Britvic — H1 2016 Earnings Presentation
45 slides from Britvic's earnings presentation, May 2016
Slide 1: Interim Results Presentation May 2016
INTERIM RESULTS PRESENTATION May 2016 Making life’s everyday moments more enjoyable 1
Slide 2: Chairman - Gerald Corbett
Chairman - Gerald Corbett Making life’s everyday moments more enjoyable 2
Slide 3: Agenda
Agenda Mathew Dunn – Chief Financial Officer » Market overview » Financial review » Full year outlook Simon Litherland – Chief Executive Officer » Delivering our strategic goals » Taking a bold approach leading the industry » Optimistic on prospects for future growth Making life’s everyday moments m
Slide 4: H1 2016 Reported financial highlights
H1 2016 Reported financial highlights (actual exchange rate) +4.3% +6.6% +30bps +5.5% 0.2x +4.5% Group Group Group EBITA Adjusted Improvement Interim Revenue EBITA Margin EPS of in net debt to DPS EBITDA £678.0m £69.0m 10.2% 17.3p 2.0x 7.0p Growing shareholder returns in difficult market conditions
Slide 5: Soft drinks market increasingly challenging in H1
As anticipated the soft drinks market was increasingly challenging in H1 MARKET OVERVIEW AT H1 Take-home market value % growth / decline 4 week versus last year 4% 0% OCT DEC FEB APR -4% GB France Ireland Source: GB: Nielsen to 09.04.16, ROI: Nielsen to 20.03.16 and France: IRI to 04.04.16 Making li
Slide 6: Soft drinks market value declined in GB & France whilst Ireland grew
Soft drinks market value declined in GB & France whilst Ireland grew in H1 Take-home soft drinks market half-year versus last year Volume, Value, 3.0% 4% 2.9% Price/mix, 1.0% Volume, 0.3% 0% Price/mix, -0.1% Value, -0.4% Value, -0.4% Price/mix, -0.7% Volume, -1.4% -2% GB France Ireland Source: GB: N
Slide 7: We continued to outperform the market and gain value share in GB
We continued to outperform the market and gain value share in GB MARKET OVERVIEW AT H1 Britvic Share GB take-home market value +15% Cold / Hot, 15.5% Water, 12.0% Adult, 3.8% 0% Total Soft Drinks, Carbs, -0.5% - 0.4% Stills ex-water, Cola, -2.3% -2.7% Dilutes, -3.9% -10% Kids, -9.8% Source: GB: Niel
Slide 8: In France we gained value share in all our categories
In France we gained value share in all our categories MARKET OVERVIEW AT H1 Britvic Share France take-home market value Kids, 4.1% +5% 0% Total Soft Drinks, -0.4% Juice, -3.1% -5% Syrups, -4.5% Source: France: IRI to 04.04.16 Making life’s everyday moments more enjoyable 8
Slide 9: Reconciliation of reported results to organic constant currency performance
Reconciliation of reported results to organic constant currency performance +6.8% 678.0 650.3 44.1 -11.7 633.9 +4.3% -4.7 Revenue £m -1.8% -0.7% -2.5% H1 2015 Organic F/x H1 2016 Brazil H1 2016 Reported +4.0% 69.0 +3.1% 66.4 2.6 64.7 -0.3 2.0 -0.5% +6.6% EBITA £m +2.6% H1 2015 Organic F/x H1 2016 Br
Slide 10: H1 2016 Financial performance: GB Carbs, GB Stills, France
H1 2016 Financial performance FINANCIAL REVIEW GB Carbs GB Stills France Volume 2.4% (5.5)% (3.4)% ARP per litre 0.0% (2.5)% (2.2)% Revenue 2.4% (7.9)% (5.6)% Brand contribution 4.1% (8.5)% (4.5)% Brand margin % 70bps (30)bps 30bps GB Carbs - outperformed the market, led by Pepsi Max gaining value s
Slide 11: H1 2016 Financial performance: Ireland, International, Brazil
H1 2016 Financial performance FINANCIAL REVIEW Ireland International* Brazil** Volume 1.2% 6.2% 3.8% ARP per litre 0.0% (2.6)% 4.6% Revenue 4.1% 3.5% 8.6% Brand contribution 0.5% (15.2)% 0.4% Brand margin % (120)bps (410)bps (170)bps Ireland - outperformed the market, growth led by the lower margin,
Slide 12: A&P investment and cost base
A&P investment and cost base FINANCIAL REVIEW H1 16 H1 15 % Total A&P spend 31.6 35.4 10.7 A&P % revenue 4.7% 5.5% 80 bps Non-brand A&P 6.5 5.4 (20.4) Fixed Supply Chain 50.2 49.3 (1.8) Selling Costs 62.2 64.0 2.8 Overheads & Other Costs 69.1 71.5 3.4 Total fixed cost base 188.0 190.2 1.2 Underlying
Slide 13: Strong earnings growth
Strong earnings growth FINANCIAL REVIEW H1 16 H1 15 % @ CC EBITA 69.0 64.7 7.1 Amortisation (3.6) (1.5) (157.1) EBIT 65.4 63.2 3.8 Interest (10.9) (12.2) 10.7 PBT 54.5 51.0 7.3 Tax (12.8) (12.0) (6.7) ETR 23.5% 23.5% - PAT 41.7 39.0 7.5 FY coupon rate expected ETR guidance remains Net exceptional ch
Slide 14: Clear capital allocation priorities
Clear capital allocation priorities FINANCIAL REVIEW Profitable Growth Strong underlying FCF conversion A progressive Invest in business Selective M&A in Maintain long-term dividend policy capability core categories debt leverage within 1.5x to 2.5x range +4.5% Capex +£25m Brazil Sep 15 0.2x reducti
Slide 15: Cash flow and capex
Cash flow and capex FINANCIAL REVIEW • H1 cash outflow £46.9m compared to £31.5m last year • Capex £25.3m increase on last year due to GB supply chain investment • Offset by reduction in other spend of £11.9m due to lower share purchases and interest costs • Capex in range of £120m to £130m for the
Slide 16: Robust balance sheet & funding platform
Robust balance sheet & funding platform FINANCIAL REVIEW £m Bank and debt repayment profile • Long-term facility to November 2020 Flexible 500 Bank Facility • Option to request further 1 year extension revolving • Mechanism to increase facility to £600m credit facility USPP • Strong participation fr
Slide 17: Raw materials fixed for 2016, headwinds from currency
Raw materials fixed for 2016, headwinds from currency FINANCIAL REVIEW • Moving from 12 to 18 month hedging programme • FY16 raw material requirements largely hedged • Main currency exposure • Euro : Sterling • Small element of GB cans requirement to be fixed • Sterling: US Dollar Raw materials • Eu
Slide 18: Outperforming in difficult market conditions
Outperforming in difficult market conditions FULL YEAR OUTLOOK Gaining market share in all key markets Soft drinks market volume remaining subdued, further price deflation likely in the short-term Continued investment in future growth drivers Continued investment inEarnings growth future growth driv
Slide 19: Agenda
Agenda Mathew Dunn – Chief Financial Officer » Market overview » Financial review » Full year outlook Simon Litherland – Chief Executive Officer » Delivering our strategic goals » Taking a bold approach leading the industry » Optimistic on prospects for future growth Making life’s everyday moments m
Slide 20: A clear strategy to create superior returns
A clear strategy to create superior returns Generating Realise global Continue to Build trust and profitable growth in opportunities in step-change our respect in our our core markets kids, family and business capability communities adult categories » Innovation to drive » Leverage our leadership in
Slide 21: Family category leadership with “Better for You” offerings
Family category leadership with “Better for You” offerings GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Robinsons in GB MiWadi Zero in Ireland 2015 re-launch removed sugar range. Slow 2015 launch, Stevia and sucralose formulation transition of consumers impacting performance New flavours added t
Slide 22: Leveraging leadership in dilutes to build a new category
Leveraging leadership in dilutes to build a new category GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Pocket dilutes Water category growth forecast to continue. Pack format to drive “out of home” usage MiWadi Mini launches in Ireland summer 2016 Launching new flavours to broaden appeal and build
Slide 23: Establishing new adult category growth opportunities
Establishing new adult category growth opportunities GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Teisseire in GB J20 Spritz in GB #1 growth premium dilutes brand* #1 growth Adult juice brand* 46% of buyers new to J20 brand, attracting Delivered 65% of category growth** younger consumers** Repea
Slide 24: “Better for You” innovation to meet evolving consumer needs
“Better for You” innovation to meet evolving consumer needs GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Ballygowan in Ireland Purdeys in GB Water plus category in strong Multi-vitamin fruit-based energy drink growth Significantly lower sugar than rival Meets consumer need of a “Better for You”
Slide 25: Winning the GB Subway business with a compelling portfolio offering
Winning the GB Subway business with a compelling portfolio offering GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Commencing a 7 year supply contract with 2 million customers served every week in GB A focus on no & low sugar offerings to significantly reduce calorie consumption Demonstrated the p
Slide 26: Winning share in a growth channel
Winning share in a growth channel GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Winning through strength of low and no sugar portfolio. Driven 40% of “On the Go” category growth in last year Portfolio broadened to appeal to growing adult segment Combined Britvic and Pepsi portfolio offers retaile
Slide 27: Outstanding growth for brand Pepsi in the last 2 years
We have delivered outstanding growth for brand Pepsi in the last 2 years GENERATING PROFITABLE GROWTH IN OUR CORE MARKETS Pepsi generated incremental £57m RSV 25% 23% 20% 15% 15% 10% 6% 5% 4% 0% 0% Cola Total Pepsi Regular Diet Max Source: GB Nielsen 2013-2015 Making life’s everyday moments more enj
Slide 28: Fruit Shoot multi-pack now on-shelf in U.S. grocery channel
Fruit Shoot multi-pack now on-shelf in U.S. grocery channel REALISE GLOBAL OPPORTUNITIES IN KIDS, FAMILY AND ADULT CATEGORIES New 10-pack now available in-store National presence with major retailer listings Initial distribution circa 20% Focus on distribution, building consumer awareness and trial
Slide 29: Outperforming a tough market in Brazil
Outperforming a tough market in Brazil REALISE GLOBAL OPPORTUNITIES IN KIDS, FAMILY AND ADULT CATEGORIES Volume and revenue ahead of last year Soft drinks market value declined 4.5% Maguary and Dafruta brands gained share Strong progress made on commercial plans to drive further revenue growth Will
Slide 30: Investing in GB to deliver cost savings and unlock growth
Investing in GB to deliver cost savings and unlock growth opportunities CONTINUE TO STEP-CHANGE OUR BUSINESS CAPABILITY A more efficient logistics and warehousing Additional capacity in growth packs network Pack flexibility to maximise channel Lower ongoing maintenance capital spend opportunities re
Slide 31: On-track with phase 1 of plan
On-track with phase 1 of plan CONTINUE TO STEP-CHANGE OUR BUSINESS CAPABILITY Leeds » PET line operational spring 2016, supplements London PET production 01 » Additional on-site warehousing to supply the North and Scotland » Increased capacity and pack flexibility in growth formats Rugby 02 » 3 can
Slide 32: Taking a bold approach leading the industry
Taking a bold approach leading the industry BUILD TRUST AND RESPECT IN OUR COMMUNITIES Reformulating drinks with Continual innovation in Using the power of our no compromise on taste products and range brands responsibly or quality » Led use of Stevia in the » MiWadi Zero launched in » 75% of market
Slide 33: Proposed GB soft drinks tax
Proposed GB soft drinks tax BUILD TRUST AND RESPECT IN OUR COMMUNITIES • Consultation process summer 2016 Timeline • Incorporated in 2017 Finance bill • Anticipated implementation April 2018 • Tax levied on drinks with added sugar based on grams of sugar per Current proposal 100ml. Two rates – 5g/10
Slide 34: Optimistic on the prospects for soft drinks category growth
Optimistic on the prospects for soft drinks category growth Increasing awareness of Accelerating demand Soft drinks opportunity in Population health and hydration for premium growth channels » Immediate refreshment » Forecast population » Consumers looking for » Consumers tapping into » Discounters
Slide 35: Summary
Summary Solid H1 financial performance Delivering our strategic commitments Investing to generate long-term sustainable growth Optimistic on category growth opportunities Making life’s everyday moments more enjoyable 35
Slide 36: Appendix
APPENDIX Making life’s everyday moments more enjoyable 36
Slide 37: H1 2016 Financial highlights (constant currency)
H1 2016 Financial highlights (constant currency) +5.1% +7.1% +20bps +6.1% 0.2x +4.5% Group Group Group EBITA Adjusted Reduction in Interim Revenue EBITA Margin EPS of net debt to DPS EBITDA £678.0m £69.0m 10.2% 17.3p 2.0x 7.0p Growing shareholder returns in difficult market conditions EBITA is defin
Slide 38: GB Carbs
GB Carbs FINANCIAL REVIEW H1 2016 H1 2015 % Var Volume 631.2 616.7 2.4 ARP per litre 46.5p 46.5p - Revenue 293.8 286.8 2.4 Brand contribution 117.7 113.1 4.1 Brand margin % 40.1% 39.4% 70bps Making life’s everyday moments more enjoyable 38
Slide 39: GB Stills
GB Stills FINANCIAL REVIEW H1 2016 H1 2015 % Var Volume 174.3 184.5 (5.5) ARP per litre 84.7p 86.9p (2.5) Revenue 147.7 160.3 (7.9) Brand contribution 69.7 76.2 (8.5) Brand margin % 47.2% 47.5% (30)bps Making life’s everyday moments more enjoyable 39
Slide 40: France
France FINANCIAL REVIEW H1 2016 H1 2015 % Var (AER) % Var (CC) Volume 137.7 142.6 (3.4) (3.4) ARP per litre 78.9p 83.1p (5.1) (2.2) Revenue 108.6 118.5 (8.4) (5.6) Brand contribution 31.5 34.0 (7.4) (4.5) Brand margin % 29.0% 28.7% 30bps 30bps Making life’s everyday moments more enjoyable 40
Slide 41: Ireland
Ireland FINANCIAL REVIEW H1 2016 H1 2015 % Var (AER) % Var (CC) Volume 104.2 103.0 1.2 1.2 ARP per litre 49.1p 50.2p (2.2) - Revenue 62.9 61.7 1.9 4.1 Brand contribution 21.5 22.1 (2.7) 0.5 Brand margin % 34.2% 35.8% (160)bps (120)bps Making life’s everyday moments more enjoyable 41
Slide 42: International
International FINANCIAL REVIEW H1 2016 H1 2015 % Var (AER) % Var (CC) Volume 18.9 17.8 6.2 6.2 ARP per litre 110.6p 129.2p (14.4) (13.3) Revenue 20.9 23.0 (9.1) (7.9) Brand contribution 3.9 8.0 (51.3) (51.3) Brand margin % 18.7% 34.8% (1610)bps (1650)bps Making life’s everyday moments more enjoyable
Slide 43: Cash flow
Cash flow FINANCIAL REVIEW H1 2016 H1 2015 EBIT 65.4 63.2 Depreciation and amortisation 25.2 22.3 EBITDA 90.6 85.5 Working capital (49.5) (42.4) Capital spend (47.3) (22.0) Pension contributions (20.8) (20.8) Other spend (19.9) (31.8) Underlying free cash flow (46.9) (31.5) Dividends (42.6) (36.4) A
Slide 44: Ireland take-home market value
Ireland MARKET OVERVIEW AT H1 Britvic Share GB take-home market value Water, 14.5% +10% Energy, 8.1% Stills, 5.6% Total Soft Drinks, 2.9% Adult, 1.8% Carbs, 1.2% 0% Cola, -1.2% Dilutes, -2.1% Lemon/Lime, -5.0% -10% Kids, -10.0% Source: ROI: Nielsen to 20.03.16 Making life’s everyday moments more enj
Slide 45: ADR programme
ADR programme • ADRs give access to cross-border market liquidity • Cost effective and convenient to own • Quoted in U$D • Dividends paid in U$D • Symbol - BTVCY • CUSIP - 111190104 • Ratio - 1ADR = 2 ORD • Underlying SEDOL : BON8QD5 • Underlying ISIN : GB00B0N8QD54 • Depositary : BNY MELLON Making