Slide 1: Scales Corporation Limited Annual Results Presentation
SCALES CORPORATION LIMITED GROWING YOUR DIVERSIFIED AGRIBUSINESS Annual Results Presentation For the twelve months ended 31 December 2016 28 February 2017
Slide 2: Agenda
AGENDA • 2016 Highlights • Financial Performance • Divisional Performance & Outlook • Capital Management • Strategy • Outlook • Appendices Scales – 2016 Full Year Results February 2017 2
Slide 3: 2016 Highlights
1 2016 HIGHLIGHTS
Slide 4: Highlights: Financial Highlights for 2016
HIGHLIGHTS Financial Highlights for 2016 1 Record Underlying EBITDA of $67.9m, 11% ahead of 2015. 2 Record Underlying NPAT of $38.6m, 11% ahead of 2015 (Statutory NPAT of $38.2m). 3 A 24% increase in revenue to $374m. 29% increase in revenue to $230m within the Horticulture division. 4 14.5 cps (ful
Slide 5: Highlights: Strategic and Operational Highlights for 2016
HIGHLIGHTS We’re Growing: Strategic and Operational Highlights for 2016 Significant strategic developments: Longview acquired in 1 November 2016, China Resources welcomed as a shareholder, Fern Ridge shareholding increased to 73%. 2 3.5m TCEs of Mr Apple’s own fruit exported: Meeting our 2020 produc
Slide 6: Scales by the Numbers
SCALES BY THE NUMBERS UNDERLYING EBITDA > half a billion 5.7m $67.9m apples picked from Mr Apple’s orchards litres of juice concentrate sold by Profruit 11% above 2015 We used 6.2mL 22,971MT sold by petfood 24,713 twenty foot container of rainwater collected from our Auckland coldstore, reducing our
Slide 7: Financials
2 FINANCIALS
Slide 8: 5 Year Performance Trend
5 YEAR PERFORMANCE TREND Our 2016 result maintains our steady progression in Group profitability • Underlying EBITDA has increased by 147% in the past 4 years. • We are continuing to invest in growth both organically and by acquisition. Underlying EBITDA* Underlying NPAT* $67.9m $38.6m CAGR 25% $61.
Slide 9: Summary Financial Performance
SUMMARY FINANCIAL PERFORMANCE Significantly ahead of 2015 results Income Statement • Revenue $373.9m, up 24% on 2015: 2015 2016 (Restated) Good organic revenue growth in all divisions. $ Millions Actual Growth % Actual ~$35m due to consolidation of Fern Ridge Revenue 373.9 24% 301.4 (previously
Slide 10: Divisional EBITDA
DIVISIONAL EBITDA Strong performances from our Horticulture and Food Ingredients divisions • Favourable international demand environment: Has resulted in ongoing strength in our Horticulture and Food Ingredients divisions which continue to deliver strong growth. Tends not to favour our storage a
Slide 11: Divisional EBITDA Trend
DIVISIONAL EBITDA TREND Strong growth in Horticulture and Food Ingredients. Storage & Logistics delivers consistent performance Trends in Underlying Divisional EBITDA ($m) Horticulture Storage & Logistics Food Ingredients $45.3m CAGR 4% $16.3m $16.2m $9.2m $40.0m CAGR 14% $14.0m $13.9m $7.6m CAGR 45
Slide 12: Balance Sheet
BALANCE SHEET An increase in capital employed is mostly influenced by the application of accounting standards resulting in non-cash balance sheet adjustments • Scales’ key assets are subject to periodic revaluation, Balance Sheet 2016 2015 including: (Restated) 742 ha. orchards owned by the Group
Slide 13: Balance Sheet (Continued)
BALANCE SHEET (CONTINUED) Excellent financial position Balance Sheet (continued) • Scales continues to be in a strong financial 2016 2015 position. (Restated) $ Millions Actual Actual • At 31 December 2016, Net Debt was Non-Current or Other Liabilities $34.6m. Deferred tax liabilities (28.2) (17.9)
Slide 14: Divisional Performance & Outlook
DIVISIONAL PERFORMANCE & OUTLOOK 3
Slide 15: Horticulture – Financial Performance
HORTICULTURE – FINANCIAL PERFORMANCE Another strong performance as premium orchards mature • Record revenue of $230m (29% above 2015 results), including approximately $35m of revenue from subsidiary company Fern Ridge. • Underlying divisional EBITDA of $45.3m (13% above 2015 results). • Record Mr Ap
Slide 16: Horticulture – Own-Grown Volumes
HORTICULTURE – OWN-GROWN VOLUMES Premium and traditional volumes both up during 2016 • Total own grown volumes of 3.55m TCEs, up 12% on 2015. • Growth concentrated in premium varieties where volumes were up by 200k TCEs (14% increase): Volumes of NZ Queens, highly sought after in Asian markets, we
Slide 17: Horticulture – Strategy
HORTICULTURE – STRATEGY Our strategy is focused on: (1) Sales to Asia & the Middle East… • During 2016 Mr Apple and Fern Ridge sold over half a billion (5.46 million TCEs) apples to more than 150 customers in approximately ~40 countries. • Mr Apple’s sales to Asia & Middle East increased markedly in
Slide 18: Horticulture – Strategy (Continued)
HORTICULTURE – STRATEGY (CONTINUED) …and (2) Increasing sales of branded apples and Plant Variety Rights • We have partnered with two other large New Zealand apple growers to secure proprietary rights to new apple varieties. Through this partnership we have, and are, developing new apple brands: D
Slide 19: Horticulture – Prices
HORTICULTURE – PRICES Our strategy is delivering improvements in the weighted average selling price across the crop • Across our entire apple crop, prices showed improvement over strong 2015 pricing. The increase in the weighted average sale price for our apples was achieved by: Attention to detai
Slide 20: Horticulture – Other KPIs
HORTICULTURE – OTHER KPIS • External grower volumes showed good growth with increased supply from both Hawke’s Bay and Nelson external growers. • Exchange rates displayed minor improvement over 2015. • Foreign exchange exposure continues to be managed, however, if current spot FX rates are maintaine
Slide 21: S&L – Financial Performance
S&L – FINANCIAL PERFORMANCE Another steady result from the Storage & Logistics division • Revenues of $108.4m, 13% ahead of 2015. • EBITDA of $16.2m, in line with 2015. • Good growth from bulk liquid storage business Liqueo, EBITDA up 30% on 2015: Full year contribution from 20-year edible oils st
Slide 22: S&L – Strategy
S&L – STRATEGY Storage & Logistics is characterised by extremely high barriers to entry • Key strategies for 2017 include: Reviewing existing coldstore activities to explore potential for improved financial performance and asset returns. Complete rollout of FMCG capable warehouse management soft
Slide 23: S&L – KPIs
S&L – KPIS • Key Performance Indicators in line with expectations: Total coldstore space up 8% on 2016 with increases in Christchurch based storage capacity. — Note, a coldstore we manage in Wellington was damaged by the November earthquake. This coldstore was closed in the early part of 2017. S
Slide 24: Food Ingredients – Financial Performance
FOOD INGREDIENTS – FINANCIAL PERFORMANCE Continued growth from our agricultural by-products businesses • Food Ingredients followed on from a solid 2015 result to deliver an even stronger 2016: Meateor sold 22,971 MT of petfood ingredients, 14% ahead of 2015 to deliver $58.0m in revenue (19% ahead
Slide 25: Capital Management
4 CAPITAL MANAGEMENT
Slide 26: Performance Against Benchmarks
PERFORMANCE AGAINST BENCHMARKS Return on Capital Employed and EBITDA Margins • Return on Capital Employed (ROCE) and EBITDA Margins are monitored for each division and the group. • We target a long-run combined ROCE of 15% and EBITDA Margin of 13%. • As previously discussed, groupwide capital employ
Slide 27: Capital Expenditure
CAPITAL EXPENDITURE Investing in Growth • Operational capital expenditure at $7.0m was slightly higher than 2015 but includes certain projects that are expected to improve operational effectiveness (for example rollout of the upgraded Mr Apple finance software). • We also invested $8.7m in growth pr
Slide 28: Strategy
5 STRATEGY
Slide 29: Update on Strategic Objectives
UPDATE ON STRATEGIC OBJECTIVES Meeting or Exceeding our Objectives • In our 2016 Annual Report we outline updated objectives for the Group and each of our divisions. We intend to assess ourselves against these objectives, and to create new objectives where targets have been met. We will report o
Slide 30: Outlook
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Slide 31: What We Know About 2017
WHAT WE KNOW ABOUT 2017 The outlook for Scales remains positive • Market dynamics remain supportive: Horticulture: — The apple harvest has just begun. Early indications are pleasing - brix (sweetness) is very high, colour is great, and fruit size on par with previous years. — Gross production is e
Slide 32: Appendices
7 APPENDICES
Slide 33: Reconciliation to Statutory Accounts
RECONCILIATION TO STATUTORY ACCOUNTS • This table reconciles Underlying EBITDA Reconciliation of Underlying EBITDA to Net Profit and Underlying Net Profit to Net Profit as 2015 Reported in our Financial Statements. 2016 (Restated) #039;000 Actual Actual • In FY2016, IFRS rules around the treatment of b
Slide 34: Disclaimer
DISCLAIMER The information in this presentation has been prepared by Scales Corporation Limited with due care and attention. However, neither Scales Corporation Limited nor any of its directors, employees, shareholders nor any other person shall have any liability whatsoever to any person for any lo