T assal Group Limited 1H18 Results Mark Ryan, Managing Director & CEO Mark Ryan, Managing Director & CEO Andrew Cresw ell, CFO Andrew Cresw ell, CFO 2 3 February 2 0 1 8 2 3 February 2 0 1 8 1
“Tassal is delivering on its growth ambitions – generating responsible and sustainable biomass growth, while delivering increasing operating, financial and shareholder returns.” Delivering responsible & sustainable results 2 2
Another record result Delivering on our grow th am bitions in a responsible w ay Operating earnings grow ing in line w ith revenue Favourable m arket Efficiency benefits flow ing Strong operating dynam ics in the dom estic from a m ore optim al salm on returns and salm on m arket harvest biom ass and size STRATEGY operating cashflow • Focus on optimising • Strong per capita consumption • Salmon harvested achieved an EBITDA returns … which growth at 11.6% average fish size of 5.11kg HOG is not just ‘cost out’ - it (target 5kg HOG) … allowed sales is also about optimising mix to be optimised as well as sales mix and pricing Optim ising dom estic delivering cost out and significant returns, and generating productivity gains salm on sales m ix : wholesale productivity gains volume at 47.0% vs. retail • Harvest tonnage up 62.6% to • Operating EBITDA up volume at 53.0% (1H17: 18,648 HOG tonnes (1H17: 23.5% to $53.2m 42.6% vs. 57.4% ) 11,467 HOG tonnes) (1H17: $43.1m) • Wholesale fresh hog market • Sales volume up 43.7% to 16,908 • Operating cashflow up pricing was maintained and HOG tonnes (1H17: 11,761 HOG 69.2% to $40.6m volume was up 23.2% tonnes) (1H17: $24.0m) • Significant growth in retail fresh packaged products 3 3
Another record result Delivering on our grow th am bitions in a responsible w ay Operational EPS strong – balance sheet significantly de-risked De Costi Seafoods Operational EPS strong Export m arket strategically continues to drive targeted - provides flex to • Operational earnings per salm on and seafood share (EPS) was up 10.0% to allow us to optim ise salm on grow th • Operating cashflow 15.09 cents per share (1H17: returns across m arkets 13.71 cps) up 69.2% to $40.6m Tassal has been (1H17: $24.0m) • Bigger fish are cheaper to grow – and • Capital raising resulted in significantly de-risked the benefit of this from a cost of salmon 18.57 million shares issued • Capital raising (share perspective is applied across both and was structured to domestic and export markets placement and share support future growth purchase plan) from 2H17 infrastructure and to • Above 6.0kg HOG salmon are more raised net proceeds of deleverage balance sheet, so suited to the Asian market – and $82.5m no earnings benefit for FY18 accordingly, attract the best pricing due to capital and working • Capital raising, together • Softening of international pricing – capital cycle with very strong growth in Tassal still received a price premium of operating cashflow and • Assuming a tax effected circa $1kg responsible capital spend interest saving on net has gearing at 13.0% • Export market was flexed to allow cash proceeds raised, an adjusted (1H17: 34.6% ) operating EPS would be generation and overall acceptable 16.26 cps – i.e. an increase • $275 million capital returns to be generated across the of 18.6% for 1H18 business for salmon investment program over the next five years 4 4 4
Grow th across all key m etrics Operating EBITDA: $ 5 3 .2 m Operating NPAT: $ 2 5 .9 m • • Statutory NPAT up 2.4% to $28.4m Statutory EBITDA up 6.1% to $56.7m Interim Dividend: 8 .0 cps, fully franked Operating Cashflow: $ 4 0 .6 m 5 5 5
Continued safety im provem ents No job is so im portant that it cannot be done safely • Safety commitment is consistent with maximising shareholder value • 1H18 safety performance improved from 1H17 • Our focus and relentless pursuit is to achieve the core value of “Zero Harm” KPI s 1 H1 8 1 H1 7 Definitions: 0 .4 0 .5 LTI FR LTIFR – Lost Time Injury Frequency Rate: (Number of Lost Time Injuries/ Total Number of Hours Worked) MTI FR 1 3 .0 1 4 .0 X 1,000,000 hours MTIFR – Medical Treated Injury Frequency Rate: TRI FR 1 3 .4 1 4 .5 (Number of Medically Treated Injuries/ Total Number 9 7 .1 % 9 5 .7 5 % Scorecard of Hours Worked) X 1,000,000 hours Driving the TRIFR – Total Injury Frequency Rate: LTIFR + MTIFR Safety culture 9 3 .0 % 9 1 .3 % scorecard 6 6 6
Right to Operate Responsibly balancing environm ental, social and econom ic dim ensions Franklin lease continues to recover – the Aquaculture Stew ardship challenges in Macquarie Harbour are Council ( ASC) certification com plex m aintained across all • Returned to compliance from an ‘out of lease STRATEGY Tassal’s operations for compliance’ perspective – in-fauna abundance is harvest fish returning • Tassal was the first salmon producer globally to achieve ASC across its entire business – and remains one of only R&D over the past 6 years focused on two (Petuna) who globally have this supporting safe operations in som e of the w ildest conditions farm ed globally, and w ill soon com m ence a transitional process tow ards off-shore farm ing W orld W ildlife Fund-Australia ( W W F-Australia) partnership strengthened through Marine Many inshore leases are Spatial Planning ( MSP) principles environm entally sustainable and enjoy excellent environm ental com pliance … • A ‘deep’ assessment of environmental, operational, shared salmon will continue to be farmed on those user and social overlay leases that demonstrate a balanced environmental, commercial and socially • Assists in a broader appreciation of shared marine values, minimising conflict, promoting better biosecurity and accepted position facilitating growth in socially accepted areas 7 7 7
“The strength of Tassal’s operating model can be clearly seen in the record 1H18 result that delivered strong growth in underlying earnings and operating cashflows, while further strengthening the company’s balance sheet.” Record 1 H1 8 results across all key m etrics 8 8
A record 1 H1 8 result Strong grow th across all key m etrics Strong grow th in revenue Financial Performance 1H18 1H17 Change ( A$m) • Statutory results Operational strategy of growing larger salmon – additional harvest biomass and size Revenue 271.33 219.34 23.7% EBI TDA 56.74 53.47 6.1% • Strong growth in salmon domestic market per capita EBI T 44.17 43.58 1.4% consumption NPAT 28.41 27.73 2.5% Operating results • Export market strategically targeted with bigger Operat ing EBI TDA 53.21 43.08 23.5% salmon Operat ing EBI T 40.65 33.19 22.5% Operating earnings grow ing in line w ith revenue Operat ing NPAT 25.95 20.46 26.8% • Favourable domestic salmon market sales mix Operat ing cashflow 40.57 24.02 68.9% I nt erim dividend - cps 8.00 7.50 6.7% • Efficiency benefits flowing from more optimal salmon harvest biomass and size Gearing Rat io 13.0% 34.6% Funding Rat io 26.1% 46.9% Very strong grow th in operating cashflow • Higher cash receipts from revenue growth combined SGARA increased SGARA increased with responsible cash spend EBITDA included a SGARA adjustment of $3.5m (1H17: EBITDA included a SGARA adjustment of $3.5m (1H17: o o increased $10.4m) increased $10.4m) Significantly low er gearing NPAT $2.5m (1H17: increased $7.3m) NPAT $2.5m (1H17: increased $7.3m) o o I ncrease in fully franked interim dividend 9 9 9
Strong balance sheet – significantly de-risked I ncreased biological assets to support future grow th • Value of live fish up 7.3% to $308.5m • Biological assets support future revenue and earnings growth • Finished goods up $37.6m to $84.5m for inventory to be sold in 2H18 and onwards • Majority of working capital spent when salmon in the water and growing – FY17 Operational Return on Assets • SGARA impact removed from calculation • Operational Return on Assets sustainable moving forward • Continuing to generate return > WACC Conservative Gearing and Funding ratios – supported by capital raising, strong operating cashflow and responsible capital spend • Gearing only 13.0% (1H17: 34.6% ), providing flexibility to invest strategically for growth • Appropriate bank funding arrangements in place – structure, headroom and tenor • Funding ratio, i.e. including RPF (net debt + RPF / equity) at 26.1% (1H17: 46.9% ) 10 10 10
Exceptional grow th in operating cashflow Supporting long term responsible reinvestm ent • Operating cashflow up 6 9 .2 % to $ 4 0 .6 m ( 1 H1 7 : $ 2 4 .0 m ) Operating Cashflow 1 H1 8 1 H1 7 ( A$m ) Reflects the strength of Tassal’s o Operating cashflow 40.57 24.02 underlying business and operational strategy Investing cashflow (39.48) (30.44) Financing cashflow 2.16 6.64 Clear ability to convert biomass held at o 30 June 2017 into cash by 31 Net increase/ ( decrease) 3.2 5 0 .2 2 December 2017 in cash held • Positive cash generation from operations to continue enabling investment in salmon Operational cash flow growth and harvest biomass • Continued focus on responsible capital spend at $39.5m to underpin sustainable growth in long-term returns Earnings maintenance assets – spend o circa 30% Earnings growth assets – spend circa o 70% 11 11 11
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