Greencore Group Plc · LSE:GNC
Greencore — Merger or Acquisition (November 2016)
46 slides from Greencore's merger presentation, Nov 14, 2016
Slide 1: Preliminary Results for the year ended 30 September 2016 and proposed acquisition of Peacock Foods
Preliminary Results for the year ended 30 September 2016 And proposed acquisition of Peacock Foods
Slide 2: Disclaimer (1)
Disclaimer (1) THIS DOCUMENT IS STRICTLY CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED ACQUISITION] BY GREENCORE GROUP PLC (THE “COMPANY”) OF [PEACOCK FOODS] (“PEACOCK”) (THE “ACQUISITION”), THE PROPOSED
Slide 3: Disclaimer (2)
Disclaimer (2) The Securities have not been and will not be registered under the US Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold in the United States absent registration under the Securities Act or an exemption from the registration requirement thereof. Th
Slide 4: Presenting today
Presenting today Patrick Coveney Eoin Tonge Chief Executive Officer Chief Financial Officer Gary Kennedy Peter Haden Chairman Chief Development Officer 4
Slide 5: Executive summary – FY16 Preliminary Results
Executive summary – FY16 Preliminary Results1 Business delivery Financial highlights • Strong growth across key • Group revenue up +10.6%, financial metrics +5.9% on a Like-for-Like* basis • Substantial commercial • Operating Profit* +11.2% momentum • Adjusted EPS* +8.3% • Investments in capability
Slide 6: Executive summary – strategic acquisition of Peacock Foods
Executive summary– strategic acquisition of Peacock Foods Proposed acquisition of Peacock Foods – a fast-growing US convenience food leader with revenue of $993.1m and Adjusted EBITDA* of $72.1m Consideration of $747.5m on a debt free cash free basis, an Adjusted EBITDA* multiple of 10.0x after acqu
Slide 7: FY16 Preliminary Results
FY16 Preliminary Results
Slide 8: FY16 Preliminary Results – financial summary
FY16 Preliminary Results – financial summary FY16 Versus FY15 (unaudited) Revenue* £1,481.9m +10.6%, +5.9% LFL Operating profit* £102.0m +11.2% Operating margin* 6.9% +10 bps Adjusted PBT* £85.9m +10.1% Adjusted earnings per share* 19.5p +8.3% Leverage* 2.4x +0.4 turn ROIC* 13.8% -30 bps 8 *Note: Th
Slide 9: FY16 Preliminary Results - Convenience Foods division
FY16 Preliminary Results - Convenience Foods division FY16 FY15 % change £m £m (unaudited) +11.2% Revenue* 1,435.2 1,290.2 +6.6% LFL Operating 100.0 89.6 +11.6% Profit* Operating 7.0% 6.9% +10 bps Margin* 12.3% FY16 Like-for-Like* revenue growth 6.6% 5.2% 2.9% -1.2% UK UK UK US Convenience Food to G
Slide 10: FY16 Preliminary Results – Convenience Foods division highlights
FY16 Preliminary Results – Convenience Foods division highlights UK Food to Go model driving strong growth • Growth underpinned by customer & consumer trends • Food to go market growing at 5.6% vs. 2.3% for UK food • Partnership model building share with customers • Capacity, capability and reach en
Slide 11: Proposed acquisition of Peacock Foods
Proposed acquisition of Peacock Foods
Slide 12: Our vision is to be a fast-growing, international convenience food leader
Our vision is to be a fast-growing, international convenience food leader Fast-growing... …international... FY16 revenue growth Pro forma FY16 sales** +10.6% +15.3% 45%* 55%* …convenience food… …leader Pro forma FY16** US revenue 4x + *Peacock Foods figures translated using GBP/USD rate of 1.2577 an
Slide 13: Peacock is a fast-growing convenience food leader
Peacock is a fast-growing convenience food leader • Focused on fast-growing categories: frozen breakfast sandwiches, Products & kids’ snack meals and salad kits customers • Growth supported by industry trend towards outsourcing • Deep, long-standing relationships with CPG leaders including Tyson, Kr
Slide 14: Investment rationale – platform for sustained profitable growth and returns in US
Investment rationale – platform for sustained profitable growth and returns in US 1 Operating scale in the Step change in revenues, key categories US and manufacturing scale 2 Leading market Increase in exposure to leading brands in positions fast-growing categories 3 New channels and new Relationsh
Slide 15: Combined scale will transform Greencore in the US
1 Combined scale will transform Greencore in the US Frozen breakfast Manufacturing Total US sales1 sandwich sales1 footprint 5x 5x 5x 5x 4x + + + 1 Based on internal management data for the last 12 months to September 2016 15
Slide 16: Leading market positions in fast-growing convenience food categories
2 Leading market positions in fast-growing convenience food categories % of combined Category Market Category revenue1 growth2/3 position2 Frozen breakfast sandwiches 30% 6%2 1 Kids’ snack meals 13% 6%2 1 Salad kits 13% 16%2 1 Fresh pre-packaged food to go 13% 8%3 N/A 1 Based on internal management
Slide 17: Growth underpinned by supportive industry trends
3 Growth underpinned by supportive industry trends Underlying category growth Changing industry structure Packaged 3% food1 Packaged food1 3% Convenience food2 5 - 6% Outsourcing industry4 5 - 7% Fresh pre- packaged 8% food to go3 • Consumer trends: snacking, protein, organic, natural, free-from, on
Slide 18: Peacock brings new long-standing relationships with leading customers
3 Peacock brings new long-standing relationships with leading customers Customer Relationship (ranked by size) Category length Breakfast sandwiches 12 years + • Multi-year, senior level, strategic relationships with Kids’ chilled meals 27 years + large customers • Supply 40-100% of their Salad kits
Slide 19: Enhanced production capabilities and manufacturing scale
4 Enhanced production capabilities and manufacturing scale • Seven leased sites with balance of capabilities (frozen, chilled, ambient) • Excellent standards in food safety • Well-invested: Peacock and its customers have invested significant capex in the facilities • Large scale production; Peacock
Slide 20: Combined business will have geographic breadth and enhanced network
4 Combined business will have geographic breadth and enhanced network Greencore sites Peacock Foods sites Romeoville, IL Bolingbrook, IL Carol Stream, IL Frozen & Chilled Ambient Chilled Quonset, RI Fresh Seattle, WA Fresh Fredericksburg, VA Minneapolis, MN CHICAGO IL, Fresh New Headquarters Frozen
Slide 21: Complementary capabilities with increasing relevance for customers
5 Complementary capabilities with increasing relevance for existing and potential new customers + • Building of deep long • Fresh food expertise • Project management, term relationships with engineering, • Industry leader in core customers automation technical/ food safety • Management of large • Sc
Slide 22: US leadership team and comprehensive integration plan in place
6 US leadership team and comprehensive integration plan in place Leadership team for new Integration plan in place business • New business to be led by Chris • Integration to be led by Peter Kirke, CEO Greencore USA Haden, CDO for Greencore Group • Retention terms agreed with top • Operational integ
Slide 23: Key features of the Peacock financial model
7 Key features of the Peacock financial model • Strong revenue growth underpinned by category growth and contract wins • Profit stability due to pass through contracts • History and culture of efficiency underpinning profitability • Co-investment capital model with customers • Strong cash conversion
Slide 24: Peacock financials: Strong recent growth trajectory
7 Peacock financials: Strong recent growth trajectory Revenue Adjusted EBITDA* Adjusted Cashflow* $993.1m $861.4m $72.1m $52.8m $47.1m $38.9m LTM LTM LTM LTM LTM LTM Sept’15 Sept’16 Sept’15 Sept’16 Sept’15 Sept’16 YOY Growth YOY Growth YOY Growth 15.3% 36.6% 21.1% 24 *Note: The Group uses a number o
Slide 25: Attractive combination benefits
7 Attractive combination benefits Pro forma financials for the combined Group (Greencore 12 months to 30 September 2016, Peacock 12 months to 25 September 2016, £m) Growth • Strong growth trajectory for both Combined businesses Revenue* 1,481.9 789.6 2,271.5 Synergies • Annual cost synergies of at l
Slide 26: Robust financing structure
7 Robust financing structure Sources and uses of funds • Pro forma net debt / EBITDA leverage £626m £626m multiple of 2.5x Acquisition Transaction A • Fully underwritten rights issue of £439m net debt costs • Rights issue of 9 for 13 at 153p/share to £187m £32m raise £439m • 34.9% discount to TERP E
Slide 27: Value creation for Greencore shareholders
Value creation for Greencore shareholders; The Directors expect… Significantly enhanced earnings from first full year Target return on capital to exceed cost of capital from the first full year Significantly increased operating cash generation and strong deleveraging Note: This slide does not consti
Slide 28: Shareholder meeting to approve the transaction on 7 December
Shareholder meeting to approve the transaction on 7 December Expected timetable Announcement acquisition, rights issue, FY16 preliminary results 14 November Publication of Prospectus and Circular Publication of Greencore 2016 Annual Report with audited FY16 result 5 December and related supplemental
Slide 29: Delivering our vision for Greencore
Delivering our vision for Greencore UK business targeting continued strong growth behind food to go model Transformational acquisition will establish a scaled and profitable platform for future growth in the US VISION Accelerates Greencore towards its vision of becoming a fast-growing, international
Slide 30: Appendix 1
APPENDIX 1
Slide 31: APPENDIX 1: Non-IFRS financial measures
APPENDIX 1: Non-IFRS financial measures The Greencore Group uses a number of non-IFRS measures to measure the performance of its operations as outlined below. These supplemental measures used by management are not measures of performance or liquidity under IFRS and should not be considered by invest
Slide 32: APPENDIX 1: Non-IFRS financial measures
APPENDIX 1: Non-IFRS financial measures Adjusted Cash Flow The Greencore Group defines Adjusted Cash Flow as net cash inflow from operating activities before tax paid/(received), interest paid and cash outflow related to exceptional items, less cash outflow from investing activities excluding cash i
Slide 33: Appendix 2
APPENDIX 2
Slide 34: Peacock financial history
Peacock financial history Peacock Revenue* Peacock Adjusted EBITDA* $897.2m $56.9m $699.4m $517.2m $37.4m $33.3m YE Dec‘13 YE Dec ‘14 YE Dec ‘15 YE Dec‘13 YE Dec ‘14 YE Dec ‘15 CAGR 31.7% CAGR 30.7% 34 * Note: The Group uses a number of non-IFRS measures, these are set out in Appendix 1
Slide 35: Peacock financials: Strong historical revenue growth
Peacock financials: Strong historical revenue growth Peacock LFL Revenue* L&L Standalone Revenue1 $825.9m $157.0m $699.4m $517.2m $100.1m $63.9m YE Dec‘13 YE Dec ‘14 YE Dec ‘15 YE Dec‘13 YE Dec ‘14 YE Dec ‘15 CAGR 26.4% CAGR 56.7% * Note: The Group uses a number of non-IFRS measures, these are set o
Slide 36: Acquisition multiple analysis for Peacock Foods
Acquisition multiple analysis for Peacock Foods Tax- and Unadjusted Tax-adjusted $m synergy-adjusted multiple multiple multiple EV 747.5 747.5 747.5 Tax adjustment (26.0) (26.0) Implementation cost adjustment 20.0 EBITDA 72.1 72.1 72.1 Synergy adjustment 15.0 Multiple 10.4x 10.0x* 8.5x 36 Note: *$65
Slide 37: Illustrative Theoretical Ex Rights Price maths and EPS
Illustrative Theoretical Ex Rights Price maths and EPS Rights issue summary Bonus factor adjustment (IAS 33) Proposed gross proceeds (£m) 439.4 A: Share price as of 11 November (cum rights) 291.9p Rights issue terms 9 for 13 B: TERP 235.1p Latest closing price 291.9p C: Indicative bonus factor1 (C =
Slide 38: Appendix 3
APPENDIX 3
Slide 39: FY16 Preliminary Results - financial summary
FY16 Preliminary Results - financial summary FY16 Versus FY15 Revenue1 £1,481.9m +10.6%, +5.9% LFL Operating profit2 £102.0m +11.2% Operating margin2 6.9% +10 bps Adjusted PBT3 £85.9m +10.1% Adjusted earnings per share3 19.5p +8.3 % Leverage4 2.4x +0.4 turn ROIC 13.8% -30 bps 1. References to like f
Slide 40: Convenience Foods division
Convenience Foods division FY16 FY15 FY16 Like for Like revenue growth1 12.3% £m £m % change +11.2%, 6.6% Revenue1 1,435.2 1,290.2 5.2% +6.6% LFL 2.9% Operating 100.0 89.6 +11.6% -1.2% profit2 Operating UK UK UK US Convenience 7.0% 6.9% +10 bps Food to Go Prepared Meals Grocery Food to Go Foods marg
Slide 41: Ingredients & Property division
Ingredients & Property division % change FY16 FY15 Division Actual Constant £m £m currency currency represents less Revenue1 46.7 50.1 -6.8% -12.0% than 5% of Group activity Operating profit2 2.0 2.1 -4.8% Revenue decline driven mainly by weak global dairy markets Operating profit broadly in lin
Slide 42: Exceptional items, financing, tax, & pensions
Exceptional items, financing, tax, & pensions Exceptional Charge £15.9m after tax exceptional charge recognised in relation to: (1) new plant commissioning costs, (2) reorganisation costs largely in UK Food to Go, (3) land remediation costs, and (4) transaction & integration costs of acquisition
Slide 43: EPS and Dividend
EPS and Dividend EPS FY16 FY15 Adjusted earnings 9.5% ahead Adjusted earnings3 £79.7m £72.8m Adjusted earnings per share up 8.3% Denominator for earnings 409.3m 405.5m per share Adjusted earnings per share3 19.5p 18.0p Dividend FY16 FY15 Recommended final dividend of 4.10 pence per share Total
Slide 44: Cashflow and Net Debt
Cashflow and Net Debt Net debt at 30 September 2016 of £331.8m - 2.4 Net Debt / EBITDA* £m FY16 FY15 EBITDA2 138.4 121.5 Key features of net debt movement: Increase in capital expenditure behind Working capital movement 13.2 (7.6) major capacity and capability Net capex (103.1) (93.1) enhancement
Slide 45: Borrowings profile
Borrowings profile During the year, $100m of maturing private placement notes repaid – These notes were refinanced in June 2016 with $74.5m and £18m of new notes with an average maturity of 8.5 years Primary bank facility of £300m extended for a further year to March 2021 Total committed facil
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