Glanbia plc Full Year 2019 Results

RNS Number : 1214E

Glanbia PLC

26 February 2020

Glanbia delivers adjusted EPS in line with guidance and implements new measures to drive growth

Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutrition group, announces its preliminary results for the 2019 financial year ended 4 January 2020 ("Full year 2019", "FY 2019", "2019").

Summary of Results for Full Year 2019

· Revenue of €3,875.7 million (2018: €3,170.5⁽¹⁾ million), up 16.6% constant currency on prior year (up 22.2% reported)

· Pre-exceptional EBITA of €276.8 million (2018: €284.9 million), down 7.8% constant currency (down 2.8% reported)

· Joint Ventures (JVs) reported share of profits up €3.3 million to €48.6 million

· Profit after tax, pre-exceptional of €214.8 million (2018: €234.0 million)

· Exceptional items, after tax, of €34.6 million; primarily relates to actions commenced to re-organise GPN for growth

· Profit after tax, post-exceptional, of €180.2 million (2018: €234.0 million)

· Adjusted earnings per share⁽²⁾ (EPS) of 88.10 (2018: 91.01 cent) cent in line with guidance of 88c - 92c

· Basic EPS⁽³⁾ of 61.04 cent (2018: 79.28 cent)

· Operating cash flow (OCF) of €279.9 million; 86% conversion rate

· Recommended final dividend per share of 15.94 cent; total 2019 dividend increased by 10% to 26.62 cent, representing a payout ratio of 30.2%

· Completed review of GPN operations and markets with actions commenced to drive revenue growth

· 2020 adjusted EPS expected to be broadly in line with prior year on a constant currency basis.

^{(1) Restated due to IFRS 15.}

^{(2) Adjusted EPS is defined as the net profit attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation (excluding software amortisation), net of related tax, divided 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. For further details see page 40.}

^{(3) Basic Earnings Per Share is calculated by dividing the net profit attributable to the equity holders of Glanbia plc, 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. For further details see page 32.}

Commenting today Siobhán Talbot, Group Managing Director, said:

"Glanbia has delivered a 16.6% increase in revenues in 2019, driven by a strong performance from our Glanbia Nutritionals ("GN") segment, and by the acquisitions of SlimFast and Watson. GN saw broad-based volume growth with notable performances in vitamin and mineral blends, and healthy snack ingredients, underlining the continued consumer shift towards health and wellness.

It was disappointing that earnings were impacted by challenges in the Glanbia Performance Nutrition ("GPN") segment and to address these we have conducted a comprehensive business review and are taking actions to simplify our business, allowing us to concentrate on our core brands, and optimising our routes to market across channels and geographies. As a result, we expect GPN to regain branded revenue growth momentum in 2020.

Glanbia is financially strong and cash generative. We have increased our dividend by 10% and we are proposing to our shareholders that we adopt a share buyback programme in 2020.

We are confident that the actions being taken will position the company to generate enhanced shareholder value in a growing healthy nutrition market."

2019 Full Year Income Statement Highlights

2019 full year results	Pre-exceptional	Exceptional	Reported	Reported	Reported	Constant
€m	FY 2019		FY 2019	FY 2018 ¹	Change³	Currency Change³
Wholly-owned business
Revenue	3,875.7	-	3,875.7	3,170.5	+22.2%	+ 16.6%
EBITA²	276.8	(37.1)	239.7	284.9	- 2.8%	- 7.8%
EBITA margin	7.1%		6.2%	9.0%	- 190 bps	- 190 bps
Joint Ventures
Share of profit after tax (pre-exceptional)	48.6		48.6	45.3	+ 7.3%
Total Group profit	214.8	(34.6)	180.2	234.0	- 8.2%
Basic earnings per share			61.04c	79.28c	-23.0%	-26.6%
Adjusted earnings per share	88.10c			91.01c	- 3.2%	- 7.7%

1. 2018 numbers have been restated to reflect the adoption of IFRS 15.

2. EBITA is defined as earnings before interest, tax and amortization.

3. Reported and constant currency movements are on a pre-exceptional basis.

This release contains certain alternative performance measures. Detailed explanation of the key performance indicators and non-IFRS performance measures can be found in the glossary on pages 38 to 45.

Foreign Currency Exchange

Glanbia generates over 90% of earnings in US dollars and reports in euro. To eliminate the impact of foreign currency exchange rates on the translation of results, the Group uses constant currency reporting. To arrive at the constant currency change, the average exchange rate for the current year is applied to the relevant reported result from the prior year. The average euro US dollar exchange rate for FY 2019 was €1 = $1.1196 (FY 2018: €1 = $1.1812). Therefore this leads to a difference between the constant currency basis and the reported result.

2019 Financial Overview

Commentary is on a constant currency basis throughout, and on a pre-exceptional basis except where noted

Glanbia delivered strong revenue growth in 2019 with revenue increasing by 16.6% to €3,876 million. The drivers of revenue growth included a 6.6% increase in pricing, a 9.9% contribution from acquisitions with overall volume broadly in line with 2018. Price and volume growth was driven by a good performance from GN with the acquisitions of Watson and SlimFast also performing well in 2019.

Wholly-owned EBITA was €276.8 million, a 7.8% decline and EBITA margin was 7.1%, 190bps lower than 2018. EBITA decline was driven by GPN which, as previously noted, encountered challenges in International markets throughout 2019 as well as lower sales in the North American Specialty and Club channels resulting in lower volumes and negative operating leverage. This decline was partially offset by a 10.5% increase in EBITA in GN driven by volume growth, price increases and the Watson acquisition.

Glanbia's share of JVs' profit after tax increased by €3.3 million to €48.6 million in 2019 primarily as a result of good growth in volume in all JVs. Total Group profit after exceptional items was €180.2 million.

Exceptional items of €34.6 million, after tax, primarily relates to the GPN segment as well as Brexit mitigation costs and acquisition integration costs in 2019. There were no exceptional items in 2018.

Total Group profit was €214.8 million for 2019 down from €234.0 million in 2018 as a result of lower year-on-year EBITA.

As a result of lower Group profit, adjusted earnings per share was 88.10 cent which was 7.7% lower than 2018 but within the previously issued guidance range. Basic earnings per share was 61.04 cent, a 26.6% decrease on prior year, reflecting lower Group profit and exceptional charges in the year.

The 2019 results are for the 53 week period ended 4 January 2020 while 2018 comparatives are for the 52 week period ended 29 December 2018.

Review of operations and markets

In light of the significant performance issues in GPN in 2019 a comprehensive review of this business's brand strategy, route-to-market and business model took place in H2 2019. GPN will now be managed as North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses. GPN has invested in new senior talent to enhance capabilities and enable growth in each of these businesses.

In North America, GPN has two distinct brand portfolios in the performance nutrition and lifestyle categories. Consumer motivations, market segments and reach differ for each portfolio with both having the scale to benefit from focused resources to drive growth.

In International markets, GPN is reshaping primarily around the Optimum Nutrition ("ON") brand in the performance nutrition category and the Body & Fit direct-to-consumer online platform in Europe which also enhances GPN's digital capability globally.

Branded revenue growth in GPN will be achieved through prioritisation of (i) the ON brand within the performance nutrition category globally. This brand, which had Global sales of $655 million in 2019 is the largest brand in the GPN portfolio and makes up the majority of sales in the North America Performance Nutrition and International businesses; (ii) SlimFast with the majority of its sales within the North America Lifestyle portfolio, and some sales in the UK, was acquired in November 2018. SlimFast grew strongly in 2019 to revenue of $325 million and anchors the North America Lifestyle portfolio; (iii) The Body & Fit direct-to-consumer platform is the key path to growth in the online channel in Europe, as well as providing digital capability which can be leveraged on a global basis.

Complementary to the revenue growth initiatives undertaken in GPN, Glanbia has established a Group-wide project to drive margin improvement to 2022. This project encompasses a series of initiatives both in GPN and across the Group.

GPN margins will be improved via the following initiatives:

1. Simplification and exit of low margin business. This is being achieved via SKU rationalisation of the lowest performing products, which has already commenced, and will have a minimal impact on net sales. GPN will also exit the majority of its US contract manufacture business during H2 2020 and 2021;

2. Supply chain optimisation globally encompassing a review of the mix of owned and contract manufacturing; and,

3. Refined approach to innovation to drive demand for higher margin opportunities across the branded portfolio.

It is expected that this project will both fund investment in building GPN brands and contribute to EBITA margin progression with a target of over 200 basis point improvement in GPN EBITA margin by 2022.

At a Group level, Glanbia is reviewing the current operating model across GPN and GN to identify opportunities to further leverage Glanbia's scale. This project is ongoing with further updates to be announced in due course.

A number of Glanbia's financial metrics as outlined at its capital markets day in 2018 remain unchanged. Adjusted earnings per share in 2020 is expected to be broadly in line with prior year on a constant currency basis and Glanbia is targeting an average growth rate of 5% to 10% constant currency in adjusted earnings per share for the three years to 2022.

Ambition 2020 - 2022	Metric	2019 Result
Total Group revenue (including Glanbia's share of Joint Ventures) by 2022	€6.0 billion	€4.8 billion
Average growth in adjusted earnings per share 2020-2022, constant currency	5% - 10%	-7.7%
Annual return on capital employed	10% to 13%	10.9%
Annual operating cash conversion	Greater than 80%	86%

Dividend

The Board is recommending a final dividend of 15.94 cent per share which brings the total dividend for the year to 26.62 cent per share, a 10% increase on prior year. This total dividend represents a return of €78.8 million to shareholders from 2019 earnings and a payout of 30.2% of 2019 adjusted earnings per share. The final dividend will be paid on 24 April 2020 to shareholders on the share register on 13 March 2020.

Share buyback authorisation

The Board of Glanbia will seek shareholder authorisation for a share buyback programme at the Annual General Meeting on the 22 April 2020.

Board Changes

In accordance with the amended and restated Relationship Agreement dated 2 July 2017 between the Company and Glanbia Co-Operative Society Limited (the "Society"), a process to identify a successor to Martin Keane as Chairperson has commenced. A sub-committee of the Board, led by Dan O'Connor, Senior Independent Director, has been established. External advisors have been appointed to assist the sub-committee in the selection process.

Richard Laube will retire on 28 February 2020. Jer Doheny and Eamon Power (directors nominated by the Society) will retire from the Board at the forthcoming AGM on 22 April 2020. In accordance with the Relationship Agreement, in 2020 the number of directors nominated by the Society will reduce from eight to seven and in 2022 the number of directors nominated by the Society will reduce to six. Replacements will be announced in due course.

Capital Investment

In 2019 total investment in respect of capital expenditure amounted to €76.3 million which included €56.2 million on strategic capital expenditure and €20.1 million on business-sustaining expenditure. Key strategic projects completed in 2019 included investments in innovation, supply chain and expansion of manufacturing facilities and IT systems in GPN and GN, and installation of a new eCommerce platform to enhance the direct-to-consumer online sales capability in GPN. Total investment in respect of capital expenditure in 2020 is expected to be in the range of €75 - €85 million.

2020 Outlook

In 2020, Glanbia expects to deliver adjusted earnings per share broadly in line with prior year on a constant currency basis.

Glanbia expects GPN to deliver branded revenue, margin and EBITA progression in 2020 versus prior year. In GN, Nutritional Solutions continued revenue momentum is expected to be offset by margin headwinds. Joint Venture performance year-on-year is expected to decline largely due to commissioning costs of new joint venture capital projects.

Business Performance

Operations review

	FY 2019 Pre-exceptional			FY 2018¹ Pre-exceptional
€m	Revenue	EBITA	EBITA %	Revenue	EBITA	EBITA %
Glanbia Performance Nutrition	1,363.8	146.4	10.7%	1,179.6	173.1	14.7%
Glanbia Nutritionals	2,511.9	130.4	5.2%	1,990.9	111.8	5.6%
Total wholly-owned business	3,875.7	276.8	7.1%	3,170.5	284.9	9.0%
Joint Ventures (Glanbia share)	1,476.1	73.6	5.0%	1,283.8	65.8	5.1%
IFRS 15 consolidation adjustment	(539.3)			(415.1)
Total Group	4,812.5	350.4	7.3%	4,039.2	350.7	8.7%

1. Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal in its sales relationship with its joint venture Southwest Cheese rather than as an agent. The impact was to increase prior year revenue by €784 million; there was no change to EBITA following this restatement.

Glanbia Performance Nutrition

	Reported			Constant Currency
€m	FY 2019	FY 2018	Change	Change
Revenue	1,363.8	1,179.6	+ 15.6%	+ 11.0%
Pre-exceptional EBITA	146.4	173.1	- 15.4%	- 19.6%
Pre-exceptional EBITA margin	10.7%	14.7%	- 400bps	- 410bps

Commentary is on a constant currency basis throughout

GPN delivered revenue growth of 11.0% in FY 2019 versus prior year. This was driven by the contribution of SlimFast, which was acquired in November 2018 and increased GPN revenues by 20.6% in 2019, offset by a volume decline of 9.0% and pricing decline of 0.6%. Branded revenue declined 9.8% in the year on a like-for-like basis driven by an 8.9% volume decline and 0.9% pricing decline. Pricing decline related to the first half of 2019 and in the third quarter price increases were successfully implemented which helped deliver positive pricing in the second half of 2019.

2019 was a challenging year for GPN and in response to this the business has been reorganised to focus on growth opportunities. The segment will now be managed as North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses.

North America Performance Nutrition portfolio

The North America Performance Nutrition portfolio accounted for 39% of total Global GPN sales in 2019 and encompasses the Optimum Nutrition (ON), BSN and Isopure brands. Revenue declined in this portfolio as shipments lagged consumption during the year and the business had a lower level of activity in the Club channel in the fourth quarter versus the prior year. As a category leader, particularly in the Online and Club channels, ON recorded year-on-year consumption growth of mid-single-digits in North America measured channels ¹ (which capture 72% of ON North America net sales) as a result of marketing investment. As part of an overall programme to simplify and decomplex the business, GPN has significantly reduced the number of SKUs in the North America branded portfolio to provide greater focus on its core ON brand. GPN will continue to support the BSN and Isopure brands in specific channels and consumer segments. GPN will exit the majority of its contract manufacturing business during H2 2020 and 2021, which accounted for 5% of total GPN sales in 2019.

North America Lifestyle portfolio

The North America Lifestyle portfolio accounted for 29% of total Global GPN sales in 2019 and encompasses SlimFast, think! and Amazing Grass brands. The platform brand within this portfolio is SlimFast which grew consumption in North America measured channels¹ (which captures 73% of SlimFast North America net sales) by very strong double digits in 2019, mainly as a result of successful innovation across a range of ready-to-eat and ready-to-drink formats in the keto weight management category. In 2019, revenue progression of the North America Lifestyle portfolio on a like-for-like basis was flat versus prior year as a weak first quarter was balanced by a good final quarter. The final quarter reflected good momentum of the think! brand which was relaunched in the second half of the year, and the ongoing strong performance from SlimFast which entered like-for-like comparatives in November 2019.

1. North America measured channels include Online, FDMC (Food, Mass, Drug, Club) and Specialty channels. Data compiled from published external sources and Glanbia estimates.

International

International markets accounted for 26% of 2019 total Global GPN sales with European markets 13% and Rest of World 13%. These markets were the most challenging for GPN in 2019 as foreign exchange headwinds and higher tariffs impacted its competitive position resulting in branded volume declining by double digits in the year. In response to this GPN has taken actions which will restore International markets to growth in 2020.

In Europe growth in the UK market was offset by declines in Western European markets as a result of an acceleration of channel shift from the Specialty channel to Online. This market shift is being addressed through a focus on the ON brand and the Body & Fit platform.

In Rest of World markets, growth in Asia and Oceania was offset by the challenges in Brazil, Middle East and India. GPN's relative competitive position declined in Brazil in the period largely due to foreign exchange headwinds on products imported from GPN's US manufacturing base. GPN has reduced its number of SKUs and has changed its route-to-market arrangements in Brazil and this transition will be completed through 2020. In the Middle East access to a number of markets was reduced due to political instability in the region and in response to this GPN has scaled back its presence in these markets. In India the relative competitive position has been impacted by foreign exchange headwinds and importation tariffs, introduced in late 2018. Supply chain initiatives commenced in India in 2019 have taken longer than planned and will be ongoing in 2020. Throughout International markets SKU complexity has been reduced with a refocus on the ON brand.

Direct-to-Consumer

Body & Fit is GPN's Direct-to-Consumer online platform serving consumers in Europe and accounted for 6% of total GPN sales in 2019. This business delivered revenue growth in 2019 as a result of increased market coverage. Body & Fit has upgraded its online platform in 2019 and increased its digital resources. It is expanding its presence in Western Europe with a target of serving 14 markets by the end of 2020. In addition Body & Fit provides GPN with strong eCommerce capability which can be deployed for other GPN brands in the portfolio as well as in other Global markets.

EBITA

GPN pre-exceptional EBITA in FY 2019 was €146.4 million, 19.6% lower than the prior year, with a pre-exceptional EBITA margin of 10.7%. GPN margins improved in H2 2019, however, due to increased marketing spend, lower like-for-like volumes and the resulting negative operating leverage and business mix, full year margins reduced by 410 basis points versus the full year 2018.

Glanbia Nutritionals

	Reported			Constant Currency
€m	FY 2019	FY 2018¹	Change	Change
Nutritional Solutions ("NS") Revenue	744.9	577.0	+ 29.1%	+ 23.4%
US Cheese Revenue	1,767.0	1,413.9	+ 25.0%	+ 18.5%
Total Glanbia Nutritionals Revenue	2,511.9	1,990.9	+ 26.2%	+ 19.9%
Glanbia Nutritionals pre-exceptional EBITA	130.4	111.8	+ 16.6%	+ 10.5%
Glanbia Nutritionals pre-exceptional EBITA margin	5.2.%	5.6%	- 40bps	- 40bps

Commentary is on a constant currency basis throughout

GN delivered revenue growth of 19.9% in 2019, on prior year, driven by increases in volume and pricing of 5.5% and 10.8% respectively, additionally supported by revenue from the Watson acquisition. Volume growth related to capacity expansion and underlying market growth, with pricing increases at both Nutritional Solutions ("NS") and US Cheese reflecting higher dairy markets. GN's pre-exceptional EBITA in 2019 was €130.4 million, a 10.5% improvement versus prior year, however EBITA margin had a 40 basis point decline to 5.2% primarily as result of reduced margins in NS.

Nutritional Solutions

			Reported	Constant Currency
€m	FY 2019	FY 2018¹	Change	Change
Revenue	744.9	577.0	+29.1%	+ 23.4%
Pre-exceptional EBITA	100.0	88.6	+ 12.9%	+ 7.1%
Pre-exceptional EBITA margin	13.4%	15.4%	- 200bps	- 210bps

1. Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal in its sales relationship with its joint venture Southwest Cheese rather than as an agent. The impact to NS was to increase prior year revenue by €50 million; there was no change to EBITA following this restatement.

Nutritional Solutions ("NS") is a global provider of nutritional and functional premix solutions for use in healthy snacks, bars and beverages. Through its expertise and technological capabilities, it is a leading producer of advanced-technology whey protein, specialist vitamin and mineral blends, and plant-based ingredients.

NS revenue increased by 23.4% in full year 2019 versus prior year with a strong performance across both dairy and non-dairy solutions. This was driven by a 7.0% increase in volume, 3.8% increase in pricing and the Watson acquisition contributing 12.6% to revenue growth. Volume growth was broad based with a strong performance in Asian markets for vitamin and mineral blends and in the US for dairy-based healthy snacking ingredients. Pricing increase was primarily as a result of dairy market dynamics versus prior year.

Watson is performing well and has helped to expand the Nutritional Solutions supply chain footprint in addition to bringing technical capability into the business.

NS delivered an increase in EBITA of 7.1% as a result of revenue growth offsetting a margin decline of 210 basis points to 13.4%. Margin decline primarily related to negative mix from certain dairy ingredients, headwinds from tariffs on raw materials, increased investment in resources to support growth and some dilution from the Watson acquisition.

US Cheese

				Constant Currency
€m	FY 2019	FY 2018¹	Change	Change
Revenue	1,767.0	1,413.9	+ 25.0%	+ 18.5%
Pre-exceptional EBITA	30.4	23.2	+ 31.0%	+ 23.6%
Pre-exceptional EBITA margin	1.7%	1.6%	+ 10 bps	+ 10 bps

1. Following implementation of IFRS 15, prior year revenue was restated to reflect the impact of recognising the Group as a principal in its sales relationship with its joint venture Southwest Cheese rather than as an agent. The impact to US Cheese was to increase prior year revenue by €734 million; there was no change to EBITA following this restatement.

US Cheese is a leading producer of American-style cheddar cheese in the US supplying a broad range of customers, predominantly US based, which participates in the food service and retail consumer branded and private label end markets. As well as selling its own manufactured cheese, US Cheese is also the commercial partner for its joint venture Southwest Cheese ("SWC").

US Cheese revenue increased by 18.5% in full year 2019 versus prior year. This was driven by pricing increase of 13.6%, as cheese markets were significantly stronger in the second half of 2019 versus prior year. Volume growth of 4.9% reflected the full year benefit of capacity expansion commissioned in 2018.

US Cheese delivered an increase in EBITA of 23.6% as a result of revenue growth, and EBITA margin improved by 10 bps to 1.7% versus prior year due to a good operating performance.

Joint Ventures (Glanbia Share)

			Reported	Constant Currency
€m	FY 2019	FY 2018	Change	Change
Revenue¹	1,476.1	1,283.8	+15.0%	+ 12.9%
EBITA¹	73.6	65.8	+11.9%	+ 9.7%
EBITA margin	5.0%	5.1%	- 10bps	- 10bps
Share of JVs' PAT pre-exceptional items	48.6	45.3	+7.3%	+5.9%

1. Share of JVs revenue and EBITA is calculated as the share of revenue attributed to Glanbia based on Glanbia's percentage ownership of the JV. The Group accounts for all of its JVs using the equity method of accounting with only its share (based on percentage ownership) of the JV's PAT contributing to the adjusted earnings per share calculation. Any trade between Glanbia and JVs is done at arm's-length. All JVs are independently financed with their own dedicated banking facilities, each of which are non-recourse to Glanbia.

Commentary is on a constant currency basis throughout

Glanbia's share of profit after tax ("PAT") from JVs increased by €3.3 million to €48.6 million in 2019 compared to the prior year and this was driven by revenue and margin growth. Glanbia's share of JVs' revenues increased by 12.9%, with sales volume growth of 9.6%, and overall pricing increases of 3.3% primarily due to higher year-on-year dairy markets in the US.

Glanbia Ireland

The Glanbia Ireland JV ("GI") is owned 60% by Glanbia Co-operative Society Limited and 40% by Glanbia plc. GI is the largest milk processor in Ireland producing a range of value-added dairy ingredients and consumer products as well as selling farm inputs.

GI delivered a good performance in 2019 with revenue growth due to higher volumes offset by modest price declines. Milk volumes processed in 2019 increased by 7.4% on a like-for-like basis with the previous year, resulting in a total GI milk pool of 2.9 billion litres.

Southwest Cheese

Southwest Cheese ("SWC") is a large-scale producer of American-style cheddar cheese and whey ingredients in the US with a production facility located in the State of New Mexico, USA. All of SWC cheese and whey ingredients are sold through GN's route-to-market channels at market prices.

SWC delivered a strong performance in 2019 as a result of higher revenue mainly due to increased pricing and volume growth related to increased production capacity and higher year-on-year US dairy markets.

MWC

Glanbia's new JV in Michigan is at an advanced stage of construction with commissioning expected to be completed by Q3 2021. Of the total project investment of $82.5 million for Glanbia, $75 million has been invested to date, with the balance of $7.5 million to be invested on completion of the construction phase.

Glanbia Cheese UK

Glanbia Cheese UK is a large-scale mozzarella cheese producer with two production facilities in the United Kingdom. Glanbia Cheese UK primarily supplies customers in the pizza industry across Europe. It is owned 51% by Glanbia plc and 49% by Leprino Foods Company ("Leprino").

Glanbia Cheese UK delivered higher revenues in 2019 due to increased volumes offset by a modest reduction in market pricing.

Glanbia Cheese EU

Glanbia's new JV to construct a mozzarella cheese plant in Ireland is progressing to plan with commissioning expected to be completed before the end of 2020. Of a total project investment of €35 million for Glanbia, €25 million has been invested to date with a further €10 million to be invested during the remaining construction phase of the plant.

2019 Finance Review

2019 Group Income Statement

		2019			2018¹
€m	Pre-exceptional	Exceptional	Total	Pre-exceptional	Exceptional	Total
Revenue	3,875.7	-	3,875.7	3,170.5	-	3,170.5
Earnings before interest, tax and amortisation (EBITA)	276.8	(37.1)	239.7	284.9	-	284.9
EBITA margin	7.1%		6.2%	9.0%	-	9.0%
Intangible asset amortization and impairment	(60.9)	(2.0)	(62.9)	(45.9)	-	(45.9)
Operating profit	215.9	(39.1)	176.8	239.0		239.0
Finance income	6.2	-	6.2	3.9	-	3.9
Finance costs	(32.5)	-	(32.5)	(21.4)	-	(21.4)
Share of results of Joint Ventures	48.6	-	48.6	45.3	-	45.3
Profit before taxation	238.2	(39.1)	199.1	266.8	-	266.8
Income taxes	(23.4)	4.5	(18.9)	(32.8)	-	(32.8)
Profit for the year	214.8	(34.6)	180.2	234.0	-	234.0

1. 2018 numbers have been restated to reflect the adoption of IFRS 15

Revenue

Revenue increased by 16.6% versus prior year on a constant currency basis in 2019 to €3.9 billion, an increase of 22.2% on a reported basis. Sales volumes were broadly flat, with 5.5% volume growth in GN offset by a decrease of 9% year-on-year in sales volumes in GPN. Pricing had a positive impact, increasing revenue by 6.6%, driven primarily by higher dairy market pricing within GN. The SlimFast and Watson acquisitions had strong performances and accounted for 9.9% of the growth in revenue. Detailed analysis of revenue is set out within the operations review.

EBITA

EBITA before exceptional items declined 7.8% constant currency, (down 2.8% reported) to €276.8 million (2018: €284.9 million).

GPN pre-exceptional EBITA decreased by 19.6% constant currency to €146.4 million (2018: €173.1 million), a decrease of 15.4% on a reported basis. GPN pre-exceptional EBITA margin at 10.7% was 400 basis points lower than prior year reported, due to lower volumes and resulting negative operating leverage arising from lower organic revenue and business mix.

GN pre-exceptional EBITA increased by 10.5% constant currency to €130.4 million (2018: €111.8 million), 16.6% increase on a reported basis. GN pre-exceptional EBITA margin was 5.2%, down 40 basis points from 2018, due to the impact of product mix and tariff headwinds.

Net finance costs

Net finance costs increased by €8.8 million to €26.3 million (2018: €17.5 million). The increase was driven primarily by higher average levels of debt throughout the year relating to acquisitions and investments in JVs. The Group's average interest rate in 2019 was 3.4% (2018: 4.3%), the reduction on last year being mainly due to lower US dollar interest rates. Glanbia operates a policy of fixing a significant amount of its interest exposure, with 70% of projected 2020 debt currently contracted at fixed rates.

Share of results of joint ventures

The Group's share of JV profits increased by €3.3 million to €48.6 million (2018: €45.3 million) in the year. The share of results of JVs is stated after tax. JVs continue to perform strongly, with year-on-year volume growth in all JVs.

Income taxes

The 2019 pre-exceptional tax charge decreased by €9.4 million to €23.4 million (2018: €32.8 million). This represents an effective tax rate, excluding JVs, of 12.3% (2018: 14.8%). The reduction in the pre-exceptional tax rate is driven primarily by the geographic mix of profits, a lower charge for uncertain tax risks and a lower tax charge relating to corporate development activity in the year. The tax credit related to exceptional items is €4.5m. The Group currently expects that its effective tax rate for 2020 will be in the range of 11.5% to 12.5%.

Exceptional items

€m	2019
Organisation redesign costs (note 1)	12.7
Asset impairments (note 2)	17.3
Acquisition integration costs (note 3)	6.8
Brexit related costs (note 4)	2.3
Exceptional charge before tax	39.1
Exceptional tax credit	(4.5)
Exceptional charge after tax	34.6

The total net cash outflow during the year in respect of exceptional items was €12.0 million. During 2018 there were cash outflows of €2.6 million in respect of exceptional costs incurred prior to 2018.

Details of the exceptional items are as follows:

1. Organisation redesign costs relate primarily to a fundamental reorganisation of the Glanbia Performance Nutrition segment, including the creation of distinct North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses. Costs incurred to-date are professional consultancy (€7.9 million) and redundancy and employment related costs including recruitment costs and costs of relocating people to new markets and geographies to support the organisation change (€4.8 million). This restructuring programme will continue into 2020;

2. Asset impairments comprise the write down of inventory to net realisable value (€14.9 million), related development assets (€2.0 million) and some fixed assets (€0.4 million) in the GPN business. The impairment of inventory arises from (i) sales volume declines in certain non-US markets resulting in surplus inventories of €5.6 million, (ii) unsuccessful innovation SKUs in the US Food/Drug/Mass/Club (FDMC) channels of €5.7 million, (iii) the cost of discontinuing a significant number of other North American SKUs of €2.6 million to reduce SKU complexity and simplify the supply chain, and (iv) other inventory impairments of €1.0 million. Overall these inventory impairments will result in a significant simplification within the GPN business resulting in approximately 1,200 SKUs (35% of total) being discontinued. This level of inventory impairment is substantially in excess of past experience in the GPN business and none of the SKUs rationalised will be manufactured or contracted for in future. Based on the past 12 months sales, the gross revenue related to the discontinued SKUs is approximately 5% of total GPN revenues, the vast majority of which is expected to be retained through sales of alternative GPN SKUs;

3. Acquisition integration costs comprise costs relating to the integration and restructuring of acquired businesses and the transaction costs incurred in completing the current year acquisition. The charge comprised professional fees of €2.5 million, employee benefit costs of €1.2 million and inventory impairments of €3.1 million following a post-acquisition assessment of the product portfolio of the acquired businesses; and

4. Brexit related costs have been incurred in preparing the organisation for the departure of the United Kingdom from the European Union. Costs incurred include professional fees and increased storage and production costs as the Group sought to mitigate the potential risks relating to Brexit.

Profit after tax

Profit after tax for the year was €180.2 million compared to €234.0 million in 2018, comprising pre-exceptional profit after tax of €214.8 million down €19.2 million on prior year and exceptional charges of €34.6 million (there were no exceptional items in 2018). The €19.2 million decline in pre-exceptional profit after tax is primarily driven by the reduced profitability of GPN which more than offset increased profits in GN and the JVs. Higher net finance costs were offset by a lower tax charge for the year.

Earnings per share (EPS)

2019

2018

Reported

Change

Constant Currency

Change

Basic EPS

61.04

79.28

- 23.0%

- 26.6%

Adjusted EPS

88.10

91.01

- 3.2%

- 7.7%

Basic EPS decreased by 23% versus prior year, (26.6% constant currency), driven by year-on-year reduction in pre-exceptional profitability and exceptional losses in 2019.

Adjusted EPS is a key performance indicator (KPI) of the Group and a key metric guided to the market. Adjusted EPS declined by 7.7% constant currency (3.2% reported) in the year, driven by the reduction in profitability of the GPN segment and increased interest costs, offset by increased share of profits of JVs and lower income taxes.

Cash flow

The principal cash flow KPIs of the Group and Business Units are Operating Cash Flow (OCF) and Free Cash Flow (FCF). OCF represents EBITDA of the wholly-owned businesses net of business-sustaining capital expenditure and working capital movements, excluding exceptional cash flows. FCF is calculated as the cash flow in the year before the following items: strategic capital expenditure, equity dividends, acquisition spend, proceeds received on disposal, exceptional costs paid, loans to JVs, and foreign exchange movements. These metrics are used to monitor the cash conversion performance of the Group and Business Units and identify available cash for strategic investment. OCF conversion is a key element of Executive Directors and senior management remuneration. OCF and FCF results for the Group are outlined below.

€m	2019	2018
EBITDA pre-exceptional	324.9	327.8
Movement in working capital (pre-exceptional)	(24.9)	(9.7)
Business-sustaining capital expenditure	(20.1)	(16.4)
Operating cash flow	279.9	301.7
Net interest and tax paid	(74.1)	(42.2)
Dividends from JVs	35.3	31.6
Other inflows/(outflows)	(9.6)	4.3
Free cash flow	231.5	295.4
Strategic capital expenditure	(56.2)	(46.2)
Equity dividends	(74.3)	(76.0)
Acquisitions	(58.3)	(313.0)
Disposals	0.2	1.3
Exceptional items paid	(12.0)	(2.6)
Loans to/equity in JVs	(47.4)	(58.9)
Cash flow pre-foreign exchange translation/other adjustments	(16.5)	(200.0)
Exchange translation/other adjustments	(10.5)	(9.0)
Debt acquired on acquisition	(10.6)	-
Net debt movement	(37.6)	(209.0)
Net debt at the beginning of the year	(576.7)	(367.7)
Net debt at the end of the year	(614.3)	(576.7)

Operating cash flow (OCF) was €279.9 million in the year (2018: €301.7 million) and represents a strong cash conversion on EBITDA of 86% (2018: 92%). The OCF conversion target for the year was 80%. The decrease in OCF versus prior year was due primarily to higher investment in working capital and business-sustaining capital expenditure.

The Group continues to actively manage its working capital. During the year, the Group embarked on a programme to increase payables terms with significant vendors in response to similar increased receivables terms that have been agreed with certain customers.

Free cash flow (FCF) was €231.5 million (2018: €295.4 million), with the decrease primarily due to lower OCF and increased corporation tax (including acquisition integration related) payments as well as higher interest payments as a result of increased levels of debt due to acquisitions.

Acquisition spend relates to the cost of Watson which was acquired in February 2019. Loans to/equity in JVs includes the continuation of the investments in Glanbia Cheese EU, the mozzarella cheese JV in Portlaoise, Ireland and in MWC, the JV cheese and whey plant in Michigan, USA.

Group financing

Financing Key Performance Indicators	2019	2018
Net debt: adjusted EBITDA	1.71 times	1.55 times
Adjusted EBIT: net finance cost	9.3 times	14.8 times

The Group's financial position continues to be strong. Net debt at the end of 2019 was €614.3 million. This is an increase of €37.6 million from the prior year end net debt of €576.7 million. At year-end 2019, Glanbia had committed debt facilities of €1.2 billion with a weighted average maturity of 2.8 years. Glanbia's ability to generate cash as outlined above and available debt facilities ensures the Group has considerable capacity to finance future investments. Net debt to adjusted EBITDA was 1.71 times and interest cover was 9.3 times, both metrics remaining well within financing covenants.

Use of capital

Capital expenditure

The cash outflow relating to capital expenditure for the year amounted to €76.3 million (2018: €62.6 million) which includes €20.1 million of business-sustaining capital expenditure and €56.2 million of strategic capital expenditure. Key strategic projects completed in 2019 included investments in innovation, expansion of manufacturing facilities and IT systems development, particularly the further enhancement of our D2C platforms.

Investments in JVs

During 2019 the Group continued its investment in the new JVs, commenced in 2018. A total of $35 million was invested in MWC during 2019, the JV cheese and whey manufacturing facility in Michigan, USA. This brings the total Group investment in MWC to $75 million with a balance of $7.5 million still to be invested. Construction is well advanced in this facility with commissioning expected to be complete in 2021.

During 2019 the Group also invested €17 million in Glanbia Cheese EU, the JV mozzarella cheese plant in Portlaoise, Ireland, bringing the total invested to €25 million. The Group expects to invest a further €10 million over the construction phase of this project which will be commissioned before the end of 2020. The remaining funding for both of these projects will come from the other JV partners, government grants and dedicated JV banking facilities, which are non-recourse to Glanbia.

Return on Capital Employed (ROCE)

	2019	2018	Change
Return on Capital Employed	10.9%	13.2%	-230bps

ROCE decreased in 2019 by 230 basis points to 10.9%. This decrease resulted from the combination of lower profitability in the year and increased average capital employed as a result of recent acquisitions and investments in JVs. Acquisitions remain a key part of the growth strategy for the Group and it is the Group's goal to maintain a ROCE range of between 10% and 13% over the medium-term.

Dividends

Glanbia adopts a dividend policy that includes an annual dividend payout ratio between 25% and 35% of adjusted EPS. In line with this policy the recommended final 2019 dividend will be 15.94 cent per share (2018: final dividend 14.49 cent per share) and will bring the total dividend for the year to 26.62 cent per share (2018: 24.20 cent per share) and a payout ratio of 30.2%. This represents a 10% increase on prior year and a return of €78.8 million to shareholders from 2019 earnings.

Total Shareholder Return

Total Shareholder Return (TSR) for 2019 was negative 36.7%. The STOXX Europe 600 Food & Beverage Index a key benchmark for the Group, increased by 30.9% in 2019. The three-year period 2017 to 2019 Glanbia TSR was negative 32.9%. The five-year Glanbia TSR to 2019 was negative 16.1%. Glanbia's share price at the end of the financial year was €10.16 compared to €16.35 at the 2018 year end, a 38% decrease.

Impact of new accounting standards

While new accounting standards and improvements are issued annually there are two new accounting standards, which have or are expected to have significant impacts to the Group. Set out below are the impacts where relevant to Glanbia from these standards.

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 'Revenue from Contracts with Customers' is effective and was adopted by the Group for the 2019 financial year. Following a detailed review by the Group there were no material changes to revenue recognition and profits across the Group with the exception of the Glanbia Nutritionals (GN) segment as outlined below.

The Group concluded that the relationship between GN and the Group JV partner Southwest Cheese (SWC) transitioned from an agent relationship to that of a principal following a change in the assessment criteria of a principal and agent within IFRS 15. The impact is as follows:

· Revenue and costs within GN were grossed up for all sales of SWC products on which previously only commission was recognised. Comparative numbers for 2018 have also been restated to reflect this change, in line with the transitional arrangements for IFRS 15

· There is no change to EBITA in GN or at Glanbia Group level

· Although there is no change to EBITA, as a result of the increase in revenue, there is dilution to the EBITA margin percentage of GN and consequently of the wholly-owned Group. Restatement of the 2018 revenue has resulted in a reduction in EBITA margin for the Group from the previously reported margin of 11.9% to a revised margin of 9.0%.

IFRS 16 'Leases'

IFRS 16 'Leases' comes into effect for the financial year commencing on 5 January 2020. Under the new accounting standard the fair value of all qualifying operating leases, representing the present value of the lease payments over the life of the lease, will be recognised as a right of use asset with a corresponding lease liability. The new standard will result in the removal of a rental charge from the Income Statement for the leases and will be replaced with a depreciation charge in respect of the right of use asset and an interest charge relating to the lease liability. The Group will adopt the modified retrospective approach to transition permitted by the standard in which the cumulative effect of initially applying the standard is recognised in opening retained reserves at the date of initial application. The Group expects to recognise right of use assets and lease liabilities of €105.8 million and €127.5 million respectively. We do not expect this change to have a material impact on the financial KPIs of Adjusted EPS or Return on Capital Employed. We expect EBITA to increase by €2.4 million, which will be offset by a corresponding increase in interest charge of €2.7 million.

Pension

The Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, increased in 2019 by €7.8 million to €46.3 million (2018: €38.5 million). The defined benefit pension liability is calculated by discounting the estimated future cash outflows using appropriate corporate bond rates. During 2019, the relevant corporate bond rates for both the Irish and UK pension schemes reduced significantly and this resulted in an increase to the net pension liability, despite the Group pension contributions made during the year.

Foreign exchange

Glanbia generates over 90% of its earnings in US dollar currency and has significant assets and liabilities denominated in US dollars. As a result, and as Glanbia's reporting currency is euro, there can be a significant impact to reported numbers arising from currency movements year-on-year and on translation of US dollar non-monetary assets and liabilities in the preparation of the Consolidated Financial Statements. Commentary has been provided within the income statement on a constant currency basis to provide a better reflection of the underlying operating results in the year, as this removes the translational currency impact. To arrive at the constant currency change, the average foreign exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. At the balance sheet date, due to the strengthening of the US dollar compared to prior year, there was a translation gain arising on the translation of US assets and liabilities into euro. The gain on translation of non-monetary assets and liabilities from US dollar to euro is presented within other comprehensive income and amounted to €46.7 million in the year. The retranslation of non-euro denominated debt resulted in a loss of €10.5 million within the cash flow statement. Average and year-end US dollar to euro rates were as follows:

	Average		Year end
	2019	2018	2019	2018
1 euro converted to US dollar	1.1196	1.1812	1.1147	1.1454

Financial strategy

Glanbia's financial strategy is very much aligned with its overall strategy of ensuring the Group delivers on its key financial goals. Specific financial goals to enable this strategy include:

· Assessing both external and organic investment opportunities against a target minimum benchmark of 12% return after tax by end of year three, with a goal of between 10% and 13% ROCE in any one year;

· Focusing the organisation on cash conversion through improved working capital management and disciplined business-sustaining capital expenditure, with a goal of greater that 80% cash conversion;

· Leveraging the Group's activities to enable improved cost structures utilising shared services, procurement, IT and a continuous improvement mindset;

· Maintaining the capital structure of the Group within an implicit investment-grade credit profile; and

· Dividend policy with a payout ratio of 25% - 35%

Brexit and international trade challenges

The UK departed from EU membership ("Brexit") on 31 January 2020. The process and its impact in terms of the exit deal including tariffs and trade agreements remain unclear and difficult to quantify at this point in time. 2019 was a year of uncertainty in relation to Brexit and the Group sought to mitigate potential risks as much as possible as outlined in the principal risks and uncertainties (below). An exceptional cost of €2.3m has been incurred in respect of this activity.

As global trade uncertainty continues, the impact of tariffs on international trade will continue to be monitored by the Group and mitigated as much as possible.

Investor relations

Glanbia continued its active investor relations initiatives in 2019. During the year, representatives from Glanbia presented at 12 investor conferences globally and held over 300 meetings with institutional investors. A shareholder survey was carried out at the end of 2019 by an independent research company which interviewed shareholders and other stakeholders to gain insights into how Glanbia's strategy, investment case and communications are perceived. A summary of the key findings and recommendations from this research was shared with the Glanbia Board. In addition, Glanbia engaged directly with its top 40 shareholders representing over 70% of the issued equity of Glanbia on remuneration policy which was led by the Chairman of the Remuneration Committee with Remuneration advisors, and findings were shared directly with Board and also published via RNS.

Principal Risks and Uncertainties

The Board of Glanbia plc has the ultimate responsibility for the Group's systems of risk management and internal control. The Directors of Glanbia have carried out a robust assessment of the Group's principal risks, including those that may threaten Glanbia's business model, future performance, solvency or liquidity. The Board has also updated the way risks are categorised. The approach recognises the external risks associated with the operating environment, which are typically considered and managed through strategic processes, and the mainly internal risks associated with people, processes and systems which are managed through Glanbia's internal controls. Emerging risks with the potential to impact longer term success are also considered to ensure appropriate plans are in place to respond to them over time.

The Group's principal risks and uncertainties are summarised in the risk profile diagram below. Changes to risks in the year include the reclassification of acquisition/integration risk from being a strategic risk to an operational risk. This reclassification recognises that a key Group focus for 2020 is the continued successful integration of the SlimFast and Watson acquisitions. New risks identified include digital transformation risk which recognises GPN's D2C ambitions and the IT infrastructure development required to support Glanbia's objectives. The Group has also considered the broad potential impacts of the new coronavirus strain which impacts a number of its principal risks. A project team is in place to assess these threats and ensure appropriate incident and response plans are in place. Above all, Glanbia will maintain its commitment to the health and safety of its employees and customers by putting people first. Climate change risk was added as an emerging risk recognising the Group's role in protecting the environment. The risk trend and associated volatility of a number of the Group's principal risks also fluctuated as outlined in the table. There may be other risks and uncertainties that are not yet considered material or not yet known to Glanbia and this list will change if these risks assume greater importance in the future. Likewise some of the current risks will drop off the key risks schedule as management actions are implemented or changes in the operating environment occur.

Strategic /
External

Financial

Technological

Operational / Regulatory

Emerging

Risk where trend
is stable

- Economic, industry and political

- Customer concentration

- Taxation changes

- Health & Safety

- Product safety and compliance

- Acquisition/Integration

Risk where trend
is increasing

- Market disruption

- Digital transformation

- Cyber security and data protection

- Talent management

- Supply chain

- Climate change

Key risk factors and uncertainties with the potential to impact on the Group's financial performance in 2020 include:

· Market disruption risk - Increasing competition, tariffs, currency volatility and channel shifts contributed to decreased sales volumes in 2019, particularly within GPN international markets. While the disruption threat remains in some of Glanbia's markets, it has reacted appropriately by working to better manage its routes-to-market, channel mix and by implementing a SKU rationalisation project to reduce the tail of under-performing SKUs. The continued execution of these programmes and effective implementation of the GPN focus areas in 2020 is important to ensuring a positive overall impact on revenue and margin;

· Economic, industry and political risk - As an international business Glanbia operates in many countries and currencies where changing economic conditions can impact the company. In 2019, this was evidenced by the negative impact from the introduction of trade tariffs. While the risk from this element of the geo-political climate appears to be reducing following positive US/China trade negotiations other uncertainties such as the nature of the UK's future trading relationship with the EU post the Brexit transition phase is still to be determined;

· Customer concentration - While from a strategic perspective the Group aims to build strong customer relationships with major customers, the loss or material disruption with one or more of these customers, or a significant deterioration in commercial terms, could materially impact profitability. It can also expose the Group to credit exposure and other balance sheet risks. The Board is focused on utilising available mitigation to limit such exposures where possible;

· Talent management - The investment in building a global talent pool and D2C capability may be negatively impacted by a failure to attract and retain top talent; and

· Supply chain - The ability of governments and medical agencies to contain the spread of the COVID-19 virus will be important in preventing unexpected supply chain disruptions which could result in restrictions on the importation of key raw materials and/or negative impacts on Glanbia's international sales channels. While appropriate safety stocks are in place for core raw materials, a prolonged impact to the supply chain would have negative consequences from both a supply and pricing perspective.

The Group actively manages these and all other risks through its risk management and internal control processes.

Annual General Meeting (AGM)

Glanbia plc's AGM will be held on Wednesday, 22 April 2020, in the Lyrath Estate Hotel, Lyrath, Kilkenny R95 F685, Ireland.

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.

On behalf of the Board

Siobhán Talbot Mark Garvey

Group Managing Director Group Finance Director

26 February 2020

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 9:00 a.m. GMT today. Please access the webcast from the Glanbia website at http://www.glanbia.com/investors/results-centre, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

Ireland: 01 246 5638

UK / International: +44 (0) 330 336 9125

USA: +1 323 794 2423

The access code for all participants is: 9871795

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

For further information contact

Glanbia plc +353 56 777 2200

Investor contact:

Liam Hennigan, Group Director of Strategic Planning & Investor Relations: +353 86 046 8375

Media contact:

Martha Kavanagh, Head of Corporate Communications: +353 87 646 2006

Group Income Statement

for the financial year ended 4 January 2020

			2019		2018 (restated)
	Notes	Pre- exceptional €'m	Exceptional €'m (note 4)	Total €'m	Pre- exceptional €'m	Exceptional €'m (note 4)	Total €'m
Revenue	3	3,875.7	-	3,875.7	3,170.5	-	3,170.5

Earnings before interest, tax and amortisation (EBITA)	3	276.8	(37.1)	239.7	284.9	-	284.9
Intangible asset amortisation and impairment	3	(60.9)	(2.0)	(62.9)	(45.9)	-	(45.9)

Operating profit	3	215.9	(39.1)	176.8	239.0	-	239.0

Finance income	5	6.2	-	6.2	3.9	-	3.9
Finance costs	5	(32.5)	-	(32.5)	(21.4)	-	(21.4)
Share of results of equity accounted investees		48.6	-	48.6	45.3	-	45.3

Profit before taxation		238.2	(39.1)	199.1	266.8	-	266.8
Income taxes	6	(23.4)	4.5	(18.9)	(32.8)	-	(32.8)

Profit attributable to the equity holders of the Company		214.8	(34.6)	180.2	234.0	-	234.0

Earnings Per Share attributable to the equity holders of the Company
Basic Earnings Per Share (cent)	7			61.04			79.28
Diluted Earnings Per Share (cent)	7			60.92			79.04

Group Statement of Comprehensive Income

for the financial year ended 4 January 2020

	Notes	2019 €'m	2018 €'m
Profit for the year		180.2	234.0

Other comprehensive income/(expense)
Items that will not be reclassified subsequently to the Group income statement:
Remeasurements on defined benefit plans, net of deferred tax		(14.1)	(0.3)
Share of other comprehensive income of equity accounted investees, net of deferred tax	11	(8.3)	(2.0)
Revaluation of equity investments at FVOCI*, net of deferred tax	10	(0.1)	-

Items that may be reclassified subsequently to the Group income statement:
Currency translation differences	10	46.7	58.6
Currency translation difference arising on net investment hedge	10	(2.4)	(3.9)
Disposal of AFS** financial assets, net of deferred tax		-	(3.5)
Loss on cash flow hedges, net of deferred tax		(2.0)	-
Share of other comprehensive income of equity accounted investees, net of deferred tax		(10.0)	(4.2)
Other comprehensive income for the year, net of tax		9.8	44.7

Total comprehensive income for the year attributable to equity holders of the Company		190.0	278.7

* Fair value through other comprehensive income ('FVOCI')

** Available for sale ('AFS')

Group Balance Sheet

as at 4 January 2020

	Notes	4 January 2020 €'m	(restated) 29 December 2018 €'m	(restated) 31 December 2017 €'m
ASSETS
Non-current assets
Property, plant and equipment		474.1	453.0	442.2
Intangible assets		1,344.6	1,304.0	959.8
Equity accounted investees		373.2	334.5	266.9
Other financial assets		3.4	-	-
Available for sale financial assets		-	3.7	11.1
Loans to equity accounted investees		28.8	29.8	-
Deferred tax assets		1.9	2.1	1.6
Retirement benefit assets		2.1	1.1	1.7
		2,228.1	2,128.2	1,683.3
Current assets
Current tax assets		23.7	9.6	11.3
Inventories		447.5	384.6	321.6
Trade and other receivables		432.3	411.6	351.1
Derivative financial instruments		0.3	1.5	2.2
Cash and cash equivalents (excluding bank overdrafts)	9	269.0	224.6	162.2
		1,172.8	1,031.9	848.4

Total assets		3,400.9	3,160.1	2,531.7

EQUITY
Issued capital and reserves attributable to equity holders of the Company
Share capital and share premium		105.4	105.4	105.4
Other reserves	10	269.1	240.9	190.0
Retained earnings	11	1,327.4	1,242.8	1,086.3
Total equity		1,701.9	1,589.1	1,381.7

LIABILITIES
Non-current liabilities
Financial liabilities	9	514.2	752.4	499.6
Deferred tax liabilities		168.6	160.3	125.6
Retirement benefit obligations		48.4	39.6	43.6
Provisions	12	-	24.9	24.0
Capital grants		-	-	0.1
Other payables		12.5	13.0	10.1
		743.7	990.2	703.0
Current liabilities
Trade and other payables		512.5	468.4	356.6
Current tax liabilities		67.7	59.7	52.0
Financial liabilities	9	369.1	48.9	30.3
Derivative financial instruments		2.4	0.5	0.3
Provisions	12	3.6	3.3	7.8
		955.3	580.8	447.0
Total liabilities		1,699.0	1,571.0	1,150.0

Total equity and liabilities		3,400.9	3,160.1	2,531.7

On behalf of the Board

Martin Keane Siobhán Talbot Mark Garvey

Directors

Group Statement of Changes in Equity

for the financial year ended 4 January 2020

	Attributable to equity holders of the Company
	Share capital and share premium €'m	Other reserves €'m (note 10)	Retained earnings €'m (note 11)	Total €'m
Balance at 30 December 2018	105.4	240.9	1,242.8	1,589.1

Profit for the year	-	-	180.2	180.2
Other comprehensive income/(expense)	-	32.2	(22.4)	9.8
Total comprehensive income for the year	-	32.2	157.8	190.0

Transactions with equity holders of the Company
Contributions and distributions
Dividends	-	-	(74.3)	(74.3)
Purchase of own shares	-	(7.6)	-	(7.6)
Cost of share-based payments	-	4.6	-	4.6
Transfer on exercise, vesting or expiry of share-based payments	-	(1.0)	1.0	-
Deferred tax on share-based payments	-	-	0.1	0.1

Balance at 4 January 2020	105.4	269.1	1,327.4	1,701.9

Balance at 1 January 2018	105.4	190.0	1,086.3	1,381.7

Profit for the year	-	-	234.0	234.0
Other comprehensive income/(expense)	-	47.0	(2.3)	44.7
Total comprehensive income for the year	-	47.0	231.7	278.7

Transactions with equity holders of the Company
Contributions and distributions
Dividends	-	-	(76.0)	(76.0)
Purchase of own shares	-	(4.3)	-	(4.3)
Cost of share-based payments	-	8.8	-	8.8
Transfer on exercise, vesting or expiry of share-based payments	-	(0.6)	0.6	-
Deferred tax on share-based payments	-	-	0.2	0.2

Balance at 29 December 2018	105.4	240.9	1,242.8	1,589.1

Group Statement of Cash Flows

for the financial year ended 4 January 2020

	Notes	2019 €'m	2018 €'m
Cash flows from operating activities
Cash generated from operating activities	13	285.9	316.5
Interest received		3.7	4.8
Interest paid		(32.5)	(21.0)
Tax paid		(44.6)	(25.2)
Net cash inflow from operating activities		212.5	275.1

Cash flows from investing activities acquired
Payment for acquisition of subsidiaries, net of cash and cash equivalents		(58.3)	(313.0)
Purchase of property, plant and equipment		(42.7)	(32.0)
Purchase of intangible assets		(33.6)	(30.6)
Interest paid in relation to property, plant and equipment	5	(0.7)	(0.8)
Dividends received from equity accounted investees		35.3	31.6
Loans advanced to equity accounted investees		-	(17.0)
Repayment of loans advanced to equity accounted investees		1.0	-
Investment in equity accounted investees		(48.4)	(41.9)
Proceeds from disposal/redemption of FVOCI financial assets (2018: AFS financial assets)		0.5	7.9
Payments for FVOCI financial assets (2018: AFS financial assets)		(0.4)	(0.3)
Proceeds from sale of property, plant and equipment		0.2	1.3
Net cash outflow from investing activities		(147.1)	(394.8)

Cash flows from financing activities
Purchase of own shares	10	(7.6)	(4.3)
Drawdown of borrowings		606.2	370.7
Repayment of borrowings		(599.9)	(130.5)
Finance lease payments		-	(0.3)
Dividends paid to Company shareholders	8	(74.3)	(76.0)
Net cash (outflow)/inflow from financing activities		(75.6)	159.6

Net (decrease)/increase in cash and cash equivalents		(10.2)	39.9
Cash and cash equivalents at the beginning of the year		175.7	132.1
Cash acquired on acquisition		(4.2)	-
Effects of exchange rate changes on cash and cash equivalents		3.4	3.7

Cash and cash equivalents at the end of the year	9	164.7	175.7

Notes to the Financial Statements

for the financial year ended 4 January 2020

1. Accounting policies

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 4 January 2020 (referred to as the 2019 financial statements). The Group financial statements have been prepared in accordance with EU adopted International Financial Reporting Standards (IFRS), IFRIC interpretations and those parts of the Companies Act 2014, applicable to companies reporting under IFRS. The 2019 financial statements have been audited and have received an unqualified audit report. Amounts are stated in euro millions (€'m) unless otherwise stated. These financial statements are prepared for the 53-week period ended 4 January 2020. Comparatives are for the 52-week period ended 29 December 2018. The balance sheets for 2019 and 2018 have been drawn up as at 4 January 2020 and 29 December 2018 respectively. After making enquiries, the Directors have reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group financial statements.

The financial information has been prepared under the historical cost convention as modified by use of fair values for certain other financial assets and derivative financial instruments.

The Group's accounting policies which will be included in the 2019 financial statements are consistent with those as set out in the 2018 financial statements, except for changes in respect of IFRS 9 'Financial Instruments' and IFRS 15 'Revenue from Contracts with Customers' as described below. Other than IFRS 9 and IFRS 15, there are no new IFRS standards or amendments effective for the Group in 2019 which had a material impact on the financial statements.

The financial statements were approved by the Board of Directors on 25 February 2020 and signed on its behalf by Mn Keane, S Talbot, and M Garvey.

Adoption of new and amended standards, and interpretations

The Group has adopted the following standards, interpretations and amendments to existing standards during the financial year:

IFRS 9 'Financial Instruments'

IFRS 9 is the standard which replaces IAS 39 'Financial Instruments: Recognition and Measurement'. The standard addresses the classification, measurement and derecognition of financial assets and liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The Group has adopted IFRS 9 from 30 December 2018. Comparatives for 2018 have not been restated. The impact of adopting IFRS 9 was not material for the Group financial statements and there was no adjustment to retained earnings at 30 December 2018 on application of the standard.

Classification and measurement

IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities. However, it removes the previous IAS 39 categories for financial assets of held-to-maturity, loans and receivables and available for sale. Under IFRS 9, on initial recognition, a financial asset is classified as measured at amortised cost or fair value through other comprehensive income, or fair value through profit or loss. The classification is based on the business model for managing the financial assets and the contractual terms of the cash flows. Results of the assessment of the classification of financial assets are as follows:

Financial asset category	Classification and measurement under IAS 39	Results of IFRS 9 classification assessment	Classification and measurement under IFRS 9
Cash and cash equivalents Trade and other receivables Loans to equity accounted investees	Loans and receivables at fair value (initial recognition) followed by amortised cost (subsequent measurement)	Business model test: hold to collect contractual cash flows Cash flow characteristics: solely payments of principal and interest	Financial assets at fair value (initial recognition) followed by amortised cost (subsequent measurement)
Other financial assets	Available for sale assets at fair value (initial recognition and subsequent measurement) with subsequent changes in fair value recognised in other comprehensive income ('OCI'). When an asset is derecognised or impaired, cumulative gain or loss in OCI is reclassified from equity to the income statement	Business model test: hold to collect contractual cash flows Cash flow characteristics: solely payments of principal and interest	Financial assets at fair value (initial recognition) followed by amortised cost (subsequent measurement) Pertains to the financial asset - Ornua Co-operative Limited
Other financial assets		Election is made to present fair value changes in OCI and not recycle any gains or losses arising on its de-recognition to the income statement	Financial assets at fair value (initial recognition and subsequent measurement) followed by subsequent changes in fair value recognised in equity permanently Pertains to equity instruments

Other than what is disclosed in the preceding table there are no changes to the measurement and classification of remaining financial assets and liabilities determined in accordance with IAS 39 and IFRS 9. There is no impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.

Impairment

IFRS 9 has introduced a new impairment model which requires the recognition of impairment allowance based on expected credit losses rather than only incurred credit losses as is the case under IAS 39. It is applied to the Group's financial assets within the scope of IFRS 9, contract assets under IFRS 15, lease receivables and certain financial guarantees held for its subsidiaries. For trade receivables, the Group applies the IFRS 9 simplified approach to measure expected credit losses which uses a lifetime expected loss allowance. Trade receivables are written off when there is no reasonable expectation of recovery. The change in impairment methodology from implementing IFRS 9 did not have a material impact on the Group's financial statements.

Hedge Accounting

The Group has elected to adopt the new general hedge accounting model in IFRS 9. The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, there is no impact to the Group's results.

IFRS 15 'Revenue from Contracts with Customers'

The Group adopted the full retrospective approach, and has restated the prior year Group income statement and balance sheet and disclosed the opening balance sheet at 31 December 2017. The Group has assessed the impact of implementing IFRS 15 and, with the exception of the matter set out below, has not identified any material impact resulting from transition to the new standard.

Following a review of all material contracts with customers, the Group has concluded that the change from the risk and reward model under IAS 18 to the control model under IFRS 15 led to the Group's relationship within the Glanbia Nutritionals segment with its joint venture, Southwest Cheese Company, LLC to transition from an agent relationship to that of a principal as the Group controls the promised goods before transferring them to the customers. The legal position of the relationship with the joint venture remains the same. The transition to IFRS 15 results in a gross up of revenue and costs as follows:

For the financial year ended 29 December 2018	Notes	Previously reported €'m	Adjustment €'m	Restated Under IFRS 15 €'m
Revenue	3	2,386.3	784.2	3,170.5
Cost of goods sold	3	(1,706.2)	(767.1)	(2,473.3)
Gross profit	3	680.1	17.1	697.2
Selling and distribution expenses	3	(234.9)	(17.1)	(252.0)
Administration expenses	3	(160.3)	-	(160.3)

EBITA	3	284.9	-	284.9

Although there is no change to EBITA, as a result of the increase in revenue, there is a dilution to the EBITA margin of the Glanbia Nutritionals segment and the Group. For the 2019 financial year, revenue and costs relating to this arrangement are shown gross in the Group income statement. There is no change to basic or diluted EPS.

The transition to IFRS 15 described above also results in a gross up of outstanding trade receivables and amounts due to equity accounted investees which are recorded in the line items on the balance sheet "Trade and other receivables - current" and "Trade and other payables - current" respectively:

Balance sheet as at 29 December 2018	Previously reported €'m	Adjustment €'m	Restated under IFRS 15 €'m
Trade and other receivables - current	350.2	61.4	411.6
Trade and other payables - current	(407.0)	(61.4)	(468.4)

Balance sheet as at 31 December 2017
Trade and other receivables - current	302.4	48.7	351.1
Trade and other payables - current	(307.9)	(48.7)	(356.6)

Early adoption of Amendments to IFRS 9, IAS 39 and IFRS 7 'Interest Rate Benchmark Reform'

The Group has chosen to early apply the amendments to IFRS 9/IAS 39 for the financial year ended 4 January 2020, which are mandatory for annual reporting periods beginning on or after 1 January 2020. These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the on going interest rate benchmark reforms. The amendments are relevant to the Group given that it has EURIBOR floating rate debt which it cash flow hedges using EURIBOR interest rate swaps. Early adoption of the amendments allows the Group to continue hedge accounting and retain the cumulative gain or loss in the cash flow hedge reserve relating to the interest rate swaps designated as cash flow hedges even though there is uncertainty about the timing and amount of the hedged cash flows due to the interest rate benchmark reforms.

New and amended standards and interpretations that are not yet effective

The Group has not applied certain new standards and amendments to existing standards that have been issued but are not yet effective. The most significant of which are as follows:

IFRS 16 'Leases'

This standard will be effective for and will be adopted by the Group for the 2020 financial year beginning 5 January 2020 as the 2019 financial year is for the 53-week period ended 4 January 2020. The Group's evaluation of the effect of adoption of IFRS 16 is in its final stages and the findings are detailed as follows.

The Group expects that the adoption of IFRS 16 will have a material impact on the financial statements, significantly increasing the Group's recognised assets and liabilities. The Group commenced a comprehensive project to assess the impact of IFRS 16 during 2018 which is still ongoing. This project includes an accounting assessment of the impact of the implementation of new processes and procedures, including new lease accounting software, to ensure leases are accounted for in line with the new standard from the commencement of our 2020 financial year.

The Group expects to adopt the modified retrospective approach to transition permitted by the standard in which the cumulative effect of initially applying the standard is recognised in opening retained earnings at 5 January 2020. In applying IFRS 16 for the first time, the Group intends to avail of practical expedients/exemptions including:

• applying a single discount rate to a portfolio of leases with reasonably similar characteristics

• relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review

• accounting for operating leases with a remaining lease term of within 12 months of 5 January 2020 as short-term leases

• using hindsight in determining the lease term where the contract contains options to extend or terminate the lease

• not reassessing whether a contract is, or contains a lease at the date of initial application

• not making any adjustments on transition for leases for which the underlying asset is of low value

The Group's assessment of the impact of adopting IFRS 16 is in the process of being finalised. The actual adjustment can differ to the estimated impact provided below due to changes in underlying assumptions. Based on the work performed to date, the expected impact of IFRS 16 on the 2020 financial year is as follows:

• lease liabilities and right-of-use assets on 5 January 2020: increase of approximately €127.5 million and €105.8 million respectively

• return on capital employed on 5 January 2020: decrease of approximately 0.4%

• finance costs: increase of approximately €2.7 million

• operating profit: increase of approximately €2.4 million

• adjusted earnings used to calculate Adjusted Earnings Per Share: increase of approximately €0.3 million

IFRS 16 will have no impact on the Group's net cash flows but the lease repayment outflows will be disclosed as financing cash outflow, instead of operating cash outflow. Net debt is a non-IFRS measure and does not comprise of lease liabilities determined in accordance with IFRS 16 which is consistent with net debt as defined within financing covenants. Covenants are accordingly not affected on transition to IFRS 16.

There were no significant judgements or estimates made in applying IFRS 16 that would have a material impact on the Group. However, it is noted that estimation is involved in determining incremental borrowing rate (IBR) which is used to measure lease liabilities. The Group estimates the IBR based on the currency and country/region in which a lease is based, the lease duration, and the credit quality of the lessee.

IFRIC 23 'Uncertainty over Income Tax Treatments' (EU effective date: on or after 1 January 2019)

The interpretation will be effective for and will be adopted by the Group for the 2020 financial year beginning 5 January 2020. The interpretation sets out how to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12 'Income taxes'. The Group is finalising its evaluation of the impact of this interpretation on the financial statements. The Group does not expect the adoption of this interpretation to have a material impact on the financial statements, as the Group already applies the principles of IFRIC 23 in determining its uncertain tax provisions.

Amendments to IFRS 3 'Business Combinations' (IASB effective date: on or after 1 January 2020 - not yet endorsed)

The amendments clarify the definition of a business to help entities determine whether an acquired set of activities and assets is a business or not. The Group is currently evaluating the impact of the amendments on future periods.

Other changes to IFRS have been issued but are not yet effective for the Group. However, they are either not expected to have a material impact on the Group or they are not currently relevant for the Group.

2. Segment information

In accordance with IFRS 8 'Operating Segments', the Group, including its joint ventures, has identified three reportable segments as follows:

Glanbia Performance Nutrition

Glanbia Performance Nutrition manufactures and sells sports nutrition and lifestyle nutrition products through a variety of channels including speciality retail, e-Commerce, Food/Drug/Mass/Club (FDMC), and gyms in a variety of formats, including powders, Ready-to-Eat (bars and snacking foods) and Ready-to-Drink beverages.

Glanbia Nutritionals

Glanbia Nutritionals manufactures and sells cheese, dairy and non-dairy nutritional and functional ingredients, and vitamin and mineral premixes targeting the increased market focus on health and nutrition (refer to note 1 on IFRS 15 transition).

Glanbia Ireland

Glanbia Ireland is the largest milk processor in Ireland producing a range of value added dairy ingredients and consumer products. Glanbia Ireland is also a large scale seller of animal nutrition and fertilizer as well as having a chain of agricultural retail outlets in Ireland. Glanbia Ireland is an equity accounted investee and the amounts stated represent the Group's share.

Other segments and unallocated

All other segments and unallocated include both the results of other equity accounted investees who manufacture and sell cheese and dairy ingredients and unallocated corporate costs. These investees did not meet the quantitative thresholds for reportable segments in 2019 or 2018.

These segments align with the Group's internal financial reporting system and the way in which the Chief Operating Decision Maker ('CODM') assesses performance and allocates the Group's resources. Each segment is reviewed in its totality by the CODM. The CODM assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items (EBITA). Given that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for the purposes of the information presented to the CODM and are accordingly omitted from the detailed segmental analysis below.

Amounts stated for equity accounted investees represents the Group's share.

Pre-exceptional segment results are as follows:

2019

Glanbia

Performance

Nutrition

€'m

Glanbia

Nutritionals

€'m

Glanbia

Ireland

€'m

Total

reportable

segments

€'m

All other

segments and

unallocated

€'m

Total

Group

€'m

Total gross segment revenue

1,363.8

2,547.8

3,911.6

Inter-segment revenue

(35.9)

Revenue

1,363.8

2,511.9

3,875.7

Total Group earnings before interest, tax, amortisation and exceptional items

146.4

130.4

276.8

Share of results of equity accounted investees

22.2

26.4

48.6

2018 (restated)

Total gross segment revenue

1,179.6

2,026.9

3,206.5

Inter-segment revenue

(36.0)

Revenue

1,179.6

1,990.9

3,170.5

Total Group earnings before interest, tax, amortisation
and exceptional items

173.1

111.8

284.9

Share of results of equity accounted investees

22.0

23.3

45.3

Included in external revenue are related party sales between Glanbia Nutritionals and Glanbia Ireland of €0.4 million (2018 restated: €0.6 million) and between Glanbia Performance Nutrition and Glanbia Ireland of nil (2018: €0.9 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.

Revenue of approximately €405.6 million (2018 restated: €273.3 million) and €705.4 million (2018 restated: €567.3 million) is derived from two external customers respectively within the Glanbia Nutritionals segment.

Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax in the Group income statement.

Other pre-exceptional segment information is as follows:

2019	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Depreciation and impairment of PPE	17.5	30.6	-	48.1	-	48.1
Amortisation and impairment of intangibles	44.3	16.6	-	60.9	-	60.9
Capital expenditure - additions	23.6	47.1	-	70.7	4.6	75.3
Capital expenditure - business combinations	1.2	51.5	-	52.7	-	52.7

2018
Depreciation and impairment of PPE	16.1	26.9	-	43.0	-	43.0
Amortisation and impairment of intangibles	34.9	11.0	-	45.9	-	45.9
Capital expenditure - additions	28.2	34.3	-	62.5	5.3	67.8
Capital expenditure - business combinations	321.0	-	-	321.0	-	321.0

The segment assets and liabilities are as follows:

2019	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Segment assets	1,709.1	977.6	227.0	2,913.7	487.2	3,400.9
Segment liabilities	350.8	331.8	-	682.6	1,016.4	1,699.0
2018 (restated)
Segment assets	1,728.6	798.9	225.4	2,752.9	407.2	3,160.1
Segment liabilities	367.8	255.3	-	623.1	947.9	1,571.0

Geographical information

Revenue

Revenue from external customers is allocated to geographical areas based on the place of delivery or collection of the products sold as agreed with customers as opposed to the end use market where the product may be consumed.

		2019			2018 (restated)
	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Total €'m	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Total €'m
North America
US	941.0	2,185.4	3,126.4	702.3	1,731.0	2,433.3
Canada	15.9	58.2	74.1	7.3	42.2	49.5
Mexico	3.7	32.4	36.1	4.3	26.1	30.4
Europe
Ireland (country of domicile)	3.0	2.3	5.3	1.4	2.1	3.5
UK	92.3	15.4	107.7	68.7	9.9	78.6
Netherlands	55.5	29.0	84.5	47.9	24.8	72.7
Germany	11.3	19.4	30.7	10.1	19.5	29.6
Rest of Europe	80.6	29.6	110.2	121.3	26.1	147.4
International
China	20.1	51.1	71.2	12.8	43.6	56.4
Australia	27.3	7.3	34.6	27.2	6.7	33.9
Rest of World	113.1	81.8	194.9	176.3	58.9	235.2
Total	1,363.8	2,511.9	3,875.7	1,179.6	1,990.9	3,170.5

There are numerous countries in "Rest of World" including UAE, India and Brazil.

Non-current assets

The total of non-current assets, other than financial instruments, deferred tax assets, and retirement benefit assets attributable to the country of domicile and all foreign countries of operation for which non-current assets exceed 10% of total Group non-current assets are set out below.

	2019 €'m	2018 €'m
Ireland (country of domicile)	892.3	816.0
US	1,127.4	1,080.4
Others	172.2	224.8

	2,191.9	2,121.2

Disaggregation of revenue

Revenue is disaggregated based on the primary geographical markets in which the Group operates (see table above within Geographical Information). Revenue has also been disaggregated based on the Group's internal reporting structures and by the timing of revenue recognition as set out in the tables below.

		2019			2018 (restated)
	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Total €'m	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Total €'m
North America Performance Nutrition	538.3	-	538.3	553.2	-	553.2
North America Lifestyle	392.0	-	392.0	162.2	-	162.2
International	358.7	-	358.7	395.1	-	395.1
Direct-to-Consumer	74.8	-	74.8	69.1	-	69.1
Nutritional Solutions	-	744.9	744.9	-	577.0	577.0
US Cheese	-	1,767.0	1,767.0	-	1,413.9	1,413.9

Total	1,363.8	2,511.9	3,875.7	1,179.6	1,990.9	3,170.5

Products transferred at point in time	1,363.8	2,511.9	3,875.7	1,179.6	1,990.9	3,170.5
Products transferred over time	-	-	-	-	-	-

Total	1,363.8	2,511.9	3,875.7	1,179.6	1,990.9	3,170.5

3. Operating profit

			2019			2018 (restated)
	Notes	Pre- exceptional €'m	Exceptional (note 4) €'m	Total €'m	Pre- exceptional €'m	Exceptional (note 4) €'m	Total €'m
Revenue		3,875.7	-	3,875.7	3,170.5	-	3,170.5
Cost of goods sold		(3,095.8)	(19.1)	(3,114.9)	(2,473.3)	-	(2,473.3)
Gross profit		779.9	(19.1)	760.8	697.2	-	697.2
Selling and distribution expenses		(340.4)	-	(340.4)	(252.0)	-	(252.0)
Administration expenses		(162.7)	(18.0)	(180.7)	(160.3)	-	(160.3)
Earnings before interest, tax and amortisation (EBITA)		276.8	(37.1)	239.7	284.9	-	284.9
Intangible asset amortisation and impairment	13	(60.9)	(2.0)	(62.9)	(45.9)	-	(45.9)
Operating profit		215.9	(39.1)	176.8	239.0	-	239.0

4. Exceptional items

The nature of the total exceptional operating loss is as follows:

	Notes	2019 €'m
Organisational redesign costs	(a)	12.7
Asset impairments	(b)	17.3
Acquisition integration costs	(c)	6.8
Brexit related costs	(d)	2.3
Total exceptional charge before taxation		39.1

Exceptional tax credit	6	(4.5)

Total exceptional charge after taxation		34.6

During 2019 there were cash outflows of €12.0 million in respect of exceptional charges recognised in FY2019. During 2018 there were cash outflows of €2.6 million in respect of exceptional charges incurred prior to FY2018. There were no exceptional items in 2018.

(a) Organisational redesign costs relate primarily to a fundamental reorganisation of the Glanbia Performance Nutrition segment, including the creation of distinct North America Performance Nutrition, North America Lifestyle, International and Direct-to-Consumer businesses. Costs incurred to-date are professional consultancy of €7.9 million and redundancy and employment related costs including recruitment costs and costs of relocating people to new markets and geographies to support the organisation change of €4.8 million. This restructuring programme will continue into 2020.

(b) Asset impairments comprise the write down of inventory to net realisable value of €14.9 million, related development assets of €2.0 million and some fixed assets of €0.4 million in the GPN business. The impairment of inventory arises from i) sales volume declines in certain non-US markets resulting in surplus inventories of €5.6 million, ii) unsuccessful innovation SKUs in the US Food/Drug/Mass/Club (FDMC) channels of €5.7 million, iii) the cost of discontinuing a significant number of other North American SKUs of €2.6 million in order to reduce SKU complexity and simplify the supply chain; and iv) other inventory impairments of €1.0 million. Overall these inventory impairments will result in a significant simplification within the GPN business resulting in approximately 1,200 SKUs (35% of total) being discontinued. This level of inventory impairment is substantially in excess of past experience in the GPN business and none of the SKUs rationalized will be manufactured or contracted for going forward. Based on the past 12 months sales, the revenue related to the discontinued SKUs is approximately 5% of total GPN revenues, the vast majority of which is expected to be retained through sales of alternative GPN SKUs.

(c) Acquisition integration costs comprise costs relating to the integration and restructuring of acquired businesses and the transaction costs incurred in completing the current year acquisition. The charge comprised professional fees of €2.5 million, employee benefit costs of €1.2 million and inventory impairments of €3.1 million following a post acquisition assessment of the product portfolio of the acquired businesses.

(d) Brexit related costs have been incurred in preparing the organisation for the departure of the United Kingdom from the European Union. Costs incurred include professional fees and increased storage and production costs as the Group sought to mitigate the potential risks related to Brexit during 2019.

5. Finance income and costs

	2019 €'m	2018 €'m
Finance income
Interest income on loans at amortised cost to related parties	1.3	0.4
Interest income on deposits	4.7	3.1
Net interest income on cross currency swaps	0.2	0.4

Total finance income	6.2	3.9

Finance costs
Bank borrowing costs	(24.0)	(12.2)
Facility fees including cost amortisation	(1.1)	(2.0)
Finance cost of private placement debt	(7.4)	(7.2)

Total finance costs	(32.5)	(21.4)

Net finance costs	(26.3)	(17.5)

Net finance costs do not include bank borrowing costs of €0.7 million (2018: €0.8 million) attributable to the acquisition, construction or production of a qualifying asset, which have been capitalised. Interest is capitalised at the Group's average interest rate for the period of 3.4% (2018: 4.3%). Where relevant, tax deduction for capitalised interest was taken in accordance with Sec 81(3), TCA 1997. Tax relief in relation to capitalised interest is nil (2018: nil).

6. Income taxes

	2019 €'m	2018 €'m
Current tax Irish current tax charge	3.2	15.7
Adjustments in respect of prior years	0.9	(0.9)
Irish current tax for the year	4.1	14.8

Foreign current tax	16.0	17.9
Adjustments in respect of prior years	(0.9)	1.0
Foreign current tax for the year	15.1	18.9

Total current tax	19.2	33.7

Deferred tax
Deferred tax - current year	(1.2)	(0.7)
Adjustments in respect of prior years	0.9	(0.2)

Total deferred tax	(0.3)	(0.9)

Tax charge	18.9	32.8
The tax credit on exceptional items included in the above amounts is as follows:
	2019 €'m	2018 €'m
Current tax credit on exceptional items	(4.4)	-
Deferred tax credit on exceptional items	(0.1)	-

Total tax credit on exceptional items for the year	(4.5)	-

The net tax credit on exceptional items in 2019 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:

	2019 €'m	2018 €'m
Profit before tax	199.1	266.8
Income tax calculated at Irish rate of 12.5% (2018: 12.5%)	24.9	33.3
Earnings at higher Irish rates	0.2	0.4
Difference due to overseas tax rates (capital and trading)	4.0	3.3
Adjustment to tax charge in respect of previous periods	0.9	(0.1)
Tax on share of results of equity accounted investees included in profit before tax	(6.2)	(5.7)
Other reconciling differences	(4.9)	1.6

Total tax charge	18.9	32.8

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 and further clarification on certain application matters in relation to the Tax Cuts and Jobs Act enacted in December 2017 in the US. The total tax charge of the Group may also be influenced by the effects of corporate development activity and the resolution of uncertain tax positions where the final outcome of those matters is different than the amounts recorded using the probability weighted expected value approach which is considered to be the best predictor of the final outcome.

7. Earnings Per Share

Basic

Basic Earnings Per Share is calculated by dividing the net profit attributable to the equity holders of the Company 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. The weighted average number of ordinary shares in issue used in the calculation of Basic Earnings Per Share is 295,215,046 (2018: 295,159,530).

	2019	2018
Profit after tax attributable to equity holders of the Company (€'m)	180.2	234.0

Basic Earnings Per Share (cent)	61.04	79.28

Diluted

Diluted Earnings Per Share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potential dilutive ordinary shares. Share options and share awards are the Company's only potential dilutive ordinary shares.

The share awards, which are performance based, are treated as contingently issuable shares, because their issue is contingent upon satisfaction of specified performance conditions, as well as the passage of time. Contingently issuable shares are included in the calculation of Diluted Earnings Per Share to the extent that conditions governing exercisability have been satisfied, as if the end of the reporting period were the end of the vesting period. The number of share options represents the number expected to be exercised.

	2019	2018
Weighted average number of ordinary shares in issue	295,215,046	295,159,530
Shares deemed to be issued for no consideration in respect of:
- Share awards	543,676	858,826
- Share options	27,441	28,182

Weighted average number of shares used in the calculation of Diluted Earnings Per Share	295,786,163	296,046,538

Diluted Earnings Per Share (cent)	60.92	79.04

8. Dividends

The dividends paid and recommended on ordinary share capital are as follows:

	Notes	2019 €'m	2018 €'m
Equity dividends to shareholders
Final - paid 14.49c per ordinary share (2018: 16.09c)		42.9	47.6
Interim - paid 10.68c per ordinary share (2018: 9.71c)		31.6	28.7

Total		74.5	76.3

Reconciliation to Group statement of cash flows and statement of changes in equity
Dividends to shareholders		74.5	76.3
Waived dividends in relation to own shares		(0.2)	(0.3)

Total dividends paid to equity holders of the Company		74.3	76.0

Equity dividends recommended
Final 2019 - proposed 15.94c per ordinary share (2018: 14.49c)	15	47.2	42.9

9. Net debt

	2019 €'m	2018 €'m
Non-current Bank borrowings	374.3	616.2
Private placement debt	139.9	136.2
	514.2	752.4
Current Bank borrowings	264.8	-
Bank overdrafts	104.3	48.9
	369.1	48.9

Total financial liabilities	883.3	801.3

Net debt is a non-IFRS measure which we provide to investors as we believe they find it useful. Net debt comprises the following:

	2019 €'m	2018 €'m
Private placement debt	139.9	136.2
Bank borrowings	151.6	147.5
Not subject to interest rate changes*	291.5	283.7

Bank borrowings	487.5	468.7
Cash and cash equivalents net of bank overdrafts	(164.7)	(175.7)
Subject to interest rate changes*	322.8	293.0

	614.3	576.7

*Taking into account of contractual repricing dates at the reporting date.

	2019 €'m	2018 €'m
Cash at bank and in hand	260.1	216.4
Short term bank deposits	8.9	8.2
Cash and cash equivalents in the Group balance sheet	269.0	224.6
Bank overdrafts used for cash management purposes	(104.3)	(48.9)

Cash and cash equivalents in the Group statement of cash flows	164.7	175.7

10. Other reserves

	Capital reserve €'m	Merger reserve €'m	Currency reserve €'m	Hedging reserve €'m	FVOCI reserve* €'m	Own shares €'m	Share- based payment reserve €'m	Total €'m
Balance at 30 December 2018	2.8	113.1	126.4	(1.0)	(0.1)	(14.4)	14.1	240.9

Currency translation differences	-	-	46.7	-	-	-	-	46.7
Net investment hedge	-	-	(2.4)	-	-	-	-	(2.4)
Revaluation - gross	-	-	-	(16.9)	(0.2)	-	-	(17.1)
Reclassification to profit or loss - gross	-	-	-	1.3	-	-	-	1.3
Deferred tax	-	-	-	3.6	0.1	-	-	3.7
Net change in OCI	-	-	44.3	(12.0)	(0.1)	-	-	32.2
Purchase of own shares	-	-	-	-	-	(7.6)	-	(7.6)
Cost of share-based payments	-	-	-	-	-	-	4.6	4.6
Transfer on exercise, vesting or expiry of share-based payments	-	-	-	-	-	8.0	(9.0)	(1.0)
Balance at 4 January 2020	2.8	113.1	170.7	(13.0)	(0.2)	(14.0)	9.7	269.1
Balance at 31 December 2017	2.8	113.1	71.7	3.2	3.4	(19.1)	14.9	190.0

Currency translation differences	-	-	58.6	-	-	-	-	58.6
Net investment hedge	-	-	(3.9)	-	-	-	-	(3.9)
Revaluation - gross	-	-	-	(5.5)	-	-	-	(5.5)
Reclassification to profit or loss - gross	-	-	-	0.3	(5.3)	-	-	(5.0)
Deferred tax	-	-	-	1.0	1.8	-	-	2.8
Net change in OCI	-	-	54.7	(4.2)	(3.5)	-	-	47.0
Purchase of own shares	-	-	-	-	-	(4.3)	-	(4.3)
Cost of share-based payments	-	-	-	-	-	-	8.8	8.8
Transfer on exercise, vesting or expiry of share-based payments	-	-	-	-	-	9.0	(9.6)	(0.6)
Balance at 29 December 2018	2.8	113.1	126.4	(1.0)	(0.1)	(14.4)	14.1	240.9

*AFS financial asset reserve at and before 29 December 2018.

11. Retained earnings

	2019 €'m	2018 €'m
At the beginning of the year	1,242.8	1,086.3
Profit for the period Other comprehensive income/(expense) - Remeasurement on defined benefit plans	180.2 (14.6)	234.0 (0.5)
- Deferred tax on remeasurements on defined benefit plans	0.5	0.2
- Share of remeasurements on defined benefit plans from equity accounted investees, net of deferred tax	(8.3)	(2.0)
Net change in OCI	(22.4)	(2.3)
Dividends	(74.3)	(76.0)
Transfer on exercise, vesting or expiry of share-based payments	1.0	0.6
Deferred tax on share-based payments	0.1	0.2
At the end of the year	1,327.4	1,242.8

12. Provisions

	Restructuring €'m note (a)	Legal claims €'m note (b)	Property and lease commitments €'m note (c)	Operational €'m note (d)	Regulatory and related provisions €'m note (e)	Total €'m
At 30 December 2018 - non-current	-	-	2.8	-	22.1	24.9
At 30 December 2018 - current	0.1	1.7	-	0.8	0.7	3.3

Reclassification	-	-	-	-	(22.8)	(22.8)
Amount provided for in the year	0.8	-	-	-	-	0.8
Utilised in the year	-	(1.7)	(0.1)	-	-	(1.8)
Unused amounts reversed in the year	-	-	(0.6)	(0.3)	-	(0.9)
Exchange differences	-	-	-	0.1	-	0.1
At 4 January 2020 - current	0.9	-	2.1	0.6	-	3.6

(a) The restructuring provision relates mainly to a redundancy provision arising from the ongoing strategic review within the Glanbia Performance Nutrition segment. The provision at 4 January 2020 is expected to be settled within the next 12 months.

(b) The legal claims provision represented legal claims brought against the Group. All legal claims were settled during the year.

(c) The property and lease commitments provision relates to property remediation works and is based on the estimated cost of re-instating a property to its original condition. Due to the nature of the remediation works there is some uncertainty around the amount and timing of payments.

(d) The operational provision represents provisions relating to certain insurance claims and other items. Due to the nature of these items, there is some uncertainty around the amount and timing of payments.

(e) The regulatory and related provision at 30 December 2018 represented provisions relating to the interest and penalties element of uncertain tax positions and the UK pension provision. Reclassifications have taken place in the year moving regulatory and related provisions to tax balances and accrued expenses to better reflect the nature of the items.

13. Cash generated from operating activities

	Notes	2019 €'m	2018 €'m
Profit after taxation		180.2	234.0
Income taxes	6	18.9	32.8
Net write down/(write back) of inventories (pre-exceptional)		5.3	(0.3)
Non-cash movement in allowance for impairment of receivables		1.8	1.5
Non-cash element of exceptional charge before taxation		27.1	-
Non-cash movement in provisions		(0.9)	(1.1)
Non-cash movement on cross currency swaps and fair value hedges		0.8	1.0
Share of results of equity accounted investees		(48.6)	(45.3)
Depreciation of tangible assets		48.1	43.0
Amortisation of intangible assets	3	60.9	45.9
Cost of share-based payments		4.6	8.8
Difference between pension charge and cash contributions		(7.6)	(3.7)
Loss/(gain) on disposal of property, plant and equipment		0.2	(0.3)
Finance income	5	(6.2)	(3.9)
Finance expense	5	32.5	21.4
Amortisation of government grants received		-	(0.1)
Net loss on disposal of investments		-	0.2
Recycle of AFS reserve to the Group income statement on disposal of investment		-	(5.3)
Operating cash flows before movement in working capital		317.1	328.6
Increase in inventories		(61.4)	(18.4)
Decrease/(increase) in short-term receivables		1.4	(27.7)
Increase in short-term liabilities		31.3	39.0
Decrease in provisions		(2.5)	(5.0)

Cash generated from operating activities		285.9	316.5

14. Business combinations

Acquisitions in 2019

On 28 February 2019, the Group acquired 100% of the equity of Watson LLC and Polymer Films LLC (collectively known as 'Watson'). Watson is a US based non-dairy ingredient solutions business, which will be a complementary acquisition for the Group and has been included in the Glanbia Nutritionals segment. The Goodwill relates to the acquired workforce, the expectation that the business will give rise to synergies across the Glanbia Nutritionals segment, will generate future sales beyond the existing customer base, as well as the opportunity to expand the business into new markets, where there are no existing customers, and leverage the recipes and know-how across the Glanbia Nutritionals segment. Goodwill of €6.5 million is not deductible for tax purposes.

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

		Total €'m
Purchase consideration - cash paid		61.3
Less: Fair value of assets acquired		(49.5)

Goodwill		11.8
The fair value of assets and liabilities arising from the acquisition are as follows:
		Total €'m
Property, plant and equipment		16.6
Software		0.3
Intangible assets - recipes and know-how		8.8
Intangible assets - customer relationships		12.9
Intangible assets - brands		1.1
Inventories		15.3
Trade and other receivables		13.7
Trade and other payables		(8.1)
Cash and cash equivalents (excluding bank overdraft)		4.6
Bank overdraft		(8.8)
Bank loans		(6.4)
Deferred tax liability		(0.5)

Fair value of net assets acquired		49.5

The fair value of Watson's trade and other receivables at the acquisition date amounted to €13.7 million. The gross contractual amount for trade receivables due is €13.5 million, of which €0.3 million is expected to be uncollectable.

Combined impact of acquisitions

The revenue and profit before taxation and exceptional items of the Group, including the impact of acquisitions completed during the financial year ended 4 January 2020, were as follows:

2019

Acquisitions

€'m

Group excluding

acquisitions

€'m

Consolidated group including

acquisitions

€'m

Revenue

76.0

3,799.7

3,875.7

Profit before taxation

4.3

233.9

238.2

The revenue and profit before taxation and exceptional items of the Group for the financial year ended 4 January 2020 determined in accordance with IFRS 3 as though the acquisition date for all business combinations effected during the year had been at the beginning of the year would be as follows:

2019

Acquisitions

€'m

Group excluding

acquisitions

€'m

Pro-forma consolidated

group

€'m

Revenue

91.2

3,799.7

3,890.9

Profit before taxation

3.2

233.9

237.1

Acquisitions in 2018

The Group acquired KSF Holdings LLP and HNS Intermediate Corporation who collectively own SlimFast and their brands ('SlimFast') in 2018 for which the fair value of assets and liabilities were determined provisionally. Following the finalisation of the fair value of assets and liabilities during the measurement period, goodwill decreased by €1.5 million. This was as a result of an increase in the fair value of customer relationships intangible assets of €2.7 million and a decrease in the fair value of working capital of €1.2 million.

15. Events after the reporting period

See note 8 for the final dividend, recommended by the Directors. Subject to shareholder approval, this dividend will be paid on 24 April 2020 to shareholders on the register of members on 13 March 2020, the re cord date.

16. Statutory financial statements

The financial information in this preliminary announcement does not constitute the full statutory financial statements of Glanbia plc (the 'Company'), a copy of which is required to be annexed to the Company's annual return filed with the Companies Registration Office and will be published on www.glanbia.com. A copy of the full statutory financial statements in respect of the financial year ended 4 January 2020 will be annexed to the Company's annual return for 2019. 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 4 January 2020, which were approved by the Directors on 25 February 2020. A copy of the financial statements of the Group in respect of the year ended 29 December 2018 has been annexed to the Company's annual return for 2018 and filed with the Companies Registration Office and is available on www.glanbia.com.

Glossary

Key Performance Indicators and non-IFRS performance measures

NOT COVERED BY INDEPENDENT AUDITOR'S REPORT

Non-IFRS performance measures

The Group reports certain performance measures that are not defined under IFRS but which represent additional measures used by the Board of Directors and the Glanbia Operating Executive in assessing performance and for reporting both internally and to shareholders and other external users. The Group believes that the presentation of these non-IFRS performance measures provides useful supplemental information which, when viewed in conjunction with our IFRS financial information, provides readers with a more meaningful understanding of the underlying financial and operating performance of the Group.

None of these non-IFRS performance measures should be considered as an alternative to financial measures drawn up in accordance with IFRS.

The principal non-IFRS performance measures used by the Group are:

G 1. Constant currency

G 2. Total Group

G 3. Revenue

G 4. EBITA

G 5. EBITA margin %

G 6. EBITDA

G 7. Constant Currency Basic and Adjusted Earnings Per Share (EPS)

G 8. Financing Key Performance Indicators

G 9. Volume and pricing increase/(decrease)

G 10. Like-for-like revenue increase/(decrease)

G 11. Innovation rate

G 12. Effective tax rate

G 13. Average interest rate

G 14. Operating cash conversion

G 15. Operating cash flow and free cash flow

G 16. Return on capital employed (ROCE)

G 17. Total shareholder return (TSR)

G 18. Dividend payout ratio

G 19. Compound annual growth rate (CAGR)

G 20. Exceptional Items

These principal non-IFRS performance measures are defined below with a reconciliation of these measures to IFRS measures where applicable.

In the prior year the Group disclosed two non-IFRS performance measures which are not included in the current year. These were G6 (IFRS15) and G8 (Pro-forma Adjusted Earnings Per Share). G6 (IFRS15) is no longer disclosed as IFRS 15 has now been adopted by the group . G8 (Pro-forma Adjusted Earnings Per Share) is no longer disclosed as the disposal of Dairy Ireland and related assets occurred in 2017 and is not disclosed in the comparative numbers.

G 1. Constant currency

While the Group reports its results in euro, it generates a significant proportion of its earnings in currencies other than euro, in particular US dollar. Constant currency reporting is used by the Group to eliminate the translational effect of foreign exchange on the Group's results. To arrive at the constant currency year-on-year change, the results for the prior year are retranslated using the average exchange rates for the current year and compared to the current year reported numbers.

The principal average exchange rates used to translate results for 2019 and 2018 are set out below:

Euro 1 =	2019	2018
US dollar	1.1196	1.1812
Pound sterling	0.8772	0.8847

All non-IFRS performance measures have been presented on a constant currency basis, where relevant, within this glossary.

G 2. Total Group

The Group has a number of strategically important equity accounted investees (Joint Ventures) which when combined with the Group's wholly- owned businesses give an important indication of the scale and reach of the Group's operations. Total Group is used to describe certain financial metrics such as Revenue and EBITA when they include both the wholly-owned businesses and the Group's share of equity accounted investees.

G 3. Revenue

Revenue comprises sales of goods and services of the wholly-owned businesses to external customers net of value added tax, rebates and discounts. Revenue is one of the Group's Key Performance Indicators and is an IFRS performance measure.

G 3.1 Total Group revenue:	Reference to the Financial Statements/Glossary	2019 €'m	2018 Restated €'m	2018 Retranslated €'m	Constant currency growth %
US Cheese		1,767.0	1,413.9	1,491.7	18.5%
Nutritional Solutions		744.9	577.0	603.7	23.4%
Glanbia Nutritionals	Note 2	2,511.9	1,990.9	2,095.4	19.9%
Glanbia Performance Nutrition	Note 2	1,363.8	1,179.6	1,228.7	11.0%
Wholly-owned		3,875.7	3,170.5	3,324.1	16.6%
Equity Accounted investees (Pre IFRS 15 Consolidation Adjustment)	G 3.2	1,476.1	1,283.8	1,307.3	12.9%
IFRS 15 Consolidation Adjustment*	G 3.2	(539.3)	(415.1)	(437.2)	23.4%
Equity accounted investees (Post IFRS 15 Consolidation Adjustment)	G 3.2	936.8	868.7	870.1	7.7%

Total Group revenue		4,812.5	4,039.2	4,194.2	14.7%

G 3.2 Group's share of revenue of equity accounted investees:

2019	Reference to the Financial Statements/Glossary	Glanbia Ireland DAC €'m	Southwest/ Midwest Group €'m	Glanbia Cheese Limited €'m	IFRS 15 Consolidation Adjustment*	Total €m
Equity accounted investees revenue (100%)		1,961.8	1,034.2	341.7	(1,089.8)	2,247.9
% of ownership interest		40%	50%	51%	40-50%
Group's share of revenue of equity accounted investees		784.7	517.1	174.3	(539.3)	936.8
2018
Equity accounted investees revenue (100%)		1,809.9	802.4	311.0	(837.0)	2086.3
% of ownership interest		40%	50%	51%	40%-50%
Group's share of revenue of equity accounted investees		724.0	401.2	158.6	(415.1)	868.7

* The IFRS 15 Consolidation Adjustment primarily relates to the gross up of Southwest Cheese revenue due to the transition to IFRS 15. The prior year comparative has been restated to reflect this on a like-for-like basis.

G 4. EBITA

EBITA is defined as earnings before interest, tax and amortisation. EBITA references throughout the annual report are on a pre-exceptional basis unless otherwise indicated. EBITA is one of the Group's Key Performance Indicators. Business Segment EBITA growth on a constant currency basis is one of the performance conditions in Glanbia's Annual Incentive Plan for Executive Directors with Business Unit responsibility. Refer to note 3 to the financial statements for the reconciliation of continuing operations EBITA.

G 4.1 Total Group EBITA:

		Reference to the Financial Statements/Glossary		2019 €'m		2018 Reported €'m		2018 Retranslated €'m		Constant currency growth %
Nutritional Solutions			30.4		23.2		24.6		23.6%
US Cheese			100.0		88.6		93.4		7.1%
Glanbia Nutritionals	Note 2		130.4		111.8		118.0		10.5%
Glanbia Performance Nutrition	Note 2		146.4		173.1		182.2		-19.6%
Wholly-owned			276.8		284.9		300.2		-7.8%
Equity accounted investees	G 4.2		73.6		65.8		67.1		9.7%

Total Group EBITA			350.4		350.7		367.3		-4.6%

G 4.2 Reconciliation of the Group's share of equity accounted investees EBITA to the share of results of equity accounted investees on a constant currency basis is as follows:

	2019 €'m	2018 €'m
EBITA of equity accounted investees	73.6	65.8
Adjustment in respect of unrealised profit on sales to the Group	(1.3)	0.6
Amortisation	(2.4)	(2.5)
Finance costs	(10.3)	(9.0)
Income tax	(11.2)	(10.1)
Share of results of equity accounted investees	0.6	1.0
Non-controlling interest	(0.4)	(0.5)

Share of results of equity accounted investees per the Group income statement - pre-exceptional	48.6	45.3
Impact of retranslating 2018	-	0.6
Share of results of equity accounted investees on a constant currency basis - pre-exceptional	48.6	45.9
Constant currency change		5.9%

G 5. EBITA margin %

EBITA margin % is defined as EBITA as a percentage of revenue. Wholly-owned EBITA Margin % is defined as Wholly-owned EBITA as a percentage of Wholly-owned Revenue. Refer to G3.1 and G4.1 for reconciliations of Total Group revenue and Total Group EBITA respectively. EBITA references throughout the annual report are on a pre-exceptional basis unless otherwise indicated.

G 6. EBITDA

EBITDA is defined as earnings before interest, tax, depreciation (net of grant amortisation) and amortisation. EBITDA references throughout the annual report are on a pre-exceptional basis unless otherwise indicated.

	Reference to the Financial Statements/ Glossary	2019 €'m	2018 €'m
Earnings before interest, tax and amortisation (pre-exceptional EBITA)	G 4.1	276.8	284.9
Depreciation		48.1	43.0
Grant amortisation		-	(0.1)

Earnings before interest, tax, depreciation and amortisation (pre-exceptional EBITDA)		324.9	327.8

G 7. Constant Currency Basic and Adjusted Earnings Per Share (EPS)

G 7.1 Constant Currency Basic Earnings Per Share (EPS)

	Reference to the Financial Statements/Glossary	2019 €'m	2018 Reported €'m	2018 Retranslated €'m
Profit attributable to equity holders of the Company	Group income statement	180.2	234.0	245.5
Weighted average number of ordinary shares in issue (thousands)	Note 7	295,215	295,159	295,159
Basic Earnings Per Share (cent)	Note 7	61.04	79.28	83.18
Constant Currency Change		-26.6%

G 7.2 Adjusted Earnings Per Share (EPS)

Adjusted EPS is defined as the net profit attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation and impairment (excluding software amortisation), net of related tax, divided by the weighted average number of ordinary shares in issue during the year. The Group believes that adjusted EPS is a better measure of underlying performance than Basic EPS as it excludes exceptional items (net of related tax) that are not related to on-going operational performance and intangible asset amortisation, which allows better comparability of companies that grow by acquisition to those that grow organically.

Adjusted EPS is one of the Group's Key Performance Indicators. Adjusted EPS growth on a constant currency basis is one of the performance conditions in Glanbia's Annual Incentive Plan and in Glanbia's Long-term Incentive Plan.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 Reported €'m	2018 Retranslated €'m
Profit attributable to equity holders of the Company - pre-exceptional	Group income statement	214.8	234.0	245.5
Amortisation and impairment of intangible assets (excluding software amortisation) net of related tax of €8.1 million (2018: €6.1 million)		45.3	34.6	36.3
Adjusted net income		260.1	268.6	281.8
Weighted average number of ordinary shares in issue (thousands)	Note 7	295,215	295,159	295,159
Adjusted Earnings Per Share (cent)		88.10	91.01	95.49
Constant currency change		-7.7%

G 8. Financing Key Performance Indicators

The following are the financing key performance indicators defined as per the Group's financing agreements.

G 8.1 Net debt: adjusted EBITDA

Net debt: adjusted EBITDA is calculated as net debt at the end of the period divided by adjusted EBITDA. Net debt is calculated as total financial liabilities less cash and cash equivalents. Adjusted EBITDA is calculated in accordance with lenders' facility agreements definition which adjust pre-exceptional EBITDA for items such as dividends received from equity accounted investees and acquisitions or disposals. Adjusted EBITDA is a rolling 12 month measure.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Net debt	Note 9	614.3	576.7

EBITDA	G 6	324.9	327.8
Adjustments in line with lenders' facility agreements		35.0	45.2
Adjusted EBITDA		359.9	373.0

Net debt: adjusted EBITDA		1.71	1.55

G 8.2 Adjusted EBIT: Adjusted net finance cost

Adjusted EBIT: net finance cost is calculated as pre-exceptional earnings before interest and tax plus dividends received from equity accounted investees divided by net finance cost. Adjusted net finance cost comprises finance costs less finance income per the Group income statement plus capitalised borrowing costs. Adjusted EBIT and net finance cost are rolling 12 month measures.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Operating profit - (pre-exceptional)	Group income statement	215.9	239.0
Dividends received from equity accounted investees	Group statement of cash flows	35.3	31.6
Adjusted EBIT		251.2	270.6
Adjusted net finance costs	Note 5	27.0	18.3
Adjusted EBIT: Adjusted net finance cost		9.3	14.8

G 9. Volume and pricing increase/(decrease)

Volume increase/(decrease) represents the impact of sales volumes within the revenue movement year-on-year, excluding volume from acquisitions, on a constant currency basis.

Pricing increase/(decrease) represents the impact of sales pricing (including trade spend) within revenue movement year-on-year, excluding acquisitions, on a constant currency basis.

G 9.1 Reconciliation of volume and pricing increase/(decrease) to constant currency revenue growth:

	Reference to the Financial Statements/ Glossary	Volume increase/ (decrease)	Price increase/ (decrease)	Acquisitions/ (disposals)	Revenue increase/ (decrease)
US Cheese	G 3.1	4.9%	13.6%	-%	18.5%
Nutritional Solutions	G 3.1	7.0%	3.8%	12.6%	23.4%
Glanbia Nutritionals	G 3.1	5.5%	10.8%	3.6%	19.9%
Glanbia Performance Nutrition	G 3.1	-9.0%	-0.6%	20.6%	11.0%
2019 increase % - wholly-owned revenue	G 3.1	0.1%	6.6%	9.9%	16.6%
2019 increase/(decrease) % - equity accounted investees revenue (Pre IFRS15 Consolidation Adjustment)	G 3.1	9.6%	3.3%	-%	12.9%

G 10. Like-for-like revenue increase/(decrease)

G 10.1 Glanbia Performance Nutrition like-for-like branded revenue

This represents the sales increase/(decrease) year-on-year on branded sales, excluding acquisitions, on a constant currency basis. Like-for-like branded revenue increase/(decrease) is one of the Glanbia Performance Nutrition segment's Key Performance Indicators. Like-for-like branded revenue increase/ (decrease) is one of the performance conditions in Glanbia's Annual Incentive Plan for Glanbia Performance Nutrition Senior Management.

G 10.2 Glanbia Nutritionals like-for-like revenue

This represents the sales increase/(decrease) year-on-year, excluding acquisitions, on a constant currency basis.

G 11. Innovation rate

This represents net revenue from products launched in the previous three years. Innovation rate is one of the Glanbia Performance Nutrition segment's Key Performance Indicators. Innovation rate is one of the performance conditions in Glanbia's Annual Incentive Plan for Glanbia Performance Nutrition Senior Management.

G 12. Effective tax rate

The effective tax rate is defined as the pre-exceptional income tax charge divided by the profit before tax less share of results of equity accounted investees.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Profit before tax	Group income statement	238.2	266.8
Less share of results of equity accounted investees	Group income statement	(48.6)	(45.3)
		189.6	221.5
Income tax (pre-exceptional)	Group income statement	23.4	32.8

Effective tax rate		12.3%	14.8%

G 13. Average interest rate

The average interest rate is defined as the annualised net finance costs (pre-capitalised borrowing costs) divided by the average net debt during the reporting period.

G 14. Operating cash conversion

Operating cash conversion is defined as Operating Cash Flow (OCF) divided by pre-exceptional EBITDA. Cash conversion is a measure of the Group's ability to convert trading profits into cash and is an important metric in the Group's working capital management programme.

G 15. Operating cash flow and free cash flow

Operating cash flow is defined as pre-exceptional EBITDA of the wholly-owned businesses net of business sustaining capital expenditure and working capital movements, excluding exceptional cash flows.

Operating cash flow is one of the Group's Key Performance Indicators. Operating cash flow is one of the performance conditions in Glanbia's Annual Incentive Plan.

Free cash flow is calculated as the net cash flow in the year before the following items: strategic capital expenditure, acquisition spend, proceeds received on disposals, loans/investments to equity accounted investees, equity dividends paid, exceptional costs paid and currency translation movements.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Earnings before interest, tax, depreciation and amortisation (pre-exceptional EBITDA)	G 6	324.9	327.8
Movement in working capital (pre-exceptional)	G 15.3	(24.9)	(9.7)
Business sustaining capital expenditure	G 15.5	(20.1)	(16.4)
Operating cash flow	G 15.1	279.9	301.7
Net interest and tax paid	G 15.4	(74.1)	(42.2)
Dividends from equity accounted investees	Group statement of cash flows	35.3	31.6
Other (outflows)/inflows	G 15.6	(9.6)	4.3
Free cash flow		231.5	295.4
Strategic capital expenditure	G 15.5	(56.2)	(46.2)
Dividends paid to Company Shareholders	Group statement of cash flows	(74.3)	(76.0)
Loans/Investment in Equity accounted investees	Group statement of cash flows	(47.4)	(58.9)
Exceptional costs paid	G 15.2	(12.0)	(2.6)
Acquisitions	Group statement of cash flows	(58.3)	(313.0)
Proceeds from the sale of PPE	Group statement of cash flows	0.2	1.3
Net cash flow		(16.5)	(200.0)
Exchange translation		(10.5)	(9.0)
Debt Acquired on Acquisition		(10.6)	-
Net debt movement		(37.6)	(209.0)
Opening net debt	Note 9	(576.7)	(367.7)
Closing net debt	Note 9	(614.3)	(576.7)

G 15.1 Reconciliation of operating cash flow to the Group statement of cash flows in the Financial Statements:

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Cash generated from operating activities	Note 13	285.9	316.5
Add back exceptional cash flow in the year	G 15.2	12.0	2.6
Less business sustaining capital expenditure	G 15.5	(20.1)	(16.4)
Non-cash items not adjusted in computing operating cash flow:
Cost of share based payments	Note 13	(4.6)	(8.8)
Difference between pension charge and cash contributions	Note 13	7.6	3.7
(Loss)/Gain on disposal of property, plant and equipment	Note 13	(0.2)	0.3
Recycle of AFS reserve to the Group income statement on disposal of investment	Note 13	-	5.3
Net loss on disposal of investments	Note 13	-	(0.2)
Amounts payable to the Southwest/MWC Group joint venture partners		(0.7)	(1.3)

Operating cash flow	G 15	279.9	301.7

G 15.2 Exceptional cash flow in the year:

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Pre-tax exceptional charge for year	Note 4	(39.1)	-
Non-cash element of exceptional charge	Note 13	27.1	-
Current year exceptional items paid in the year		(12.0)	-
Prior year exceptional items paid in the year	Note 4	-	(2.6)
Total exceptional cash outflow in the year	Note 4	(12.0)	(2.6)

G 15.3 Movement in working capital:
	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Movement in working capital (pre-exceptional)	G 15	(24.9)	(9.7)
Net write back of inventories	Note 13	(5.3)	0.3
Non-cash movement in allowance for impairment of receivables	Note 13	(1.8)	(1.5)
Prior year exceptional items paid in the year	G 15.2	-	(2.6)
Non-cash movement in provisions	Note 13	0.9	1.1
Non-cash movement on cross currency swaps and fair value hedges	Note 13	(0.8)	(1.0)
Amounts payable to the Southwest/MWC Group joint venture partners		0.7	1.3

Movement in net working capital	Note 13	(31.2)	(12.1)

G 15.4 Net interest and tax paid:

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Interest received	Group statement of cash flows	3.7	4.8
Interest paid	Group statement of cash flows	(32.5)	(21.0)
Tax paid	Group statement of cash flows	(44.6)	(25.2)
Interest paid in relation to property, plant and equipment	Group statement of cash flows	(0.7)	(0.8)

Net interest and tax paid		(74.1)	(42.2)

G 15.5 Capital expenditure:

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Business sustaining capital expenditure	G 15	20.1	16.4
Strategic capital expenditure	G 15	56.2	46.2
Total capital expenditure		76.3	62.6
Purchase of property, plant and equipment	Group statement of cash flows	42.7	32.0
Purchase of intangible assets	Group statement of cash flows	33.6	30.6

Total capital expenditure per the Group statement of cash flows		76.3	62.6

Business sustaining capital expenditure

The Group defines business sustaining capital expenditure as the expenditure required to maintain/replace existing assets with a high proportion of expired useful life. This expenditure does not attract new customers or create the capacity for a bigger business. It enables the Group to keep running at current throughput rates but also keep pace with regulatory and environmental changes as well as complying with new requirements from existing customers.

Strategic capital expenditure

The Group defines strategic capital expenditure as the expenditure required to facilitate growth and generate additional returns for the Group. This is generally expansionary expenditure beyond what is necessary to maintain the Group's current competitive position.

G 15.6 Other (outflows)/inflows:

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Cost of share based payments	Note 13	4.6	8.8
Difference between pension charge and cash contributions	Note 13	(7.6)	(3.7)
Loss/(gain) on disposal of property, plant and equipment	Note 13	0.2	(0.3)
Disposals/redemption of available for sale financial assets	Group statement of cash flows	0.5	7.9
Additions to available for sale financial assets	Group statement of cash flows	(0.4)	(0.3)
Purchase of own shares	Group statement of cash flows	(7.6)	(4.3)
Recycle of AFS reserve to the Group income statement on disposal of investment	Note 13	-	(5.3)
Amounts payable to joint venture partners		0.7	1.3
Net loss on disposal of investments	Note 13	-	0.2
Total other (outflows)/inflows	G 15	(9.6)	4.3

G 16. Return on capital employed (ROCE)

ROCE is defined as the Group's earnings before interest, and amortisation (net of related tax) plus the Group's share of the results of Equity accounted investees after interest and tax divided by capital employed. Capital employed comprises the sum of the Group's total assets plus cumulative intangible asset amortisation and impairment less current liabilities less deferred tax liabilities excluding all financial liabilities, retirement benefit assets and cash. It is calculated by taking the average of the relevant opening and closing balance sheet amounts.

In years where the Group makes significant acquisitions or disposals, the ROCE calculation is adjusted appropriately, to ensure the acquisition or disposal are equally time apportioned in the numerator and the denominator.

ROCE is one of the Group's Key Performance Indicators. ROCE is one of the performance conditions in Glanbia's Long Term Incentive Plan.

	Reference to the Financial Statements/Glossary	2019 €'m	2018 €'m
Operating profit - pre-exceptional	Group income statement	215.9	239.0
Tax on operating profit Amortisation and impairment of intangible assets net of related tax of €9.6m (2018: €7.2m)		(26.6) 51.3	(35.4) 38.7
Share of results of equity accounted investees	Group income statement	48.6	45.3
Return		289.2	287.6
Total assets	Group balance sheet	3,400.9	3,160.1
Current liabilities	Group balance sheet	(955.3)	(580.8)
Deferred tax liabilities	Group balance sheet	(168.6)	(160.3)
Less cash and cash equivalents	Group balance sheet	(269.0)	(224.6)
Less current financial liabilities	Group balance sheet	369.1	48.9
Less retirement benefit assets	Group balance sheet	(2.1)	(1.1)
Plus accumulated amortisation		360.1	301.3
Capital employed before acquisition adjustment		2,735.1	2,543.5
Adjustment for acquisitions	G 16.1	49.4	(242.8)
Capital employed		2,784.5	2,300.7
Average capital employed		2,664.0	2,184.6

Return on capital employed		10.9%	13.2%

G 16.1. Adjustment for acquisitions

This adjustment is required to ensure the capital employed of the acquisitions (Watsons (2019) & (SlimFast (2018)) are appropriately time apportioned in the denominator.

G 17. Total Shareholder Return (TSR)

TSR represents the change in the capital value of a listed quoted company over a period, plus dividends reinvested, expressed as a plus or minus percentage of the opening value.

TSR is one of the Group's Key Performance Indicators. TSR is one of the performance conditions in Glanbia's Long Term Incentive Plan.

G 18. Dividend Payout Ratio

Dividend payout ratio is defined as the annual dividend per ordinary share divided by the Adjusted Earnings Per Share.

	Reference to the Financial Statements/Glossary	2019 € cent	2018 € cent
Adjusted Earnings Per Share	G 7.2	88.10	91.01
Dividend recommended/paid per ordinary share	Note 8	26.62	24.20

Dividend payout %		30.2%	26.6%

G 19. Compound Annual Growth Rate (CAGR)

The compound annual growth rate is the annual growth rate over a period of years. It is calculated on the basis that each year's growth is compounded.

G 20. Exceptional Items

The Group considers that items of income or expense which are material by virtue of their scale and nature should be disclosed separately if the Group financial statements are to fairly present the financial performance and financial position of the Group. Determining which transactions are to be considered exceptional in nature is often a subjective matter. Exceptional items are included on the income statement line item to which they relate. In addition, for clarity, separate disclosure is made of all items in one column on the face of the Group income statement. Refer to note 4 for an analysis of exceptional items recognised in 2019.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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