FY16 Results Presentation Laura McBain, CEO Shona Ollington, CFO 19 August 2016
FY16: Optimising returns to deliver strong growth in earnings FY17: Investing in an agile business model to optimise long-term sustainable earnings Shona Ollington, CFO 2
FY16: A year of very strong growth EBIT up 342% China revenues Revenue up to $54.3m up 331% 95% to $245m EBIT margin more Within guidance Direct trading with than doubled from China-based Sales mix optimised 10% in FY15 to enterprises and with available 22% in FY16 customers production continues to grow H2 margin greater Strong Step 3 than H1 margin formula product performance 3
FY16: Another record fjnancial performance We achieved revenue of $244.6m, an increase of 95% ($m) FY16 FY15 % change on the prior year as a result of: Revenue 244.6 125.3 95% - Increased infant formula production Gross Profjt 111.7 41.2 171% - Australian price increase in December 2015 for Gross Profjt % 45.7% 32.9% infant formula range Direct Costs (28.5) (15.2) 88% - Increased volumes direct to China following Employee costs (10.4) (5.6) 86% activation of China online reseller channels Marketing costs (6.9) (2.5) 176% - 67% increase in Australian revenues Admin & Other costs (11.6) (5.6) 107% GP margin improvement and direct costs refmect EBIT 54.3 12.3 342% the changing channel mix EBIT % 22.2% 9.8% Strong cost management while growing the business NPAT 38.3 9.0 326% infrastructure - Increased head count by 50% - Continue to embrace digital marketing strategies while building platforms for next evolution of growth EBIT up 342% to $54.3m - Seek to maximise business growth while delivering on EBIT 4
Growing operating cash fmows We are growing operating cash fmows - strong sales, strong ($m) FY16 FY15 % change debtors collection cycle, and improved trading terms with Operating cash fmow 8.9 4.7 88% suppliers have contributed to operating cash fmows for the year of $8.9m Investing cash fmow (2.4) (0.3) 521% Financing cash fmow (6.2) 23.2 (127%) During FY17 we will continue to utilise our growing earnings Net cash fmow movement 0.3 27.6 and cash fmows to invest in our supply chain and other Cash at bank 32.3 32.0 1% initiatives to drive sustainable growth and further optimise long term returns Financing cash fmows primarily relate to dividend payment made during the year Final dividend up 173% to 7.8cps fully franked - Total dividend up 316% to 11.9cps fully franked - Total dividend represents payout ratio of 30% of FY NPAT 5
Maintaining strong balance sheet Our strategic initiatives in relation to volume growth and ($m) 30 June 16 30 June 15 price increases implemented during year have contributed Assets to growth in trade receivables Cash 32.3 32.0 Due to the addition of a second manufacturing partner Trade receivables 33.9 20.9 (Fonterra) and the ingredients required to support this Inventory 67.8 17.1 initiative, inventory has increased in line with plans Other assets 9.5 2.1 - Total inventory increasing to $67.8m comprised of Total assets 143.5 72.1 $35.1m fjnished goods and $32.7m of ingredients Liabilities Trade and other payables 48.3 19.1 - Increased levels of fjnished goods to support the current sales rate of the business Borrowings 0.1 0.2 Current tax liabilities 10.5 3.6 Refmecting the growth in inventory and timing of delivery of Other liabilities 1.3 0.4 stock in June, trade payables have increased at year end Total liabilities 60.2 23.3 The Company had $32.3m in cash and minimal debt Net assets 83.3 48.8 at 30 June - Funding facility is in place to support shorter term working capital growth requirements 6
Growing in Australia and China 67% growth in Australian revenues to $178.6m: FY16 Australia China/HK SEA/ Total Other Segment - Increased distribution Results ($m) Revenue 178.7 62.1 3.8 244.6 - Price increases % Growth 67% 331% (8%) 95% - Growing market share from PY Segment 331% growth in China/HK revenues: 35.6 20.9 0.3 56.8 EBIT* - Increased brand awareness EBIT %* 20% 34% 11% 23% * Before corporate overheads - Growth in e-commerce business FY16 Segment Revenue - Growth in reseller customer activations Group Revenue $245m Australia revenues South East Asia sales refmect change in distributor $179m growing at 67% arrangements to enable greater control of Vietnam and Malaysia sales channels China revenues growing $62m at 331% $4m SEA/Other 7
We continue to perform as a high growth company and set the scene for continued growth Bellamy’s EBIT ($m) Bellamy’s Revenue Growth ($m) A$m A$m $160 $40 139.5 35.1 $140 $120 $30 105.1 $100 19.2 67.9 $80 $20 57.4 $60 26.8 7.0 $40 $10 24.1 5.3 $20 0.9 2.0 $0 $0 1H14 2H14 1H15 2H15 1H16 2H16 1H14 2H14 1H15 2H15 1H16 2H16 BAL Revenue ($m) Expon. (BAL Revenue ($m)) BAL EBIT ($m) Expon. (BAL EBIT ($m)) We have strong foundations to continue our growth strategy Increase in manufacturing volumes in FY17 will support inventory build for growth in existing and new markets We have increased our available supply, and delivered growth in revenue and EBIT Demand for Bellamy’s brand continues to increase refmecting our recognition as a healthy, safe brand with product to match 8
FY16: Optimising returns to deliver strong growth in earnings FY17: Investing in an agile business model to optimise long-term sustainable earnings Laura McBain, CEO 9
Growing our organic milk supply pool Bellamy’s Production Volume H2 14 H1 15 H2 15 H1 16 H2 16 Bellamy’s has Bellamy’s has Progressing the reliable access to strategic partnerships conversion to organic the international with co-ops by small group of organic milk pool and and ingredient farmers in Tasmania – specialty ingredients manufacturers that with estimated needed for high underpin supply on-boarding of quality organic infant of key formula supply in 2 years formula ingredients 10
Building manufacturing capabilities to leverage the growing organic ingredient pool 2015: Signed 6-year Product Bellamy’s Supply agreement potential Bellamy’s a key customer capacity across all sites is greater 2016: Signed 5-year strategic than current manufacturing arrangement • Commenced manufacturing utilised Beingmate has 51% ofg-take; capacity Bellamy’s is a key customer for remainder 11
Australia: increasing penetration Substantial opportunity to further penetrate Australian market – currently selling products in Total Bellamy’s Distribution 4,400 of 7,000 distribution points 7,000 Deepening distribution both geographically and with new retailers 59% Increasing ranging across retailers toward our 4,400 entire baby food and formula range 3,600 3,000 Developing new accounts with smaller retailer and pharmacy groups No.1 in Cereal across scanned sales in Australia Signifjcant changes to the Australian retailer TOTAL MARKET FY14 FY15 FY16 OPPORTUNITY market for formula since changes to China regulations. The changes have meant more direct Number of distribution points covered dealings by brands with Daigous 12
China: agility the key to meeting the changing channel mix Direct retailing commenced throughout FY16 in China, increasing Bellamy’s brand penetration Focused on further growing our multi- channel distribution – online and offmine – with infant formula as the spearhead Leverage Top 10 presence for infant formula on Tmall With the China consumer buying more and more online, we aim to capture a growing portion of the e-commerce market directly through multiple platforms such as Tmall, JD, VIP , and BabyTree 13
China: manufacturing regulatory changes strengthening growth opportunities Bellamy’s is set to benefjt from new Chinese regulations which will limit registered factories in China and ofgshore to producing three brands (or “series”) and each brand/ series to three products - Essentially, this means each manufacturer can register a maximum of 9 products for sale to China Bellamy’s volumes, scale and depth of penetration mean we are a priority top three customer with our manufacturers and canners Aidan Coleman, the chief executive of Bega Cheese, said… Bega would concentrate on producing infant formula for Bellamy’s, its joint-venture partner Blackmores and one other brand which remained confjdential. 9 June 2016, Australian Financial Review 14
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