tassal group limited for personal use only
TRANSCRIPT
Tassal Group Limited
FY14 post results roadshow
Mark Ryan, Managing Director & CEOAndrew Creswell, Chief Financial Officer
September 2014
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FY14 Overview
Mark Ryan
Delivering results through domestic market strategyF
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Key themes from FY14Sales initiatives and operating efficiencies driving earnings growth and $/kg returns…
• Sustainably generating more $/kg from sales –underpinning improved returns
• Customer support through tough supply period due to hot summer 2012/13 highlights sustainability of domestic market strategy
• Domestic marketing campaign continues to build brand and drive sales
Strong balance sheet and growing dividend…
• Continued strength in cash flow… sustainable contribution margins, combined with working capital management practices and effective use of RPF
• Further strengthened balance sheet with gearing at lowest level since listing
• Continued growth in dividend… total dividend up 21.1% to 11.5cps (50% franked)
…return levels continuing to increase towards target
36.5%31.7%
25.6%18.4% 15.4%
0%
10%
20%
30%
40%
FY10 FY11 FY12 FY13 FY14
9.5% 10.3%9.2%
10.6%11.8%
0%
5%
10%
15%
FY10 FY11 FY12 FY13 FY14
42.546.8 51.0
59.263.5
$2.20 $2.41 $2.24$2.70
$3.30
0
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2
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20
40
60
80
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FY10 FY11 FY12 FY13 FY14
Operating EBITDAOp EBITDA/Hog KG
A$m A$/kg
Return on Assets
Gearing (net debt/equity)
Operating EBITDA $/Hog Kg
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Strong financial performanceEarnings growing faster than revenue
Gearing Ratio (net debt/equityFunding Ratio (net debt + RPF/equity)
Continued strength and growth in cash flow
Continued growth in dividend
Further strengthened balance sheet and lowered gearing
42.5 46.80 51.059.2 63.5
0
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40
60
80
FY10 FY11 FY12 FY13 FY14
A$m
Operating EBITDA
28.5 41.5
50.4 49.7 50.6
0
20
40
60
FY10 FY11 FY12 FY13 FY14
A$m
Operating Cash Flow
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• Tassal’s Board has endorsed a health and safety strategy that has as its core value Zero Harm For Everyone, Everywhere
• Overall, our safety performance is at an unacceptable level. Any fatality or serious injury is unacceptableo The loss of Ian Thompson in December 2013 needs to be acknowledged for the magnitude of the impact
to his family and workmates and stand as a poignant reminder to everyone of the importance of a sustained and relentless focus on “Zero Harm - Everyone, Everywhere”
o This challenging event has resulted in a strengthening of resilience towards our safety culture - at all levels and with everyone
o Focus remains on supporting Ian’s family and workmates
• Overall, results achieved on all previously established lead & lag indicators, trending in right direction
• AS 18001 & 4801 accreditation secured. This was a first for Aquaculture in Tasmania & one of only two in Australia
• Cultural program progress supported via external survey – confirms journey to “interdependence” is on track … but not yet complete
• Tassal’s commitment to safety is consistent with the company’s focus on maximising shareholder value
.
Zero harmNo job is so important that it cannot be done safely
KPIs FY 20 13Actual
FY2014Target
FY2014Actual
Zero Harm
LTIFR 8.30 <6.00 1.39 0 .00
Incident rate 1.28 <1.20 0.25 0 .00
ATLR 7.27 4.00 3.5 0 .00MTIFR 64.16 80.00 38.16 30 .00
Scorecard measure
92.81% 91.00% 93 .00% 93 .00 %
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Financial performance
Andrew Creswell
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FY14 operating NPAT Key drivers – $ variance
FY13 Operating NPAT v FY14 Operating NPAT
Sustainably generating more $
26,605
(5,619) (1,272)
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9,298 895 966 62 932
(1,376)
30,524
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
$'000
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1.21
1.51
(0.32) (0.11)(0.23)
(0.15)(0.10) (0.09)
0.01
(0.14)
1.58
-
0.50
1.00
1.50
2.00
2.50
3.00
$/KG
FY14 operating NPAT Key drivers – $/TSV kg variance
• Focus on core domestic market sales $/kg returns
• Reduction in costs/kg across the board
Note1. Total Sales Volume Hog Equivalent (“TSV”) for FY14 is 19,268 hog tonnes (FY13: 21,934 hog tonnes) 2. $/TSV kg variance per revenue and expense item is calculated by dividing the specific revenue and expense item $
variance by TSV
Sustainably generating more $/kg
FY13 Operating NPAT v FY14 Operating NPAT
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28.5
41.5
50.4 49.7 50.6
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20
40
60
FY10 FY11 FY12 FY13 FY14
A$mA$mA$mA$m
Continued strength in cash flows
• Operating cash flow up 1.8% to $50.6m
o sustainable contribution margins generated from domestic market sales
o cashflow from operations has underpinned increase of biological assets – up $28.9m to $188.8m
o focus on improved working capital management practices
o effective use of RPF
• Investing cash flow up 49.6% to $(29.8)m due to Macquarie Harbour expansion and biomass growth
• Financing cash flow at $(28.1)m down 8.1% from $(30.6)m comprising repayment of debt $12.7m and payment of dividends $15.4m
Operating cash flow
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40.048.3
60.250.2 53.4
0
1530
45
6075
FY10 FY11 FY12 FY13 FY14
A$m
128.3147.9 145.4 159.9
188.8
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FY10 FY11 FY12 FY13 FY14
A$m
36.5%31.7%
25.6%
18.4%15.4%
0%
10%
20%
30%
40%
FY10 FY11 FY12 FY13 FY14
Strong balance sheet
Inventory
• Marginal inventory build for finished goods stock heading into FY15 … which is reflective of the sales growth anticipated for FY15
Biological Assets
• Value of live fish up 18.0% to $188.8m (FY13: $159.9m)
• Requisite biological asset pipeline for future revenue and earnings growth
Biological Assets
Inventory
Gearing reduced significantly
• Gearing reduced to 15.4% (FY13: 18.4%) to lowest levels since listing
• Appropriate bank funding arrangements in place – from a structure, headroom and tenor perspective
Funding ratio
• Funding ratio, i.e. including RPF (net debt + RPF / equity) at 29.1% (FY13: 33.2%)
Gearing
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Operational review
Mark Ryan
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Revenue driven by sales initiatives
• Operating revenue largely flat at $260.47m (FY13: $266.05m) and volume down 12.2% to 19,268 hog tonnes (FY13: 21,934)
o domestic retail market sales the largest driver of revenue and volume
o domestic wholesale market revenue and volume down due to restricted supply base from hot summer 2012/13
o sales otherwise destined for domestic wholesale were utilised for domestic retail due to restricted supply base
o higher domestic $ sales/kg return offset higher COGS due to hot summer 2012/13
o limited export sales
Revenue flat whilst volume down due to supply constraints
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Domestic retail market underpinning growth
• Domestic retail market was the largest driver of sales revenue and volume
• Retail is expected to continue to drive sales and volumes going forward
o 2-3 year agreements with major customers for fresh and smoked salmon
o retailers continue to embrace new Tassal products
o strong performance due to marketing campaign and support of major customers
Volume up 3.9%; revenue up 11.3%
Domestic retail sales
8,979 9,91512,030
14,296 14,859110.8127.9
153.4180.7
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FY10 FY11 FY12 FY13 FY14Volume Revenue
Hog Tonnes A$m
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Volume constraints limiting domestic wholesale market
• Domestic wholesale revenue was down due to low fish supply
• Supply constrained for FY14 due to effects of hot Summer 2012/13
• Repositioned fish input and feed diet strategies to underpin supply growth in FY15 onwards
• Supply is being managed as best we can to return a more balanced supply across wholesale and retail sales markets in FY15
Volume down 40.5%; revenue down 30.0%
Domestic wholesale sales
8,477
6,645
8,6587,405
4,406
86.4
69.0
88.8 84.6
59.2
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2,000
4,000
6,000
8,000
10,000
FY10 FY11 FY12 FY13 FY14Volume Revenue
Hog Tonnes A$m
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Strategic priorities and outlook
Mark Ryan
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Key priorities – FY15
• Delivering acceptable returns:
o maintaining pricing (and increasing where possible)
o continue to increase domestic market per capita consumption (through investment in marketing and promotion, new product initiatives, support of major customers)
o reducing production costs (through increased biomass at Macquarie Harbour and performance of the SBP)
• Repositioned fish input and feed diet strategies underpinning supply growth in FY15 onwards
• Commencement of the next round of expansionary investment with the build of new hatchery infrastructure
o total FY15 capex approved spend approximately $37m
o maintenance capex now around $20m
o increase in the main due to Rookwood 2 expansion – which will be completed over FY15 and FY16
o Triabunna Fish By-Products Processing Facility – which is supported by a $3.85m Federal Government Grant – to be completed over FY15
• Move closer to global best practice from operational perspective - cost of growing, cost of processing, cost of supply and logistics
• Continue to mitigate agricultural risk
o New Harvest Strategy, Smolt Input (Project Sweet Spot) and Selective Breeding Program (SBP)
• Implement further sustainability and environmental initiatives
Achieving more acceptable return levels… Target statutory ROA of 15%
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Key priorities – FY15
• To allow Tassal the best chance to achieve its targeted Statutory ROA of 15% - and to recover higher feed costs incurred during FY14 for the fish to be harvested in FY15 – we have positioned 2H15 to be stronger than 1H15 – underpinned by the following:
o A new and innovative way to merchandise and price the fresh portion range for Coles will be available from October 2014
o New & improved Superior Gold smoked salmon range and premium pricing to come into effect from October 2014 at both major retailers
o Improved pricing for the Tassal smoked salmon range has been implemented
o Timing and focus of our marketing campaign
2H15 stronger than 1H15
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Maximising our chances of achieving target statutory ROA of 15%
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In summary...
• Sustainably generating more $/kg from sales given domestic market focus and improved operational efficiencies
• Domestic market demand continues to strengthen… marketing campaign continues to build brand and drive sales
• Strong growth in earnings… particularly $/kg returns
• Continued strength in cash flow… sustainable contribution margins, combined with working capital management practices and effective use of RPF driving reduction in borrowings and increased dividends
• Further strengthened balance sheet… due to stable cash flows, with lowest gearing since listing and lower funding ratios
• Continued growth in dividend… up 21.1% to 11.5cps; 50% franked for FY14
• 2H15 positioned to be stronger than 1H15
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Any questions?
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Appendix
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Strategic PrioritiesMaximise cash flow
• Optimise both Biological Feed Conversion (“BFCR”) & Economic Feed Conversion (“EFCR”)
• Minimise stock on hand (including Seafood Development) to ensure minimise working capital cycle and maximise cash flow
• Maximise the use of assets –responsible capital spend
• Working capital cycles – ensure minimum permissible tolerance around collection cycles
Optimise the business
• With supply/demand for Tasmanian Salmon Industry in equilibrium (following hot summer) the market fundamentals are set for stronger domestic pricing, lower promotional costs and higher unit margins
• Maximise domestic market per capita consumption growth - whilst maximising gross and net pricing and maximising marketing exposure (for the right spend)
• Ensure optimal balance of Tassal supply / demand equation
• Plan and allocate fish resources across supply chain to maximise value -right fish, right size, right time, right use, right products
Deliver acceptable returns
• Key focus on “ROA” (Return on Assets) to ensure the efficient use of the Company’s asset base for earnings growth
• Through an LTI plan, Tassal Executive Team is incentivised on delivering the following for FY15:→ Statutory
Return on Assets of 15% to 17%
→ Statutory Earnings per share growth of 10% to 20%
Zero Harm
• Maintain compliance focus - due diligence
• Drive/Embedcontinued cultural change towards interdependent behaviours - team & individual level
• Leadership –accountability / performance management
KPIs FY15
LTIFR <1.38
Incident rate
<0.25
ATLR <3
MTIFR <35
Compliance 93%
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Statutory, underlying & operating results
FY14 vs. FY13
Full Year ended 30 June 2014Statutory
Profit $'000
Non Recurring
Items $'000Underlying
Profit $'000AASB 141
Impact $'000Operational Result $'000
Revenue (from all sources) 266,331$ -$ 266,331$ -$ 266,331$ EBITDA 78,597$ -$ 78,597$ (15,052)$ 63,545$ EBIT 63,128$ -$ 63,128$ (15,052)$ 48,076$ Profit before income tax expense 58,061$ -$ 58,061$ (15,052)$ 43,009$ Income tax expense (17,000)$ -$ (17,000)$ 4,516$ (12,484)$ Net profit after income tax expense 41,061$ -$ 41,061$ (10,536)$ 30,525$
Full Year ended 30 June 2013 Statutory
Profit $'000
Non Recurring
Items $'000 Underlying Profit $'000
AASB 141 Impact $'000
Operational Result $'000
Revenue (from all sources) 272,805$ -$ 272,805$ -$ 272,805$ EBITDA 69,033$ -$ 69,033$ (9,787)$ 59,246$ EBIT 53,501$ -$ 53,501$ (9,787)$ 43,714$ Profit before income tax expense 47,502$ -$ 47,502$ (9,787)$ 37,715$ Income tax expense (14,045)$ -$ (14,045)$ 2,936$ (11,109)$ Net profit after income tax expense 33,457$ -$ 33,457$ (6,851)$ 26,606$
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Disclaimer
This presentation has been prepared by Tassal Group Limited for professional investors. The information contained in this presentation is for information purposes only and does not constitute an offer to issue, or arrange to issue, securities or other financial products. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. The presentation has been prepared without taking into account the investment objectives, financial situation or particular need of any particular person.
No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in the presentation. To the maximum extent permitted by law, none of Tassal Group Limited, its directors, employees or agents, nor any other person accepts any liability, including, without limitation, any liability arising out of fault. In particular, no representation or warranty, express or implied is given as to the accuracy, completeness or correctness, likelihood of achievement or reasonableness of any forecasts, prospects or returns contained in this presentation nor is any obligation assumed to update such information. Such forecasts, prospects or returns are by their nature subject to significant uncertainties and contingencies.
Before making an investment decision, you should consider, with or without the assistance of a financial adviser, whether an investment is appropriate in light of your particular investment needs, objectives and financial circumstances. Past performance is no guarantee of future performance.
The distribution of this document is jurisdictions outside Australia may be restricted by law. Any recipient of this document outside Australia must seek advice on and observe such restrictions.
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Tassal Group Limited
FY14 Results
Mark Ryan, Managing Director & CEOAndrew Creswell, Chief Financial Officer
19 August 2014
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