Glanbia plc 2019 Half Year Results

Glanbia publishes HY 2019 results and revises outlook for full year 2019

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION RELATING TO FY 2019 OUTLOOK

 

31 July 2019 - Glanbia plc ("Glanbia", the "Group", the "Company", the "plc"), the global nutrition group, is publishing its financial results for the six month period ended 29 June 2019 ("financial half year 2019", "half year 2019", "first half of 2019", "HY 2019" or "H1 2019") contained on pages 11 to 39 and a revised outlook for full year 2019.

 

Results summary for the financial half year 2019

·      Adjusted earnings per share of 36.69 cent, a decline of 10.8% constant currency (down 5.5% reported);

·      Glanbia Performance Nutrition EBITA declined by 30.2%, constant currency, (down 25.9% reported);

·      Wholly owned revenues of €1,758.4 million (2018: €1,477.8 million), up 12.0% constant currency on prior half year (up 19.0% reported);

·      Wholly owned revenue driven by volume growth of 1.6%, price decline of 0.2% and acquisitions of 10.6% constant currency, versus prior half year;

·      Glanbia Performance Nutrition, revenue growth of 13.4% constant currency (up 19.3% reported), driven by the SlimFast acquisition;

·      Nutritional Solutions, revenue growth of 27.0% constant currency (up 34.6% reported), driven by strong volume growth and the Watson acquisition;

·      US Cheese, revenue growth of 4.9% constant currency (up 12.4% reported);

·      Joint Ventures share of profit after tax was €26.8 million, up €9.0 million on prior half year; and

·      Interim dividend of 10.68 cent per share up 10% on prior half year.

 

Full year 2019 outlook

Full year 2019 guidance of adjusted earnings per share on a reported basis revised to 88 cent to 92 cent range assuming foreign exchange rates remain at current levels.

 

Commenting today Siobhán Talbot, Group Managing Director, said:

"Glanbia grew wholly owned revenues by 12.0%, on a constant currency basis, in the first half of 2019. Adjusted earnings per share declined in the period by 10.8% on a constant currency basis. Our Nutritional Solutions, US Cheese and Joint Venture businesses had good results in the period. The recent acquisitions of SlimFast and Watson are performing very well. Glanbia Performance Nutrition ("GPN") had a disappointing first half reflecting a number of factors including, business seasonality, consumer channel shift in Europe and difficult global trade dynamics in key international markets. Overall while we have positive momentum across many parts of the Group, this has increased our caution for the remainder of the year. For full year 2019 Glanbia now expects to deliver adjusted earnings per share on a reported basis of between 88 cent to 92 cent assuming foreign exchange rates remain at current levels."

 

2019 financial half year results highlights

				Constant
€m	HY 2019	HY 20181	Change	Currency Change2
Wholly owned business
Revenue	1,758.4	1,477.8	+19.0%	+12.0%
EBITA3	111.4	123.7	-9.9%	-15.3%
EBITA margin	6.3%	8.4%	-210 bps	-210bps
Equity Accounted Investees - Joint Ventures
Share of profit after tax	26.8	17.8	+50.6%	+47.3%
Total Group profit for the period	83.3	98.2	-15.2%
Reported basic earnings per share	28.22c	33.27c	-15.2%
Adjusted earnings per share	36.69c	38.83c	-5.5%	-10.8%

 

1.   Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising sales from Glanbia's Joint Venture, Southwest Cheese. The impact was to increase prior half year sales by €365.8 million; there was no change to EBITA following this restatement.

2.   To arrive at the constant currency change, the average exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. The average Euro US Dollar exchange rate for the first half of 2019 was €1 = $1.130 (HY 2018: €1 = $1.211).

3.   EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items.

 

This release contains certain alternative performance measures. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found on pages 33 to 39.

 

Foreign exchange

Glanbia generates a significant amount of its revenues in US Dollars and reports in Euro. To eliminate the impact of exchange rates on translation of results the Group uses constant currency reporting. To arrive at the constant currency change, the average exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. The average Euro US Dollar exchange rate for the first half of 2019 was €1 = $1.130 (HY 2018: €1 = $1.211). Therefore this leads to a difference between the constant currency change and the reported result.

 

2019 half year overview

In the first half of 2019 Glanbia wholly owned revenue was €1,758.4 million, an increase of 12.0% constant currency (up 19.0% reported). Wholly owned EBITA was €111.4 million, down 15.3% constant currency (down 9.9% reported). Wholly owned EBITA margins from operations were 6.3%, down 210 basis points on a constant currency and reported basis driven by lower margins in GPN and GN in the period.

 

Glanbia's share of Equity Accounted Investees (Joint Ventures) profit after tax increased by €9.0 million to €26.8 million for the first half of 2019.

 

Total Group profit (after exceptional items) for the period was €83.3 million, down €14.9 million on prior half year.

 

Adjusted earnings per share was 36.69 cent. This was a decrease on prior year of 10.8% constant currency (down 5.5% reported).

 

Capital investment

Glanbia's total investment in capital expenditure (tangible and intangible assets) was €37.0 million in the first half of 2019 of which €30.0 million was strategic investment. The key strategic capital investment project in the period was the installation of a new ecommerce platform to enhance the direct-to-consumer online sales capability in Glanbia Performance Nutrition. This project will be on-going during 2019.  Glanbia expects to invest a total of €70 million to €80 million in capital expenditure in full year 2019.

 

Dividend per share

Consistent with Glanbia's target annual dividend pay-out ratio of between 25% and 35% of adjusted earnings per share, the Board is recommending an interim dividend of 10.68 cent per share (HY 2018: 9.71 cent per share). This represents an increase of 10% on the prior year interim dividend. The dividend will be paid on 4 October 2019 to shareholders on the register of members as at 23 August 2019. Irish withholding tax will be deducted at the standard rate where appropriate.

 

Full year 2019 outlook

For full year 2019 Glanbia adjusted earnings per share is expected to be between 88 cent to 92 cent assuming foreign exchange rates remain at current levels. Versus prior year, on a constant currency basis, this would be a decline of between -7% to -3% (reported -3% to +1%).  The revision to the expected outlook for adjusted EPS is driven by a revised outlook for the GPN business. GPN expects momentum to increase significantly in the second half of 2019, however some of the global trade related challenges in certain international geographies seen in the first half of the year are expected to continue thereby reducing the overall result in GPN for the year.

 

In FY 2019 Glanbia expects to convert over 80% of EBITDA to operating cash flow and deliver a return on capital employed between 10% and 13%.

 

Financial half year 2019 operations review

 

		HY 2019			HY 2018
				Restated1
€m	Revenue	EBITA	EBITA %	Revenue	EBITA	EBITA %
Glanbia Performance Nutrition	620.1	46.9	7.6%	519.6	63.3	12.2%
Nutritional Solutions	369.6	50.5	13.7%	274.6	48.0	17.5%
US Cheese	768.7	14.0	1.8%	683.6	12.4	1.8%
Total wholly owned businesses	1,758.4	111.4	6.3%	1,477.8	123.7	8.4%
Joint Ventures	460.0	41.0	8.9%	425.6	26.8	6.3%
Total Group	2,218.4	152.4	6.9%	1,903.4	150.5	7.9%

 

1.    Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal in its sales relationship

with its Joint Venture Southwest Cheese rather than as an agent. The impact was to increase prior half year sales by €365.8 million; there was no change to EBITA

following this restatement.
 

Glanbia Performance Nutrition

				Constant Currency
€m	HY 2019	HY 2018	Change	Change
Revenue	620.1	519.6	+19.3%	+13.4%
EBITA	46.9	63.3	- 25.9%	- 30.2%
EBITA margin	7.6%	12.2%	- 460bps	- 470bps

 

Commentary on percentage movements is on a constant currency basis throughout

 

In the first half of 2019 GPN revenues increased 13.4% to €620.1 million. The driver of revenue growth was the SlimFast acquisition which delivered 24.3% of the growth partially offset by volume decline of 8.2% and price decline of 2.7%.

 

SlimFast has delivered a strong performance since its acquisition in November 2018. Sales in H1 2019, on a like for like basis, grew by 21%.  In particular recent product innovations have performed well and it is expected that this rate of growth will continue for the remainder of 2019. 

 

The volume decline in the half year primarily related to the negative effect of geopolitical issues and related supply chain changes in certain non-US markets and first quarter seasonality in the US market as previously reported.  In non-US markets, key territories that experienced challenges were Northern Europe, where there was an acceleration of channel shift from traditional distributors to online channels, Middle East, where geopolitical events have led to head winds in the region, Latin America where economic conditions have deteriorated and India where supply chain initiatives in response to tariff increases have taken longer than planned. In the US, consumption in the key channels of online and FDMC was good throughout the period.  Sell in momentum improved during the period with GPN delivering sales growth in these channels in the second quarter. The US specialty channel continues to decline and this impacted branded and contract sales in the period.   

 

Negative pricing primarily reflected brand investment and pricing initiatives to negate the impact at consumer level of FX and tariff headwinds in non-US markets. Price decline moderated during the second quarter with price increases being implemented, largely at the end of the period. 

 

Innovation performed ahead of plan in the period with sales from products launched in the past 3 years exceeding the 15% target with successful launches in the energy and protein space across ready to mix, ready to drink and ready to eat formats in the period.  During the period the "thinkThin" brand was re-launched as "think!" with new brand imagery and marketing support.  The bar category in the US remains competitive but continues to provide growth opportunities with lifestyle consumers.

 

EBITA declined by 30.2% as a result of EBITA margin decline of 470 basis points to 7.6%. Margin decrease was as a result of negative operating leverage, negative price and increased investment focused on lifestyle brands and the direct-to-consumer platform.

 

For full year 2019 GPN expects like for like branded revenue to decline by low-to-mid single digits.  Improved momentum in the US and Asian markets in the second half are expected to be offset by declines in the EMEA and LATAM regions.  The SlimFast acquisition is expected to maintain its current strong run rate in H2 2019 which will deliver overall branded revenue growth for GPN.  Margins are expected to improve significantly in the second half of 2019 primarily as a result of improved operating leverage and implemented price increases. However due to the challenges experienced in H1 and continued margin challenges in certain international markets, margins in FY 2019 are expected to be 250 to 300 basis points lower than prior year. As a result GPN expects to deliver a lower EBITA in 2019 versus prior year.

 

Glanbia Nutritionals

		HY 2019			HY 2018
				Restated1
€m	Revenue	EBITA	EBITA %	Revenue	EBITA	EBITA %
Nutritional Solutions	369.6	50.5	13.7%	274.6	48.0	17.5%
US Cheese	768.7	14.0	1.8%	683.6	12.4	1.8%
Total Glanbia Nutritionals	1,138.3	64.5	5.7%	958.2	60.4	6.3%

 

1. Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal in its sales relationship with its Joint Venture Southwest Cheese rather than as an agent. The impact was to increase prior year sales by €365.8 million; there was no change to EBITA following this restatement

 

Commentary on percentage movements is on a constant currency basis throughout

 

Nutritional Solutions

		Restated		Constant Currency
€m	HY 2019	HY 2018	Change	Change
Revenue	369.6	274.6	+34.6%	+27.0%
EBITA	50.5	48.0	+5.2%	-1.4%
EBITA margin	13.7%	17.5%	-380bps	-390bps

 

Nutritional Solutions ("NS") is a leading marketer of advanced‐technology whey protein, specialist vitamin & mineral blends, plant based ingredients and functional beverages.

 

NS revenues increased in the first half of 2019 by 27.0%. This was driven by a 12.0% increase in volume, a 3.5% increase in price and the Watson acquisition delivering 11.5% of the revenue growth. Volume growth was broad based with customers across dairy and non-dairy solutions with good growth in both the US and EU markets and the price increase was primarily as a result of higher dairy markets versus prior year.

 

The Watson acquisition, which closed in February 2019, is performing well with integration on track.

 

NS delivered a marginal decline in EBITA of 1.4% as a result of margin decline by 390 basis points to 13.7%.  Timing factors resulted in relatively higher margins in 2018 with the 2019 margin reflecting the mix of volume growth and some headwinds as a result of increased tariffs on raw materials.

 

NS expects to deliver growth in the second half and full year 2019 driven by continued strong volume momentum across both the dairy and non-dairy solutions portfolio as well as the Watson acquisition.

 

 

US Cheese

		Restated		Constant Currency
€m	HY 2019	HY 2018	Change	Change
Revenue	768.7	683.6	+12.4%	+4.9%
EBITA	14.0	12.4	+12.9%	+6.1%
EBITA margin	1.8%	1.8%	0 bps	0 bps

 

US Cheese is a leading producer of American‐style cheddar cheese in the US supplying a range of customers. US Cheese customers are predominantly US based and participate in the food service, retail, consumer branded and private label end markets. US Cheese sells cheese produced by Glanbia as well being the commercial partner for its joint venture partner Southwest Cheese.

 

US Cheese had revenue of €768.7 million in H1 2019. Revenue increased by 4.9% versus the same period in 2018 and this was driven by a 4.8% improvement in volume and a 0.1% increase in price. Volume growth was primarily related to capacity expansion at the Southwest Cheese joint venture which was commissioned in the second quarter of 2018. Price was broadly flat versus prior year.

 

US Cheese is expected to deliver a result for full year 2019 broadly in line with prior year

 

Joint Ventures (Glanbia share)

		Restated		Constant Currency
€m	HY 2019	HY 2018	Change	Change
Revenue*	460.0	425.6	+8.1%	+7.9%
Share of JVs' profit after tax **	26.8	17.8	+50.6%	+47.3%

* Includes Glanbia's share of revenue from the Glanbia Ireland and Glanbia Cheese UK joint venture.

** Includes Glanbia's share of profits from the Glanbia Ireland, Glanbia Cheese UK and Southwest Cheese joint ventures

Commentary on percentage movements is on a constant currency basis throughout

 

Glanbia's principal joint ventures include Glanbia Ireland, Southwest Cheese and Glanbia Cheese UK.  Glanbia uses the equity method of accounting for its joint ventures and includes its share of joint venture profit after tax in the adjusted earnings per share calculation.  Glanbia has adopted the IFRS 15 accounting standard in 2019.  Following the implementation all sales of Southwest Cheese products are now recognised within revenue of Glanbia Nutritionals, previously only commission on these sales was recognised, and comparatives for 2018 have been restated accordingly. As a result share of revenue noted above excludes sales of Southwest Cheese.

 

Joint Ventures ("JVs") revenues increased by 7.9% in the period and the drivers of this were a 6.2% increase in volume and a 1.7% increase in price. Volume increase was primarily related to increased milk supply in Ireland.  Price increase reflected improved year on year dairy markets. Glanbia's share of JVs' profit after tax ("PAT"), increased by €9.0 million to €26.8 million in the first half of 2019 as a result of volume growth across all joint ventures and higher profitability in Southwest Cheese.

 

In full year 2019 JVs are expected to deliver a share of profit after tax broadly in line with prior year.

 

 

 

Half year 2019 finance review

 

Half Year 2019 results summary pre-exceptional				Constant Currency
		Restated1
€m	HY 2019	HY 2018	Change	Change
Revenue	1,758.4	1,477.8	+19.0%	+12.0%
EBITA	111.4	123.7	(9.9%)	(15.3%)
EBITA margin	6.3%	8.4%	(210bps)	(210bps)
- Amortisation of intangible assets	(28.9)	(21.5)
- Net finance costs	(13.3)	(7.6)
- Share of results of Joint Ventures	26.8	17.8
- Income tax	(9.2)	(14.2)
Profit for the half year	86.8	98.2
Basic earnings per share	28.22	33.27	(15.2%)
Adjusted earnings per share	36.69	38.83	(5.5%)	(10.8%)

 

1.     Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal

in its sales relationship with its Joint Venture Southwest Cheese rather than as an agent. The impact was to increase prior half year sales

by €365.8 million; there was no change to EBITA following this restatement.

 

Income statement

Wholly owned revenue increased 12.0% on a constant currency basis (up 19.0% reported) to €1,758.4 million (HY 2018: €1,477.8 million) in the half year 2019. Increased revenue was driven primarily by the impact of the SlimFast and Watson acquisitions of 10.6% and volume growth of 1.6%, offset partially by negative pricing of 0.2%. EBITA declined by 15.3% on a constant currency basis (9.9% reported) to €111.4 million (HY 2018: €123.7 million) driven primarily by adverse organic sales in half year 2019 within the GPN segment and the reduced margin within GPN and GN segments. EBITA margin decreased by 210 bps on a constant currency basis (decreased by 210 bps reported) to 6.3% driven by negative operating leverage, negative price and increased investment focused on lifestyle brands and the direct-to-consumer platform within GPN and product mix  and tariff  headwinds within GN.

 

Net financing costs of €13.3 million increased €5.7 million versus prior year (HY 2018: €7.6 million) driven by increased debt following the acquisitions of SlimFast in November 2018 and Watson in February 2019. The Group's average interest rate for the period was 3.6% (HY 2018: 4.0%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 95% of projected 2019 debt currently contracted at fixed rates.

 

The Group's share of results of Joint Ventures is up €9.0 million on prior year. The key drivers of growth versus prior year are Glanbia Ireland, driven by growth in sales volumes, Southwest Cheese due to positive dairy market pricing and the impact of the plant expansion completed in Q2 2018; and positive dairy market impacts to margins within Glanbia Cheese.

 

The half year 2019 pre-exceptional tax charge decreased by €5.0 million. This represents an effective tax rate, excluding share of results of Joint Ventures, of 13.3% (HY 2018: 15.0%). The reduction in the effective tax rate is primarily driven by the reduction in the US corporate tax rate from 35% to 21%.

 

Profit for the period excluding exceptional items decreased by €11.4 million from €98.2 million to €86.8 million on a reported basis. Exceptional items before taxation in the period amounted to €4.3 million and are discussed further below.

 

Adjusted earnings per share

	HY 2019	HY 2018	Change	Constant Currency Change
Adjusted earnings per share	36.69	38.83	(5.5%)	(10.8%)

 

Adjusted earnings per share is provided as it is more reflective of the Group's underlying performance than basic earnings per share. Adjusted earnings per share is calculated based on the net profit attributable to equity holders of the parent before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax. Further details on the calculation of adjusted earnings per share is set out in the glossary to the financial statements.

 

In half year 2019, adjusted earnings per share declined 10.8% constant currency (down 5.5% reported), driven by a reduction in EBITA and higher net finance costs offset partially by improved share of results of Joint Ventures and lower effective tax rate.

 

 

Exceptional items

Exceptional items incurred in the first half of 2019 resulted in a post-tax exceptional charge of €3.5 million (2018: nil). Details of the exceptional items incurred in the period are as follows:

 

€ m	H1 2019
Organisation restructuring costs (note 1)	3.2
Brexit related costs (note 2)	1.1
Exceptional loss before tax	4.3
Current taxation credit  (note 3)	(0.8)
Total exceptional loss	3.5

1.     Organisation restructuring costs - The structure and operating model of the Group is kept under constant review to ensure that it is appropriate to support the current and future needs of the group. Work undertaken in 2019 has focused on the Glanbia Performance Nutrition segment and in particular the structures and model to support the creation of distinct Sports Nutrition, Lifestyle and Direct to Consumer components.  Work has also commenced on the integration of Watson within the Glanbia Nutritionals segment following its acquisition in February 2019. The costs incurred to date have been in relation to professional consultancy, employment related costs including recruitment costs for new roles and costs in relocating people to new markets and geographies to support the organisational redesign. This process is on-going and further costs will be incurred in the second half of the year.

2.     Brexit related costs - These costs have been incurred in preparing the organisation for the departure of the United Kingdom from the European Union. There continues to be significant political uncertainty as to the eventual outcome and to assist in mitigating these risks, as much as possible in an uncertain environment, the Group has incurred significant cost. Costs incurred to date include professional fees and increased storage and production costs.

3.     Current taxation credit relates to the tax credit arising on the respective exceptional costs outlined above.

 

Group financing

Financing key performance indicators	HY 2019	HY 2018	FY 2018
Net debt €m1	777.6	402.1	576.7
Net debt : adjusted EBITDA1	2.14 times	1.22 times	1.55 times
Adjusted EBIT1 : net finance cost (interest cover)	10.5 times	7.3 times	14.8 times

 

^1. Definitions of net debt, adjusted EBITDA and adjusted EBIT are as per financing agreements which include dividends from Joint Ventures and the pro forma effect of acquisitions. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found in the glossary to the financial statements.

 

The Group's financial position continues to be strong.  Net debt at the end of half year 2019 was €777.6 million. This is an increase of €375.5 million relative to the end of half year 2018 driven by the acquisitions of SlimFast in November 2018 and Watson in February 2019. Net debt to adjusted EBITDA was 2.14 times and interest cover was 10.5 times, both metrics remaining well within financing covenants.  Relative to the 2018 year end, net debt has increased by €200.9 million driven primarily by the acquisition of Watson in February 2019 and the investment in the new Michigan and Glanbia Cheese EU joint ventures.

 

 

Cash flow

Operating Cash Flow (OCF) and Free Cash Flow (FCF) are key performance indicators of the Group in monitoring cash flow and working capital performance. Set out in the table below is the OCF and FCF for half year 2019.

 

Cash flow analysis - pre exceptional
€m	HY 2019	HY 2018	Change
EBITDA	134.8	144.7	(9.9)
Working capital movement	(108.9)	(77.9)	(31.0)
Business sustaining capital expenditure	(7.0)	(7.0)	-
Operating cash flow	18.9	59.8	(40.9)
Net interest and tax paid	(45.4)	(17.6)	(27.8)
Dividends from Joint Ventures	16.1	15.4	0.7
Other outflows	(7.2)	0.6	(7.8)
Free cash flow	(17.6)	58.2	(75.8)
Strategic capital expenditure	(30.0)	(18.9)	(11.1)
Dividends paid	(42.9)	(47.6)	4.7
Amounts loaned to / invested in  Joint Ventures	(37.6)	(16.5)	(21.1)
Exceptional cash paid	(2.8)	(2.7)	(0.1)
Acquisitions	(59.6)	-	(59.6)
Net cashflow	(190.5)	(27.5)	(163.0)

 

Operating cash flow in the period amounted to €18.9 million which is €40.9 million adverse to prior year. This has been primarily driven by the increased working capital outflow in the period and reduced EBITDA performance. The increased working capital has been driven by higher inventory levels as a result of higher raw material values as well as inventory build as part of Brexit planning and the impact of the acquisitions of SlimFast and Watson. Free Cash Flow is an outflow of €17.6 million which is €75.8 million adverse to prior year driven primarily by reduced operating cash flow and higher interest costs and the timing of tax payments.

 

Pension

On 29 June 2019, the Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, amounted to €36.8 million, an decrease of €1.7 million compared to year end 29 December 2018 net liability of €38.5 million. See note 8 for further details on the retirement benefit obligation at the reporting date.

 

 

Principal risks and uncertainties

The Board of Glanbia plc has the ultimate responsibility for the Group's systems of risk management and internal control. The Group's risk management framework outlines the key stakeholder risk management responsibilities. It is designed to ensure that there is input across all levels of the business to the management of risk and to enable the Group to remain responsive to emerging risks and the ever changing environment in which it operates. This framework, together with the processes to identify, manage and mitigate potential material risks to the achievement of the Group's strategic objectives are set out in detail on pages 46-53 of the plc's 2018 Annual Report.

 

The Group's principal risks and uncertainties are summarised in the risk profile diagram below, together with an overview of the risk trend identified. There may be other risks and uncertainties that are not yet considered material or not yet known to the Group and this list will change if these risks assume greater importance in the future.

 

	Strategic and commercial	Financial	Operational and regulatory
Risk where trend is stable	•     Acquisition risk	•     Tax risk	•     Supplier risk •     Site compliance risk and environmental, health & safety regulation risks •     Product safety and compliance risks
Risk where trend is increasing	•     Economic, industry and political risks (including Brexit) •     Market risk •     Customer concentration risk		•     IT, data protection and cyber security risks •     Talent management risk

 

Key risk factors and uncertainties with the potential to impact on the Group's financial performance in the second half of 2019 include:

·   Economic, industry and political risk - Macroeconomic and global trade uncertainty continues to increase, partly as a result of the geopolitical climate where the potential for the introduction of further trade tariffs may have negative impacts to Glanbia's strategic growth objectives. In addition, the nature of the United Kingdom's future trading relationship with the European Union post Brexit is still to be determined. The risk of a hard Brexit, where no deal is agreed with the EU, appears to be increasing and may damage the UK and EU economies. Any outcome other than a full customs union could introduce additional costs and the food and drinks sector is likely to be initially hit with higher tariffs more so than any other sector. As a consequence of the increased downside risks, the Board has focused on ensuring that the short and medium-term impacts to the Group are clearly understood. This focus includes ensuring that appropriate action plans across a broad range of issues including operational risks, currency risks, regulatory risks, raw material pricing and cross border trade costs are developed and implemented where possible. In its simplest terms the key short term impacts to Glanbia include effectively planning for and managing raw material and finished goods into and out of the UK and cross border product flows.

 

This includes measures such as:

o Increasing stocks of raw materials in the UK beyond what Glanbia would normally hold for supply chain safety purposes;

o Reviewing EU storage and co-manufacture arrangements;

o Detailed discussions with customers and suppliers on potential export certificate, customs inspection, logistic requirements and challenges;

o Review of potential alternative manufacturing and supply strategies; and

o Monitoring of international tax legislation developments, particularly in the UK.

 

The Board and the Brexit cross-divisional and joint venture committee will continue to monitor closely the potential outcomes of the Brexit negotiations and broader international trade related risks and will remain focused on ensuring that the Group is equipped as best as possible to address the short and medium term challenges that may arise.

 

·   Market risk - The overall impact on margins of movements in dairy pricing and the importance of managing the evolving GPN channel mix as a key driver of category growth; and

·   Customer concentration risk - While from a strategic perspective the Group aims to build strong customer relationships with major customers, it can expose Glanbia to credit exposure and other balance sheet risks. The Board and management will be focussed on utilising available mitigation to limit such exposures while recognising that they cannot be fully eliminated.

·   IT, data protection and cyber security risk - The risk of a significant technology failure, data leak or key site disruption may negatively impact our reputation and business operations.

·   Talent management - The investment in building our Direct to Consumer capability may be negatively impacted by a failure to attract and retain top talent.

 

The Board continues to place particular emphasis on monitoring both principal and emerging risks and regularly monitors the Group's risk management framework to ensure risks are being appropriately mitigated through its risk management and internal control processes.

 

 

Cautionary statement

Glanbia plc (the 'Group') has made forward-looking statements in this document that are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include, but are not limited to, information concerning the Group's possible or assumed future results of operations, business strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words 'believe,' 'develop,' 'ensure,' 'arrive,' 'achieve,' 'anticipate,' 'maintain,' 'grow,' 'aim,' 'deliver,' 'sustain,' 'should' or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any forward-looking statements. The risk factors included at pages 50 to 53 of the Group's 2018 Annual Report could cause the Group's results to differ materially from those expressed in forward-looking statements. There may be other risks and uncertainties that the Group is unable to predict at this time or that the Group currently does not expect to have a material adverse effect on its business. These forward-looking statements are made as of the date of this document. The Group expressly disclaims any obligation to update these forward-looking statements other than as required by law. The forward-looking statements in this release do not constitute reports or statements published in compliance with any of Regulations 6 to 8 of the Transparency (Directive 2004/109/EC) Regulations 2007.

 

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 9.00 a.m. BST today. Please access the webcast from the Glanbia website at http://www.glanbia.com/investors/results-centre, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

 

 

Ireland:	+353 (0)1 246 5638
UK/International:	+44 (0) 330 336 9128
Netherlands:	+31 (0) 20 703 8211
Italy:	+39 02 3600 8019
USA:	+1 323-794-2551

 

The access code for all participants is: 8799986

A replay of the call will be available for 30 days approximately two hours after the call ends.

 

For further information contact

Glanbia plc +353 56 777 2200

 

Siobhán Talbot, Group Managing Director Mark Garvey, Group Finance Director
Liam Hennigan, Group Director Strategic Planning and  Investor Relations	+353 86 046 8375
Martha Kavanagh, Head of Corporate Communications	+353 87 646 2006

 

 

 

2019 Half year financial report

Responsibility statement

The Directors are responsible for preparing the half yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 as amended, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim Financial Reporting', as adopted by the European Union.

 

The Directors of Glanbia plc confirm that, to the best of their knowledge:

·     The condensed Group interim financial statements for the period commencing 30 December 2018 and ended 29 June 2019 (six months/half year) have been prepared in accordance with the International Accounting Standard applicable to interim financial reporting (IAS 34) adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

·     The half yearly financial report includes a true and fair review of the development and performance of the business and the position of the Group;

·     The half yearly financial report includes a true and fair review of the important events that have occurred during the first six months of the financial year, their impact on the condensed Group financial statements for the half year ended 29 June 2019, and a description of the principal risks and uncertainties for the remaining six months; and

·     The half yearly financial report includes a true and fair review of related party transactions that have occurred during the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or the performance of the Group in the first six months of the current financial year.

 

Board changes

The Directors of Glanbia plc are as listed in the Glanbia plc 2018 Annual Report, with the exception of the following changes which have been previously announced:

·      On 24 April 2019, to facilitate the broadening of external perspectives of the Board, Mr Hugh McGuire and Mr Brian Phelan did not put themselves forward for re-election at the Company's AGM. Their key executive roles are unaltered and they continue in their executive leadership positions as CEOs of the Group's two global growth platforms, Glanbia Performance Nutrition and Glanbia Nutritionals respectively.

·      On 1 May 2019, Mr Paul Harran retired from the Board and Mr Dan O'Connor took up the position of Senior Independent Director.

·      On 1 May 2019, Ms Mary Minnick, Mr Richard Laube and Mr John Daly were appointed to the Board as independent Non-Executive Directors.

·      On 20 June 2019, as a result of these new appointments the composition of the following Board committees was amended as follows:

·      Audit Committee - Richard Laube, Independent Non-Executive Director was appointed as a member of the Audit Committee.

·      Nomination and Governance Committee - Dan O'Connor, Independent Non-Executive Director, was appointed as Chairperson of the

Nomination and Governance Committee; and

·      Remuneration Committee -John Daly and Mary Minnick, Independent Non-Executive Directors were appointed as members of the

Remuneration Committee. 

 

A full list of current directors is maintained on the Glanbia plc website: www.glanbia.com

 

Glanbia Co-operative Society Limited - Right to nominate Glanbia plc Directors

In compliance with Listing Rule 6.1.7 of the Euronext Dublin/Listing Rule 9.2.2 AD of the UKLA (UK Listing Authority), Glanbia plc has entered into a written legally binding agreement (the 'Relationship Agreement') with Glanbia Co-op, which is intended to ensure that Glanbia Co-op complies with the independence provisions/undertakings set out in Listing Rule 2.2.15 of Euronext Dublin and 6.5.4 R of the UKLA. This relationship agreement provides that the governance arrangements set out below will apply with respect to the composition and size of the Board of Glanbia plc. Glanbia Co-op currently owns 31.5% of the issued share capital of Glanbia plc. Between 2012 and 2017, Glanbia Co-op and the Board agreed the following changes, which will impact the composition and size of the Board until 2022:

 

·     In 2020 the number of Glanbia Co-op Nominee Directors will reduce from eight to seven, and

·     In 2022 the number of Glanbia Co-op Nominee Directors will reduce from seven to six. It is the intention that Glanbia Co-op would continue to nominate a Glanbia Co-op Nominee as Chairman of the Board until no later than 30 June 2020.

·     Further, if Glanbia Co-op's shareholding in Glanbia plc falls below 28% of the issued share capital, discussions will take place regarding a further reduction in the size of Glanbia Co-op's representation on the Board.

 

A list of current Directors is maintained on the Glanbia plc website: www.glanbia.com.

 

 

On behalf of the Board

 

 

 

Siobhán Talbot                                                                                                                                         Mark Garvey

Group Managing Director                                                                                                                      Group Finance Director

 

31 July 2019