Final Results

RNS Number : 8589Z
Glanbia PLC
13 March 2013
 




 

2012

Full year results

Leading global nutritional solutions and cheese group

Wednesday, 13 March 2013

 

 

 

Record results with 22% growth in adjusted earnings per share

Historic year for corporate development

Positive outlook for 2013 

 

 

 

13 March 2013 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutritional solutions and cheese group, announces its results for full year ended 29 December 2012.

 

2012 results highlights

·      22.1% growth in adjusted earnings per share in reported currency, 14.2% in constant currency, ahead of expectations. Strong performance driven by Global Nutritionals where like for like revenue grew 20% reflecting positive markets and strong operational performances in each business unit;

·      Clarity on the strategy to expand Irish dairy processing restructures the Dairy Ireland segment, reduces majority shareholder ownership to 41.3% and facilitates further international growth;

·      €115 million capital investment included the purchase of a US nutritionals company which expands Ingredient Technologies capabilities and customer base in high growth markets; and

·      10% dividend increase for the third consecutive year.

 

2012 results summary pre exceptional¹

Constant Currency²

Reported Currency


2012

Change

2012

Change

Wholly owned businesses





Revenue

€2,092.4m

+ 8.3%

€2,211.8m

+ 14.4%

EBITA

€162.6m

+ 15.1%

€175.9m

+ 24.5%

EBITA margin

7.8%

+ 50 bps

8.0%

+ 70 bps

Pro forma Joint Ventures and Associates³





Revenue

€792.5m

- 3.3%

€826.3m

+ 0.8%

EBITA

€36.2m

- 10.6%

€37.7m

- 6.9%

EBITA margin

4.6%

- 30 bps

4.6%

- 30 bps

Pro forma total Group





Revenue

€2,884.9m

+4.8%

€3,038.1m

+10.4%

EBITA

€198.8m

+9.4%

€213.6m

+17.5%

EBITA margin

6.9%

+30bps

7.0%

+40bps






 Adjusted earnings per share³

52.90c

14.2%

56.56c

+22.1%

-     Continuing operations

47.36c

+17.4%

51.02c

+26.5%

-     Discontinued operations

5.54c

-7.4%

5.54c

-7.4%

 

¹Figures are pre exceptional items which in 2012 amounted to a charge of €4.7 million (2011: €7.6 million)

² Commentary is based on constant currency. Constant currency is based on translating 2012 results at the 2011 average market exchange rate (€1 = $1.392). The reported average exchange rate for 2012 was €1 = $1.285.

³ In accordance with IFRS 5 the disposal of a 60% interest in GIIL results in its total performance from January 2011 to November 2012 being treated as a discontinued operation in the financial statements of the Group. To better reflect the structure of the Group going forward this analysis presents GIIL as a 40% associate of the Group for both 2012 and 2011. Full details on the accounting treatment of the GIIL transaction are outlined on page 16 of this document.

 

 

Commenting today John Moloney, Group Managing Director, said:

"The Group delivered strong organic revenue growth and a 22.1% increase in adjusted earnings per share; the third consecutive year of double digit progression. We also achieved a landmark agreement with our majority shareholder, Glanbia Co-operative Society, which restructured our Irish dairy processing business from a wholly owned operation to an associate. In addition, the Society's ownership of the plc will reduce to 41.3% and the composition of the Board will evolve on a phased basis from 2016.

 

"The prospects for 2013 are good, although we remain cautious given the global environment. We expect adjusted earnings per share growth, on a constant currency basis, of between 8% and 10% for the full year from a base of 51.02 cents. The Irish dairy processing transaction facilitates a concentrated focus on our international growth and the longer-term prospects for Glanbia are very positive.  We are in a stronger position than ever to drive the business forward and capitalise on our competitive advantage in both business-to-business and business-to-consumer nutritional products and solutions."

 

2012 overview and 2013 outlook

 

Strong financial performance

Glanbia delivered a strong financial performance in 2012 as continued momentum in Global Nutritionals drove a third consecutive year of good organic revenue and earnings growth. On a constant currency basis, Total Group revenue including the proforma Group share of joint ventures & associates was €2.9 billion; €2.1 billion in the wholly owned businesses, up 8.3% and €0.8 billion in the joint ventures and associates, down 3.3%. Total Group EBITA margin was 6.9%, reflecting a 7.8% margin in the wholly owned businesses, up 50 basis points and 4.6% in the Joint Ventures & Associates, down 30 basis points.  Adjusted earnings per share grew 14.2% on a constant currency basis, ahead of expectations.

 

Strategic reorganisation

One of the main 2012 business focus areas for the Group was to clarify our strategic approach to the potential opportunity for expansion in Irish dairy processing, which will arise as a consequence of the abolition of EU milk quotas in 2015. The disposal of 60% of our Irish dairy processing business, Dairy Ingredients Ireland, on 25 November 2012 to Glanbia Co-operative Society Limited (the "Society") achieved this and has led to a strategic reorganisation of the segmental structure of Glanbia. This business became an associate of the Group and the newly formed entity is named Glanbia Ingredients Ireland Limited ("GIIL"). This reorganisation has reduced the Group's overall exposure to global dairy markets and potential earnings volatility. It also clarified future capital allocation priorities, enabling Glanbia to focus its resources on the areas of highest sustainable growth.

 

Ongoing capital investment programme

The Group also undertook a significant programme of investment in capital projects and acquisitions in 2012 amounting to €115 million. This included the €45 million acquisition of Aseptic Solutions in the USA to enhance Global Nutritionals' Ingredient Technologies; the opening of a state-of-the-art Customised Premix Solutions plant in Europe; capacity expansion in Performance Nutrition and a new cheese innovation centre in Idaho. The return on capital employed achieved by the Group increased by 130 basis points to 14.1%.

 

Strong balance sheet and financial ratios

Improvements in key financial ratios were also achieved during the year. Net debt to adjusted EBITDA at year end was 1.7 times and interest cover was 8.1 times. Glanbia also successfully renewed its banking facilities totalling €468 million, extending maturity out to 2018. This complements the $325 million private debt placement completed in 2011 which matures in 2021.

 

Board changes

There were a number of Board changes during the year. Kevin Toland, CEO & President of Glanbia USA and Global Nutritionals and an Executive Director, left Glanbia after 13 years at the end of 2012. Brian Phelan, who has been with the Group since 1993, was appointed to the Board with effect from 1 January 2013 as an Executive Director with responsibility for Group Development and Global Cheese. Jer Doheny joined the Board in June 2012 as a Society nominee, replacing James Gannon, also a Society nominee. Donard Gaynor joined the Board on 12 March 2013 as a Non Executive Director.

 

Progressive dividend

The Board is recommending a final dividend of 5.43 cents per share, bringing the total dividend for the year to 9.09 cents per share, representing an increase of 10%.

 

2013 positive outlook

We are guiding 8% to 10% year-on-year growth in adjusted earnings per share, on a constant currency basis, from 51.02 cents, which takes into account the dilutive effect of the GIIL transaction. There are some headwinds with an uncertain global economic environment and challenging Irish retail environment, but the Group is well positioned to maintain its growth momentum. We are in a stronger position than ever to capitalise on the competitive advantages we have in high growth markets. Our focus in 2013/2014 will be to refresh the Group's strategy so that we prioritise growth opportunities in terms of a long-term plan and focus our investment on the areas that will deliver strong returns to shareholders. 

 

Operations review

This operations review provides a summary of our 2012 corporate development, segmental analysis of our results and an update on the performance and prospects of each of our business units. Furthermore we have included a strategy update and an outlook for the Group for 2013.

 

2012 corporate development

A key business focus area for 2012 was the future of our Irish dairy processing business, which was a matter of interest to a wide range of stakeholders in the Group including:

·      Glanbia Irish dairy farmers who, post 2015, will have the opportunity to expand their production for the first time in almost 30 years;

·      The Society both as a major shareholder but also as the representative body for its members, many of whom are Glanbia suppliers and customers; and

·      Institutional investors and capital market participants, who want to ensure that the Group continues to allocate its resources to the areas of greatest growth potential. 

 

The outcome of discussions on this challenge and opportunity was the decision to form a more direct and deeper strategic relationship between the plc and the Society in Irish dairy processing. The Society acquired a 60% interest in Dairy Ingredients Ireland (the Group's wholly owned Irish dairy processing business unit) with an option to purchase the remaining 40% within six years. The plc retained a 40% interest and as a result from November 2012, Dairy Ingredients Ireland became an associate company of the plc. The new entity, named Glanbia Ingredients Ireland Limited (GIIL), is being run by the existing management, has a separate Board and is financed on a standalone basis. The business will build on its strong foundations as the number 1 dairy processor in Ireland and is progressing plans to expand its dairy processing capacity with a €180 million investment programme.

 

In addition, the Society received member approval to reduce its shareholding below 51% of the issued share capital of the plc. This involved the sale of 6% of the issued share capital by the Society, in two placements which took place in November and December 2012, successfully broadening the international institutional investor base of the Group. In a separate but related transaction, on 14 March 2013, the Society intends to distribute an additional 7% of the issued share capital of the plc to its members which will reduce the Society's shareholding to 41.3%. As a consequence of this step change in the Society's ownership of the plc, the composition of the Board will change over a period of years from 2016.

 

Alongside the Irish dairy processing transaction, the Group completed a €45 million nutritionals acquisition and invested €70 million in a range of capital projects. Glanbia also made further progress in developing new markets and award-winning product innovation continued, details of which are contained in the segmental review.

 

Understanding these results

·      Glanbia uses constant currency as a basis for commentary on its financial results and providing earnings guidance, as a large portion of its earnings are US dollar denominated. Constant currency is based on translating 2012 results at the 2011 average exchange rate. The 2011 average exchange rate was €1 = US$1.392 which compares with the reported average exchange rate for 2012 of €1 = US$1.285.

·      IFRS 5 requires that the Group Financial Statements reflect the 60% disposal of GIIL as a disposal of 100% and acquisition of 40% of GIIL. To better reflect the structure of the Group going forward, the results and commentary in the operations review are on a pro forma basis to include GIIL as a 40% owned associate for each of 2012 and 2011.  See page 15 for full detail.

·      Total Group includes Glanbia's share of Joint Ventures & Associates and is used to demonstrate the full scale of the Group's activities.

·      All commentary is pre exceptional items which in 2012 amounted to a charge of €4.7 million compared with a charge of €7.6 million in 2011. Full details of exceptional items are on page 11 of this announcement.

 

Segmental analysis

Reported Currency

Reported Currency



2012



2011


€m

Revenue

EBITA

EBITA %

Revenue

EBITA

EBITA %

US Cheese & Global Nutritionals

1,580.8

155.5

9.8%

1,316.9

117.5

8.9%

Dairy Ireland

631.0

20.4

3.2%

616.0

23.8

3.9%

Total wholly owned businesses

2,211.8

175.9

8.0%

1,932.9

141.3

7.3%

Pro forma JVs & Associates

826.3

37.7

4.6%

819.5

40.5

4.9%

Pro forma Total Group

3,038.1

213.6

7.0%

2,752.4

181.8

6.6%

 

Constant Currency



2012


€m

Revenue

EBITA

EBITA %

US Cheese & Global Nutritionals

1,461.4

142.2

9.7%

Dairy Ireland

631.0

20.4

3.2%

Total wholly owned businesses

2,092.4

162.6

7.8%

Pro forma JVs & Associates

792.5

36.2

4.6%

Pro forma Total Group

2,884.9

198.8

6.9%

 

Pro forma Total Group revenue grew by 4.8% to €2,884.9 million (2011: €2,752.4 million). This growth was driven primarily by positive pricing and volume growth in the Global Nutritionals businesses, which drove a 20% increase in revenue across the three nutritional business units. 

 

Pro forma Total Group EBITA increased by 9.4% to €198.8 million (2011: €181.8 million). Total Group EBITA margin grew by 30 basis points to 6.9% (2011: 6.6%), as margin growth within the US Cheese & Global Nutritionals segment more than offset a decline in margins in Dairy Ireland and in Joint Ventures and Associates.

 

The largest segment in the Group is US Cheese & Global Nutritionals. This segment represented 51% of pro forma total Group revenue in 2012 and 72% of pro forma total Group EBITA. This segment also has the highest EBITA margin which in 2012 was 9.7%, up 80 basis points compared with 2011.

 

US Cheese & Global Nutritionals

Continuing business

Constant Currency

Reported Currency

€m

2012

2011

Change

2012

Change

Revenue

1,461.4

1,316.9

+11.0%

1,580.8

+20.0%

EBITA

142.2

117.5

+21.0%

155.5

+32.3%

EBITA margin

9.7%

8.9%

+80bps

9.8%

+90bps

 

In 2012, US Cheese & Global Nutritionals revenue increased 11.0% to €1,461.4 million (2011: €1,316.9 million). The growth in total revenue is attributable to underlying organic volume growth of 6%, higher pricing and an enhanced product mix of 4% and the impact of the Aseptic Solutions acquisition of 1%. EBITA and EBITA margins increased in the period driven by a strong performance by Global Nutritionals.

 

US Cheese

In 2012, average US cheese prices were 6% lower than in 2011 as fluctuations in milk supply resulted in weaker prices in the first half and stronger prices in the second half of the year. Demand for American-style cheese during 2012 continued to be resilient, reflecting positive growth across the domestic retail and foodservice and export sectors.

 

Against this market backdrop, US Cheese delivereda reasonable performance in 2012. While revenues were behind the prior year, this was entirely price driven. Volumes grew by low single digits. US Cheese introduced a revised milk price formula mechanism in 2012 which more closely aligns the price paid for milk with market prices for both cheese and whey products. This helps to ensure that milk price paid by US Cheese remains competitive while providing a level of margin protection. US Cheese maintains an ongoing focus on operating efficiencies and costs through the Glanbia Performance System. For the full year, lower revenues combined with similar margins to 2011 resulted in a modest decline in full year EBITA for US Cheese.

 

In 2012, construction of an $11 million cheese innovation centre in Idaho commenced and is expected to be completed in the first half of 2013. This centre is focused on enhancing new product development capabilities, helping to deliver product innovation within the Group's portfolio as well as working closely with key customers to meet their product development needs.

 

In terms of 2013 outlook, US Cheese is expected to deliver results broadly in line with 2012. Domestic US cheese demand growth is forecast to remain positive with the trend towards snacking and convenience continuing to grow across both retail and foodservice. Cheese exports from the US, which increased 17% in 2012, are on track for another record year.

 

Global Nutritionals

Ingredient Technologies

Ingredient Technologies markets a range of dairy and whey based ingredients, from whey protein concentrate 34 (WPC34) and lactose to whey protein concentrate 80 (WPC80) and whey protein isolate (WPI), and it also develops dairy and non-dairy functional and nutritional solutions. Average pricing for most whey products in 2012 was significantly ahead of 2011, driven by strong demand across all key sectors. Whey prices stabilised and softened slightly towards the end of 2012 as new global supply started to come on stream.

 

Ingredient Technologies performed strongly in 2012. The significant increase in market pricing for whey products resulted in higher revenues as well as improved margins. In addition, the importance of functional and nutritional solutions capability within the business continued to grow. This is driven by the development of new food technologies and capabilities as well as the ongoing trend towards clean labels, reduced sugar, natural products and demand for protein. The recently developed OptiSol® 2000 binding system, which won the Innovation Award at the prestigious IFT 2012 Food Expo, is a key example of Ingredient Technologies' market driven and science based innovation.

 

In July 2012, Glanbia acquired California based Aseptic Solutions ("AS") for a total consideration of €45 million. AS is a formulator, manufacturer and co-packer of nutritional beverages including premium super-fruit drinks, vitamin shots and protein shakes. The acquisition of AS expands Ingredient Technologies' end-to-end solutions capability as an ingredients supplier, formulator and end product manufacturer and enhances its competitive position. In addition, Ingredient Technologies has commenced construction on a new $29 million cereal ingredient plant in South Dakota, USA, with completion of the facility expected in the second half of 2013. This plant, which will focus exclusively on value-added cereal ingredients including flax, chia and other high nutrient ingredient products, will replace the Group's Canadian flax facility which was destroyed by fire in March 2012.

 

For 2013, pricing for certain whey products such as WPC 34 is expected to remain relatively firm while incremental supplies of lactose and high end whey is forecast to reduce prices for these products. These market dynamics will adversely impact performance in Ingredient Technologies, relative to a strong 2012, but they will be partially offset by the continued development of functional and nutritional solutions offerings and the full year impact of the AS acquisition.

 

Performance Nutrition

US consumer demand for powdered sports nutrition products was strong in 2012 with overall market growth estimated at approximately 11% in the year. Despite strong growth rates, the market environment continues to be very competitive. However, Glanbia's investment in brands and a clear focus on quality and product innovation continues to drive brand loyalty. During 2012, key product launches included:

·      Optimum Nutrition 'Platinum Pre' - a pre-workout energy and focus product that supports training performance and metabolism using safe and effective ingredients with clear labeling on the 'facts' panel; and

·      BSN™ 'Syntha-6™ Isolate'  - a new ultra-premium protein powder made with 100% isolate protein, for post work-out recovery, that is an industry first 50:50 blend of whey protein isolate and milk protein, combining a mix of fast and slow release proteins.

 

Performance Nutrition delivered a strong performance in 2012 from both a revenue and EBITA perspective. Global branded revenue grew by 20% in the year. Its brands outpaced market growth rates in the US and strong revenue growth was also achieved in key international markets in Europe, Latin America and the Asia Pacific region. While price increases implemented in 2011 and early 2012 dampened the rate of volume growth in the first half, growth recovered in the second half. EBITA growth for the year was also positive. Higher whey input costs and the ongoing investment in people, systems and processes, required to drive future growth, more than offset the increase in selling prices, resulting in a modest decline in EBITA margins for the year.

 

In 2012, Performance Nutrition continued integrating the commercial, marketing, operations, supply chain and finance functions of the Optimum Nutrition and BSN brands under one organisation. In 2013, this process will be augmented by a significant investment in systems as the Group's SAP platform is deployed in the business. In addition, Glanbia is committed to a €45 million capital programme that will increase capacity at the Performance Nutrition facilities in Chicago, USA. This project commenced in Q1 2013 and will be commissioned in Q2 2014. These initiatives underpin Glanbia's plans to further increase its market share and brand position with its leading family of sports nutrition brands in the US and other key international markets. The Group estimates that Performance Nutrition has a current global market share of approximately 13% of the high-growth, but fragmented, sports nutrition market.

 

The outlook for Performance Nutrition is favourable. While the ongoing investment in the business will result in higher overheads, raw material cost pressures are expected to moderate as new supplies of high end whey products become available in 2013 and volume growth is expected to be positive, with a strong innovation pipeline supporting brand development and market penetration in the US and other international markets.

 

Customised Premix Solutions

Customised Premix Solutions is a leading global provider of micronutrient premixes. In 2012, market growth was driven by strong demand for premix solutions within the beverage, breakfast cereal, infant formula fortification, supplement and nutrition bar segments.

 

Customised Premix Solutions delivered a solid performance in 2012. Volumes continued to exhibit strong growth reflecting positive underlying demand trends within its key market segments. In July, Customised Premix Solutions commissioned its new €20 million plant in Germany. This plant enhances the Group's ability to serve customers across Europe, the Middle East and Africa and further consolidates Glanbia's position as a leader in the global pre-mix solutions market. EBITA margins for Customised Premix Solutions did experience some downward pressure reflecting a change in business mix and the ongoing investment in the operational capabilities of the business, in particular the new plant in Germany.

 

The outlook for Customised Premix Solutions is positive and is underpinned by current favourable market trends and continued demand growth in key market segments.

 

Dairy Ireland

Continuing business¹

Constant Currency

Reported Currency

€m

2012

2011

Change

2012

Change

Revenue

631.0

616.0

2.4%

631.0

2.4%

EBITA

20.4

23.8

- 14.3%

20.4

- 14.3%

EBITA margin

3.2%

3.9%

- 70bps

3.2%

- 70bps

¹ Dairy Ireland continuing business figures include Consumer Products and Agribusiness and exclude GIIL for both 2011 and 2012.

 

In 2012, Dairy Ireland revenue increased 2.4% to €631.0 million (2011: €616.0 million). This revenue growth is attributable to organic volume growth of 3% and pricing growth of 2%, offset by the impact of the Yoplait franchise disposal. EBITA decreased by 14.3% to €20.4 million (2011: €23.8 million) and EBITA margin declined by 70 basis points. This performance reflects a challenging year in both Consumer Products and Agribusiness.

 

Consumer Products

The Irish food retail environment remains very challenging. Consumers are still focused on price which benefits discount retailers and private label products at the expense of mainstream retailers and branded products. In this context, Consumer Products delivered a satisfactory performance in 2012. Excluding the impact of the Yoplait franchise sale in the first half of the year, Consumer Products' volumes were broadly in line with 2011 and margins remained largely unchanged in the year. The Yoplait Ireland franchise was sold back to Yoplait for €18 million cash. While Consumer Products continues to distribute Yoplait branded products, it will now focus more closely on ongoing innovation and the development of its own core beverage and food brands. The outlook for Consumer Products remains challenging reflecting Irish economic conditions, ongoing price competition and volatile input costs.

 

Agribusiness

Poor weather conditions resulted in increased demand for feed but this was offset by lower demand for fertilizer. Higher input cost prices in both of these product categories contributed to margin pressure across the sector in 2012. In line with the market environment, Agribusiness revenue growth was positive as higher feed pricing and volumes offset revenue declines in the fertilizer and retail categories. EBITA margins were lower, mainly due to input cost pressures and a change in the business mix. In July 2012 Agribusiness entered into an exclusive, long-term contract with US-based Sturm Foods to supply milled Irish oats to McCann's Irish Oatmeal, a premium oatmeal brand in the US market. To cater for the new contract, Glanbia is expanding its existing milling operations with the construction of a new state-of-the-art oats milling facility in Portlaoise, with completion expected by late 2013. In 2013, Agribusiness is expected to perform broadly in line with 2012 with the longer term outlook underpinned by the forecast increase in milk production in Ireland on the abolition of European milk quotas in 2015.

 

Joint Ventures & Associates (Glanbia Share)

Pro forma¹

Constant Currency

Reported Currency

€m

2012

2011

Change

2012

Change

Revenue

792.5

819.5

- 3.3%

826.3

+ 0.8%

EBITA

36.2

40.5

- 10.6%

37.7

- 6.9%

EBITA margin

4.6%

4.9%

- 30bps

4.6%

- 30bps

¹ Joint Ventures and Associates figures include GIIL for both 2011 and 2012. See page 15 for full detail on pro forma adjustments.

 

 

Glanbia Ingredients Ireland

Global dairy markets weakened steadily during the first half of 2012 driven by substantial growth in global milk production. However, adverse weather conditions in a number of the major milk producing regions around the middle of the year resulted in a reduction in milk supply and a strengthening of dairy markets. While global dairy market demand remained relatively robust throughout 2012, pricing moved in response to these supply side fluctuations. In line with global dairy markets, the market environment for GIIL improved in the latter part of 2012 relative to a challenging first half. While milk input cost was adjusted to reflect market conditions, revenue, EBITA and EBITA margins in GIIL were somewhat lower in 2012. During the year GIIL commissioned a €21 million expansion of value-added whey processing capacity. Plans to increase milk processing capacity by up to 60% through a €180 million investment programme, including a new €150 million processing facility are progressing well and will be financed independently by GIIL. The outlook for 2013 is broadly positive with the performance of GIIL expected to be in line with 2012.

 

Southwest Cheese (SWC)

While US Cheese markets were volatile in 2012, average market pricing for the year was below 2011. Prices for high end whey products were significantly ahead of the prior year, driven by strong demand, particularly from the sports nutrition sector. Revenue increased marginally in 2012 as lower cheese pricing was offset by higher pricing of whey products. Margins improved in the year mainly as a result of operational efficiencies and there was some improvement in EBITA in 2012 compared with 2011. During the year, SWC enhanced its product mix through an increase in production of higher-value whey protein isolate. A pre-engineering study is also currently being completed on a potential development of lactose production capacity to serve increased demand in growth sectors such as infant formula. 2013 performance for SWC is expected to be in line with 2012.

 

Glanbia Cheese

Overall demand for mozzarella cheese in Europe remained solid in 2012 and Glanbia Cheese maintained its strong market position with key customers. The increase in milk input costs in the UK and, in particular, Northern Ireland combined with the lower value of the dairy by-products of mozzarella manufacture impacted its 2012 performance. Both revenue and EBITA declined, relative to a strong 2011. An improved performance is forecast in 2013 driven primarily by volume growth.

 

Nutricima

2012 was a challenging year in Nigeria due to social unrest in the Northern region in particular. As a consequence, volumes were lower year on year reducing revenue; however EBITA was broadly in line. In 2013 while the business will continue to focus on its distribution strategy and revised routes to market, we expect the market environment to remain stable but challenging.

 

Strategy update and 2013 business focus areas

Our vision is to be the leading global nutritionals solutions and cheese group. Our strategic opportunity is to create a unique integrated nutritionals business with leadership positions in select consumer and ingredients categories. Our strategic objective is to optimise value across our portfolio of businesses and brands to maximise returns to shareholders over the longer-term. We have clear strategic priorities for the business to:

·      Align with key growth customers and markets;

·      Build a strong pipeline of customer-focused, market-based and science-backed innovation;

·      Deliver organic and acquisition investments that maximise return on capital;

·      Achieve operational excellence and disciplined cost management; and

·      Develop a strong multi-disciplined team focused on success.

 

2013 business focus areas

As part of our ongoing strategic planning process for the Group, we carry out an annual review and update of our three year business plan. Based on this three year strategic plan, we also identify shorter term business focus areas. These focus areas help to ensure that our near term goals are consistent with our longer term strategy and that we continue to deliver long-term performance.

 

The 2013 business focus areas relate primarily to US Cheese & Global Nutritionals, which is Glanbia's largest segment. These plans include:

·      Drive organic growth in Global Nutritionals;

·      Continue the successful expansion of Performance Nutrition and Customised Premix Solutions into select international markets;

·      Commence capacity expansion and complete SAP implementation in Performance Nutrition;

·      Further develop the ingredient solutions capabilities of Ingredients Technologies including the building of a new cereal ingredients plant in South Dakota, USA;

·      Enhance commercialisation of cheese innovation and export platforms with the new Customer Innovation Centre in Idaho.

 

In Joint Ventures & Associates our clear focus for 2013 is to manage the transition of Glanbia Ingredients Ireland from a wholly owned subsidiary to a strategic partnership with the Group's major shareholder. A final decision will also be made on the potential development of lactose capacity in Southwest Cheese upon a review by the plc and its partner of the pre-engineering study currently being completed.

 

At a Group-level in 2013, we will increase our investment in people and infrastructure to underpin the next phase of growth. We will also continue to develop and evaluate our acquisition pipeline, with a focus on nutritional businesses. 

 

Strategic review

Glanbia is currently reviewing its longer term strategy with the aim of designing the Group's strategic roadmap for the next decade, from a market-backed, top down perspective. This process is to help the Board determine the growth potential within our existing portfolio of businesses including the strength of our capabilities and assets.

 

The successful resolution of the future of Irish dairy processing facilitates a concentrated focus on our international growth strategy and the longer-term prospects for Glanbia are very good.  Glanbia today has two well established nutrition platforms that span both business-to-business and branded business-to-consumer nutritional products and solutions. The first is global ingredients, which incorporates large-scale cheese and ingredients manufacturing and value-added ingredient solutions, and has the potential to broaden and deepen its range of value-adding functional and nutritional solutions technologies. The second platform is high-quality sports nutrition with great brands and leading market positions, which has the potential to expand beyond core current consumers, customers, channels and markets into additional performance nutrition sectors.

 

We are in a stronger position than ever to capitalise on the competitive advantages we have in high growth markets. Our focus in 2013/2014 will be to refresh the Group's strategy so that we prioritise growth opportunities in terms of a long-term plan and focus our investment on the areas of highest potential growth and returns. 



Finance review

 

2012 results summary pre exceptional

Constant Currency

Reported Currency

€m

2012

Change

2012

Change

Revenue

2,092.4

8.3%

2,211.8

14.4%






EBITA

162.6

15.1%

175.9

24.5%

EBITA margin

7.8%


8.0%


- Amortisation of intangible assets

(18.7)


(19.9)


- Net finance costs

(19.4)


(20.4)


- Share of results of Joint Ventures & Associates

11.4


12.1


- Income tax

(23.4)


(25.5)


Profit for the year from continuing operations

112.5

22.8%

122.2

33.4%

Profit for the year from discontinued operations¹

26.7

-7.3%

26.7

-7.3%

Profit for the year

139.2

15.6%

148.9

23.7%

¹ As required IFRS 5, discontinued operations comprise the performance of GIIL to November 2012.

 

 

Revenue

Revenue from continuing operations grew by 8.3% to €2.1 billion (2011: €1.9 billion) reflecting continued strong organic growth primarily in Global Nutritionals.

 

EBITA & EBITA margin

EBITA grew by 15.1% to €162.6 million (2011: €141.3 million).  EBITA margin increased by 50 basis points to 7.8% (2011: 7.3%), with margin growth in Global Nutritionals partially offset by reduced margins in Dairy Ireland. EBITA margin growth in US Cheese and Global Nutritionals was 80 basis points.

 

Share of results of Joint Ventures and Associates

The Group's share of results of Joint Ventures & Associates declined by €2.9 million to €11.4 million (2011: €14.3 million) primarily due to the challenging environment in Glanbia Cheese. Share of Joint Ventures & Associates is an after tax and interest amount.

 

Net financing costs

Net financing costs decreased by €4.0 million to €19.4 million (2011: €23.4 million) reflecting debt and interest rate management in the year. The Group's average interest rate for the full year was 4.6% (2011: 5.0%). Glanbia operates a policy of fixing a significant amount of its interest exposure with 67% of projected 2013 debt currently contracted at fixed rates for 2013.

 

Taxation

The 2012 tax charge increased to €23.4 million (2011: €22.7 million) which represents an effective rate, excluding Joint Ventures & Associates, of 18.8% (2011: 22.7%). The decrease in the effective rate is driven by the change in mix and geographic locations in which profits are earned.

 

Adjusted earnings per share

Constant Currency

Reported Currency


2012

Change

2012

Change

Continuing operations

47.36c

17.4%

51.02c

26.5%

Discontinued operations

5.54c

-7.4%

5.54c

-7.4%

Total

52.90c

14.2%

56.56c

22.1%

 

Total adjusted earnings per share grew 14.2% with adjusted earnings per share for continuing operations growing 17.4% driven by growth in EBITA in US Cheese and Global Nutritionals combined with lower interest charges and a lower effective tax rate.

 

 

2012 exceptional items



€m

1. Sale of Yoplait franchise

6.1

2. Rationalisation costs

(3.8)

3. Flax processing facility

4.4

4. Property write down

(5.1)

5. 60% disposal of GIIL

(7.8)

6. Taxation credit

1.5

Total exceptional charge

(4.7)

 

2012 exceptional items resulted in an exceptional charge of €4.7 million (2011: €7.6 million). Details of the 2012 exceptional items are as follows:

 

1.     In May 2012, the Group disposed of the Yoplait franchise for Ireland for cash consideration of €18 million which gave rise to a gain of €6.1 million post related write down in property, plant and equipment and rationalisation costs.

2.     An ongoing cost competitiveness programme in Dairy Ireland resulted in further rationalisation costs in this segment of €3.8 million. 

3.     In March 2012, a fire destroyed Ingredient Technologies' Canadian flax facility and a gain of €4.4 million represents the minimum insurance proceeds receivable, less the book value of the assets written down.

4.     During the year the Group reviewed the carrying value of its Irish property portfolio, which resulted in a write down in value of €5.1 million. 

5.     A loss of €7.8 million was made on the disposal of 60% of Dairy Ingredients Ireland; details of which are given on page 16.

6.     The tax credit applicable to the exceptional items (1 to 4 above) amounted to €1.5 million.

 

Dividend per share

The Board is recommending a final dividend of 5.43 cents per share (2011: final dividend 4.94 cents per share). This represents an increase of 10% in the year and brings the total dividend for the year to 9.09 cents per share (2011: 8.27 cents per share).

 

 

Cash flow




€m

2012

€m

2011

€m

EBITDA

200.6

163.6

Dividends from Joint Ventures & Associates

13.8

14.8

Working capital movement

(59.1)

(13.3)

Net interest and tax paid

(48.1)

(31.8)

Business sustaining capital expenditure

(30.1)

(27.3)

Other outflows

(16.7)

(19.2)

Free cash flow from continuing operations

60.4

86.8

Loans advanced to Joint Ventures & Associates

(3.3)

0.0

Strategic acquisitions/capital expenditure

(84.8)

(128.1)

Disposals

27.1

2.7

Restructuring costs

(6.5)

(10.0)

Equity dividends

(25.3)

(22.9)

Net cash outflow from continuing operations

(32.4)

(71.5)

Cash flow re discontinued operations¹

122.3

6.1

Cash flow pre currency exchange/fair value adjustments

89.9

(65.4)

Currency exchange/fair value adjustments

13.8

(6.8)

Cash flow for the year

103.7

(72.2)

Net debt at the beginning of the year

(480.3)

(408.1)

Net debt at the end of the year

(376.6)

(480.3)

¹ Cash flows relating to discontinued operations are detailed on page 16.

 

Free cash flow is after charging working capital movements and business sustaining capital expenditure, but before strategic investments or divestments and equity dividends.

 

During the year the Group generated free cash flow from continuing operations of €60.4 million (2011: €86.8 million) a decrease of €26.4 million year-on-year. Higher EBITDA in 2012 of €200.6 million (2011: €163.6 million) was offset by year-on-year higher working capital and increased taxation payments. The working capital outflow of €59.1 million reflects the increased working capital requirements in Global Nutritionals due to strategic investment in inventories and business growth, increased debtors within Agribusiness due to higher revenue in the latter months of the year and a receivable for insurance proceeds relating to the fire at the Canadian flax facility.

 

Strategic capital expenditure and acquisition expenditure during the year amounted to €85 million including the €45 million acquisition of Aseptic Solutions, the construction of a new Customised Solutions Premix facility in Germany, the expansion of production capacity within Performance Nutrition and the commencement of expenditure on the innovation centre in US Cheese.

 

Net cash outflows of €32.4 million from continuing operations are offset by cash inflows of €122.3 million relating to discontinued operations resulting in a decrease in net debt of €103.7 million in the year to €376.6 million (2011: €480.3 million). 

 

 

 

Group financing

Financing Key Performance Indicators

2012

2011

Net debt¹: adjusted EBITDA²

1.7 times

2.1 times

Adjusted EBIT² : net finance cost

8.1 times

6.3 times

Return on capital employed³

14.1%

12.8%

¹ Includes cumulative redeemable preference shares.

² The definition of adjusted EBITDA and adjusted EBIT are per our financing agreements and include dividends from Joint Ventures & Associates.

³ Return on capital employed (ROCE) is calculated as Group operating profit after tax plus Group's share of results of Joint Ventures & Associates after interest and tax, over capital employed. Capital employed is defined as the Group's non-current assets plus working capital. ROCE  in both 2011 and 2012 has been restated to reflect the disposal of 60% of GIIL

 

 

The Group delivered a year end net debt: adjusted EBITDA leverage ratio of 1.7 times (2011: 2.1 times) compared to the Group's banking covenant of 3.8 times. In 2012, adjusted EBIT to net financing cost cover rose to 8.1 times (2011: 6.3 times), reflecting increased profits and lower debt. The Group's banking covenant is a minimum of 3.5 times interest cover.

 

The Group currently has three sources of committed debt finance totalling €753.5 million;

·      A $325 million (€246.5 million) private placement of senior loan notes, due June 2021;

·      Bilateral multicurrency revolving loan facilities totaling €467.9 million with eight banks, all maturing January 2018, which were renewed during 2012 on common terms and conditions; and

·      Cumulative redeemable preference shares of €39.1 million due for redemption July 2014.

 

Return on capital employed

The calculation of return on capital employed has been restated for both 2012 and 2011 to reflect GIIL as a 40% associate. The return on capital employed has improved by 130bps to 14.1% (2011: 12.8% as restated). The Group operates to an internal hurdle rate of return on investment decisions of 12% post tax, by year three, and monitors investment spend against this metric.

 

Financial risk management

The conduct of Glanbia's ordinary business operations necessitates the holding and issuing of financial instruments and derivative financial instruments by the Group. The main risks, arising from issuing, holding and managing these financial instruments, typically include liquidity risk, interest rate risk and currency risk. The Group does not trade in financial instruments. The Group's treasury policies and guidelines are designed to mitigate the impact of fluctuations in interest rates and exchange rates and to manage the Group's financial risks. These policies were reviewed in 2012 by the Group Audit Committee and the Board.

 

Pension

At 29 December 2012 the Group's net pension liability under IAS 19 'Employee Benefits', before deferred tax, increased by €49.7 million to €98.1 million (2011: €48.4 million). This increase in the Group's deficit reflected the negative movement in actuarial assumptions (€98.8 million) caused primarily by a significant reduction in the discount rate applied to Irish retirement obligations to 3.8% (2011: 5.6%) partially offset by the disposal of the retirement obligation relating to GIIL of €37.0 million and employer contributions. The fair value of the assets of the pension schemes at 29 December 2012 was €332.6 million (2011: €400.0 million) and the value of the scheme liabilities was €430.7 million (2011: €448.4 million).

 

 

Net pension liability under IAS 19 'Employee Benefits'

 

2012

€m

2011

€m

At the beginning of the year

(48.4)

(48.6)

Exchange differences

(0.5)

(0.5)

Total expense

(8.0)

(3.2)

Actuarial loss

(98.8)

(17.0)

Disposals

37.0

-

Employer contributions

20.6

20.9

At the end of the year

(98.1)

(48.4)

 

Investor Relations

In 2012, we continued to demonstrate our commitment to open and transparent dialogue with the investor community participating in more than 150 investor meetings in Ireland, the UK, mainland Europe, North America and Canada as well as a number of capital market conferences.  Our largest shareholder, Glanbia Co-operative Society Limited, also formed a significant part of our investor relations programme with a series of meetings carried out with the Council of the Society during the year.

 

In 2012, the share price increased 80.5% from €4.63 to €8.35. Total Shareholder Return (TSR) for the year was 83.02%. The share price outperformed the Irish Stock Exchange index by 62.6%, the FTSE E300 Index by 65.1%, the S&P 500 Index by 67.0% and the FTSE E300 Food Producers Index by 68.2%.

 

Financial strategy

Glanbia is well positioned financially to drive the next phase of growth. Our financial strategy will continue to be to provide the funding and financial flexibility required to deliver the Group's organic and acquisition growth plans, while maintaining prudent financial KPIs.

 

Annual General Meeting (AGM)

The Group's AGM will be held on Tuesday, 21 May 2013, in The Newpark Hotel, Castlecomer Road, Kilkenny, Co. Kilkenny.

 

Principal risks and uncertainties affecting the Group's performance in 2013

The Board of Glanbia plc has the ultimate responsibility for risk management. The performance of the Group is influenced by global economic growth and consumer confidence in the markets in which it operates. In 2013, the principal risks affecting the Group's performance are:

·      The continued fragile global and EU economic outlook;

·      The challenging Irish retail environment and the associated management of margins within Dairy Ireland; and

·      The effective execution of our international growth strategy within Global Nutritionals. 

 

The principal risks and uncertainties will be outlined in detail in the 2012 Annual Report.

 

 

Understanding the Glanbia Ingredients Ireland (GIIL) transaction

Glanbia plc disposed of 60% of its interest in GIIL on 25 November 2012, retaining a 40% interest. The relevant accounting standards require that in a transaction of this nature, where ultimately the Group no longer has control of the entity, the Group financial statements should reflect the transaction in the first instance as a disposal of 100% of GIIL. The 40% interest retained is treated thereafter as an associate of the Group.

 

GIIL is therefore presented in the Group financial statements as a discontinued operation and its profit after tax until date of disposal (25 November 2012) has been presented as a single amount in the Group Income Statement under the heading of discontinued operations. The 2011 figures have been restated on a similar basis, with the entire profits of GIIL included within discontinued operations. From 25 November 2012, GIIL has been accounted for as an associate of the Group and 40% of its results from that date have been included within Share of results of Joint Ventures and Associates.

 

In addition, as required by IFRS 5, the historical allocation of central corporate costs to GIIL has been revised to exclude costs that will continue to be incurred by the Group, with the result that the 2011 EBITA of US Cheese and Global Nutritionals has been reduced by €4.7m  (costs that had previously been allocated to GIIL).

 

Pro-forma adjustments

To better reflect the structure of the Group going forward, the financial commentary included in this document is based, where indicated, on pro-forma results. In these instances, 40% of the results of GIIL for the period from 1 January 2012 to 24 November 2012 are included within the Joint Ventures and Associates segment and the pro-forma results for 2011 equally include 40% of GIIL for the full year.

 

Pro forma revenue and EBITA for Joint Ventures & Associates

2012

2011

2012

Constant currency

Reported currency

Reported currency

€m

Revenue

EBITA

Revenue

EBITA

Revenue

EBITA

Total GIIL within discontinued operations

623.2

36.6

738.3

38.2

623.2

36.6

40% of above GIIL within disc. operations

14.6

295.3

15.3

249.3

14.6

Other Joint Ventures & Associates

543.2

21.6

524.2

25.2

577.0

23.1

Pro-forma Joint Ventures & Associates

792.5

36.2

819.5

40.5

826.3

37.7

 

Reconciliation of pro forma EBITA to profit after tax (PAT) for Joint Ventures & Associates

The table below reconciles pro-forma EBITA with share of results of Joint Ventures & Associates, as reported in the Income Statement.

 

€m

Constant Currency

Reported Currency

2012

2011

Change

2012

Change

Pro forma EBITA

36.2

40.5

(4.3)

37.7

(2.8)

Reversal of pro forma adj. for GIIL

(14.6)

(15.3)

0.7

(14.6)

0.7

Reported EBITA

21.6

25.2

(3.6)

23.1

(2.1)

Finance costs

(5.0)

(4.7)

(0.3)

(5.3)

(0.6)

Income taxes

(5.2)

(6.2)

1.0

(5.7)

0.5

Profit after tax

11.4

14.3

(2.9)

12.1

(2.2)

 

 

Adjusted earnings per share 

Adjusted EPS is also calculated on a pro-forma basis to recognise the 40% interest retained in GIIL.

 

Pro forma adjusted earnings per share pre exceptional

 

2012

2012

Constant currency

Reported currency

€m

Contin-ued

Discont-inued

Total

Contin-ued

Discont-inued

Total

Profit for the year

112.5

26.7

139.2

122.2

26.7

148.9

Less Minority interests

(0.4)

-

(0.4)

(0.4)

-

(0.4)

Add back amortisation (net of tax)

16.4

0.4

16.8

17.4

0.4

17.8

Reclassify 40% of GIIL retained by Group

10.8

(10.8)

-

10.8

(10.8)

-

Adjusted net income

139.3

16.3

155.6

150.0

16.3

166.3

Adjusted earnings per share (cents)

47.36

5.54

52.90

51.02

5.54

56.56

 

Impact on Group cash flows from the GIIL transaction

The cash flow relating to the discontinued operations of €122.3 million per the summary cash flow on page 12 is detailed as follows:

 

GIIL transaction summary cash flows


€m

2012

Cash outflow of GIIL to date of disposal


(28.9)

Dividend from GIIL to Group

9.6


Proceeds on disposal:



- net assets

49.3


- working capital

119.3


Equity investment by Group in GIIL

(23.7)


Other cashflows

(3.3)


Net cash inflow to Group on disposal


151.2

Cash flow relating to the discontinued operations


122.3

 

Exceptional loss relating to GIIL transaction

Exceptional items for 2012 include a €7.8 million loss related to the disposal of GIIL detailed as follows:

 


€m

2012

100% of GIIL net assets

(84.5)

40% equity interest retained

33.8

Cash consideration in respect of 60% disposal

49.3

Disposal related costs

(5.0)

Currency translation gain previously in equity

1.0

Cancellation of interest rate swaps

(2.7)

Taxation credit

0.3

Loss on disposal

(7.8)

 

 

Cautionary statement

This announcement contains forward-looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this announcement, whether as a result of new information, future events, or otherwise.

 

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 8.30 a.m. today. Please access the webcast from our website at Link: http://www.glanbia.com/FYR-Webcast, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

 

Ireland: 01 4860916

UK: +44 20 7136 6283

Europe: +44 20 7136 6283

US: +1 212 444 0896

Passcode: 8439507

 

 

For further information contact

Glanbia plc +353 56 777 2200 

Siobhán Talbot, Group Finance Director

Shane Power, Group Investor Relations Manager +353 56 777 2244

Geraldine Kearney, Corporate Communications Director + 353 87 231 9430

 


Group income statement for the financial year ended 29 December 2012

 

 





 

Pre-exceptional

2012

€'000


 

Exceptional

2012

€'000


 

Total

2012

€'000


Pre-

exceptional

2011*

€'000


 

Exceptional

2011*

€'000


 

Total

2011*

€'000


Notes



(note 3)






(note 3)



Continuing operations

Revenue

2

2,211,757


-


2,211,757


1,932,849


-


1,932,849














Earnings before interest, tax
and amortisation (EBITA)


175,842


1,610


177,452


141,326


(8,723)


132,603

Intangible asset amortisation


(19,864)


-


(19,864)


(17,947)


-


(17,947)














Operating profit


155,978


1,610


157,588


123,379


(8,723)


114,656














Finance income

4

2,942


-


2,942


3,056


-


3,056

Finance costs

4

(23,370)


-


(23,370)


(26,467)


-


(26,467)

Share of results of Joint Ventures & Associates


12,147


-


12,147


14,331


-


14,331














Profit before taxation


147,697


1,610


149,307


114,299


(8,723)


105,576

Income taxes

5

(25,500)


1,440


(24,060)


(22,661)


1,090


(21,571)














Profit for the year from continuing operations


122,197


3,050


125,247


91,638


(7,633)


84,005














Discontinued operations













Profit for the year from discontinued operations, net of tax

3

26,744


(7,761)


18,983


28,803


-


28,803














Profit for the year


148,941


(4,711)


144,230


120,441


(7,633)


112,808














Attributable to:













Equity holders of the Parent






143,790






112,178

Non-controlling interests






440






630




















144,230






112,808








































Earnings per share from continuing and discontinued operations attributable to the equity holders of the Parent (cents)

Basic earnings per share (cents)

6












From continuing operations






42.45






28.40

From discontinued operations






6.46






9.82







48.91






38.22














Diluted earnings per share (cents)

6












From continuing operations






42.07






28.17

From discontinued operations






6.40






9.73







48.47






37.90

 

Basic and diluted earnings per share from continuing operations assumes a 100% disposal of Glanbia Ingredients Ireland Limited (GIIL) on 25 November 2012. Note 6 - Earnings Per Share details the adjusted earnings per share for the continuing Group reflecting the retained 40% interest in GIIL.

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

On behalf of the Board

L Herlihy               J Moloney              S Talbot
Directors


 

Group statement of comprehensive income for the financial year ended 29 December 2012

 



2012

 €'000


2011

€'000







Profit for the year



144,230


112,808







Other comprehensive income/(expense)






Actuarial (loss) - defined benefit schemes



(98,763)


(17,029)

Deferred tax credit on actuarial loss



10,635


2,615

Share of actuarial (loss) - Joint Ventures & Associates



(1,227)


(38)

Deferred tax credit/(charge) on actuarial loss - Joint Ventures & Associates



169


(77)

Currency translation differences



(8,071)


18,538

Net investment hedge



1,409


230

Revaluation of available for sale financial assets



(971)


(1,484)

Fair value movements on cash flow hedges



3,445


3,563

Deferred tax on cash flow hedges and revaluation of available for sale financial assets



(172)


1,214







Other comprehensive (expense)/income for the year, net of tax



(93,546)


7,532







Total comprehensive income for the year



50,684


120,340







Total comprehensive income attributable to:






Equity holders of the Parent



50,244


119,710

Non-controlling interests



440


630







Total comprehensive income for the year



50,684


120,340 

 


Group statement of changes in equity for the financial year ended 29 December 2012

 

Attributable to equity holders of the Parent



Share capital and share premium €'000         


Other reserves €'000


Retained earnings €'000


Total

€'000


Non-controlling

interests

€'000


Total

€'000













Balance at 1 January 2011

99,741


132,227


185,544


417,512


6,892


424,404













Profit for the year

-


-


112,178


112,178


630


112,808













Other comprehensive income/(expense)












Actuarial loss  - defined benefit schemes

-


-


(17,029)


(17,029)


-


(17,029)

Deferred tax on actuarial loss

-


-


2,615


2,615


-


2,615

Share of actuarial loss - Joint Ventures & Associates

-


-


(115)


(115)


-


(115)

Fair value movements

-


2,079


-


2,079


-


2,079

Deferred tax on fair value movements

-


1,214


-


1,214


-


1,214

Currency translation differences

-


18,538


-


18,538


-


18,538

Net investment hedge

-


230


-


230


-


230













Total comprehensive income for the year

-


22,061


97,649


119,710


630


120,340













Dividends paid during the year

-


-


(22,942)


(22,942)


(387)


(23,329)

Cost of share based payments

-


2,388


-


2,388


-


2,388

Transfer on exercise, vesting or expiry of share based payments

-


(1,057)


1,057


-


-


-

Shares issued

42


-


-


42


-


42

Premium on shares issued

1,179


-


-


1,179


-


1,179

Purchase of own shares

-


(2,075)


-


(2,075)


-


(2,075)













Balance at 31 December 2011

100,962


153,544


261,308


515,814


7,135


522,949













Profit for the year

-


-


143,790


143,790


440


144,230













Other comprehensive income/(expense)












Actuarial loss - defined benefit schemes

-


-


(98,763)


(98,763)


-


(98,763)

Deferred tax on actuarial loss

-


-


10,635


10,635


-


10,635

Share of actuarial loss - Joint Ventures & Associates

-


-


(1,058)


(1,058)


-


(1,058)

Fair value movements

-


2,474


-


2,474


-


2,474

Deferred tax on fair value movements

-


(172)


-


(172)


-


(172)

Currency translation differences

-


(8,071)


-


(8,071)


-


(8,071)

Net investment hedge

-


1,409


-


1,409


-


1,409













Total comprehensive (expense)/income for the year

-


(4,360)


54,604


50,244


440


50,684













Dividends paid during the year

-


-


(25,327)


(25,327)


(300)


(25,627)

Cost of share based payments

-


3,209


-


3,209


-


3,209

Transfer on exercise, vesting or expiry of share based payments

-


588


(588)


-


-


-

Shares issued

25


-


-


25


-


25

Premium on shares issued

1,108


-


-


1,108


-


1,108

Purchase of own shares

-


(7,692)


-


(7,692)


-


(7,692)













Balance at 29 December 2012

102,095


145,289


289,997


537,381


7,275


544,656

 

Goodwill previously written off amounting to €93.0 million (2011: €93.0 million) is included in opening and closing retained earnings.

 

 


 

Group statement of financial position as at 29 December 2012

 

Notes


2012

€'000


2011

€'000

ASSETS






Non-current assets






Property, plant and equipment



309,496


394,552

Intangible assets



473,016


467,277

Investments in associates



67,586


12,178

Investments in joint ventures



58,482


58,484

Trade and other receivables



16,835


14,575

Deferred income tax assets



19,963


11,255

Available for sale financial assets



9,144


11,165










954,522


969,486

Current assets






Inventories



282,028


336,855

Trade and other receivables



271,589


304,301

Derivative financial instruments



1,457


6,161

Cash and cash equivalents

8


275,572


231,373










830,646


878,690







Total assets



1,785,168


1,848,176







EQUITY






Issued capital and reserves attributable to equity holders of the Parent






Share capital and share premium



102,095


100,962

Other reserves



145,289


153,544

Retained earnings

9


289,997


261,308










537,381


515,814

Non-controlling interests



7,275


7,135







Total equity



544,656


522,949







LIABILITIES






Non-current liabilities






Borrowings

8


527,046


658,896

Derivative financial instruments



-


1,319

Deferred income tax liabilities



91,057


93,459

Retirement benefit obligations



98,133


48,425

Provisions for other liabilities and charges



22,013


22,120

Capital grants



2,636


17,161










740,885


841,380

Current liabilities






Trade and other payables



345,423


400,850

Current tax liabilities



7,430


6,656

Borrowings

8


125,086


52,808 

Derivative financial instruments



938


5,657

Provisions for other liabilities and charges



20,750


17,876










499,627


483,847







Total liabilities



1,240,512


1,325,227







Total equity and liabilities



1,785,168


1,848,176

 

 

 

On behalf of the Board

L Herlihy               J Moloney              S Talbot
Directors

 


Group statement of cash flows for the financial year ended 29 December 2012

 

Notes


2012

€'000


2011*

€'000







Cash flows from operating activities






Cash generated from operating activities

10


128,817


145,386

Interest received



2,814


3,134

Interest paid



(24,240)


(25,200)

Tax paid



(26,688)


(9,774)

Interest and tax paid - discontinued operations



(7,657)


(7,493)







Net cash inflow from operating activities



73,046


106,053







Cash flows from investing activities






Acquisition of subsidiary, net of cash acquired



(45,365)


(114,252)

Disposal of undertaking and investment in associate



25,599


-

Repayment of intercompany liability

3


125,652


-

Flax processing facility - insurance proceeds



8,132


-

Disposal of Yoplait franchise



18,000


-

Payment of deferred consideration on acquisition of subsidiaries



(1,104)


(1,146)

Purchase of property, plant and equipment



(65,893)


(38,310)

Purchase of intangible assets



(4,119)


(1,646)

Dividends received from joint ventures



13,778


14,761

Loans advanced to joint ventures and associates



(3,275)


-

Decrease in available for sale financial assets



523


2,283 

Proceeds from sale of property, plant and equipment



495


420

Investing cash flows from discontinued operations

3


(23,964)


(8,929)







Net cash inflow/(outflow) from investing activities



48,459


(146,819)







Cash flows from financing activities






Proceeds from issue of ordinary shares



1,133


1,221 

Purchase of own shares



(7,692)


(2,075)

Private debt placement



-


226,828

(Decrease) in borrowings



(44,646)


(160,780)

Dividends paid to Company shareholders

7


(25,327)


(22,942)

Dividends paid to non-controlling interests



(300)


(387)

Capital grants received



1,584


-

Financing cash flows from discontinued operations

3


(928) 


(404) 







Net cash (outflow)/inflow from financing activities



(76,176)


41,461







Net increase in cash and cash equivalents



45,329


695







Cash and cash equivalents at the beginning of the year



231,373


229,101

Effects of exchange rate changes on cash and cash equivalents



(1,130)


1,577







Cash and cash equivalents at the end of the year

8


275,572


231,373

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

                                                                                                   


Group statement of cash flows for the financial year ended 29 December 2012

 

 

Reconciliation of net cash flow to movement in net debt



2012


2011*




€'000


€'000







Net increase in cash and cash equivalents



45,329


695

Cash movements from debt financing



47,869


(65,080)










93,198


(64,385)







Fair value movement of interest rate swaps qualifying as fair value hedges



2,850


387

Exchange translation adjustment on net debt



7,723


(8,211)

Movement in net debt in the year

 

 

103,771


(72,209)







Net debt at the beginning of the year



(480,331)


(408,122)







Net debt at the end of the year



(376,560)


(480,331)







Net debt comprises:






Borrowings



(652,132)


(711,704)

Cash and cash equivalents



275,572


231,373








8


(376,560)


(480,331)

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information


Notes to the financial information for the financial year ended 29 December 2012

1 Basis of preparation

The financial information has been prepared under the historical cost convention as modified by use of fair values for available for sale financial assets and derivative financial instruments, and the accounting policies that the Group has adopted for 2012. The Group believes that EBITA is a relevant performance measure and therefore has disclosed this in the Group Income Statement. In addition, the presentation of results by nature of expense is considered a more meaningful format for the Income Statement. This is a change in accounting policy which has no impact on operating profit, profit for the year or the statement of financial position.

 

The financial information set out in this document does not constitute full statutory financial statements but has been derived from the Group financial statements for the year ended 29 December 2012 (referred to as the 2012 financial statements). The 2012 financial statements have been audited and have received an unqualified audit report. Amounts are stated in euro thousands (€'000) unless otherwise stated. The financial information is prepared for a 52 week year ending on 29 December 2012. Comparatives are for the 52 week year ended on 31 December 2011. The statements of financial position for 2012 and 2011 have been drawn up as at 29 December 2012 and 31 December 2011 respectively.

 

The financial statements were approved by the Board of Directors on 12 March 2013 and signed on its behalf by L Herlihy, J Moloney and       S Talbot.

 

2 Segment information

In accordance with IFRS 8 - Operating Segments the Group has three segments, as follows: US Cheese & Global Nutritionals, Dairy Ireland and Joint Ventures & Associates. These segments align with the Group's internal financial reporting system and the way in which the Chief Operating Decision Maker assesses performance and allocates the Group's resources. A segment manager is responsible for each segment and is directly accountable for the performance of that segment to the Group Operating Executive Committee which acts as the Chief Operating Decision Maker for the Group. Each segment derives its revenue as follows: US Cheese & Global Nutritionals earns its revenue from the manufacture and sale of cheese, whey protein and other nutritional solutions; Dairy Ireland earns its revenue from the sale of a range of dairy products and farm inputs; Joint Ventures & Associates revenue arises from the manufacture and sale of cheese, whey proteins and dairy consumer products. The Other Business segment is now included as part of the Dairy Ireland segment as no revenue was generated by Other Business during the period. Comparatives have been restated accordingly. Each segment is reviewed in its totality by the Chief Operating Decision Maker.

The Group Operating Executive Committee assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items.

As outlined in note 3, the Group sold 60% of Glanbia Ingredients Ireland Limited during the year. 100% of the trade and activities of this business are shown below under discontinued operations.

 

2.1 The segment results for the year ended 29 December 2012 are as follows:

 

 


 



US Cheese & Global Nutritionals

€'000


Dairy Ireland**

€'000


JV's & Associates

€'000


Discontinued Operations

€'000


Group including JV's & Associates
€'000












Total gross segment revenue

(a)

1,587,707


630,999


577,002


653,292


3,449,000

Inter-segment revenue


(6,906)


(43)


-


(30,096)


(37,045)












Segment external revenue


1,580,801


630,956


577,002


623,196


3,411,955












Segment earnings before interest, tax, amortisation and exceptional items

(b)

155,415


20,427


23,105


36,614


235,561

** Discontinued Operations were previously included within the Dairy Ireland segment

 

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €8.1 million, related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €15.3 million and related party sales between Discontinued Operations and Joint Ventures & Associates of €62.4 million. Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

 


 

 

2.1 (a): Segment revenue is reconciled to reported external revenue as follows:

 

 


 


2012

€'000



Segment revenue

3,449,000

Inter-segment revenue

(37,045)

Joint Ventures & Associates revenue

(577,002)

Revenue from Discontinued Operations

(623,196)



2,211,757

 

 

2.1 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax as follows:

 

2012

€'000



Segment earnings before interest, tax, amortisation and exceptional items

235,561

Discontinued Operations - earnings before interest, tax, amortisation and exceptional items

(36,614)

Amortisation

(19,864)

Exceptional items

1,610

Joint Ventures & Associates interest and tax

(10,958)

Finance income

2,942

Finance costs

(23,370)



Reported profit before tax - continuing operations

149,307

Income taxes

(24,060)



Reported profit after tax - continuing operations

125,247

 

Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury and taxation functions, which manage the cash and taxation position of the Group.

 

Other segment items included in the income statement for the year ended 29 December 2012 are as follows:

 


US Cheese & Global Nutritionals

€'000


Dairy   Ireland**

€'000


JV's & Associates

€'000


Discontinued Operations

€'000


Group including JV's & Associates
€'000












Depreciation of property, plant and equipment


16,132


8,880


8,627


10,960


44,599

Amortisation of intangibles


16,624


3,240


-


489


20,353

Capital grants released to the income statement


(73)


(174)


(288)


(1,031)


(1,566)

Exceptional items before tax


(4,401)


2,791


-


8,095


6,485

** Discontinued Operations were previously included within the Dairy Ireland segment

 

 

 

 

The segment assets and liabilities at 29 December 2012 and segment capital expenditure and acquisitions for the year then ended are as follows:

 


US Cheese & Global Nutritionals

€'000


Dairy   Ireland

€'000


JV's & Associates

€'000



Group

 including

 JV's &

 Associates
€'000











Segment assets

(c)

1,066,714


288,618


142,903



1,498,235











Segment liabilities

(d)

301,997


171,628


-



473,625











Segment capital expenditure and acquisitions

(e)

112,222


30,973


10,721



153,916

 

 

2.1 (c): Segment assets are reconciled to reported assets as follows:

 

2012

€'000



Segment assets

1,498,235

Unallocated assets

286,933



Reported assets

1,785,168

 

Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.

 

 

2.1 (d): Segment liabilities are reconciled to reported liabilities as follows:

 

2012

€'000



Segment liabilities

473,625

Unallocated liabilities

766,887



Reported liabilities

1,240,512

 

Unallocated liabilities primarily include items such as tax, borrowings and derivatives.

 

 

2.1 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:

 

2012

€'000



Segment capital expenditure and acquisitions

153,916

Joint Ventures & Associates capital expenditure

(10,721)

Unallocated capital expenditure

77

Discontinued Operations capital expenditure

(23,964)



Reported capital expenditure and acquisitions - continuing operations

119,308

 

 

 

 

2.2 The segment results for the year ended 31 December 2011 are as follows:

 


US Cheese & Global Nutritionals

€'000


Dairy   Ireland**

€'000


JV's & Associates

€'000


Discontinued Operations

€'000


Group including JV's & Associates
€'000












Total gross segment revenue

(a)

1,319,944


615,928


524,293


750,941


3,211,106

Inter-segment revenue


(3,023)


-


-


(12,639)


(15,662)












Segment external revenue


1,316,921


615,928


524,293


738,302


3,195,444












Segment earnings before interest, tax, amortisation and exceptional items

(b)

117,461


23,865


25,226


38,172


204,724

** Discontinued Operations were previously included within the Dairy Ireland segment

 

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €3.6 million, related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €12.4 million and related party sales between Discontinued Operations and Joint Ventures & Associates of €95.1 million.

 

2.2 (a): Segment revenue is reconciled to reported external revenue as follows:

 

2011

€'000



Segment revenue

3,211,106

Inter-segment revenue

(15,662)

Joint Ventures & Associates revenue

(524,293)

Revenue from Discontinued Operations

(738,302)



Reported external revenue - continuing operations

1,932,849

 

 

2.2 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax as follows:

 

2011

€'000



Segment earnings before interest, tax, amortisation and exceptional items

204,724

Discontinued Operations - earnings before interest, tax, amortisation and exceptional items

(38,172)

Amortisation

(17,947)

Exceptional items - rationalisation costs

(8,723)

Joint Ventures & Associates interest and tax

(10,895)

Finance income

3,056

Finance costs

(26,467)



Reported profit before tax - continuing operations

105,576

Income taxes

(21,571)



Reported profit after tax - continuing operations

84,005

 

Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury and taxation functions, which manage the cash and taxation position of the Group.

 

 

 

 

Other segment items included in the income statement for the year ended 31 December 2011 are as follows:

 


US Cheese & Global Nutritionals

€'000


Dairy   Ireland**

€'000


JV's & Associates

€'000


Discontinued Operations

€'000


Group including

JV's & Associates
€'000












Depreciation of property, plant and equipment


13,443


9,129


7,653


11,568


41,793

Amortisation of intangibles


14,570


3,377


-


525


18,472

Capital grants released to the income statement


(57)


(270)


(268)


(1,113)


(1,708)

Exceptional items - rationalisaton costs


-


8,723


-


-


8,723

** Discontinued Operations were previously included within the Dairy Ireland segment

 

 

The segment assets and liabilities at 31 December 2011 and segment capital expenditure and acquisitions for the year then ended are as follows:

 


US Cheese & Global Nutritionals

€'000


Dairy   Ireland

€'000


JV's & Associates

€'000



Group

 including

 JV's &

 Associates
€'000











Segment assets

(c)

931,923


585,896


85,237



1,603,056











Segment liabilities

(d)

268,418


267,732


-



536,150











Segment capital expenditure and acquisitions

(e)

140,833


30,432


4,042



175,307

 

 

2.2 (c): Segment assets are reconciled to reported assets as follows:

 

2011

€'000



Segment assets

1,603,056

Unallocated assets

245,120



Reported assets

1,848,176

 

Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.

 

 

2.2 (d): Segment liabilities are reconciled to reported liabilities as follows:

 

2011

€'000



Segment liabilities

536,150

Unallocated liabilities

789,077



Reported liabilities

1,325,227

 

Unallocated liabilities primarily include items such as tax, borrowings and derivatives.

 

 

 

 

2.2 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:

 

2011

€'000



Segment capital expenditure and acquisitions

175,307

Joint Ventures & Associates capital expenditure

(4,042)

Unallocated capital expenditure

215

Discontinued Operations capital expenditure

(8,929)



Reported capital expenditure and acquisitions - continuing operations

162,551

 

 

 

2.3 Entity wide disclosures

 

Revenue from external customers for each group of similar product in the US Cheese & Global Nutritionals, Dairy Ireland, Joint Ventures & Associates and Discontinued Operations segments is outlined at section 2.1 and 2.2 above.

 

Geographical information

Revenue by geographical destination is reviewed by the Chief Operating Decision Maker. The breakdown of revenue by geographical destination is as follows:

 

2012

€'000


2011

€'000





USA

1,592,563


1,390,414

Ireland

908,956


838,596

UK

259,811


235,338

Rest of Europe

250,492


322,022

Other

437,178


424,736






3,449,000


3,211,106

 

Revenue of approximately €341.8 million (2011: €320.0 million) is derived from a single external customer.

 

The total of non-current assets, other than financial instruments and deferred tax assets, located in Ireland is €184.0 million (2011: €267.8 million) and located in other countries, mainly the USA, is €750.6 million (2011: €690.4 million).

 

 

 

                                                                                                   


 

3 Exceptional items and discontinued operations

Notes


2012

€'000


2011

€'000

Exceptional items - continuing operations












Sale of Yoplait franchise

(a)


6,109


-

Rationalisation costs

(b)


(3,810)


(8,723)

Flax processing facility

(c)


4,401


-

Property write down

(d)


(5,090)


-

Total exceptional credit/(charge) before tax - continuing operations



1,610


(8,723)







Exceptional tax credit - continuing operations

5


1,440


1,090







Net exceptional credit/(charge) - continuing operations



3,050


(7,633)













Exceptional items - discontinued operations












Glanbia Ingredients Ireland Limited - 60% disposal

(e)


(8,095)


-







Total exceptional (charge) - discontinued operations



(8,095)


-







Exceptional tax credit - discontinued operations



334


-







Net exceptional (charge) - discontinued operations



(7,761)


-







Total exceptional (charge)



(4,711)


(7,633)

 

(a)   During 2012, following a strategic review of its Consumer Products business the Group agreed new terms to its relationship with Yoplait, the owner of the global Yoplait yogurt business. Under the new agreement Yoplait reacquired the franchise for Ireland from the Group for €18.0 million. This gain was offset by a related write down in property, plant and equipment and rationalisation costs totalling €11.9 million (€5.7 million of which was a non cash cost).

(b)   Rationalisation costs primarily relate to redundancy costs in the Dairy Ireland segment.

(c)    During 2012 a flax processing facility operated by the Group in Canada suffered fire damage. The exceptional gain of €4.4 million reflects the minimum insurance proceeds receivable, less the net book value of assets written down. Discussions with the Group's insurers are ongoing.

(d)   The Group reviewed its property portfolio during the year which resulted in a write down of €5.1 million.

(e)   In November 2012, the Group reached an agreement with Glanbia Co-operative Society Limited (the "Society") whereby the Society acquired a 60% interest in the dairy ingredients business, Glanbia Ingredients Ireland Limited. With effect from 25 November 2012 the Group's 40% shareholding in Glanbia Ingredients Ireland Limited has been treated as an associate undertaking and accounted for using the equity method in accordance with IAS 28 'Investments in Associates'. In accordance with IFRS 5 'Non Current Assets Held for Sale and Discontinued Operations', the disposal of the Group's interest is considered to be a discontinued operation.

 

 

In line with IFRS 5, a loss on disposal of €8.1 million was recognised in the income statement. This includes the recycle of €1.0 million cumulative foreign currency translation gains which were previously recognised in equity. The loss on this transaction arose as follows:

Discontinued operations

 

2012

€'000



100% disposal of Glanbia Ingredients Ireland Limited

(84,470)

40% equity interest retained in Glanbia Ingredients Ireland Limited

33,788

Total cash consideration received in respect of 60% disposal

49,289

Disposal related costs

(5,026)

Currency translation gain previously recognised in equity

1,001


(5,418)



Discontinued finance cost - cancellation of interest rate swaps

(2,677)

Exceptional loss

(8,095)

 

 

The revenue and results of 100% of the Group's discontinued operations for the eleven months to 24 November 2012 and twelve months to 31 December 2011 were as follows:

 

2012

€'000


2011

€'000





Revenue

623,196


738,302

Expenses

(587,071)


(700,655)





Operating profit

36,125


37,647

Net finance costs

(5,100)


(4,530)





Profit before taxation

31,025


33,117

Income taxes

(4,281)


(4,314)





Profit for the year from discontinued operations

26,744


28,803

 

 

The net assets of the Group's discontinued operations at 24 November 2012 and 31 December 2011 were as follows:

 

2012

€'000


2011

€'000

Assets of discontinued operations




Property, plant and eqiupment

131,588


119,003

Intangibles

3,291


3,419

Investments

4,751


4,980

Working capital

125,782


76,448





Total assets of discontinued operations

265,412


203,850





Liabilities of discontinued operations




Intercompany liability to Glanbia plc group

(125,652)


-

Retirement benefit obligation

(36,954)


(11,431)

Deferred income tax liabilities

(2,232)


(4,072)

Finance lease and government grants

(16,104)


(16,972)





Total liabilities of discontinued operations

(180,942)


(32,475)

 

 


 

 

The cash flows of the Group's discontinued operations for the eleven months to 24 November 2012 and twelve months to 31 December 2011 were as follows:

 

 

2012

€'000


2011

€'000

Operating cash flows




Profit before taxation

31,025


33,117

 

 



Depreciation

10,960


11,568

Amortisation

489


525

Interest expense

5,100


4,530

Amortisation of government grants received

(1,031)


(1,113)





Cash generated from discontinued operations before changes in working capital

46,543


48,627

Increase in working capital

 (42,889)


(25,674)





Operating cash flows generated from discontinued operations

3,654


22,953





Interest paid**

(5,100)


(4,530)

Tax paid**

(2,557)


(2,964)





Operating net cash (outflow)/inflow after interest and tax from discontinued operations

(4,003)


15,459





Cash flows from investing activities




Purchase of property, plant and equipment

(23,964)


(8,929)





Investing cash (outflow) from discontinued operations

(23,964)


(8,929)





Cash flows from financing activities




Finance lease principal payments

(928)


(968)

Capital grants received

-


564





Financing cash (outflow) from discontinued operations

(928)


(404)


 


 









 Cash (absorbed)/generated at the end of the eleven month period/year

(28,895)


6,126

 

** Estimated allocation of the Group's interest and tax cost to discontinued operations

 

 


4 Finance income and costs

2012

€'000


2011*

€'000

 

Finance income




 

Interest income

2,913


2,874

 

Interest income on deferred consideration

29


182

 





 

Total finance income

2,942


3,056

 





 

Finance costs




 

Bank borrowings repayable within five years

(9,434)


(14,092)

 

Interest cost on deferred consideration

-


(106)


UK pension provision

(121)


(113)

 

Finance lease costs

(131)


(188)

 

Interest rate swaps, transfer from equity

(1,059)


(4,876)

 

Interest rate swaps, fair value hedges

1,764


2,308 

 

Fair value adjustment to borrowings attributable to interest rate risk

(1,764)


(2,308)

 

Finance cost of private debt placement

(13,376)


(7,273)

 

Finance cost of preference shares

(4,349)


(4,349)

 





 

Total finance costs

(28,470)


(30,997)

 





 

Net finance costs

(25,528)


(27,941)

 





 

From continuing operations

(20,428)


(23,411)

 

From discontinued operations

(5,100)


(4,530)

 

 

 

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

 

 

 

                       

 

5 Income taxes

Notes


2012

€'000


2011*

€'000

Continuing operations






Current tax






Irish current tax



8,557


5,677

Adjustments in respect of prior years



(1,015)


(432)







Irish current tax on income for the year - continuing operations



7,542


5,245







Foreign current tax



17,568


6,223

Adjustments in respect of prior years



36


1,539







Foreign current tax on income for the year - continuing operations



17,604


7,762







Total current tax - continuing operations



25,146


13,007







Deferred tax






Deferred tax - current year



1,617


11,886

Adjustments in respect of prior years



(1,263)


(2,232)







Total deferred tax - continuing operations



354


9,654







Pre exceptional tax charge - continuing operations



25,500


22,661







Exceptional tax (credit) - continuing operations






Current tax

(a)


(236)


(1,090)

Deferred tax

(a)


(1,204)


-







Total tax charge  - continuing operations



24,060


21,571

 

Discontinued operations






Current tax






Irish current tax



2,557


2,964

Adjustments in respect of prior years



(11)


(3)







Total current tax - discontinued operations



2,546


2,961







Deferred tax






Deferred tax - current year



1,735


1,395

Adjustments in respect of prior years



-


(42)







Total deferred tax - discontinued operations



1,735


1,353







Pre exceptional tax charge - discontinued operations



4,281


4,314







Exceptional tax (credit) - discontinued operations






Current tax

(b)


(334)


-

Deferred tax

(b)


-


-

Total tax charge - discontinued operations



3,947


4,314







Total tax charge for the year



28,007


25,885

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

 

 

(a)   Notes on exceptional tax credit - continuing operations:

(i)    An exceptional current tax credit of €0.4 million and an exceptional deferred tax credit of €1.0 million, both relating to the sale of the Yoplait franchise.

(ii)   The rationalisation costs relating to redundancies in the Dairy Ireland segment resulted in an exceptional current tax credit of €0.4 million (2011: €1.1 million).

(iii) The fire damage suffered at the Group's flax processing facility in Canada resulted in an exceptional current tax charge of €0.6 million and an exceptional deferred tax charge of €0.4 million.

(iv)  The impairment in the Group's property portfolio resulted in an exceptional deferred tax credit of €0.6 million.

(b)   The disposal of 60% of Glanbia Ingredients Ireland Limited to the Society resulted in an exceptional current tax credit of €0.3 million. There was no deferred tax impact.

The exceptional net tax credit in 2012 and 2011 has been disclosed separately above as it relates to costs and income which have been presented as exceptional.

 

The tax on the Group's profit before tax differs from the theoretical amount that would arise applying the corporation tax rate in Ireland, as follows:

 

 



2012

€'000


2011*

€'000

 

Profit before tax - continuing operations

149,307


105,576





Income tax calculated at Irish rate of 12.5% (2011: 12.5%)

18,663


13,197

Earnings at (reduced)/ higher Irish rates

(1,702)


724

Difference due to overseas tax rates

19,396


7,496

Adjustment to tax charge in respect of previous periods

(2,242)


(1,125)

Tax on post tax profits of Joint Ventures & Associates included in profit before tax

(1,518)


(1,791)

Other differences including expenses not deductible for tax purposes

(8,537)


3,070





Total tax charge - continuing operations

24,060


21,571

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

 

Factors that may affect future tax charges and other disclosure requirements

 

The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group operates and other relevant changes in tax legislation, including amendments impacting on the excess of tax depreciation over accounting depreciation. The total tax charge of the Group may also be influenced by the effects of corporate development activity.

 

 

 

 

 

 

 

 

 


 

6 Earnings per share

 

Basic

Basic earnings per share is calculated by dividing the net profit attributable to the equity holders of the Parent by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as own shares.

 

 

2012


2011*

Profit attributable to equity holders of the Parent (€'000)




From continuing operations

124,807


83,375

From discontinued operations

18,983


28,803





Weighted average numbr of ordinary shares in issue

294,022,876


293,536,350





Basic earnings per share (cents per share)

  



From continuing operations

42.45


28.40

From discontinued operations

6.46


9.82


48.91


38.22

 

 

Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Share options and share awards are potential dilutive ordinary shares. In respect of share options and share awards, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming exercise of all share options and share awards.

 

2012


2011*

Weighted average number of ordinary shares in issue

294,022,876


293,536,350

Adjustments for share options and share awards

2,670,265


2,413,436





Adjusted weighted average number of ordinary shares

296,693,141


295,949,786





Diluted earnings per share (cents per share)




From continuing operations

42.07


28.17

From discontinued operations

6.40


9.73


48.47


37.90

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

 

 

 

 

 

Adjusted

Adjusted earnings per share is considered to be more reflective of the Group's overall underlying performance. Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before net exceptional items and intangible asset amortisation (net of related tax). In order that adjusted earnings per share would fairly represent the ongoing structure of the Group the calculation for both 2012 and 2011 has been amended to include 40% of the actual adjusted net income of Glanbia Ingredients Ireland Limited as if it had been an associate in both years.

 

2012

€'000


2011*

€'000





Profit attributable to equity holders of the Parent - continuing operations

124,807


83,375

Amortisation of intangible assets (net of related tax)

17,381


15,704

Net exceptional items

(3,050)


7,633

Adjustment to reflect 40% share of discontinued operations retained by the Group

10,869


11,705





Adjusted net income - continuing operations

150,007


118,417





Profit attributable to equity holders of the Parent - discontinued operations

18,983


28,803

Amortisation of intangible assets (net of related tax)

428


459

Net exceptional items

7,761


--

Adjustment to reflect 40% share of discontinued operations retained by the Group

(10,869)


(11,705)





Adjusted net income - discontinued operations

16,303


17,557





Adjusted earnings per share (cents per share)




From continuing operations

51.02


40.34

From discontinued operations

5.54


5.98


56.56


46.32





Diluted adjusted earnings per share (cents per share)




From continuing operations

50.56


40.01

From discontinued operations

5.49


5.93


56.05


45.94

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

                                                                                                   


 

7 Dividends

 

The dividends paid in 2012 and 2011 were €25.3 million (8.60 cents per share) and €22.9 million (7.82 cents per share) respectively. On 19 October 2012 an interim dividend of 3.66 cents per share on the ordinary shares amounting to €10.8 million was paid to shareholders on the register of members at 7 September 2012. The Directors have recommended the payment of a final dividend of 5.43 cents per share on the ordinary shares which amounts to €15.9 million. Subject to shareholders approval, this dividend will be paid on 31 May 2013 to shareholders on the register of members at 19 April 2013, the record date. These financial statements do not reflect this final dividend.

 

If a shareholder's registered address is in the UK and a shareholder has not previously provided the Company with a mandate form for an Irish euro account, a shareholder will default to a sterling payment. All other shareholders will default to a euro payment.

 

8 Net debt


2012

€'000


2011

€'000

Borrowings due within one year

125,086


52,808

Borrowings due after one year

527,046


658,896

Less:




Cash and cash equivalents

(275,572)


(231,373)





Net debt

376,560


480,331

 

 

 

 

9 Retained earnings






Retained

earnings

€'000


Goodwill

write-off

€'000


Total

€'000










Balance at 1 January 2011




278,505


(92,961)


185,544










Profit for the year




112,178


-


112,178










Other comprehensive income/(expense)









Actuarial loss - defined benefit schemes




(17,029)


-


(17,029)

Deferred tax on actuarial loss




2,615


-


2,615

Share of actuarial loss - Joint Ventures & Associates




(115)


-


(115)










Total comprehensive income for the year




97,649


-


97,649










Dividends paid during the year




(22,942)


-


(22,942)

Transfer on exercise, vesting or expiry of share based payments




1,057


-


1,057










Balance at 31 December 2011




354,269


(92,961)


261,308










Profit for the year




143,790


-


143,790










Other comprehensive income/(expense)









Actuarial loss - defined benefit schemes




(98,763)


-


(98,763)

Deferred tax on actuarial loss




10,635


-


10,635

Share of actuarial loss - Joint Ventures & Associates




(1,058)


-


(1,058)










Total comprehensive income for the year




54,604


-


54,604










Dividends paid during the year




(25,327)


-


(25,327)

Transfer on exercise, vesting or expiry of share based payments




(588)


-


(588)










Balance at 29 December 2012




382,958


(92,961)


289,997

 

 

10 Cash generated from operations




Notes


2012

€'000


2011*

€'000










Continuing operations


















Profit before taxation






149,307


105,576










Development costs capitalised






(4,339)


(4,042)

Write-off of intangibles

         





3,996


1,195

Non-cash exceptional loss/(gain) - continuing operations






(1,610)


8,723

Share of results of Joint Ventures & Associates






(12,147)


(14,331)

Depreciation






25,012


22,572

Amortisation






19,864


17,947

Cost of share based payments






3,209


2,388

Difference between pension charge and cash contributions






(12,577)


(17,706)

(Profit)/loss on disposal of property, plant and equipment






(146)


363

Interest income




4


(2,942)


(3,056)

Interest expense




4


23,370


26,467

Non-cash movement on investments






-


-

Amortisation of government grants received






(247)


(327)










Cash generated from continuing operations before changes in working capital






190,750


145,769

Change in net working capital:









- (Increase) in inventory






(54,341)


(22,405)

- (Increase)/decrease in short term receivables






(93,078)


(9,427)

- (Decrease)/increase in short term liabilities






87,752


20,516

- (Decrease) in provisions






(5,920)


(12,020)










Cash generated from continuing operations






125,163


122,433

Cash generated from discontinued operations




3


3,654


22,953










Total cash generated from operations






128,817


145,386

* As re-presented to reflect the effect of discontinued operations - refer to note 3 for further information

 

 

 

11 Business combinations

On 25 July 2012 the Group acquired 100% of Aseptic Solutions USA Ventures, LLC ("AS"). AS is a manufacturer and co-packer of nutritional beverages including premium super-fruit drinks, vitamin shots and protein shakes. AS expands Ingredient Technologies' end-to-end solutions capability as an ingredients supplier, formulator and end product manufacturer and enhances its competitive position.

 

Details of net assets acquired and goodwill arising from the acquisition are as follows:

 

€'000

 

Purchase consideration - cash paid

45,365

Less: fair value of assets acquired

29,820



Goodwill

15,545

 

Goodwill is attributable to the profitability, development opportunities and the benefits associated with the extension of the Groups portfolio by complementing and enhancing existing ingredient solution capabilities.

 

 

The fair value of assets and liabilities arising from the acquisition are as follows:

 

Fair value €'000



Property, plant and equipment

12,991

Intangible assets - other

457

Intangible assets - brands/know-how

12,115

Intangible assets - customer relationships

6,840

Inventories

1,653

Trade and other receivables

4,166

Trade and other payables

(7,547)

Deferred tax liabilities

(855)



Fair value of assets acquired

29,820

 

The revenue included in the Group income statement from 25 July 2012 to 29 December 2012 contributed by the new business was €12.3 million. The new business also contributed profit before interest, tax and amortisation of €0.9 million over the same period.

 

The revenue and profit for the financial year ended 29 December 2012, determined in accordance with IFRS 3 - 'Business Combinations', as though the acquisition date for the AS business combination effected during the year had been the beginning of that year would be as follows; revenue €32.1 million and profit before interest, tax and amortisation of €4.5 million.

 

Acquisition related costs included in the Group income statement for the year ended 29 December 2012 amounted to €1.0 million (2011: €0.4 million).

 

No contingent liabilities were recognised following this acquisition. The gross contractual value and fair value of trade and other receivables at the acquisition date amounted to €4.4 million. An allowance for doubtful debts of €0.2 million is included.

 

 

12 Events after the reporting period

There were no significant events outside the ordinary course of business affecting the Group since 29 December 2012.

 

13 Statutory financial statements

The financial information in this preliminary announcement is not the statutory financial statements of the Company, a copy of which is required to be annexed to the Company's annual return filed with the Companies Registration Office. A copy of the financial statements in respect of the financial year ended 29 December 2012 will be annexed to the Company's annual return for 2013. The auditors of the Company have made a report, without any qualification on their audit, of the financial statements of the Group and Company in respect of the financial year ended 29 December 2012, which were approved by the Directors on 12 March 2013. A copy of the financial statements of the Group in respect of the year ended 31 December 2011 has been annexed to the Company's annual return for 2012 and filed with the Companies Registration Office.

 


This information is provided by RNS
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