2019 HALF YEAR RESULT
22 August 2019
Alison Watkins
Group Managing Director
Martyn Roberts
Group Chief Financial Officer
Peter West
Managing Director, Australian Beverages
Ana Metelo
Group Head of Investor Relations
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DISCLAIMER
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The material in this presentation is general background information about Coca-Cola Amatil and its activities current as at the date of the presentation. It is information given in summary form and does not purport to be complete.
Information in this presentation is not intended to be relied upon as advice to investors or potential investors and does not take into account the financial situation, investment objectives or needs of any particular investor.
Before making any investment decision investors should consider these factors, and consult with their own legal, tax, business and/or financial advisors.
Coca-Cola Amatil 2019 Half-Year Result | 2 |
AGENDA
2019 | Half-Year Result - Group Highlights | Alison Watkins |
2019 | Half-Year Result - Other Highlights | Alison Watkins |
Our Shareholder Value Proposition | Alison Watkins | |
Segment Results Overview | Alison Watkins | |
Australian Beverages Performance | Peter West | |
Australian Beverages Strategy & Progress Updates | Peter West | |
Business Performance | Martyn Roberts | |
Sustainability & Outlook | Alison Watkins | |
Questions & Answers | ||
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Coca-Cola Amatil 2019 Half-Year Result | 3 |
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GROUP
PERFORMANCE
Alison WatkinsGroup Managing Director
Coca-Cola Amatil 2019 Half-Year Result | 4 |
2019 HALF YEAR RESULT - GROUP HIGHLIGHTS
- Strong Grouprevenuegrowth of 5.2 per cent for the period reflecting the results of strategic initiatives across the Group.
- Statutory earnings before interest and tax (EBIT) of $273.5 million, up 4.7 per cent, and statutory net profit after tax (NPAT) of $168.0 million, up 6.3 per cent.
- Statutory earnings per share (EPS) increased by 6.4 per cent while ongoing1EPSdeclined by 4.0 per cent.
- Ongoing1EBITof $289.9 million and ongoing1NPATof $173.3 million represented declines of 3.8 per cent and 3.9 per cent respectively, in line with our expectations.
- Strongcash flowresult with ongoing1free cashflow before lease accounting changes improving by $86.2 million on the prior period plus $40 million proceeds from the sale of SPC.
- Total unfranked dividendfor the half of 25.0 cents per share comprising: interim dividendof 21.0 cents per share (1H18: 21.0 cents per share and 65 per cent franked per share), and special dividend of 4.0 cents per share, following the sale of SPC.
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1. Ongoing refers to continuing operations results adjusted to exclude non-trading items.
Coca-Cola Amatil 2019 Half-Year Result | 5 |
2019 HALF YEAR RESULT - OTHER HIGHLIGHTS
BUSINESS SEGMENTS OVERVIEW
AUSTRALIAN BEVERAGES
- Australian Beverages showed pleasing progress from the Accelerated Growth Plan. As expected, EBIT was impacted by container deposit schemes, additional investment in "Feet On The Street" and cycling HY18 EBIT benefit from $10 million credit in relation to the NSW container deposit scheme.
NEW ZEALAND & FIJI
-
Excellentall-round performance in New Zealand and solid profit growth from Fiji; continuing the strong momentum from previous years.
INDONESIA & PNG - Strong sales growth in Indonesia from excellent execution and investments in marketing and in PNG from operational improvements.
ALCOHOL & COFFEE - Achieved another period of double digit profit growth, now representing 9% of Group earnings.
CORPORATE & SERVICES
- Corporate & Services result was in line with the FY19 earnings guidance for the segment.
ADDITIONAL DEVELOPMENTS
SPC
- On 1 July 2019 we announced the successful completion of the sale of the SPC business to Shepparton Partners Collective Pty Ltd. The business was sold for a consideration of $40 million payable at completion. Taking into account working capital adjustments to the sale price, carrying amount of net assets sold and costs of disposal, a profit on sale of $14 million was recorded upon completion.
AMATIL X
- Launched into Indonesia, partnered with local accelerator in H1 (Digitaraya, powered by Google). Amatil X Academy in full swing in our Indonesian business, to identify and develop the best ideasin-house, and embed entrepreneurial capability in the business.
SUSTAINABILITY
- Announced that from 2020, 7 out of 10 of our plastic bottles in Australia will be made from 100 per cent recycled materials. Ceased distribution of plastic straws.
PROPERTY
Continued to progress the rationalisation of our property portfolio, including the sale of lots 2 and 3 of our former bottling facility in Thebarton, South Australia.
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Coca-Cola Amatil 2019 Half-Year Result 6
OUR SHAREHOLDER VALUE PROPOSITION
We are focused on generating attractive sustainable returns for shareholders. FY19 is the second year of a two-year transition phase for the Group and we target the Group to return to delivery of mid-single-digit EPS growth from 2020.
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Investment case
Predominantly a Coca-
Cola franchisee with
leading brands
Route-to-market with
scale and reach
Large-scale, modern, low-cost infrastructure
Steady cash flow from core Australia and New Zealand franchises
Growth opportunities including Indonesia and Alcohol & Coffee providing upside
EBIT drivers
Revenue growth plans and
continuous cost focus
across the group
Targeting low | Core developed | |
market | ||
single-digit | franchises | |
EBIT growth | (Australia and | |
New Zealand) |
+
Developing
Targeting markets
double-digit(Indonesia,
EBIT growthPapua New Guinea and Fiji)
+
Targeting Alcohol
double-digit& Coffee
EBIT growth
EPS drivers
Modest capex for developed markets
+
Growth capex for
Indonesia
funded via TCCC equity
injection
+
Continuous working capital management
+
Bolt-on acquisitions
Capital management
initiatives
Targeting shareholder
value creation
Mid single-digit
EPS growth
Attractive dividends:
above 80% payout ratio
Strong balance sheet
Strong return on capital
employed
Coca-Cola Amatil 2019 Half-Year Result | 7 |
SEGMENT RESULTS OVERVIEW
Underlying EBIT $ million | HY19 | HY18 | Change | % of Group | ||
% | underlying EBIT | |||||
Australian Beverages | 161.6 | 176.3 | (8.3) | 55.7 | ||
New Zealand & Fiji | 57.3 | 49.8 | 15.1 | 19.8 | ||
Indonesia & Papua New Guinea | 52.2 | 50.6 | 3.2 | 18.0 | ||
Alcohol & Coffee | 24.8 | 22.5 | 10.2 | 8.6 |
Corporate & Services | (6.0) | 2.2 | N/M | (2.1) | ||
Total | 289.9 | 301.4 | (3.8) | |||
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Coca-Cola Amatil 2019 Half-Year Result | 8 |
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AUSTRALIAN
BEVERAGES
PERFORMANCE
Peter WestAustralian Beverages Managing
Coca-Cola Amatil 2019 Half-Year Result | 9 |
AUSTRALIAN BEVERAGES
Pleasing revenue results from the investments being made in our Accelerated Australian Growth Plan. EBIT impacted as expected by container deposit schemes - cycling of prior year $10m credit and Queensland volume impact.
$ million | HY19 | HY18 | Change |
Trading revenue | 1,215.3 | 1,221.9 | (0.5%) |
Revenue per unit case ($) | $8.30 | $8.24 | 0.7% |
Volume (million unit cases) | 146.4 | 148.2 | (1.2%) |
Ongoing EBIT | 161.6 | 176.3 | (8.3%) |
EBIT margin | 13.3% | 14.4% | (1.1)pts |
Ongoing return on capital employed | |||
(before lease accounting changes) | 31.4% | 35.9% | (4.5)pts |
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COMMENTARY
COMMENTARY
Trading revenue per unit case was 0.7% higher comprising:
o1.5% increase from container deposit scheme charges
o(0.4)% net investment in realised price
o(0.4)% decrease from product/channel mix
Total volume impacted by the implementation of the Container Refund Scheme in Queensland; total volumes outside Queensland declined by only 0.3 per cent.
EBIT result was impacted by:
oHY18 EBIT benefit from $10 million credit due to lower actual redemption rates in the NSW container deposit scheme compared to forecast.
oadditional investment in "Feet On The Street" in the State Immediate Consumption channel.
oadditional costs due to commissioning issues at our Richlands, Queensland distribution centre and manufacturing site. These have now been largely rectified.
o$4.6m benefit from the introduction of AASB16 lease accounting standard.
Coca-Cola Amatil 2019 Half-Year Result 10
AUSTRALIAN BEVERAGES
Accelerated Growth Plan starting to deliver with volume growth limited by impact of QLD Container Refund Scheme, rate realisation in cola multipack cans and water in grocery and the cessation of low value/margin Peats Ridge in Officeworks.
Volume Composition By Category (million unit cases)
HY19 | HY18 | Change | |||
Sparkling | |||||
Cola | 73.7 | 73.8 | (0.1%) | ||
Flavours / Adult | 22.4 | 23.5 | (4.7%) | ||
Total sparkling | 96.1 | 97.3 | (1.2%) | ||
Frozen | 11.7 | 11.3 | 3.5% | ||
Stills | |||||
Water(1) | 25.9 | 27.5 | (5.8%) | ||
Value added dairy / Energy | 5.4 | 4.8 | 12.5% | ||
Other stills (2) | 7.3 | 7.3 | - | ||
Total stills | 38.6 | 39.6 | (2.5%) | ||
Total | 146.4 | 148.2 | (1.2%) | ||
- Water volumes include Neverfail
- "Other Stills" includes juice, tea, kombucha and sports
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CATEGORY
Must Win
- Diet & lightcolasachieved mid-single digit volume growth, mostly offsetting a small decrease in Classic Coca-Cola. This was achieved in a period of successful price realisation in grocery as consumers adjust to reduced discounts.
- Underlying volumes inwaterwere solid given we ceased sales of the low value/margin brand Peats Ridge in Officeworks in September 2018 (1muc impact) and we experienced a further 6 months of Mount Franklin Everyday Low Pricing, cycling a Hi- Low pricing strategy in Grocery in the prior year.
Double Down
- The double down strategy inenergy and value- added dairyare yielding strong results with each category growing volumes at double-digit rates and gaining value and volume share.
- Portfolio further enhanced with the launch of Nutriboost in May andCoca-Cola Energy in June.
Stabilise
- Flavours / Adultvolumes declined during ongoing changes in pricing and ranging strategies by major retailers.
Enter
- Commencement of distribution of Mojo kombucha contributed to a flat result forOther stills.
Coca-Cola Amatil 2019 Half-Year Result | 11 |
AUSTRALIAN BEVERAGES
Significant trajectory improvement in volumes in the On-The-Go channel. Value and volume share gains in Convenience & Petroleum with rate realisation achieved in Grocery.
Volume Composition By Channel (million unit cases)
HY19 | HY18 | Change | |
Grocery, convenience | 86.5 | 88.2 | (1.9%) |
& petroleum |
On-the-go(1) | 59.9 | 60.0 | (0.2%) |
Total | 146.4 | 148.2 | (1.2%) |
1. On-The-Go includes: national and state operational accounts, RECA and licensed.
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CHANNEL
Grocery
- Successful rate realisation achieved in cola multipack cans and water with volume impact in the short term as consumers adjust to new pricing.
- 1 million unit cases impact from cessation of sales of low value/margin Peats Ridge water through Officeworks in October 2018.
Convenience & Petroleum
- Volume growth driven by the double down strategies in energy andvalue-added dairy.
On-The-Go
-
Significant improvement in volume trajectory
oState immediate consumption: encouraging early signs from the additional investment in "Feet On The Street".
oRECA: Maintained volume momentum from FY18
due to strong focus and targeting with channel specific product launches.
oNational on premise:Volume growth driven by additional volumes from Pizza Hut customer win and the Avengers campaign in cinemas.
Coca-Cola Amatil 2019 Half-Year Result 12
AUSTRALIAN BEVERAGES
Encouraging results in State Immediate Consumption as additional "Feet On the Street" are rolled out around the country
STATE IMMEDIATE CONSUMPTION - | STATE IMMEDIATE CONSUMPTION - | STATE IMMEDIATE CONSUMPTION - | ||
SYDNEY | ADELAIDE | All STATES | ||
Volume change (%) | Volume change (%) | Monthly yoy volume change (%) |
*
Jan Feb Mar/Apr May Jun
1H19
out of "Feet on The Street"
due to the change in Easter timing
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Coca-Cola Amatil 2019 Half-Year Result 13
CONTAINER DEPOSIT SCHEME UPDATE
Australian Beverages' volumes have been impacted by the implementation of container deposit schemes in NSW, the ACT and QLD and will continue to be impacted, to a certain extent, by the introduction of schemes in WA in 2020 and TAS in 2022. There has been a larger impact on volumes in QLD than experienced in NSW in 1H18.
1H19 UPDATE
NEW SOUTH WALES
- Commenced 1 December 2017.
- From 5 August 2019 we increased our CDS charge from 10.91 cents (excluding GST) to 11.82 cents (excluding GST), due to rising cost base for the NSW container deposit scheme and as the scheme matures.
AUSTRALIAN CAPITAL TERRITORY
- Commenced 30 June 2018.
- From 5 August 2019 we increased our charge from 10.91 cents (excluding GST) per eligible container to 11.82 cents (excluding GST), due to rising cost base for the ACT container deposit scheme and as the scheme matures.
QUEENSLAND
- Commenced 1 November 2018 with charge set at 10.38 cents (excluding GST) per eligible container.
- From 4 November 2019 the charge per eligible container is planned to increase to 11.82 cents (excluding GST).
- Actively participating in administration of the scheme.
-
Volumes decreased 3.8 per cent, whereas Nationalex-QLD volumes decreased 0.3 per cent in the half.
WESTERN AUSTRALIA - Targeting implementation in June 2020.
TASMANIA
-
Expected to be rolled out by 2022.
VICTORIA - No announcements of any schemes to date.
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Coca-Cola Amatil 2019 Half-Year Result 14
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STRATEGY &
PROGRESS
UPDATES
Peter WestAustralian Beverages Managing Director
Coca-Cola Amatil 2019 Half-Year Result 15
OUR ACCELERATED AUSTRALIAN GROWTH PLAN
Our refined Accelerated Australian Growth Plan defines our priorities and focus for the medium term
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STRATEGY
AMBITION
OBJECTIVES
CATEGORY
CHANNEL
ENABLERS
LEAD | EXECUTE | PARTNER | ||
- Maintain #1 NARTD position, winning NARTD market value growth
- A broad, innovativeconsumer-centric portfolio and best-in-market execution
- Make the "Total Beverages Company" strategy a market reality
REJUVENATE THE CORE | DOUBLE DOWN IN | CLOSE THE GAP AND | ||||||||||||||||||
GROWTH AREAS | CREATE NEW GAPS | |||||||||||||||||||
MUST WIN | STABILISE | DOUBLE DOWN | ENTER | |||||||||||||||||
Cola | Flavours, Tea, Juice, | Value-added dairy | Emerging beverages | |||||||||||||||||
Water | Sports, Adult | Energy | ||||||||||||||||||
MUST WIN | STABILISE | DOUBLE DOWN | ENTER | |||||||||||||||||
Grocery | National On Premise | Convenience & | Online | |||||||||||||||||
Direct to Consumer | Petroleum | |||||||||||||||||||
State IC | ||||||||||||||||||||
Licensed | RECA | |||||||||||||||||||
Portfolio | Revenue growth | Product and | Overhauled S&OP | Cost optimisation | ||||||||||||||||
simplification and | packaging | |||||||||||||||||||
management | process | and reinvestment | ||||||||||||||||||
innovation | sustainability | |||||||||||||||||||
Coca-Cola Amatil 2019 Half-Year Result | 16 |
OUR ACCELERATED AUSTRALIAN GROWTH PLAN
Consistent with our strategy, we are planning for revenue and volume momentum in 2H19 to position us for a return to growth from 2020
CATEGORY | Strong focus on winning in our core categories whilst accelerating growth in |
double down categories and growing emerging categories | |
•Launch of "Share a Coke" campaign in 2H19 | |
•Stabilisation of Cola volumes as price realisation is embedded in grocery | |
•Coca Cola Energy & Nutriboost to continue to grow in 2H19 | |
•Comparable Everyday Low Pricing year on year in Mount Franklin multi packs in grocery | |
•Commencement of the distribution of the Made brands Rokeby Farms and Impressed juice | |
•Expanded distribution of Mojo Kombucha | |
•Launch of Powerade Active | |
CHANNEL | Continue delivering momentum in state immediate consumption and rolling |
out initiatives in grocery | |
•Full half year benefit of the "Feet On the Street" initiative in State Immediate Consumption | |
•Improved retail execution by bringing store merchandising services in-house | |
•Focus on key selling weeks (eg Footy Finals, Christmas) in grocery | |
Our enablers bring our plan to life | |
ENABLERS | |
•Revenue management: price normalisation of Flavours 24 pack cans | |
•Implementation of the RGM 2.0 program: launch of a new 20x250ml mini cans multipack format in grocery in NSW | |
•Reduced EBIT impact from Richlands commissioning | |
•Improved execution across core processes | |
•All single serve carbonated PET bottles made from 100% recycled PET with supporting advertising | |
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Coca-Cola Amatil 2019 Half-Year Result 17
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BUSINESS
PERFORMANCE
Martyn RobertsGroup Chief Financial Officer
Coca-Cola Amatil 2019 Half-Year Result 18
NEW ZEALAND & FIJI
The segment had an excellent start to 2019, achieving strong revenue and volume growth and double digit EBIT growth.
Change -
$ millionHY19 HY18 Change Constant Currency1Trading revenue | 303.6 | 280.2 | 8.4% | 5.3% |
Revenue per unit case ($) | $8.10 | $7.87 | 2.9% | 0.0% |
Volume (million unit cases) | 37.5 | 35.6 | 5.3% | 5.3% |
Ongoing EBIT | 57.3 | 49.8 | 15.1% | 11.8% |
EBIT margin | 18.9% | 17.8% | 1.1pts | 1.1pts |
Return on capital employed | 31.8% | 29.1% | 2.7pts | |
1. The constant currency basis is determined applying 1H18 foreign exchange rates to 1H19 local currency results
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NEW ZEALAND
- Continued momentum from FY18 achieving strong revenue, volume and earnings growth as well as margin improvement.
- Strong performances across sparkling and still beverages.
- Revenue growth delivered in all major channels.
FIJI
- Solid profit growth despite challenging economic conditions.
Coca-Cola Amatil 2019 Half-Year Result 19
INDONESIA & PAPUA NEW GUINEA
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The segment delivered strong revenue growth with lower EBIT growth.
Change - | ||||
$ million | HY19 | HY18 | Change | Constant |
Currency1 | ||||
Trading revenue | 581.8 | 487.8 | 19.3% | 12.9% |
Revenue per unit case ($) | $4.57 | $4.23 | 8.0% | 2.4% |
Volume (million unit cases) | 127.2 | 115.2 | 10.4% | 10.4% |
Ongoing EBIT | 52.2 | 50.6 | 3.2% | 0.8% |
EBIT margin | 9.0% | 10.4% | (1.4)pts | (1.0)pts |
Return on capital employed | 10.3% | 11.3% | (1.0)pts | |
the
1. The constant currency basis is determined applying 1H18 foreign exchange rates to 1H19 local currency results
INDONESIA
- Achieved strong volume growth across sparkling, water, andvalue-added dairy categories together with rate realisation across the portfolio.
- Overall gained volume share in NARTD.
- Volume and value share growth in sparkling driven by effective promotions, outstanding Festive execution, new products andconsumer-centric marketing.
- Solid volume growth across all channels, particularly in Traditional Trade with the channel growing double digit.
- EBIT result reflected additional marketing spend with theCoca-Cola Company and unfavourable FX impact on commodities.
PAPUA NEW GUINEA
- Double digit revenue and volume growth driven by sparkling.
- Business operations tracked in line with expectations following successful addressing of operational issues in FY18.
Coca-Cola Amatil 2019 Half-Year Result 20
ALCOHOL & COFFEE
Achieved modest revenue growth and continued double digit EBIT growth.
Change - | ||||
$ million | HY19 | HY18 | Change | constant |
currency1 | ||||
Trading revenue | 279.8 | 270.0 | 3.6% | 2.7% |
Ongoing EBIT | 24.8 | 22.5 | 10.2% | 9.8% |
EBIT margin | 8.9% | 8.3% | 0.6pts | |
1. The constant currency basis is determined applying 1H18 foreign exchange rates to 1H19 local currency results
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ALCOHOL
- Revenue and EBIT growth, benefiting from price realisation in spirits & premix.
- New Zealand achieved a strong result, benefitting from the strength of the Beam Suntory Premix & Spirits portfolio.
- Australia, we grew share in bourbon, gin, rum and vodka. Canadian Club along with the spirit brands, Jim Beam White and Makers Mark continued to deliver volume growth.
- Launched Suntory Toki, an exciting innovation from Beam Suntory to drive further growth in whisky.
COFFEE
- Revenue, volume and EBIT growth driven by strong sales in grocery.
- Gained market share in beans and ground coffee.
Coca-Cola Amatil 2019 Half-Year Result 21
CORPORATE & SERVICES
Decline in earnings in line with outlook provided in FY18.
$ million | HY19 | HY18 | Change |
Trading revenue1 | 25.9 | 27.8 | (6.8)% |
Ongoing EBIT | (6.0) | 2.2 | |
1. Represents revenue mostly from our recycling business in South Australia
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SERVICES
- Smaller contribution from the services division due to lower services to Australian Beverages.
- Lower earnings in the property division due to lower rental fees received from Australian Beverages.
CORPORATE
- Investments in Group capabilities and in IT platforms.
Coca-Cola Amatil 2019 Half-Year Result 22
INCOME STATEMENT
Statutory NPAT increased 6.3% as a result of lower non- trading items than in the prior year. Ongoing NPAT declined 3.9%, in line with a 3.8% decline in ongoing EBIT.
$ million | HY19 | HY18 | Change | |
EBIT - Ongoing(1) | 289.9 | 301.4 | (3.8)% | |
Net finance costs | (34.7) | (36.5) | (4.9)% | |
Taxation expense | (73.6) | (77.2) | (4.7)% | |
Non-controlling interests | (8.3) | (7.4) | 12.2% | |
NPAT - Ongoing (1) | 173.3 | 180.3 | (3.9)% | |
Profit / (loss) from discontinued operations | 6.2 | (4.6) | (234.8)% | |
Non-trading items after income tax | (11.5) | (17.6) | (34.7)% | |
NPAT | 168.0 | 158.1 | 6.3% | |
1. Ongoing refers to continuing operations results adjusted to exclude non-trading items |
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COMMENTARY
- Ongoing(1)NPAT declined 3.9%, in line with a 3.8% decline in ongoing EBIT.
- Decline innet finance costsdue to an increase in interest income on deposits held in Indonesia and PNG and small benefit from average debt reduction. The introduction of the AASB16 lease accounting standard resulted in additional $7.1 million in net finance costs.
- Taxation expensedeclined in line with reduced ongoing EBIT, with effective tax rate of 28.8%.
- Highernon-controlling interests due to increased interest income on deposits held in Indonesia.
- Non-tradingitems were primarily associated with the restructuring programs in Australia.
Coca-Cola Amatil 2019 Half-Year Result 23
CAPITAL EMPLOYED - ONGOING1
Working capital improved by $61.0 million.
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| Working capital- decreased by $61.0 million, | ||||
Variance | |||||
$ million | HY19 | HY18 | due to improved debtor collections and | ||
$M | receivables management in the Australian | ||||
business and cycling 1H18 impact of extended | |||||
Working capital | 365.7 | 426.7 | (61.0) | ||
customer credit in Indonesia during Ramadan. | |||||
Property, plant and equipment (PPE) | 1,834.5 | 1,830.0 | 4.5 | | PPEhas remained largely unchanged with asset |
Intangible assets | 1,255.6 | 1,214.5 | 41.1 | additions being in line with depreciation, and | |
Current and deferred tax liabilities (net) | (261.4) | (274.8) | 13.4 | property disposals in 2H18 being offset by | |
foreign exchange translation impacts. | |||||
Derivative non-debt liabilities - related (net) | (33.2) | (8.0) | (25.2) | | The increase in intangible assetsis mainly |
Other net assets (net) | 60.9 | 8.2 | 52.7 | due to acquisition of the Rekorderlig Australian | |
distribution rights and foreign exchange | |||||
Capital employed | 3,222.1 | 3,196.6 | 25.5 | translation impacts. | |
(before lease accounting changes)(2) | | Current and deferred tax liabilities (net) | |||
Right of use assets (including related deferred tax) | 450.0 | - | 450.0 | decreased by $13.4 million due to the tax | |
benefit associated with the 2018 SPC | |||||
Capital employed | 3,672.1 | 3,196.6 | 475.5 | impairment. | |
| Derivative non-debt liabilities - related | ||||
Return on capital employed (ROCE) | |||||
(before lease accounting changes) (2) | 19.3% | 21.3% | (2.0) pts | (net)increased by $25.2 million mainly as a | |
result of unrealised losses recognised in equity | |||||
Return on capital employed (ROCE) | 18.1% | 21.3% | (3.2) pts | on resin hedging and realisation of in the money | |
aluminium hedging. | |||||
- Ongoing refers to continuing operations results adjusted to excludenon-trading items
- Lease accounting changes refers to the introduction of AASB16 lease accounting standard.
CAPITAL EXPENDITURE1
Capex was $28.0 million lower than 1H18 due to timing of spend in Australia and New Zealand.
Capex ($ million) and Capex / Depreciation and amortisation (x times)
2.00 | |||||||||||||
1.60 | |||||||||||||
464 | 1.28 | ||||||||||||
1 | 1.20 | ||||||||||||
1.07 | 1.10 | ||||||||||||
0.95 | |||||||||||||
393 | |||||||||||||
165 | 3 | ||||||||||||
334 | 0.58 | ||||||||||||
312 | |||||||||||||
117 | 296 | 6 | |||||||||||
285 | ~300 | ||||||||||||
8 | |||||||||||||
11 | |||||||||||||
10 | 256 | 112 | |||||||||||
7 | 58 | 99 | |||||||||||
68 | 73 | ||||||||||||
143 | 54 | ||||||||||||
16 | 62 | 62 | |||||||||||
69 | 84 | ||||||||||||
72 | 39 | ||||||||||||
42 | 17 | 18 | 98 | ||||||||||
27 | 35 | 39 | |||||||||||
189 | 3 | ||||||||||||
126 | 23 | ||||||||||||
113 | 117 | 96 | 97 | 23 | |||||||||
85 | - | ||||||||||||
8 | |||||||||||||
41 | |||||||||||||
FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | 1H19 | ||||||
Indonesia & PNG | New Zealand & Fiji | SPC (FY18) | |||||||||||
Corporate, Food & Services | Australian Beverages | Alcohol & Coffee | |||||||||||
Total | Capex / D&A | ||||||||||||
- Capex excludes amounts arising due to the lease accounting change being right of use assets and depreciation thereof
- From FY12 to FY17, SPC Capex is included in Corporate, Food & Services and in FY18 SPC Capex is presented separately.
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COMMENTARY
- Group capital expenditure was $28.0 million lower than 1H18 at $98.0 million. Reduction on last year is primarily due to timing of project spend in Australia, and lower half one spend in New Zealand.
- Australian Beverages:capex includes spend on equipment at Richlands, solar panel installations at three facilities and investment in technology to support sales and customer service programs and automation.
- New Zealand & Fiji:capex includes implementation of a new ERP system in Fiji and the rollout of cold drink equipment across both New Zealand and Fiji.
- Indonesia & PNG:Capex spend includes the affordable small sparkling line in Surabaya, operational and production efficiencies in Indonesia. In PNG spend was on construction of a new warehouse in Lae and upgrade of the can line.
- Corporate and Services:Capex spend is primarily in relation to cold drink equipment investment in Australia.
- Capital expenditure is weighted to the second half reflecting the timing of projects in Australia, Indonesia and PNG.
Coca-Cola Amatil 2019 Half-Year Result 25
FREE CASH FLOW - ONGOING1
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Strong free cash flow - ongoing1(before lease accounting changes)2improved by $86.2 million on the prior period.
$ million | HY19 | HY18 | Change |
($M) | |||
EBIT | 284.7 | 301.4 | (16.7) |
Depreciation and amortisation expenses | 136.8 | 129.1 | 7.7 |
Impairment charges | 1.2 | 0.8 | 0.4 |
Changes in adjusted working capital | 3.3 | (43.1) | 46.4 |
Net interest and other finance costs paid | (22.0) | (41.4) | 19.4 |
Income taxes paid | (55.6) | (95.2) | 39.6 |
Movements in other items | (38.9) | (0.2) | (38.7) |
Operating cash flows (before lease accounting | 309.5 | 251.4 | 58.1 |
changes)2 | |||
Capital expenditure | (98.0) | (126.0) | 28.0 |
Proceeds from sale of non-current assets | 3.7 | 4.0 | (0.3) |
Payments for additions of other intangible assets | - | (0.4) | 0.4 |
Free cash flows (before lease accounting changes)2 | 215.2 | 129.0 | 86.2 |
Operating cash flows - Ongoing | 339.4 | 251.4 | 88.0 |
Free cash flows - Ongoing | 245.1 | 129.0 | 116.1 |
Cash realisation (before lease accounting changes)2 | 96.9% | 79.3% | 17.6 pts |
Cash realisation | 96.6% | 79.3% | 17.3 pts |
- Ongoing refers to continuing operations results adjusted to excludenon-trading items.
- Lease accounting changes refers to the introduction of AASB16 lease accounting standard.
COMMENTARY
- Ongoing free cash flows (before lease accounting changes) was $215.2 million, an increase of $86.2 million driven by:
- A decrease in working capital due to Australian Beverages improved debtor collections and receivables management and reduced receivables in Indonesia.
- Increased interest income received in Indonesia and PNG due to increased interest rates achieved.
- Reduction in tax payments in Australia due to a lower instalment rate applied by the Australian Taxation Office and a refund received in relation to the 2018 year.
- Partially offset by the impact of resin prepayments in Indonesia so as to secure advantageous foreign exchange and pricing outcomes.
- Reduced capital expenditure due to completion of significant projects carried out in 2018, such as the Richlands bottling line and New Zealand automated warehouse projects.
- Ongoing cash realisation (before lease accounting changes) was 96.9%, a 17.6 points increase due to the improvement in operating cash flows.
Coca-Cola Amatil 2019 Half-Year Result 26
NET DEBT AND INTEREST COVER
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Net debt reduced by $163.6 million year on year prior to the impact of the new lease accounting standard.
Net debt ($ million) and Ongoing EBIT interest cover (x times)
9.9 | 10.3* | ||
9.4 | 8.8 * | ||
7.8 | 7.7 | 8.4* | |
6.7 | |||
5.3 | |||
1,780.6 | |||
1,871.3 | |||
1,632.5 | 1,759.3 | 491.5 | |
1,337.2 | 1,327.8 | ||
1,289.1 | |||
1,146.3 | |||
992.8 |
FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | 1H19 |
Net debt | Lease accounting standard impact | ||||||
Ongoing EBIT interest cover before lease accounting changes | Ongoing EBIT interest cover after lease accounting changes |
* Ongoing EBIT and Interest expenses
COMMENTARY
- Net debt increased to $1,780.6 million as a result of the introduction of the new lease accounting standard. Excluding this impact, net debt decreased to $1,289.1 million compared to $1,327.8 million at the end of 2018, reflecting a strong free cash flow result and funds received from the sale of SPC.
- Total available debt facilities at period end were $2.6 billion with average maturity of 5.6 years.
- Substantial proportion of cash assets held for specific purposes or constraints (Indonesia & PNG).
- Ongoing EBIT interest cover increased from 8.3 times in 1H18 to 8.4 times, reflecting inclusion of leasing interest in 1H19 offsetting increased interest income from Indonesia and PNG. Excluding the impact of the introduction of the new lease accounting standard, EBIT interest cover increased to 10.3 times.
Coca-Cola Amatil 2019 Half-Year Result 27
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SUSTAINABILITY & OUTLOOK
Alison WatkinsGroup Managing Director
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OUR PROGRESS ON SUSTAINABILITY
Our approach to sustainability will underpin our future performance. In the first half of 2019 we continued to make progress against all of our sustainability goals, including sustainable packaging, sugar reduction and energy consumption.
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SUGAR REDUCTION | ENERGY CONSUMPTION | SUSTAINABLE PACKAGING | |
- Continuedcommitment to reducing sugar across our Australian and New Zealand portfolio by 10% by 2020, with a further 10% reduction across both markets by 20251.
-
Progress against the target as at
30 June 2019:
oAustralia - 7.0%
oNew Zealand - 4.1% oIndonesia - 7.8%
1. Based on portfolio-wide weighted volume average total sugar content (g/100ml). All targets are for 2020 compared to 1 January 2016 unless otherwise specified.
- Continued progress towards 60% renewable orlow-carbon energy use across our operations.
- One of the SE Asia'slargestrooftop solar installation underway in Indonesia
- More than10,000solar panels with capacity of 3,527 kWacross three sites in Australia - Eastern Creek, Richlands and Kewdale
- Committed toSeven out of ten of our plastic bottles inAustralia will be made from 100% recycled plastic by the end of 2019
- Ceaseddistributed ofplastic straws in Australia
- Partnered with Keep Australia Beautiful totarget litter hotspots
- Maintained our commitment to Fiji basedMission Pacific
Coca-Cola Amatil 2019 Half-Year Result 29
TVC - SUSTAINABILITY
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Coca-Cola Amatil 2019 Half-Year Result 30
2019OUTLOOK
2019 OUTLOOK
The end of 2019 will mark the completion of a two year transition period.
- Australian Beverages:is positioned for growth in 2020 with the completion of the additional $10 million of investments in our Accelerated Australian Growth Plan and with container deposit schemes in NSW and QLD substantially embedded by the end of 2019.
- Indonesia:we are encouraged by the growth we have achieved from April 2018 and will continue to deliver our Accelerate to Transform strategy with additional marketing expenditure in 2019 as we navigate soft macroeconomic conditions, a weak Indonesian Rupiah and subdued market growth.
- New Zealand & Fiji, Papua New Guinea and Alcohol & Coffee: expected to deliver growth in line with our Shareholder Value Proposition.
- Corporate & Services:an EBIT loss of approximately $12 million is expected in line with the outlook provided.
NON-TRADING ITEMS
- As part of our cost optimisation programs across the Group, we are expectingone-off costs in 2019 of up to $30 million.
- We are pursuing opportunities to dispose of surplus properties which would result inone-off gains in 2019, partially offsetting the one-off costs.
TARGET FROM 2020 AND BEYOND
- We remain committed to our Shareholder Value Proposition targeting a return to delivery ofmid-single digit earnings per share growth from 2020.
- This will depend on the success of revenue growth initiatives in Australia, Indonesian economic factors and regulatory conditions in each of our markets.
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Coca-Cola Amatil 2019 Half-Year Result 31
2019:CAPEX, DIVIDENDS AND BALANCE SHEET
CAPITAL EXPENDITURE
- 2019 Group capex is expected to be approximately $300 million.
DIVIDENDS
- Continue to target medium term dividend payout ratio of over 80 per cent.
- Amatil dividends are expected to return to being franked in 2021. At that stage, depending on the mix of earnings between Australia and other countries, we expect the level of franking to be above 50 per cent.
BALANCE SHEET
- Balance Sheet to remain conservative with flexibility to fund future growth opportunities.
- Expecting to maintain strong return on capital employed.
- We will seek to maximise value for shareholders by pursuing additional sales of surplus properties.
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Coca-Cola Amatil 2019 Half-Year Result 32
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QUESTIONS &
ANSWERS
Coca-Cola Amatil 2019 Half-Year Result 33
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APPENDIX
Coca-Cola Amatil 2019 Half-Year Result 34
IMPACT OF AASB16 LEASING STANDARD
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Net debt has increased by $491.5 million and profit for the half has decreased by $1.3 million as a result of adoption of the new standard.
Impact on the Group's balance sheetas at transition (1 January 2019) and
28 June 2019 is shown below as increases in the noted items:
Balance sheet $million | 28 June 2019 | 1 January 2019 |
Right of use assets | 432.2 | 454.1 |
Lease liabilities | 491.5 | 506.9 |
Deferred tax assets | 17.8 | 15.8 |
Accumulated losses - opening balances | 37.0 | 37.0 |
Impact on the Group's income statementfor the 2019 half year: | ||
Income statement (continuing operations) $million | HY19 | |
Operating lease expenses (previous lease accounting) | 38.2 | |
Depreciation of right of use assets | (33.0) | |
EBIT | 5.2 | |
Net finance costs | (7.1) | |
Profit before income tax | (1.9) | |
Income tax expense | 0.6 | |
Profit for the half year | (1.3) | |
Impact on the Group's statement of cash flows: | ||
Statement of cash flows $million | HY19 | HY18 |
Operating cash flows - | ||
Operating lease payments | - | (33.6) |
Lease payments (interest component) | (7.1) | - |
Financing cash flows - | (7.1) | (33.6) |
(29.9) | ||
Lease payments (principal component) | - | |
Total lease payments | (37.0) | (33.6) |
COMMENTARY
- Amatil transitioned to AASB 16 on 1 January 2019, not restating comparatives for practical reasons (as permitted)
- AASB 16 brings majority of leases on balance sheet as a right of use asset (ROU) and corresponding lease liability
- Amatil's leases mainly relate to properties located in Australia and New Zealand
- Adoption of the standard had no significant impact on Amatil's ability to pay or frank dividends, credit ratings or ability to obtain finance or any tax related matters
- The standard increases Amatil's net debt for lease liabilities by $491.5 million as at 28 June 2019.
- The impact on the income statement is an increase in EBIT of $5.2 million and a reduction in NPAT of $1.3 million for the half year.
- Operating cashflow for H119 has been increased by $29.9m due to reclassification of the principal component of lease payments into 'financing' activities.
- Othernon-IFRS metrics such as return on capital employed (ROCE) have been impacted and disclosed on a before (comparable) and after lease accounting change basis. This approach will continue for full year reporting and move to the new basis for 2020 and future.
Coca-Cola Amatil 2019 Half-Year Result 35
ACCELERATE TO TRANSFORM - FOCUS AREAS
We have five areas of focus in the near term
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STRATEGY
AMBITION
LEADEXECUTE
- #1 in NARTD value share
- Consumer-centricapproach
- Best-in-classmarket execution enabled by an optimised route-to-market
PARTNER
ACTIONS
- GROW SPARKLING
Drive sparkling
B. GAIN SHARE IN
TEA AND VALUE- C. STABILISE JUICE ADDED DAIRY
Scale to #2 Tea share
C. MAINTAIN | D. OPTIMISE | |
WATER AND | ||
DISTRIBUTION | ||
ISOTONIC | ||
Optimise RTM |
relevance and
and establish as a
Stabilise Minute Maid
Maintain position for | network with further |
consumption by
sizeable value-added
Pulpy and investigate
future growth | refined Retail and |
providing a strong reason to consume
dairy player
long term options
Wholesaler roles |
BRANDS
Original Tea
• | Drive recruitment through | • | Innovate in Tea | • | Enhance the sensorial and | • | Maintain existing brand | • | Segmented execution | |
• | 250mL ASSP pack | • | Enter 'Original' Tea at | refreshment value | • | building initiatives | • | Differentiated service | ||
INITIATIVES | Activate based on | • | scale with new brand | • | proposition | Explore longer term | • | standards based on VPO | ||
occasions | credentials | options | benefit | trialing programs | ||||||
consumer and community | Build Nutriboost brand | Investigate long term | options e.g. functional | Refine CVP through | ||||||
• | Product innovation | • | Wholesaler partnerships to | |||||||
complement Retail | ||||||||||
Coca-Cola Amatil 2019 Half-Year Result 36
OUR GROUP STRATEGY HAS
THREE DISTINCT ELEMENTS
PERFORM | Primary focus | GROW | Greater focus | |
LEADEXECUTE PERFORM
GROWTH WITHIN
GROWTH BETWEEN
GROWTH BEYOND
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STRONG ORGANISATION
Ongoing focus
FIT FOR PURPOSE | ||||||||
LEADERSHIP | REPUTATION AND TRUST | |||||||
Coca-Cola Amatil 2019 Half-Year Result 37
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CCA - Coca-Cola Amatil Ltd. published this content on 22 August 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 August 2019 10:27:02 UTC