A2 Milk Company Limited · NZX:ATM
A2 Milk — The a2 Milk Company — Shareholder Meeting (November 2016)
34 slides from A2 Milk's shareholder meeting presentation, Nov 22, 2016
Slide 1: Annual Meeting 2016
ANNUAL MEETING 2016 GEOFFREY BABIDGE MANAGING DIRECTOR & CEO 22 NOVEMBER 2016 a2 Milk™ a2 Platinum™ and The a2 Milk Company™ are trademarks of The a2 Milk Company Limited
Slide 2: Managing Director's Address
Managing Director’s Address • Company overview • FY16 result highlights • Science and intellectual property update • FY17 July – October update • Conclusion
Slide 3: Company Overview
“LY COMPANY OVERVIEW
Slide 4: The a2 Milk Company at a glance
The a2 Milk Company at a glance • The a2 Milk Company (“a2MC”) is in the business of Key metrics producing, marketing and selling premium branded dairy nutritional products in targeted global markets NZ$ million AU$ million1 Market Capitalisation2 ~1,500 ~1,410 • All a2MC branded products contain on
Slide 5: We're on an extraordinary growth and transformational journey
We’re on an extraordinary growth and transformational journey 5
Slide 6: The a2 Milk Company proposition
The a2 Milk Company proposition 1 Single-minded company focus 2 Compelling and growing 34. Integrated IP portfolio and on A1 protein-free products scientific evidence proprietary know-how (pioneers and experts) 46. Unique and effective 55. Clean and green Australia 63. Capital-light investment marke
Slide 7: An evolving strategic roadmap
An evolving strategic roadmap As the A2 protein pioneers we are single-mindedly determined to help our consumer’s enjoy a better life. Continue to build a substantial Build a global infant Establish an advanced premium milk business nutrition business adult nutrition business • Strategic corne
Slide 8: FY16 Result Highlights
FY16 RESULT HIGHLIGHTS
Slide 9: Financial summary
Financial summary % NZ$ million FY16 FY15 change • Revenue growth of 127.4% on pcp Revenue 352.8 155.1 +127.4% • EBITDA growth before non-recurring items of $49.8m on pcp Gross margin 151.0 54.4 +177.5% • Gross margin reflects change in product mix, with infant formula now Sales & distribution (19.0
Slide 10: FY13 – FY16 in charts
FY13 – FY16 in charts Group Revenue (NZ$ million) Group EBITDA1 (NZ$ million) 352.8 54.6 155.1 94.7 110.8 10.6 3.6 4.8 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16 H1 H2 H1 H2 Portfolio Composition (% Group Revenue) Net Operating Cash Flows (NZ$ million) 2% 10% 27% 21.5 61% 95% 88% 70% 3.6 0.4 (8.1) 34%
Slide 11: a2 Platinum infant formula, a significant product platform in our business
a2 Platinum® infant formula, a significant product platform in our business • Group revenue for infant formula was NZ$214.4 million, compared Growth in Group Infant Formula Sales (NZ$m) to NZ$41.7 million for FY15 140.5 • Infant formula accounted for 61% of group revenue, up from 27% on pcp 73.9 • G
Slide 12: Segment performance
Segment performance ANZ CHINA • Stand out performance for the ANZ business, in particular • Strong sales growth delivered positive full year Operating growth of a2 Platinum® in grocery and pharmacy EBITDA for the first time • Stock shortages of infant formula 1H16 remedied • Developing multi product
Slide 13: Science & IP Update
Q SCIENCE & IP UPDATE
Slide 14: Recent developments in the science
Recent developments in the science • The science continues to develop with published research over last two years demonstrating: – A1 beta casein protein can trigger inflammation of the gut, leading to digestive discomfort; does not occur with A2 protein (China human study)1 – The mechanism by which
Slide 15: Patent and trade mark coverage
Patent and trade mark coverage Territories in which a2MC has applications and/or registrations for patents and/or trade marks as at November 21, 2016 15
Slide 16: Patent portfolio continues to evolve
Patent portfolio continues to evolve Type Patent Title(s)* Expiry Territories^ Genotyping, herd Animal Genotyping Method May 2023 Australia, Canada, China, Hong Kong, India, Japan, New Zealand, Singapore, South Korea, formation and use USA, Vietnam Phenotyping Method Of Selecting Non-Diabetogenic Mi
Slide 17: FY17 July – October Update
FYI7 JULY — OCTOBER UPDATE
Slide 18: FY17 update: 4 months to October
FY17 update: 4 months to October NZ$ million 4M17 4M16 % change Group Revenue Group EBITDA (4 month) (4 month) Revenue 155.2 79.3 96% EBITDA 35.5 6.2 473% 155.2 35.5 PBT 35.0 5.5 536% NPAT 22.0 3.2 NM Management results are unaudited NM = not meaningful 79.3 • 4M17 revenue (4 months to October 2016)
Slide 19: FY17 update: 4 months to October (ANZ)
FY17 update: 4 months to October • ANZ – Fresh milk performing well with solid growth on pcp, in line with plan – Continued and consistent growth in consumer demand for a2 Platinum® infant formula – Remaining flexible to meet changing distribution trends with growing proportion of demand now from Ph
Slide 20: FY17 update: 4 months to October (China)
FY17 update: 4 months to October • China – Demand growth in direct and cross border e-commerce (CBEC) trade, reflects increasing awareness in China of the a2 Platinum® and a2 Milk™ brands supported by in-country marketing strategy – Strengthening Shanghai based team with priority in sales, marketing
Slide 21: Number of babies born should continue to increase
Our review indicates the number of babies born should continue to increase China’s Child Population (0-36 Months, Million People) Source: National Bureau Of Statistics, National Census 2000 & 2010, China-based consultancy analysis 21
Slide 22: a2 Platinum performance in China continues to strengthen
a2 Platinum® performance in China continues to strengthen • a2 Platinum’s value share continues to climb within Tmall/Taobao e-commerce platforms • Growing relative strength in Stage 1 and Stage 2 indicating increased trust and brand credibility amongst Chinese parents a2 Platinum® infant formula sh
Slide 23: Growing investment in marketing across Australia and China
Growing investment in marketing across Australia and China • Continuing to grow investment in building brand equity year on year • China in-market marketing building brand awareness – China/Australian ‘Feel The Difference’ testimonial film achieved ~25 million views and the website received ~2 milli
Slide 24: FY17 update: 4 months to October (USA, UK)
FY17 update: 4 months to October • USA – Improving rates of sale in key accounts: Whole Foods Northern California, Ralph's and Sprouts – Strong build in Trader Joes in California – Earned media activity building: LA Times, Fox News (California), Fox 5 (San Diego), New Nutrition journal, and Forbes l
Slide 25: Increasing brand awareness of a2 Milk in USA
Increasing brand awareness of a2 Milk™ in USA especially in California • Increased media interest and exposure on key news outlets • New marketing campaign “#feelgoods” launched with a “Spring Dance” brand film – Over 2.5 million views – Website visits are up 10 times and organic search to the site
Slide 26: Conclusion
“LY CONCLUSION
Slide 27: Conclusion
Conclusion • Year to date revenue reflects significant seasonal build for key China sales event 11/11 Singles Day • 4M17 Group EBITDA/Sales increased to 22.9%, reflecting continued growth in infant formula sales • Investment in brand continues across the Group to support business growth • Remaining
Slide 28: Appendix
APPENDIX 28
Slide 29: Geographic financial performance
Geographic financial performance NZ$ million FY16 FY15 Movement % Segment Operating Segment Operating Segment Operating Operating Segment Revenue EBITDA1 Revenue EBITDA1 Revenue EBITDA1 Australia & New Zealand (ANZ) 296.3 84.7 149.1 30.0 99% 182% China & other Asia 38.2 9.2 4.1 (3.1) 832% (397%) Cor
Slide 30: Cash position
Cash position • Significant improvement in net operating cash flow, increasing to $21.5m, up from ($8.1m) in pcp • Issue of equity comprises net funds from FY16 capital raising of $40.8m and amounts paid up on partly paid shares of $3.4m • Working capital movement reflects an increase in inventories
Slide 31: Reconciliation of non GAAP measures
Reconciliation of non GAAP measures NZ$ million FY16 FY15 ANZ Segment EBITDA 84.7 30.0 China & other Asia Segment EBITDA 9.2 (3.1) USA & UK Segment EBITDA (20.5) (12.1) Corporate & other Segment EBITDA (18.8) (11.7) EBITDA1 54.6 3.1 EBITDA before non-recurring items 54.6 4.8 Depreciation/Amortisatio
Slide 32: Board renewal and shareholder information
Board renewal and shareholder information • Further progress with board renewal program – Appointment of independent non-executive directors Peter Hinton (17 February 2016) and Warwick Every-Burns (23 August 2016) – Retirement of non-executive director, Melvyn Miles (23 August 2016) – Ongoing assess
Slide 33: Disclaimer
Disclaimer This presentation dated 22 November 2016 is provided for information purposes only. The information contained in this presentation is not intended to be relied upon as advice to investors and does not take into account the investment objectives, financial situation or needs of any particu
Slide 34: .com
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The a2 Milk Company — Shareholder Meeting (November 2016) on 6ix