebuild – Commercial Excellence Continued strong performance against the market Greencore outperformed the market as a whole, and in specific key categories Volume, 26 weeks to 31 Mar 2024 Market Greencore Total Grocery(1) Sandwiches Ready Meals Enabled by: • Focused approach to new produ
Slide 20: Building an enterprise-wide Operational Excellence programme
Horizon 2: Rebuild – Operational Excellence Building an enterprise-wide Operational Excellence programme… Enterprise level improvement is underpinned by Operational Excellence pillar structure: Units per direct labour hour A Manufacturing & Supply +4% Chain Excellence 94 98 E Processes B Automation
Slide 21: Significant progress achieved against five pillars
Horizon 2: Rebuild – Operational Excellence …with significant progress achieved against five pillars A 11 p.p. reduction in organisational losses in pilot plant A Manufacturing & Supply Chain Excellence B 3 focus areas in assembly robotics, materials automation & warehouse E Processes B automation A
Slide 22: Investment in processes & technology in FY24
Horizon 2: Rebuild – Process & Technology Transformation Investment in processes & technology in FY24 • Implementing a consistent infrastructure for data, processes and technology Data • Common ERP complemented by optimal solutions for specific business needs • Improvement achieved through 41 initia
Slide 23: Three horizon framework for recovery and growth
Three horizon framework for recovery and growth 1 Stabilise 2 Rebuild 3 Grow Horizon 1 – FY23 Horizon 2 – FY24-26 Horizon 3 – FY24-28 Explore selective internal and external investment within our Ongoing rebuild core and/or expand into of profitability & complementary categories and Completed return
Slide 24: Growth considerations in Horizon 3
Horizon 3: Grow Growth considerations in Horizon 3 Guiding principles Application in practice Strategic: Enhancing Category Expansion: Opportunities to exposure to structural consolidate in selected subset of existing growth categories, or expand into complementary categories Financial: Clear assess
Slide 25: Outlook
@ Greencore OUTLOOK Dalton Philips, CEO woes
Slide 26: Outlook
Outlook Priority on returning the business to prior levels of profit 1 and returns as soon as possible Encouraged by the strong and accelerating progress made in 2 portfolio, commercial, operations and technology to improve profitability and returns Currently expect FY24 Adjusted Operating Profit to
Slide 27: i > i =
i 3 > i 2 =
Slide 28: Appendix 1: Supplementary financial information
APPENDIX 1 Supplementary financial information
Slide 29: LFL Revenue Growth across both categories
LFL Revenue Growth across both categories FTG Categories Reported (0.3%) Food to Go categories Reported Revenue change LFL Revenue vs H1 23 Growth 4.6% (0.3%) 0.0% (4.9%) 2.7% • Proactively resigning several low margin contracts (4.9%) (net of new business wins) led to a 4.9% reduction 580.4 2.0% 57
Slide 30: H1 24: other financial items
H1 24: other financial items £m H1 24 H1 23 Highlights Net finance costs (10.6) (9.8) • Net finance costs increased due to increasing interest rates in the market Tax (before exceptional items) (3.4) (0.2) • Effective tax rate for the period ended 29th March 2024 was 24% (H1 Group exceptional items
Slide 31: H1 24 Cash Flow
H1 24 Cash Flow £m unless otherwise stated H1 24 H1 23 Variance Free Cash Flow Opening Net Debt (excluding lease liabilities) 154.0 180.0 26.0 Adjusted EBITDA 55.9 39.9 16.0 (£26.5m) Net Working Capital (43.2) (32.3) (10.9) Maintenance Capital Expenditure (10.1) (8.8) (1.3) Free Cash Flow Exceptiona
Slide 32: H1 24 balance sheet highlights
H1 24 balance sheet highlights £m unless stated H1 24 H1 23 Net Debt 243.9 268.8 Net Debt (excluding lease liabilities) 198.0 219.4 Net Debt: EBITDA (x)1 1.4 1.9 Pension deficit (net of deferred tax) 15.2 12.8 Average Invested Capital 709.8 717.4 ROIC (%) 10.2 7.5 (2) Net Debt: EBITA (x) as measured
Slide 33: FY24 guidance
FY24 guidance £m FY24 FY23 Depreciation and Amortisation(1) c.£55m £56.5m Capital Expenditure c.£40-45m £37.4m Cash Interest(2) c.£23m £16.4m P&L Interest(2) c.£22m £16.9m Cash Tax c.£5m £2.7m Effective Tax Rate c.25% 21% Pension Deficit Contributions & Costs c.£12-15m £11.1m (1) excludes customer r
Slide 34: Definitions of APMs
Definitions of APMs The Group uses the following Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the performance of its operations and of the Group as a whole. Like-for-Like Revenue Growth (vs FY23) Adjusted Earnings and Adjusted Earnings Per Share (‘EPS’) Like-for-L
Slide 35: Definition of APMs continued
Definition of APMs continued… Capital Expenditure Net Debt and Net Debt Excluding Lease Liabilities The Group defines Maintenance Capital Expenditure as the expenditure required to Net Debt comprises current and non–current borrowings less net cash and cash maintain/ replace existing assets with a h
Slide 36: IR Contacts Calendar
IR CONTACTS CALENDAR Catherine Gubbins Q3 24 Trading Update 30 July 2024 Chief Financial Officer Full Year Period End 27 September 2024 Curtis Armstrong Full Year Results 28 November 2024 Director of FP&A and IR investor.relations@greencore.com 36
Slide 37: Appendix 2: Greencore at a glance
APPENDIX 2 Greencore at a glance
Slide 38: Greencore at a glance
across 20 categories x)= chilled prepared chilled soups and meals per year sandwiches and sauces per year, other food to go oe items each year ul i U wm Yorkshire puddings” per year The world’s largest fresh pre-packaged colleagues Ye m1 H1 24 RESULTS | MAY 2024 38
Slide 39: Our business model
Our business model Our inputs Sourcing with Integrity Making with Care Feeding with Pride People We are committed to ensuring that the raw materials Our Great Food is underpinned by our dedication to We design products with taste, freshness, c.13,600 we use in the products we supply to our customers