Guinness Nigeria PLC · NSENG:GUINNESS
Guinness Nigeria — H1 F16 Earnings Presentation
45 slides from Guinness Nigeria's earnings presentation, Feb 1, 2016
Slide 1: Guinness Nigeria Half Year F16 Results
GUINNESS NIGERIA HALF YEAR F16 RESULTS February 1st, 2016 www.guinness-nigeria.com Highly Confidential
Slide 2: F16 H1 Results Briefing
F16 H1 Results Briefing Peter Ndegwa Commercial Performance Highlights MD/CEO Ron Plumridge Financial Performance Review Finance and Strategy Director Peter Ndegwa Performance Priorities MD/CEO Sesan Sobowale Questions & Answers Corporate Relations Director www.guinness-nigeria.com 2 Highly Confiden
Slide 3: F16 H1 Results Briefing
F16 H1 Results Briefing Peter Ndegwa Commercial Performance Highlights MD/CEO Ron Plumridge Financial Performance Review Finance and Strategy Director Peter Ndegwa Performance Priorities MD/CEO Sesan Sobowale Questions & Answers Corporate Relations Director www.guinness-nigeria.com 3 Highly Confiden
Slide 4: Our Ambition
Our Ambition To be the best performing, most trusted and respected consumer Since 1950…. products company in Nigeria Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new customer need Build and c
Slide 5: Challenging operating environment
Challenging operating environment GDP Growth Inflation Rate 7.0% 6.54% 6.23% 9.6% 6.21% 5.94% 9.37% 6.0% 9.34% 9.39% 9.30% 9.2% 9.22% 5.0% 9.17% 3.96% 9.00% 4.0% 2.85% 8.8% 3.0% 2.35% 8.66% 2.0% 8.49% 8.4% 8.36% 1.0% 8.16% 0.0% 8.0% Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Jan Feb Mar Apr May Jun J
Slide 6: Beer and Malt market remains competitive
Beer and Malt market remains competitive Beer market grew by c3.0% in the first half of F16 with the growth coming from the value segment which presently accounts for over c35% of the market Market continues to remain increasingly competitive as various players compete for the squeezed share of
Slide 7: F16 H1 Performance
F16 H1 Performance Challenged Half Year Performance Naira ‘b’ vs LY Net Sales 49.8 -9.8% Cost of Sales (28.4) -3.6% Operating Profit 3.4 -51.6% Profit After Tax 1.2 -65.5% www.guinness-nigeria.com 7 Highly Confidential
Slide 8: F16 H1 Performance drivers
F16 H1 Performance drivers Premium core returning to growth despite flight to value in the market Launch of Guinness Africa Special in December at an accessible price point Decline in Orijin volumes primarily due to the growth of the value sector and the lapping of strong distribution build
Slide 9: F16 H1 Results Briefing
F16 H1 Results Briefing Peter Ndegwa Commercial Performance Highlights MD/CEO Ron Plumridge Financial Performance Review Finance and Strategy Director Peter Ndegwa Performance Priorities MD/CEO Sesan Sobowale Questions & Answers Corporate Relations Director www.guinness-nigeria.com 9 Highly Confiden
Slide 10: F16 H1 Income Statement
F16 H1 Income Statement F16 H1 F15 H1 vs LY Naira ‘b’ Naira ‘b’ Net Sales 49.8 55.3 -9.8% Cost of Sales (28.4) (29.5) -3.6% Operating Profit 3.4 7.0 -51.6% Profit After Tax 1.2 3.4 -65.5% www.guinness-nigeria.com 10 Highly Confidential
Slide 11: Revenue (NSV)
Revenue (NSV) F16 H1 F15 H1 Naira ‘b’ Naira ‘b’ NSV -9.8% Net Sales 49.8 55.3 Growth in premium core Guinness and Malta Guinness Orijin impacted by move to value and lapping of prior year distribution build Beginning to compete effectively in value with Satzenbrau Pricing action taken on key brands
Slide 12: Cost of Sales & Gross Profit
Cost of Sales (COGS) & Gross Profit (GP) F16 H1 F15 H1 COGS -3.6% Cost of Sales Naira ‘b’ (28.4) Naira ‘b’ (29.5) GP -16.9% Gross Profit 21.4 25.8 Procurement savings helped mitigate the impact of inflation and FX A strong focus on costs yielded a 3% reduction in costs per hectolitre Increase in loc
Slide 13: Marketing, Distribution, Admin & One-off costs
Marketing, Distribution, Admin & One-off costs F16 H1 F15 H1 Naira ‘b’ Naira ‘b’ Marketing & Marketing & Distribution -0.5% Distribution (13.1) (13.1) Admin Expenses 0% Admin Expenses (5.2) (5.2) One-off Cost -100% One-off Cost (0.0) (0.9) Strong marketing focus on core brands Admin expenses held fl
Slide 14: Finance Cost, Taxation & PAT
Finance Cost, Taxation & PAT F16 H1 F15 H1 Naira ‘b’ Naira ‘b’ Net Finance Finance Cost -25.8% Cost (1.7) (2.3) Taxation -61.9% Taxation (0.5) (1.3) PAT -65.5% PAT 1.2 3.4 Reduction in finance costs due to improvement in rates and level of borrowings Effective tax rate of 28% www.guinness-nigeria.co
Slide 15: Profit decline driven by significant mix change only partially mitigated by cost savings
Profit decline driven by significant mix change only partially mitigated by cost savings 3.4 Drivers of PAT F16, H1 vs. LY (=N= billion) 0.2 1.2 4.3 0.8 0.6 0.9 0.1 0.4 1.3 0.9 F15 PAT Volume Mix Price & Material Other costs Marktg & Admin & One- Interest Tax F16 PAT Trade & Usage distrbn exp off co
Slide 16: Balance Sheet H1 F16
Balance Sheet H1 F16 31 Dec' 31 Dec' 2015 2014 Change N'bn N'bn N'bn Non-current assets 86.2 90.1 (3.9) Inventories 13.0 14.1 (1.1) Receivables + Prepayments 27.8 25.9 2.0 Cash 7.0 5.9 1.1 Total Assets 134.0 135.9 (1.9) Equity 44.7 43.6 1.1 Non-current liabilities 23.4 40.9 (17.5) Current liabilitie
Slide 17: Gearing
Gearing 31-Dec- 31-Dec- Gearing -22% 2015 2014 Net Gearing 51% 73% Significant reduction in net borrowings from N32bn to N23bn Balance Sheet remains strong www.guinness-nigeria.com 17 Highly Confidential
Slide 18: Volatility
Volatility High levels of volatility expected to continue in the market place and this remains a major focus area for the business Key initiatives to mitigate volatility Portfolio expansion Productivity and cost review Increased local sourcing of raw material Specific actions being taken
Slide 19: F16 H1 Results Briefing
F16 H1 Results Briefing Peter Ndegwa Commercial Performance Highlights MD/CEO Ron Plumridge Financial Performance Review Finance and Strategy Director Peter Ndegwa Performance Priorities MD/CEO Sesan Sobowale Questions & Answers Corporate Relations Director www.guinness-nigeria.com 19 Highly Confide
Slide 20: Performance priorities
Performance priorities Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumer needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth
Slide 21: Winning with a total beverage portfolio
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumer needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plans
Slide 22: Our Total Beverage & Alcohol (TBA) Strategy
Our Total Beverage & Alcohol (TBA) Strategy Facilitate the achievement of our ambition to create the best performing, most trusted and respected consumer products company in Nigeria Leverage the strength of our unparalleled portfolio of beer, adult premium non-alcoholic drinks (APNADs), ready to
Slide 23: Acquisition of DBN Distribution Rights
Acquisition of DBN Distribution Rights Acquired the distribution rights to Diageo Plc’s International Premium Spirits (IPS) brands in Nigeria. Guinness Nigeria took over various assets including the current inventory of Diageo Brands Nigeria Limited The consideration for the transaction was approxim
Slide 24: Granted USL Distribution Rights
Granted USL Distribution Rights Granted the manufacturing and distribution rights to United Spirits Limited’s (USL) brands in Nigeria USL is the largest spirits business in India which is also a subsidiary of Diageo Plc This transaction will become effective today, 1st February 2016. The annualized
Slide 25: Strengthen and accelerate our premium core brands
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumer needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plans
Slide 26: Guinness Foreign Extra Stout
Guinness Foreign Extra Stout GUINNESS ON GROWTH TRAJECTORY BIGGEST EVER FOOTBALL PROMOTION - EVERY MINUTE MADE OF BLACK! • English Premier League sponsorship with advertising across all live matches MADE OF BLACK COMES TO THE PEOPLE! • City Made of Black’ recognised 000s of real made of black heroes
Slide 27: Malta Guinness
Malta Guinness ™ Launched the You Vs Brand Purpose Campaign Inspiring Can Do attitude Participation and Engagement platform Highly Confidential
Slide 28: Orijin RTD Price Roll Back and Compliance Drive
Orijin RTD Price Roll Back and Compliance Drive Herbal RTD sector impacted by the move to value. Despite competitors launches Orijin RTD heavily dominates the category. Innovation plans for Orijin Exceptionally strong brand equity www.guinness-nigeria.com 28 Highly Confidential
Slide 29: Win in value lager
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value lager Innovate at scale to meet new consumer needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plans with the
Slide 30: Getting the commercial basics right
Getting the commercial basics right • Visibility • Price • Distribution www.guinness-nigeria.com 30 Highly Confidential
Slide 31: Eastern variant of Dubic Lager, NKE ANYI
Launched an Eastern variant of Dubic Lager, NKE ANYI, leveraging the red cap symbolism www.guinness-nigeria.com 31 Highly Confidential
Slide 32: Innovate at scale to meet new consumers' needs
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumers’ needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plan
Slide 33: Guinness Africa Special!
GUINNESS AFRICA SPECIAL! • Guinness Stout with African herbs and spices, 5% ABV at a more accessible price point • National rollout completed Highly Confidential
Slide 34: Sustain leadership in Innovation
Sustain leadership in Innovation Strong Innovation pipeline as consumers continue to demand more variety for different occasions New formats, variants and SKUs to compliment new brand innovation F13 F14 F15 F16 Successful innovation excluding park upgrades and new formats www.guinness-nigeria.com 34
Slide 35: Build advantage in route to consumer
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumers’ needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plan
Slide 36: Extend our Advantage in our Route to Customer
Extend our Advantage in our Route to Customer Increased our coverage by further 12,000 outlets in the first half of the year Deployed sales force technology deployment completed 20% improvement in Outlet Activation standards compliance Continued sales force capability initiatives www.guinnes
Slide 37: Drive out cost to invest in growth
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumers’ needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plan
Slide 38: Drive out cost to invest in growth
Drive out cost to invest in growth Productivity initiatives have commenced Increase in local sourcing of raw material from 27% to 43% in F15 and presently 49% Leveraging Diageo’s contracts for best value Improving plant efficiency Reduce waste in the production process Support functions
Slide 39: Guarantee our plans with the right people and capabilities
Winning with a total beverage portfolio Strengthen and accelerate our premium core brands Win in value and mainstream Innovate at scale to meet new consumers’ needs Build and then constantly extend our advantage in route to consumer Drive out cost to invest in growth Guarantee our plan
Slide 40: Focus on People and capabilities unchanged
Focus on People and capabilities unchanged Simplify and streamline our business and ensure clearer accountabilities and decision making Position our organization for capability standards required to deliver our performance ambition Key focus on Commercial capability building www.guinness-niger
Slide 41: And Community
And Community Our commitment to sustainability and responsibility forms the core of our business objectives Scholarships to 11 students in host communities in Abia and Edo States, 10 Engineers for One Year graduate skills development programme (NAPIN) and 10 young Nigerians on a two year programme a
Slide 42: Our future expectations
Our future expectations The softening macroeconomic context is impacting consumer confidence and disposable income leading to consumer down trading Further volatility can be expected in the FX markets which will put pressure on costs Competition will remain strong and the opportunity to take p
Slide 43: Results briefing agenda
Peter Ndegwa Commercial Performance Highlights MD/CEO Ron Plumridge Financial Performance Review Finance and Strategy Director Peter Ndegwa Performance Priorities MD/CEO Sesan Sobowale Questions & Answers Corporate Relations Director www.guinness-nigeria.com 43 Highly Confidential
Slide 44: Questions and Answers
Questions and Answers Page intentionally left blank www.guinness-nigeria.com 44 Highly Confidential
Slide 45: Important Notice
Important Notice This presentation is based on Guinness Nigeria Plc’s unaudited financial results for the half year period ending 31st December 2015. Guinness Nigeria Plc (“GN” or the “Company”) has obtained some information in this presentation from sources it believes to be reliable. Although GN h