Greencore Group Plc · LSE:GNC
Greencore — H1 FY23 Earnings Presentation
41 slides from Greencore's earnings presentation, May 30, 2023
Slide 1: Results for the half year ended 31 March 2023
RESULTS For the half year ended 31 March 2023
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 Welcome & Introduction Dalton Philips, CEO Financial Review Emma Hynes, CFO Operating & Strategic Update Dalton Philips, CEO Outlook Dalton Philips, CEO Dalton Philips, CEO Q&A Emma Hynes, CFO Note: The Group uses Alternative Performance Measures ('APMs') which are non-IFRS measures t
Slide 4: Welcome & Introduction
WELCOME & INTRODUCTION Dalton Philips, CEO
Slide 5: Executive summary
Executive summary Volume performance supporting strong revenue growth in H1 FY23 • Continued improvement through H1 in volume growth supporting strong revenue growth • Inflation remained a significant challenge in H1, with good progress in recovery and mitigation • Focused on core performance, with
Slide 6: Reflections after eight months in role
Reflections after eight months in role • Greencore is an impressive business… • …but it has been a challenging three years – with inflation defining the landscape • We have a refreshed team, ambition and plan focused on rebuilding profit and returns H1 FY23 RESULTS | MAY 2023 6
Slide 7: Financial Review
FINANCIAL REVIEW Emma Hynes, CFO
Slide 8: H1 FY23 key financial metrics
H1 FY23 key financial metrics Reported Revenue Growth Adjusted Operating Profit Adjusted EPS +20.1% £11.8m 0.5p -£5.4m -1.3p Free Cash Flow ND:EBITDA* ROIC -£24.3m 1.9x 7.5% -£6.5m +0.2x +120bps *As per financing agreements, excluding lease liabilities Note: all comparisons versus H1 FY22 H1 FY23 RE
Slide 9: Financial summary
Financial summary £m unless otherwise stated H1 FY23 H1 FY22 Change Group Revenue 925.8 770.8 +20.1% Adjusted EBITDA 39.9 43.8 -£3.9m Adjusted Operating Profit 11.8 17.2 -£5.4m Adjusted Operating Margin (%) 1.3% 2.2% -90bps Adjusted Profit Before Tax 3.4 11.7 -£8.3m Group Exceptional Items (after ta
Slide 10: Strong revenue growth driven by inflation recovery and volume increases
Strong revenue growth driven by inflation recovery and volume increases Highlights +20.1%(3) • Strong revenue growth in both Food to Go and Other Convenience categories +0.6% +5.0% • Successful execution of inflation recovery within Group customer base delivering mid-teen pricing benefit +14.5% 925.
Slide 11: Revenue momentum across Food to Go and Other Convenience categories
Revenue momentum across Food to Go and Other Convenience categories Highlights Food to Go Food to Go Other Convenience Reported revenue increased by 15.6% driven categories categories by: +15.6%(3) +28.5%(3) • Inflation recovery • Underlying volume growth in sandwiches +4.5% +0.1% • Contribution of
Slide 12: Continued progress on inflation recovery and mitigation
Continued progress on inflation recovery and mitigation Highlights • H1 FY23 saw a continued increase in Continued inflationary increases inflation across the Group, with overall % inflation recovery and mitigation into mid-teens inflation into mid-teens of total cost base Inflation Recovered Inflat
Slide 13: Free cash flow outflow driven by seasonal working capital movement
Free cash flow outflow driven by seasonal working capital movement £m FCF Conversion 50 (12mth) 40 42.4% 30 -32.3 20 39.9 10 -8.8 0 -2.3 -9.6 -10 -24.3 -5.3 -20 -8.3 2.4 -30 -40 Adjusted Net Working Maintenance Exceptional Interest & Tax Pension Leases Other Free Cash Flow EBITDA Capital Capex Cashf
Slide 14: Net debt increase driven by seasonal outflow and continued share buyback program
Net debt increase driven by seasonal outflow and continued share buyback program 0 -50 -180.0 -100 -219.4 -228.0 -268.8 -150 -24.3 -200 48.0 4.3 -4.2 -15.2 -250 -49.4 -300 £m Net Debt Lease Net Debt Free Cash Strategic Equity/ FX/Other Net Debt Lease Net Debt FY22 Liabilities FY22 (ex Flow Capex Pur
Slide 15: Improved financial position and continued capital returns
Improved financial position and continued capital returns Highlights Leverage £m ND:EBITDA • Net debt (excluding lease liabilities) at 600 £219.4m 498 1.9x 500 Revolving Credit Facilities • Group ND:EBITDA * 1.9x 400 Other Bank 300 219 Private Placement Notes • Cash and undrawn facilities of £277.8m
Slide 16: Operating & Strategic Update
OPERATING & STRATEGIC UPDATE Dalton Philips, CEO
Slide 17: Key messages
@David M: Visuals / look+feel Key messages to be updated throughout Rebuilding profitability and returns is our 1 number one priority We understand the drivers of recent profitability 2 erosion and are crystal clear on how to rebuild Coupled with disciplined capital allocation, this 3 will drive ret
Slide 18: Drivers of >3pp margin erosion since FY19
Drivers of >3pp margin erosion since FY19 Sources of Adjusted Operating Profit Margin change, FY19-22 (%) Drivers of margin change Increase Decrease -3.1 pts 1 • Scale of inflation challenge 1 • Recovery and mitigation limited to absolute cost increases 2.7% • Volume protection through COVID – 2 sec
Slide 19: Multiple levers to rebuild profitability
Multiple levers to rebuild profitability Drivers of profitability How we plan to rebuild profitability Volume Leadership positions in attractive, resilient categories Revenue Price Recovering inflation effectively, and valuing capacity Input costs Inflationary pressures easing somewhat in the months
Slide 20: Well-positioned in categories that outpace the wider market
Volume Revenue Price Well-positioned in categories Input costs COGS Portfolio that outpace the wider market Conversion People Fixed costs Other costs Resilient categories despite Market volume growth inflationary pressures Last 52 and 26 weeks to 16th April Grocery Convenience Food to Go • Convenien
Slide 21: Inflation expected to slow down
Volume Revenue Price Inflation expected to slow down Input costs COGS Portfolio Conversion People Fixed costs Other costs % inflation by month (vs same month last year) Forecast Record inflation3 300 • Fastest food inflation for 45 years 200 • LTM inflation of 19.4% Utilities1 100 • Previous 10-year
Slide 22: Simplifying range is helping reduce the cost of complexity
Volume Revenue Price Simplifying range is helping Input costs COGS Portfolio reduce the cost of complexity Conversion People Fixed costs Other costs Evolution of selected portfolio metrics, H1 FY23 vs H1 FY22 H1 FY22 H1 FY23 Refocusing our product agenda to drive value: +3% -9% -9% • Fewer, more imp
Slide 23: Resetting operational excellence approach
Volume Revenue Price @David M: Visuals / look+feel Resetting operational excellence Input costs to be updated throughout COGS Portfolio approach Conversion People Fixed costs Other costs New team & approach: • New COO resetting our strategy, framework, goals and team • Standardised cost diagnostic d
Slide 24: Acted decisively to reduce fixed cost base
Volume Revenue Price Acted decisively to reduce fixed Input costs COGS Portfolio cost base Conversion People Fixed costs Other costs • Continued focus on delivery of c.£30m annualised benefits by FY24 from Better Greencore to mitigate inflation • Shifted focus in FY23: • Halted capital investment fo
Slide 25: Profit recovery coupled with capital discipline will drive returns
Profit recovery coupled with capital discipline will drive returns • Returns are improving but still below historic levels • Profit rebuild is single most important route to enhancing returns • Disciplined approach to capital allocation – each part of the portfolio must cover its cost of capital • S
Slide 26: Outlook
OUTLOOK Dalton Philips, CEO
Slide 27: Outlook
Outlook 1 Strategy focused on driving core performance to rebuild profitability, ROIC and cash generation; foundations for profit recovery established Confident in continued inflation recovery, including lag from H1; 2 recovery and mitigation supported by range of efficiency initiatives 3 Strong bal
Slide 28: FY23 delivery
FY23 delivery FY23 delivery supported by: • Seasonal second half volume uplift in Food to Go and associated operational leverage • Price renegotiations already completed in H1 FY23 along with additional inflation recovery • Fixed cost controls already implemented through Better Greencore including m
Slide 29: Q&A
Q&A
Slide 30: Appendix 1: Supplementary financial information
APPENDIX 1 Supplementary financial information
Slide 31: FY23 H1: other financial items
FY23 H1: other financial items £m FY23 H1 FY22 H1 Highlights Net finance costs (9.8) (6.2) • Net finance costs increased due to Tax (before exceptional items) (0.2) (1.7) increasing interest rates in the market Group exceptional items (after tax) (4.8) (6.5) • Effective tax rate 21% (FY22:19%) • Net
Slide 32: FY23 H1 cashflow
FY23 H1 cashflow £m FY23 H1 FY22 H1 Opening Net Debt (excluding lease liabilities) 180.0 183.1 Adjusted EBITDA 39.9 43.8 Working capital (32.3) (34.8) Maintenance capex (8.8) (6.0) Exceptional cashflows (2.3) (0.3) Interest/tax (9.6) (7.7) Pension (5.3) (5.8) Leases (8.3) (8.7) Other 2.4 1.7 Free Ca
Slide 33: FY23 H1 balance sheet highlights
FY23 H1 balance sheet highlights £m FY23 H1 FY22 H1 Net Debt 268.8 272.3 Net Debt (excluding lease liabilities) 219.4 219.3 Net Debt: EBITDA (x)1 1.9 2.1 Pension deficit (net of deferred tax) 15.0 8.7 Average Invested Capital 717.4 743.5 ROIC (%) 7.5 6.3 1 as measured under financing agreements H1 F
Slide 34: FY23 guidance
FY23 guidance £m FY22 FY23 Depreciation and Amortisation (£54.7m) c.(£57m) Capital Expenditure (£50.0m) c.(£50m) Cash Interest1 (£15.5m) c.(£17m) P&L Interest1 (£11.1m) c.(£17m) Cash Tax £2.2m c.(£6m) Effective Tax Rate 19% c.21% Pension Deficit Contributions & Costs (£15.0m) c.(£15m) 1 on interest
Slide 35: 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. Pro Forma Revenue Growth (vs FY22) Adjusted Earnings and Adjusted Earnings Per Share (‘EPS’) Pro Forma Reve
Slide 36: Definitions of APMs (continued)
Definitions of APMs (continued) Capital Expenditure Net Debt and Net Debt Excluding Lease Liabilities The Group defines Maintenance Capital Expenditure as the expenditure Net Debt comprises current and non–current borrowings less net cash and cash required for the purpose of sustaining the operating
Slide 37: IR Contacts & Calendar
IR CONTACTS & CALENDAR Curtis Armstrong Q3 23 Trading Update 25 July 2023 Head of FP&A Full Year Period End 29 September 2023 investor.relations@greencore.com FY23 Results 28 November 2023 H1 FY23 RESULTS | MAY 2023 37
Slide 38: Appendix 2: Greencore at a glance
APPENDIX 2 Greencore at a glance
Slide 39: Yorkshire puddings
Yorkshire puddings per year Lh. sandwiches and other food to go items each year chilled prepared meals per year eer: across 20 categories 10.600 The world’s largest fresh pre-packaged ine chilled soups sauces per year
Slide 40: Manufacturing and Distribution
Manufacturing We operate 23 manufacturing units across 16 locations, including eight sandwich units, five chilled ready meal units, three salad units, two sushi units, two chilled soup and sauces units, one chilled quiche unit and one Yorkshire Pudding unit. We also operate an Irish ingredients busi
Slide 41: 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 Our Great Food is underpinned by our dedication We design products with taste, freshness, c.14,000 materials we use in the products we supply to to food safety,