Vitaco Holdings Limited Management presentation

PRIVATE & CONFIDENTIAL

Management presentation

Vitaco Holdings Limited

PRIVATE & CONFIDENTIAL

Joined Vitaco in 2009

Responsible for Manufacturing, Supply Chain, Procurement, Quality

Assurance and Regulatory Affairs

Over 20 years’ experience in manufacturing and operations at Nestlé

Joined Nestlé in New Zealand, spent majority of 23 years as an expatriate

working in Australia and Asia in senior leadership roles and leading strategic

projects

Roger Scott, Chief Operating Officer

Presenting today

1

Business overview and investment highlights

21 24

EBITDA

Vitaco is an Australian & New Zealand nutritional products company with a portfolio of well-established and leading brands

3

Vitaco overview Business composition

– Exposure to attractive categories domestically and internationally

– Operates in attractive industry categories with historical growth1 – Vitamins & Dietary

Supplements, Sports Nutrition and Health & Wellness Packaged Food

– Leading market positions with established brands

– #1 New Zealand Vitamins and Dietary Supplements market1

– #1 Australian and New Zealand Sports Nutrition markets1

– Diversified product portfolio with multiple channels to market

– 6 key brands within three industry categories

– Balanced mix of channels

– Vertically integrated business model with capacity to support future growth

– Dedicated product development capabilities with evidenced ability to bring niche products

to mass markets

– In-house product manufacturing facilities in New Zealand with surplus capacity

– Multiple avenues for growth

– Category growth, new product development and expansion of distribution

– International growth, particularly in China

– In-sourcing and acquisitions

– Strong pro forma financial track record and forecast

– FY16 revenue and EBITDA growth of 23% and 15% respectively

– Highly experienced management team

1

Notes:

1. Source: Euromonitor International (market share for Australian sports nutrition is after aggregating Musashi’s 2014 market share).

2. Historical and forecast financials and includes estimated contribution from Musashi integration in FY16 forecast and have been

rounded to the closest whole percentage (in the case of percentages).

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4

5

By category (FY16 PF net revenue)

By geography (FY16 PF net revenue)

44%

38%

18%

Vitamins and dietary supplements

Sports nutrition

Health and wellness packaged food

53%

38%

9%

Australia

New Zealand

International

2

Financial highlights ($m)2

172211

Net revenue

FY15 FY16F

6

7

1-Strong industry growth due to favourable long-term thematics, consumption dynamics and population trends

4

Australia and New Zealand retail category growth (2004A – 2014A CAGR) Market characteristics and growth drivers

Source: Euromonitor

Attractive domestic and international

dynamics

Ageing population

Increasing health consciousness

Brand strength an important success

factor

New Product Development (NPD) and

“speed to market” key to adapting to

consumer preferences

Growth in sports nutrition driven by mass-

market consumption

Barriers to entry support Vitaco’s leading

market position and future growth

Global retail category growth (3 year CAGR)

Sports Nutrition Health & Wellness

Packaged FoodVitamins & Dietary

Supplements

Notes:

1. Converted from local currency using average US$ exchange rate for each historical period (Euromonitor)

2. Converted from local currency at constant currency using average US$ exchange rate for 2014 (Euromonitor)

(1) (2) (1) (2) (1) (2)

Sports Nutrition Health & Wellness

Packaged FoodVitamins & Dietary

Supplements

8.7%

5.5%

Australia New Zealand

12.0%

4.8%


5.6%

7.2%


3.7%

5.6%

FY11A - 14A FY14A - 17F

10.2% 9.9%

FY11A - 14A FY14A - 17F

3.9%

6.5%

FY11A - 14A FY14A - 17F

2-Leading market positions with established brands

5

FY16 PF revenue

contribution

Age of brand

(years) Market position Example products

Vit

am

ins &

Su

pp

lem

en

ts

11% 111#1 Vitamin and dietary supplements brand in the New

Zealand grocery channel

23% 48A leading brand in the New Zealand pharmacy and

health food channels with a longstanding presence in

the Australian health food channel

9% 35+Fast growing vitamin and dietary supplement brand in

the Australian Pharmacy channel

%

Sp

ort

s &

Ac

tive

Nu

trit

ion 19% 24

#1 sports nutrition brand in the Australian sports

nutrition market, with wide distribution through

mainstream channels

12% 28One of the leading brands in the Australian sports

nutrition market, with wide distribution in mainstream

channels

7% 30A leading sports nutrition brand in the New Zealand

market and a longstanding presence in the Australian

health food channel

1% 8Weight management brand in the Australian grocery,

pharmacy and DTC channels

He

alt

h F

oo

ds

16% 111Grocery and health food channel brand, holding a

leading position in a number of specialist grocery

channel sub-categories

2% 35+Stable brand in Australian grocery and health food

channels

Source: Vitaco Management, Euromonitor, Aztec.

3-Diversified product portfolio with multiple channels to market

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Source: Vitaco Management


Vit

am

ins

&

Su

pp

lem

en

ts

Sp

ort

s &

Ac

tive

Nu

trit

ion

an

d H

ea

lth

Fo

od

s

Sp

ort

s &

Ac

tive

Nu

trit

ion

Hea

lth

Fo

od

s

Health Food

& Pharmacy

1,197

Grocery

4278,350

Route

(inc. gyms)Grocery

2,250

Pharmacy

5,633

Health food

680

D2C

International

Stores

Channel mix FY16PF revenue by channel

Diversified across product categories,

sales channels and geographies

Diversification provides a balanced

earnings base

20%

19%

13%11%

10%

8%

5%

9%

5%

AU grocery NZ grocery

AU health food & specialty NZ health food & specialty

AU pharmacy NZ pharmacy

Route International

Contract

4-Vertically integrated business model with production capacity to support future growth

7

Sites with capacity for future growth

Concurrent focus on cost, quality and efficiency

Strategic procurement provides competitive

advantages

Opportunities to further in-source

manufacturing

Emphasis on quality assurance and compliance

with key government certifications

Recent capital investment into manufacturing

facilities

East Tamaki facilities


Capability

c.12,000 sqm facility housing head offices, laboratories,

manufacturing and warehousing capabilities

$30m invested in upgrading the manufacturing and warehouse

facility and IT assets over the last 7 years

Certification

Audited by Medsafe and accredited by the TGA – Regular audits

conducted by regulatory authorities

GMP certification

Licensed by the NZ Ministry of Primary Industry (dairy products)

Industry fragmentation provides

M&A opportunities across

segments

Track record of successful M&A

execution

Industry consolidation6

Expansion of points of distribution

(e.g. Nutra-Life expanding into

pharmacy channel)

Expansion will contribute to future

growth

Expansion of distribution3

Compelling industry tailwinds

Proactive consumer focus on health and wellness

Strong historical growth

Category growth1

17 NPD focused FTE’s

c.220 new SKUs launched in FY15

Strong focus on new product

development with specialist in-

house capabilities

New product development2

Opportunities for ‘clean and green’

Australian and NZ products

particularly in Asia

Growth through supplements &

dairy snacks

Opportunity in Asian markets via e-

commerce channel (Tmall Global,

JD.com)

UK Aussie Bodies expansion

International growth5

Opportunity to bring UHT, soft gel cap and select

food manufacturing in-house

Successful track record – bar manufacturing in-

sourced in 2013

60% of products manufactured internally1

In-sourcing4

5-Multiple avenues for growth

8

Notes:

1 Management estimates

419647

1,438

3,628

4,010

4,612

Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15

6-Strong growth in Asian product demand

9

Asian product historic revenue1,2

Nutra-Life and Healtheries

supplements range is accessing

a significant and growing

opportunity

Healtheries Milk Biscuits product

range has established a credible

platform for expanding Vitaco’s

food portfolio

Marketing programs commenced

via We Chat, Weibo (popular

social media platforms) and

tourist magazines/newspapers

Retail channel expansion

underway through e-commerce

retailers including Tmall Global

(Alibaba Group’s direct to

consumer platform)

Comments

Quarterly Asian product revenue has increased ~11x from

March 2014 on a constant FX basis

1. Shown in AUD assuming constant NZDAUD of 0.878

2. Asian product sales consist of the Asian range of supplements and Milk Biscuits

A$’000

10


Ryan d'Almeida

Chief Executive Officer

Brent Hall

GM Supply Chain and Contract

Manufacturing

Jay Drezner

GM International & Business

Development


Appointed Chief Executive Officer in 2014

20 years in food and nutrition industry including Weight Watchers and Retail Food Group

Phil Wiltshire

Chief Financial Officer


20 years experience in senior finance positions in large NZ consumer products businesses including Fonterra


Former CFO (Naturade) with over 15 years experience in corporate finance

Martin Drinkrow

GM Sports & Active Nutrition and

Health Foods


Previously held various senior roles at Clorox (including General Manager) and Unilever

Roger Scott

Chief Operating Officer


Over 20 years’ experience in manufacturing and operations at Nestlé

Joined Vitaco 2009

Previously held several roles at Nestlé

John Stanton

GM Vitamins and Supplements


Previous sales & marketing roles in multinational FMCG organisations across NZ and Australia

7-Highly experienced management team

Financial overview

Revenue growth of 23% and EBITDA growth of 15% is forecast in FY16

12

Pro forma net revenue 1,2,3 Pro forma EBITDA1,2,4

146 148

172 186

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FY13 FY14 FY15 FY16F

Revenue Musashi

211

17.3

19.7

20.6

23.5

0.2

11.8%

13.3%

11.9% 11.2%

FY13 FY14 FY15 FY16F

EBITDA Musashi Margin

23.7

June year end, A$m June year end, A$m

1. Includes Musashi forecast revenue of A$25.8m and pro forma run rate earnings of A$0.2m p.a. in FY16F

2. Revenue and EBITDA shown in AUD assuming weighted average actual historical and forecast NZDAUD foreign exchange rate for

revenue (FY13: 0.804; FY14 0.904; FY15: 0.930; FY16F: 0.895) and EBITDA (FY13: 0.803; FY14 0.908; FY15: 0.928; FY16F: 0.896)

3. Net revenue represents invoiced revenue less deferred discounts

4. EBITDA represents net revenue less COGS and operating costs. EBITDA margin calculated as EBITDA as a percentage of net revenue

and includes contribution from Musashi in FY16F

Growth: 7.6%

Growth incl. Musashi: 22.6%

• New banking facilities comprise:

– Facility A: A$62 million three year revolving cash advance facility

– Facility B: A$8 million three year working capital facility

• Proceeds are for general corporate purposes and growth initiatives

• Pro forma net debt is forecast to be $39.8m

Capital structure and dividend policy

13

Pro forma IPO capitalisation

A$m Pro forma at Completion

Senior debt1 39.8

Cash -

Net debt 39.8

Net debt / pro forma EBITDA (FY15) 1.9x

Net debt / pro forma EBITDA (FY16) 1.7x

New banking facilities

Dividend policy

• The Directors intend to target a dividend payout ratio of 50-60% of pro

forma NPAT from 2016

• The Directors expect the first dividend will be determined in respect of

the period from Completion of the Offer to 31 December 2015 and will

be payable in March 2016

• The dividends expected to be paid to Shareholders will be franked

with Australian franking credits and imputed with New Zealand

imputation credits to the maximum extent appropriate taking into

account the Company’s tax position

1. The total net indebtedness of $39.8 million as at 16 September 2015 is stated after $0.2 million of capitalised borrowing costs

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Summary of investment highlights

Exposure to attractive categories domestically and internationally

Leading market positions with established brands

Diversified product portfolio with multiple channels to market

Vertically integrated business model with capacity to support future growth

Multiple avenues for growth

Strong financial track record and forecast

Highly experienced management team

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Vitaco Holdings Limited Management presentation

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