Half Yearly Report

RNS Number : 5659P

Glanbia PLC

20 August 2014

 

Glanbia 2014 Half year results Leading global performance nutrition and ingredients group Wednesday, 20 August 2014 Good performance in first half driven by Global Performance Nutrition Reiterating 2014 guidance of 8% to 10% constant currency adjusted EPS growth

20 August 2014 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global performance nutrition and ingredients group, announces its results for the six months ended 5 July 2014.

Results highlights

·      The Group delivered a good performance for the first half of the year. On a constant currency basis, Total Group revenue grew 10.7%, Total Group EBITA increased by 10.3% and adjusted earnings per share grew 11.5%. On a reported basis, Total Group revenue increased 8.1%, Total Group EBITA increased by 6.0% and adjusted earnings per share grew by 6.8%;

·      Global Performance Nutrition was the key growth driver as revenue growth of 21.8% and a 110 basis point margin expansion drove a strong  increase in EBITA on a constant currency basis;

·      Global Ingredients delivered a satisfactory performance in the context of a difficult operating environment with EBITA largely unchanged versus the prior year on a constant currency basis;

·      Dairy Ireland performance was behind the prior year as stabilisation in Consumer Products was more than offset by a lower performance in Agribusiness;

·      Joint Ventures & Associates delivered a good performance overall; and

·      The Group today announces a €60 million strategic investment programme in Global Ingredients aimed at maximising the value of our whey pool and further strengthening our position as a leader in value-added dairy ingredients.

2014 half year results1	Reported			Constant currency
€m	HY 2014	HY 2013	Change	Change2
Wholly-owned businesses
Revenue	1,294.2	1,236.3	+4.7%	+7.7%
EBITA	107.3	102.3	+4.9%	+9.7%
EBITA margin	8.3%	8.3%	+0 bps	+20 bps
Joint Ventures & Associates3
Revenue	503.4	426.8	+17.9%	+19.3%
EBITA	22.2	19.9	+11.6%	+13.3%
EBITA margin	4.4%	4.7%	-30 bps	-20 bps
Total Group3
Revenue	1,797.6	1,663.1	+8.1%	+10.7%
EBITA	129.5	122.2	+6.0%	+10.3%
EBITA margin	7.2%	7.3%	-10 bps	+0 bps
Adjusted earnings per share	32.45c	30.39c	+6.8%	+11.5%

Commenting today Siobhán Talbot, Group Managing Director, said:

"Glanbia had a good first half in 2014 resulting in a constant currency increase of 11.5% in adjusted earnings per share. Global Performance Nutrition was the key contributor delivering strong branded revenue growth, through effective execution in core channels and continued international growth. Global Ingredients delivered a satisfactory first half in the context of milk procurement issues in Idaho and unfavourable whey pricing dynamics. Dairy Ireland performed in line with expectation, albeit behind the prior year while Joint Ventures & Associates was also in line with expectation. We continue to invest in our strategy of maximising the value of our ingredients. Today we announce a new €60 million programme in Global Ingredients to further our ambition to be a leader in science-led nutritional solutions and systems. The outlook for the remainder of the year is positive and we expect to achieve our guidance of 8% to 10% growth in adjusted earnings per share on a constant currency basis for 2014."

__________________________________

1. All figures shown are pre exceptional items.

2. A significant portion of our earnings are denominated in US dollars.  Constant currency is based on translating HY 2013 results at the HY 2014 average market exchange rate (€1 = $1.371). The reported average exchange rate for HY 2013 was €1 = $1.313.

3. Total Group includes Glanbia's share of Joint Ventures & Associates.

2014 half year overview

For the six months ended 5 July 2014

Glanbia delivered a good performance in the first half of 2014 driven primarily by Global Performance Nutrition. Total Group revenues including the Group's share of Joint Ventures & Associates were €1.8 billion, up 8.1% (10.7% constant currency). Total Group EBITA was €129.5 million, up 6.0% (10.3% constant currency). Total Group EBITA margin was 7.2%, down 10 basis points (unchanged on a constant currency basis), reflecting an 8.3% margin in the wholly owned businesses and 4.4% in Joint Ventures & Associates. Adjusted earnings per share was 32.45 cents, up 6.8% (11.5% constant currency).

Capital investment update

Strategic capital investment is a core element of Glanbia's long term strategy and the Group continues to invest significantly behind its two growth platforms, Global Performance Nutrition and Global Ingredients. Global Performance Nutrition recently commissioned the first phase of a new €50 million investment in a state-of-the-art manufacturing facility in Aurora, Illinois and today we are pleased to announce a significant new capital investment programme within Global Ingredients.

The programme, totalling €60 million in our Idaho based facilities, is strongly aligned with our strategy of adding further value to our whey stream while also supporting the growth ambitions of Performance Nutrition. The programme, which we expect to be fully commissioned by the end of 2015, involves the development of increased production capacity of higher end whey as well as increased capacity of lactoferrin, a specialty milk component used in a variety of sectors including infant formula and supplements.

Board changes

Jerry Liston, Non-Executive Director, retired from the Board on 13 May 2014. Patrick Coveney joined the Board as a Non-Executive Director on 30 May 2014. Mr. Coveney, aged 43, is Chief Executive Officer of Greencore Group plc, a leading international convenience food group. Also on 30 May 2014, Brendan Hayes joined the Board as a Non-Executive Director nominated by Glanbia Co-operative Society Limited.

Investor Day 2014

Glanbia will hold its 2014 investor day in Chicago on Wednesday, 19 November 2014. This event will focus on our Global Performance Nutrition segment. As well as learning about the long term strategy of the business, attendees will gain an in-depth understanding of our approach to marketing, operations and international expansion. There will also be a visit to our recently commissioned manufacturing facility. All of Glanbia's executive management team will be in attendance as well as a number of senior Global Performance Nutrition management.

2014 outlook

Overall, the outlook for the Group for 2014 is positive. While Global Performance Nutrition is expected to be the main driver of growth, Dairy Ireland is expected to deliver an improved performance versus the prior year with Global Ingredients largely unchanged. On this basis, we are reiterating our guidance for 2014 of 8% to 10% growth in adjusted earnings per share on a constant currency basis. 

2014 half year operations review

Commentary is on a constant currency basis throughout

Segmental analysis

	HY 2014			HY 2013
€m	Revenue	EBITA	EBITA %	Revenue	EBITA	EBITA %
Global Performance Nutrition	374.6	42.9	11.5%	320.2	33.6	10.5%
Global Ingredients	565.8	53.9	9.5%	532.9	56.6	10.6%
Dairy Ireland	353.8	10.5	3.0%	383.2	12.1	3.2%
Total wholly-owned businesses	1,294.2	107.3	8.3%	1,236.3	102.3	8.3%
Joint Ventures & Associates	503.4	22.2	4.4%	426.8	19.9	4.7%
Total Group	1,797.6	129.5	7.2%	1,663.1	122.2	7.3%

Global Performance Nutrition

	Reported			Constant Currency
€m	HY 2014	HY 2013	Change	Change
Revenue	374.6	320.2	+17.0%	+21.8%
EBITA	42.9	33.6	+27.7%	+33.6%
EBITA margin	11.5%	10.5%	+100 bps	+110 bps

Global Performance Nutrition ('GPN') delivered a strong performance in the first half of 2014. Revenues increased 21.8% driven primarily by organic volume growth of 19.6% and the impact of the Nutramino acquisition in January of 2.5%. Branded revenue growth remained strong at 18.6% primarily due to growth across key international markets. Overall branded revenue growth was weighted towards the first quarter of the year in advance of a price increase implemented in April. Contract manufacturing revenue growth was also strong, however, this is expected to moderate in the second half of the year. EBITA increased 33.6% reflecting the strong revenue performance partially offset by higher overheads associated with the ongoing investment in support of business and market growth. EBITA margin for the period was 11.5% reflecting a 110 basis point increase versus prior year. 

Demand trends within the US sports nutrition market remain positive. Within the US market, the specialty and internet channels, which are the largest and amongst the fastest growing segments of the market, remain our primary focus. International revenue growth remains strong reflecting the awareness of and high regard for our brands across the globe. This growth endorses our strategy of building strong in-market teams in each of our key geographies and we continue to invest in our people and infrastructure to sustain our international growth trajectory. The acquisition of Nutramino, a leading Scandinavian sports nutrition business, in January 2014, is fully aligned with this strategy and further strengthens our international presence as well as providing us with an entry point into the convenience channel in Europe.

Innovation is central to our growth model in GPN and we had a number of exciting product launches in the first half of the year. In addition to the launch of BSN's Syntha 6 bar in EMEA and Optimum Nutrition's PRO Series, the recent launch of the new BSN N.O.-Xplode pre-workout supplement represented our first global product launch.

The first phase of our new state-of-the-art manufacturing plant in Aurora was successfully commissioned in May. This plant offers improved efficiencies versus our existing facilities and allows us to produce the majority of our products internally. The second phase, bringing the total cost to approximately €50 million, will be commissioned in early 2015 and will support the delivery of our growth targets for the next 3-4 years.

Global Ingredients

	Reported			Constant Currency
€m	HY 2014	HY 2013	Change	Change
Revenue	565.8	532.9	+6.2%	+10.7%
EBITA	53.9	56.6	-4.8%	+0.5%
EBITA margin	9.5%	10.6%	-110 bps	-100 bps

Global Ingredients delivered a satisfactory performance in the first half of the year in the context of challenging milk procurement conditions in Idaho. Revenues increased 10.7% reflecting a 13.9%impact from higher pricing and 1.6% from the acquisition of a small specialty cheese plant in Blackfoot, Idaho in March 2013. These were partially offset by an organic volume decline of 4.8%. EBITA increased marginally in the period as a good performance in Customised Solutions was offset by a somewhat weaker performance in US Cheese and Ingredient Technologies. Global Ingredients' EBITA margin declined 100 basis points in the period to 9.5%.

US Cheese

While cheese prices in the USA have declined from their first half peaks, they remain at relatively high levels. This has primarily reflected a tighter supply environment across the USA as demand across key channels has been broadly stable.

In response to a competitive milk procurement environment in Idaho, we revised milk procurement policies in the period. While this resulted in increased milk input costs, we have achieved greater security of supply with two year supply contracts now in place with the majority of our suppliers.

In this context, US Cheese had a satisfactory performance in the first half of the year. Revenues increased as significantly stronger cheese pricing more than offset the volume decline that resulted from tighter milk procurement conditions. EBITA was behind the prior year as the impact of lower volumes and higher input costs was not fully offset by operational efficiency measures and pricing changes.

Ingredient Technologies

Underlying demand conditions across Ingredient Technologies' key end markets remain positive. Overall performance was behind the prior year with positive revenue growth more than offset by lower margins. The performance of the dairy side of the business was negatively impacted as base whey prices, which are a key driver of milk input costs, increased relative to high-end whey prices. Development of the non-dairy grain and beverage platforms continues with positive customer engagements to date.

Our strategy of maximising the value of our ingredient pool remains on track as demonstrated by the €60 million investment programme announced today. The additional high-end whey and lactoferrin production capabilities will strengthen our position in these product categories and facilitate our goal of being a leader in the development of science‐led nutritional solutions and systems.

Customised Solutions

Customised Solutions delivered a good performance in the first half of the year. Revenue growth was positive reflecting volume growth combined with a positive price and mix effect. An increase in margins driven primarily by a favourable mix effect combined with positive revenue growth resulted in a good EBITA performance for the period.

While the sector remains competitive we continue to see good growth potential across key end market segments including beverage, infant formula, supplement and nutrition bar segments. Our existing global footprint and reputation for market leading customer service provides us with a strong platform to optimise these market opportunities as they present themselves.

Dairy Ireland

	Reported			Constant Currency
€m	HY 2014	HY 2013	Change	Change
Revenue	353.8	383.2	-7.7%	-7.7%
EBITA	10.5	12.1	-13.2%	-13.2%
EBITA margin	3.0%	3.2%	-20 bps	-20 bps

Consumer Products was relatively stable in the period with the decline in overall performance a result of lower Agribusiness sales in the period against a relatively good prior year. Revenues declined 7.7% reflecting a 4.9% organic volume decline and a 2.8% decline in pricing. EBITA was 13.2% behind the prior year reflecting a 20 basis point decline in margins.

Consumer Products

Consumer Products delivered a satisfactory performance in the period against a continued challenging market backdrop. Revenue growth was positive driven primarily by a favourable price and mix effect. While milk input costs have reduced modestly in recent months, average milk cost for the first half of the year was well above prior year levels. Overall, Consumer Products delivered an EBITA broadly in line with the prior year as higher input costs were offset by cost savings associated with our efficiency programme. Further costs associated with this programme are expected to be incurred in the second half of the year. The new UHT (Ultra-Heat-Treated) facility in Co. Monaghan was successfully commissioned in the second quarter of the year and we continue to work to develop market opportunities for our branded long-life liquid milk and cream across China, Europe and the Middle East.

Agribusiness

Agribusiness' revenues declined versus the prior year due to a combination of lower prices and volumes. The decline in volumes related primarily to animal feed and reflected particularly strong demand in the prior year as a result of poor weather conditions for much of the first half of 2013. Volume performance across other product categories was satisfactory and, in particular, the recently commissioned oats mill in Portlaoise continues to perform well. Overall, EBITA was behind the prior year as lower revenues more than offset the benefit of ongoing cost and efficiency measures.

Joint Ventures & Associates (Glanbia Share)

	Reported			Constant Currency
€m	HY 2014	HY 2013	Change	Change
Revenue	503.4	426.8	+17.9%	+19.3%
EBITA	22.2	19.9	+11.6%	+13.3%
EBITA margin	4.4%	4.7%	-30 bps	-20 bps

Joint Ventures & Associates delivered a good performance in the first half of the year. Revenues increased 19.3% reflecting 6.3% organic volume growth and 13.0% pricing growth. Volume growth was positive across all key joint ventures and associates with Glanbia Ingredients Ireland and Glanbia Cheese, in particular, benefiting from favourable milk supply environments. The main driver of the increase in pricing was global dairy market prices which, despite a downward trend in the first half of the year, are above prior year levels. EBITA increased 13.3% driven primarily by the strong volume growth performance.

The construction of Glanbia Ingredients Ireland's new €150 million milk processing plant in Belview, Co. Kilkenny is progressing well and is expected to commission in early 2015. Long term supply contracts, which have been successfully agreed with 94% of our suppliers to date, provide increased security and visibility in respect of milk supply volumes post elimination of quotas in 2015.

2014 outlook

Global Performance Nutrition is expected to deliver a good performance in 2014 reflecting positive revenue growth combined with an expected uplift in margins. After a strong performance in the first half of the year, revenue growth is expected to slow in the second half reflecting an anticipated decline in contract manufacturing revenues, the potential impact of the Russian import ban on international revenue growth and increased competition in the US market. Notwithstanding these challenges, our branded business remains strong and is underpinned by our market leading brands and our ongoing investment in operations, innovation, marketing and international expansion.

Global Ingredients performance for the full year is targeted to be broadly in line with the prior year. Milk throughput in the cheese and whey facilities in Idaho is expected to be below 2013 levels for the rest of the year. This, together with higher input costs, will impact performance for both US Cheese and Ingredient Technologies in the second half. Within Global Ingredients these challenges will be largely offset by the ongoing progress being made by Ingredient Technologies in respect of its non-dairy platforms as well as the continued positive performance in the Customised Solutions business.  

Dairy Ireland is expected to deliver an improved performance for both the second half of the year and the full year. This is expected to be driven primarily by Consumer Products due to the ongoing rationalisation measures being implemented across the business.

Joint Ventures & Associates are expected to deliver a 2014 performance broadly in line with the prior year as overall dairy markets are expected to be more challenging in the second half of the year resulting in some margin pressure.

Overall, the outlook for the Group for 2014 is positive. While Global Performance Nutrition is expected to be the main driver of growth, Dairy Ireland is expected to deliver an improved performance for the year with Global Ingredients largely unchanged. On this basis, we are reiterating our guidance for 2014 of 8% to 10% growth in adjusted earnings per share on a constant currency basis. 

2014 half year finance review

Results summary pre exceptional				Constant
				Currency
€m	HY 2014	HY 2013	Change	Change
Revenue	1,294.2	1,236.3	+4.7%	+7.7%
EBITA	107.3	102.3	+4.9%	+9.7%
EBITA margin	8.3%	8.3%	+0 bps	+20 bps
- Amortisation of intangible assets	(10.6)	(10.0)
- Net finance costs	(10.5)	(10.8)
- Share of results of Joint Ventures & Associates	15.3	13.6
- Income tax	(14.7)	(13.9)
Profit for the period	86.8	81.2

Income statement

Revenue increased 4.7% (7.7% constant currency) to €1.3 billion (HY 2013: €1.2 billion). EBITA grew by 4.9% (9.7% constant currency) to €107.3 million (HY 2013: €102.3 million). EBITA margin was unchanged at 8.3% (+20 basis points constant currency).

The Group's share of results of Joint Ventures & Associates increased by €1.7 million to €15.3 million (HY 2013: €13.6 million). Share of results of Joint Ventures & Associates is an after tax and interest amount.

Net financing costs decreased by €0.3 million to €10.5 million (HY 2013: €10.8 million). The Group's average interest rate for the period was 4.4% (HY 2013: 4.8%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 85% of projected 2014 debt currently contracted at fixed rates for 2014.

The HY 2014 tax charge increased by €0.8 million to €14.7 million (HY 2013: €13.9 million). This represents an effective rate, excluding Joint Ventures & Associates, of 17.0% (HY 2013: 17.0%).

Adjusted earnings per share

	HY 2014	HY 2013	Change	Constant Currency Change
Adjusted earnings per share	32.45c	30.39c	+6.8%	+11.5%

Adjusted EPS is calculated as the profit for the year attributable to the equity holders of the parent before

exceptional items and amortisation of intangible assets (net of tax). Adjusted EPS increased 6.8% (11.5% constant currency) to 32.45 cents per share (HY 2013: 30.39 cents per share).

Exceptional items

	€m
1.  Rationalisation costs	(0.6)
2.  Transaction costs	(3.0)
3.  Taxation credit	0.9
Total exceptional charge	(2.7)

Exceptional items incurred in the first half of 2014 resulted in an exceptional charge of €2.7 million. Details of these items are as follows:

1.     Rationalisation costs amounting to €0.6 million were incurred in Dairy Ireland in the first six months of the year. These costs relate to the ongoing rationalisation and efficiency programmes being implemented in both Consumer Products and Agribusiness. We expect to incur exceptional costs of €11 million related to these programmes for the full year 2014.

2.     Transaction costs relate to acquisition activities that did not come to fruition. The primary costs incurred were legal, taxation, due diligence, other consultancy and loan facility fees.

3.     The tax credit applicable to exceptional items 1 and 2 above amounted to €0.9 million.

Dividend per share

The Board is recommending an interim dividend of 4.43 cents per share (HY 2013: 4.03 cents per share) an increase of 10%. Dividends will be paid on Friday, 10 October 2014 to shareholders on the register of members as at Friday, 29 August 2014. Irish withholding tax will be deducted at the standard rate where appropriate.

Net debt and cash flow

The Group's net debt position at 5 July 2014 increased by €27.1 million to €471.8 million relative to the first half of 2013 (HY 2013: €444.7 million). Relative to the year ended 4 January 2014, the Group's net debt increased by €97.4 million (FY 2013: €374.4 million). The main uses of cash since the year end include an increase in working capital of €83.9 million, capital expenditure of €57.2 million and the acquisition of Nutramino for €21.1 million.

Group financing

Following the redemption at maturity of €39.1 million of cumulative redeemable preference shares on 31 July 2014, the Group currently has two sources of committed debt finance totalling €705.9 million;

·    Bilateral multicurrency revolving loan facilities totalling €466.8 million with eight banks, all maturing January 2018, which were renewed during 2012 on common terms and conditions; and

·    A $325 million (€239.1 million) private placement of senior loan notes, due June 2021.

At 5 July 2014, the Group had a net debt to adjusted EBITDA leverage ratio of 2.0 times (HY 2013: 2.0 times) compared to the Group's banking covenant of 3.5 times. Adjusted EBIT to net financing cost cover stood at 8.1 times (HY 2013: 8.6 times) compared to the Group's banking covenant of 3.5 times.

Pension

The Group's net pension liability at 5 July 2014, under IAS 19 (revised) 'Employee Benefits', before deferred tax, increased by €6.5 million to €91.4 million relative to the first half of 2013 (HY 2013: €84.9 million). Relative to the year end 2013, the net pension liability increased by €13.4 million (FY 2013: €78.0 million). This increase was driven primarily by changes in actuarial assumptions, the most important of which was the 60 basis point reduction in the discount rate applicable to the Irish pension schemes to 3.00% (FY 2013: 3.60%).

Principal risks and uncertainties affecting the Group's performance in 2014

The Board of Glanbia plc has ultimate responsibility for risk management. The performance of the Group is influenced by global economic growth and consumer confidence in the markets in which it operates. In the second half of 2014, the principal risks affecting the Group's performance are:

·    Milk availability and raw material input cost fluctuations in US Cheese and Ingredient Technologies;

·    The potential impact of geopolitical unrest on our international growth strategy;

·    The continued challenging market backdrop in Consumer Products; and

·    The effective execution of our growth strategy in Global Ingredients and Global Performance Nutrition. 

Further details on the principle risks and uncertainties are provided on pages 38 to 41 in the 2013 Annual Report. The Group actively manages these and all other known risks through its systems of risk management and internal control.

Cautionary statement

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

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 8.30 a.m. today. Please access the webcast from our website at http://glanbia.com/1H14-webcast, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

Ireland                   01 246 5603

UK                           020 3427 1915

Europe                   [phone]

USA                         212 444 0896

Passcode               7382302

For further information contact

Glanbia plc [phone] 

Siobhán Talbot, Group Managing Director

Mark Garvey, Group Finance Director

Shane Power, Head of Investor Relations [phone]

Geraldine Kearney, Corporate Communications Director + 353 87 231 9430

Responsibility statement

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

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

·      The Group condensed financial statements for the half year ended 05 July 2014 have been prepared in accordance with the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

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

·      The half yearly financial report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group condensed financial statements for the half year ended 05 July 2014, and a description of the principal risks and uncertainties for the remaining six months;

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

·      The Directors of Glanbia plc are as listed in the Glanbia plc 2013 Annual Report, with the exception of the following changes in the period:

Jerry Liston retired on 13 May 2014.

Patrick Coveney and Brendan Hayes were appointed on 30 May 2014.

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

On behalf of the Board

Siobhán Talbot                                                                    Mark Garvey

Group Managing Director                                  Group Finance Director

19 August 2014

Condensed income statement
for the half year ended 05 July 2014

		Half year 2014						Half year 2013							Year 2013
		Pre- exceptional		Exceptional		Total		Pre- exceptional		Exceptional		Total		Pre- exceptional			Exceptional		Total
		2014		2014		2014		2013		2013		2013		2013			2013		2013
	Notes	€'000		€'000		€'000		€'000		€'000		€'000		€'000			€'000		€'000
				(note 7)						(note 7)							(note 7)
Revenue	6	1,294,157		-		1,294,157		1,236,349		-		1,236,349		2,382,133			-		2,382,133
Earnings before interest, tax and amortisation (EBITA)		107,314		(3,638)		103,676		102,269		-		102,269		187,665			5,804		193,469
Intangible asset amortisation		(10,565)		-		(10,565)		(10,020)		-		(10,020)		(21,011)			-		(21,011)
Operating profit		96,749		(3,638)		93,111		92,249		-		92,249		166,654			5,804		172,458
Finance income	8	841		-		841		1,077		-		1,077		2,168			-		2,168
Finance costs	8	(11,337)		-		(11,337)		(11,870)		-		(11,870)		(25,110)			-		(25,110)
Share of results of Joint Ventures & Associates		15,276		-		15,276		13,580		-		13,580		26,488			-		26,488
Profit before taxation		101,529		(3,638)		97,891		95,036		-		95,036		170,200			5,804		176,004
Income taxes	9	(14,663)		874		(13,789)		(13,847)		-		(13,847)		(24,692)			(316)		(25,008)
Profit for the period		86,866		(2,764)		84,102		81,189		-		81,189		145,508			5,488		150,996
Attributable to:
Equity holders of the Parent						83,592						80,738							150,330
Non-controlling interests						510						451							666
						84,102						81,189							150,996
Earnings per share attributable to the equity holders of the Parent
Basic earnings per share (cents)	11					28.33						27.39							51.01
Diluted earnings per share (cents)	11					28.20						27.22							50.66

Condensed statement of comprehensive income for the half year ended 05 July 2014
			Half year		Half year		Year
			2014		2013		2013
	Notes		€'000		€'000		€'000
Profit for the period			84,102		81,189		150,996
Other comprehensive income/(expense) Items that are not reclassified subsequently to the Condensed income statement:
Remeasurements - defined benefit schemes	17		(16,857)		8,512		(1,546)
Deferred tax credit/(charge) on remeasurements			1,760		(1,007)		(166)
Share of remeasurements - Joint Ventures & Associates			(3,582)		1,802		(1,149)
Deferred tax credit/(charge) on remeasurements - Joint Ventures & Associates			452		(225)		220
Items that may be reclassified subsequently to the Condensed income statement:
Currency translation differences	16		4,040		4,187		(24,592)
Net investment hedge	16		(245)		(588)		2,472
Revaluation of available for sale financial assets	16		1,409		779		1,425
Fair value movements on cash flow hedges	16		2,009		264		898
Deferred tax on cash flow hedges and revaluation of available for sale financial assets	16		(519)		(292)		(541)
Other comprehensive (expense)/income for the period, net of tax			(11,533)		13,432		(22,979)
Total comprehensive income for the period			72,569		94,621		128,017
Total comprehensive income attributable to:
Equity holders of the Parent			72,059		94,170		127,351
Non-controlling interests			510		451		666
Total comprehensive income for the period			72,569		94,621		128,017

Condensed statement of changes in equity
for the half year ended 05 July 2014

				Attributable to equity holders of the Parent
					Share capital and share premium			Other reserves			Retained earnings			Total			Non -controlling  interests				Total
Half year 2013		Notes			€'000			€'000			€'000			€'000			€'000				€'000
Balance at 29 December 2012					102,095			145,289			289,997			537,381			7,275				544,656
Profit for the period					-			-			80,738			80,738			451				81,189
Other comprehensive income/(expense)
Remeasurements - defined benefit schemes		17			-			-			8,512			8,512			-				8,512
Deferred tax on remeasurements					-			-			(1,007)			(1,007)			-				(1,007)
Share of remeasurements - Joint Ventures & Associates					-			-			1,577			1,577			-				1,577
Fair value movements		16			-			1,043			-			1,043			-				1,043
Deferred tax on fair value movements		16			-			(292)			-			(292)			-				(292)
Currency translation differences		16			-			4,187			-			4,187			-				4,187
Net investment hedge		16			-			(588)			-			(588)			-				(588)
Total comprehensive income					-			4,350			89,820			94,170			451				94,621
Dividends paid during the period		10			-			-			(16,009)			(16,009)			-				(16,009)
Cost of share based payments		16			-			2,292			-			2,292			-				2,292
Transfer on exercise, vesting or expiry of share based payments		16			-			6,317			(6,317)			-			-				-
Shares issued		15			36			-			-			36			-				36
Premium on shares issued		15			1,529			-			-			1,529			-				1,529
Purchase of own shares		16			-			(4,642)			-			(4,642)			-				(4,642)
Balance at 29 June 2013					103,660			153,606			357,491			614,757			7,726				622,483
					Attributable to equity holders of the Parent
					Share capital and share premium			Other reserves			Retained earnings			Total			Non -controlling  interests					Total
Half year 2014					€'000			€'000			€'000			€'000			€'000					€'000
Balance at 04 January 2014					103,997			126,600			405,289			635,886			7,634					643,520
Profit for the period					-			-			83,592			83,592			510					84,102
Other comprehensive income/(expense)
Remeasurements - defined benefit schemes		17			-			-			(16,857)			(16,857)			-					(16,857)
Deferred tax on remeasurements					-			-			1,760			1,760			-					1,760
Share of remeasurements - Joint Ventures & Associates					-			-			(3,130)			(3,130)			-					(3,130)
Fair value movements		16			-			3,418			-			3,418			-					3,418
Deferred tax on fair value movements		16			-			(519)			-			(519)			-					(519)
Currency translation differences		16			-			4,040			-			4,040			-					4,040
Net investment hedge		16			-			(245)			-			(245)			-					(245)
Total comprehensive income					-			6,694			65,365			72,059			510					72,569
Dividends paid during the period		10			-			-			(17,650)			(17,650)			-					(17,650)
Cost of share based payments		16			-			2,931			-			2,931			-					2,931
Transfer on exercise, vesting or expiry of share based payments					-			4,444			(4,444)			-			-					-
Shares issued		15			5			-			-			5			-					5
Premium on shares issued		15			333			-			-			333			-					333
Purchase of own shares					-			(5,793)			-			(5,793)			-					(5,793)
Balance at 05 July 2014					104,335			134,876			448,560			687,771			8,144					695,915

Condensed balance sheet
as at 05 July 2014

			Half year		Half year		Year
			2014		2013		2013
	Notes		€'000		€'000		€'000
ASSETS
Non-current assets
Property, plant and equipment			409,704		335,108		373,972
Intangible assets			471,856		475,214		454,486
Investments in associates			86,380		76,063		80,492
Investments in joint ventures			68,098		61,758		62,894
Trade and other receivables			9,735		16,436		9,376
Deferred tax assets			24,224		18,781		22,464
Available for sale financial assets			10,111		8,140		9,498
			1,080,108		991,500		1,013,182
Current assets
Inventories			302,251		281,879		314,481
Trade and other receivables			372,381		397,520		257,216
Derivative financial instruments			1,861		2,090		1,750
Cash and cash equivalents	13		89,014		73,060		106,259
			765,507		754,549	679,706
Total assets			1,845,615		1,746,049		1,692,888
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital and share premium	15		104,335		103,660		103,997
Other reserves	16		134,876		153,606		126,600
Retained earnings			448,560		357,491		405,289
			687,771		614,757		635,886
Non-controlling interests			8,144		7,726		7,634
Total equity			695,915		622,483		643,520
LIABILITIES
Non-current liabilities
Borrowings	13		521,331		517,753		441,641
Deferred tax liabilities			98,477		82,592		95,584
Retirement benefit obligations	17		91,360		84,888		78,035
Provisions for other liabilities and charges	14		19,268		21,803		18,492
Capital grants			2,368		2,577		2,471
			732,804		709,613		636,223
Current liabilities
Trade and other payables			358,345		374,476		344,642
Current tax liabilities			472		16,646		1,415
Borrowings	13		39,447		-		39,062
Derivative financial instruments			1,325		2,585		1,725
Provisions for other liabilities and charges	14		17,307		20,246		26,301
			416,896		413,953		413,145
Total liabilities			1,149,700		1,123,566		1,049,368
Total equity and liabilities			1,845,615		1,746,049		1,692,888

Condensed statement of cash flows

for the half year ended 05 July 2014

							Half year			Half year						Year
							2014			2013						2013
	Notes						€'000			€'000						€'000
Cash flows from operating activities
Cash generated from operating activities	20						27,225			17,799						163,493
Interest received							308			332						2,253
Interest paid							(10,418)			(12,238)						(26,409)
Tax paid							(14,514)			(11,974)						(31,600)
Net cash inflow/(outflow) from operating activities							2,601			(6,081)						107,737
Cash flows from investing activities
Acquisition of subsidiary	21						(21,135)			-						-
Insurance proceeds							-			-						7,670
Purchase of property, plant and equipment	12						(53,020)			(37,678)						(94,897)
Purchase of intangible assets	12						(4,155)			(8,800)						(11,543)
Dividends received from joint ventures							3,171			1,524						10,937
Loans repaid from joint ventures and associates							-			-						7,178
Decrease in available for sale financial assets							815			1,785						1,752
Proceeds from sale of property, plant and equipment							47			104						780
Net cash (outflow) from investing activities							(74,277)			(43,065)						(78,123)
Cash flows from financing activities
Proceeds from issue of ordinary shares	15						338			1,565						1,902
Purchase of own shares							(5,793)			(4,642)						(7,387)
Increase/(decrease) in borrowings							77,500			(134,088)						(162,921)
Dividends paid to Company shareholders	10						(17,650)			(16,009)						(27,929)
Dividends paid to non-controlling interests							-			-						(307)
Finance lease payments							(238)			-						-
Net cash inflow/(outflow) from financing activities							54,157			(153,174)						(196,642)
Net decrease in cash and cash equivalents							(17,519)			(202,320)						(167,028)
Cash and cash equivalents at the beginning of the period							106,259			275,572						275,572
Effects of exchange rate changes on cash and cash equivalents							274			(192)						(2,285)
Cash and cash equivalents at the end of the period	13						89,014			73,060						106,259
					Half year						Half year					Year
					2014						2013					2013
Reconciliation of net cash flow to movement in net debt						€'000						€'000					€'000
Net decrease in cash and cash equivalents						(17,519)						(202,320)					(167,028)
Cash movements from debt financing						(77,262)						134,088					162,921
Acquisition of subsidiary - debt acquired		21				(1,401)						-					-
						(96,182)						(68,232)					(4,107)
Fair value movement of currency swaps					(269)						1,106					674
Exchange translation adjustment on net debt						(869)						(1,007)					5,549
Movement in net debt in the period						(97,320)						(68,133)					2,116
Net debt at the beginning of the period						(374,444)						(376,560)					(376,560)
Net debt at the end of the period						(471,764)						(444,693)					(374,444)
Net debt comprises:
Borrowings	13					(560,778)						(517,753)					(480,703)
Cash and cash equivalents	13					89,014						73,060					106,259
						(471,764)						(444,693)					(374,444)

Notes to the condensed financial statements

for the half year ended 05 July 2014

 

1.    General information

Glanbia plc (the "Company") and its subsidiaries (together the "Group") is a leading global performance nutrition and ingredients Group with its main operations in Europe, USA, Middle East, Africa, Asia Pacific and Latin America.

The Company is a public limited company incorporated and domiciled in Ireland. The address of its registered office is Glanbia House, Kilkenny, Ireland. The Group is controlled by Glanbia Co-operative Society Limited ("the Society"). The Society can nominate up to 14 members of the Board of Directors of Glanbia plc for the years 2014 to 2015 (inclusive) and currently holds, together with its subsidiaries, 41.3% of the issued share capital of the Company and is the ultimate parent of the Group.

The Company shares are quoted on the Irish and London Stock Exchanges.

2.    Basis of preparation

The condensed interim financial statements for the six months ended 05 July 2014 and for the six months ended 29 June 2013 have not been audited by the Group's auditors. The amounts disclosed for the full year ended 04 January 2014 represent an abbreviated version of the Group's financial statements for that year, which received an unqualified audit report. The statutory accounts for the financial year ended 04 January 2014 were approved by the Board of Directors on 11 March 2014 and have been filed with the Companies Registration Office.

The Group's condensed interim financial statements for the six months ended 05 July 2014 have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 - Interim Financial Reporting. These condensed interim financial statements do not constitute statutory accounts within the meaning of section 19 of the Companies (Amendment) Act 1986. The condensed interim financial statements should be read in conjunction with the financial statements for the year ended 04 January 2014, which have been prepared in accordance with IFRS.

The Group meets its day-to-day working capital requirements through its bank facilities. The Group's forecasts and projections, taking account of changes in trading performance, show that the Group expects to be able to operate within the level of its current facilities. After making enquiries, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group's budget for a period of not less than 12 months, the medium term plans as set out in the five year strategic plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group's committed borrowing facilities and Group financing key performance indicators (KPIs). The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements for the six months ended 05 July 2014.

3.    Accounting policies

The methods of computation and accounting policies adopted in the preparation of the Group's condensed interim financial statements are consistent with those applied in the Annual Report for the year ended 04 January 2014 ("2013 Annual Report") except for the IFRSs outlined below. The Group's accounting policies are set out in the financial statements in the 2013 Annual Report.

The following standards and interpretations, issued by the International Accounting Standards Board ('IASB') and the International Financial Reporting Interpretations Committee ('IFRIC'), are effective for the Group for the first time in the current financial period and where relevant have been adopted by the Group:

·      IAS 27 (revised) - Separate financial statements

·      IAS 28 (revised) - Associates and joint ventures

·      IFRS 10 - Consolidated financial statements

·      IFRS 11 - Joint arrangements

·      IFRS 12 - Disclosure of interests in other entities

·      Amendments to IFRS 10,11,12 - Transition guidance

·      Amendments to IFRS 10, IFRS 12 and IAS 27 - Exception from consolidation for 'investment entities'

·      Amendments to IAS 32 - Financial instruments: Presentation, offsetting financial assets and financial liabilities

·      Amendments to IAS 36 - Impairment of assets, recoverable amount disclosures for non - financial assets

·      Amendments to IAS 39 - Financial instruments; Recognition and measurement, novation of derivatives and continuation of hedge accounting

·      IFRIC 21 -  Levies (Not yet endorsed by EU)

Adoption of the standards above had no significant impact on the results or financial position of the Group during the period.

4.    Changes in estimates and assumptions

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 04 January 2014.

5.    Financial risk management

The Group's activities expose it to a variety of financial risks as follows: market risk, currency risk, interest rate risk, price risk, liquidity risk, cash flow risk and credit risk. The interim condensed financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's 2013 Annual Report.

There have been no changes to the risk management procedures or policies since 2013 year end.

Fair value estimation

The fair value of financial instruments traded in active markets (such as available for sale financial assets) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price.

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using generally accepted valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date.

In accordance with IFRS 7 - Financial Instruments: Disclosures, the Group has disclosed the fair value of instruments by the following fair value measurement hierarchy:

·      quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1)

·      inputs, other than quoted prices included in level 1, that are observable for the asset and liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2)

·      inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3)

The following table presents the Group's assets and liabilities that are measured at fair value at 05 July 2014 and 04 January 2014:

	Level 1		Level 2		Level 3		Total
05 July 2014	€'000		€'000		€'000		€'000
Assets
Derivatives used for hedging	-		1,861		-		1,861
Available for sale financial assets - equity securities	344		3,161		-		3,505
Total assets	344		5,022		-		5,366
Liabilities
Derivatives used for hedging	-		(1,325)		-		(1,325)
Total liabilities	-		(1,325)		-		(1,325)

	Level 1		Level 2		Level 3		Total
04 January 2014	€'000		€'000		€'000		€'000
Assets
Derivatives used for hedging	-		1,750		-		1,750
Available for sale financial assets - equity securities	307		1,789		-		2,096
Total assets	307		3,539		-		3,846
Liabilities
Derivatives used for hedging	-		(1,725)		-		(1,725)
Total liabilities	-		(1,725)		-		(1,725)

There were no transfers between levels 1, 2 and 3 during the period.

There were no changes in valuation techniques during the periods.

Valuation techniques used to derive level 2 fair values

Level 2 equities are fair valued using the latest prices quoted in the grey market as at 05 July 2014.

Level 2 trading and hedging derivatives comprise mainly of foreign exchange contracts. These foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. The effects of discounting are generally insignificant for Level 2 derivatives.

Level 2 debt investments are fair valued using a discounted cash flow approach, which discounts the contractual cash flows using discount rates derived from observable market prices of other quoted debt instruments of the counterparties.

Group's valuation process

The Group's finance department includes a team that performs the valuations of financial assets and financial liabilities required for financial reporting purposes. This team reports directly to the Group Finance Director who in turn reports to the Audit Committee. Discussions of valuation processes and results are held between the Group Finance Director and the Audit Committee.

Changes in level 2 fair values are analysed at each reporting date. As part of this discussion, the valuation team presents a report that explains the reasons for the fair value movements.

Fair value of financial assets and liabilities measured at amortised cost

The fair value of borrowings are as follows:

		05 July 2014		04 January 2014
Non-current		539,383		456,064
Current		39,447		39,062
		578,830		495,126

The fair value of the following financial assets and liabilities approximate their carrying amount:

·      Trade and other receivables

·      Cash and cash equivalents (excluding bank overdrafts)

·      Trade and other payables

6.     Segment information

In accordance with IFRS 8 - Operating Segments, the Group has four segments, as follows: Global Performance Nutrition, Global Ingredients, Dairy Ireland and Joint Ventures & Associates. These segments align with the Group's internal financial reporting system and the way in which the Chief Operating Decision Maker assesses performance and allocates the Group's resources. A segment manager is responsible for each segment and is directly accountable for the performance of that segment to the Glanbia Operating Executive Committee which acts as the Chief Operating Decision Maker for the Group.

Each segment derives its revenues as follows: Global Performance Nutrition earns its revenue from sports nutrition solutions; Global Ingredients earns its revenue from the manufacture and sale of cheese, whey protein and other customised solutions; Dairy Ireland earns its revenue from the manufacture and sale of a range of consumer products and farm inputs and Joint Ventures & Associates revenue arises from the manufacture and sale of cheese, whey proteins and dairy consumer products. Each segment is reviewed in its totality by the Chief Operating Decision Maker. The Glanbia Operating Executive Committee assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items.

6.1 The segment results for the period ended 05 July 2014 are as follows:
		Global Performance Nutrition		Global Ingredients		Dairy Ireland		JVs & Associates		Group  including JVs & Associates
		€'000		€'000		€'000		€'000		€'000
Total gross segment revenue	(a)	374,627		585,140		353,824		503,444		1,817,035
Inter-segment revenue		-		(19,434)		-		-		(19,434)
Segment external revenue		374,627		565,706		353,824		503,444		1,797,601
Segment earnings before interest, tax, amortisation and exceptional items	(b)	42,907		53,871		10,536		22,158		129,472
Segment assets	(c)	585,454		648,620		336,298		164,213		1,734,585
Segment liabilities	(d)	95,902		200,155		188,750		-		484,807

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €5.3 million and related party sales between Global Ingredients and Joint Ventures & Associates of €9.1 million. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.

6.1(a) Total gross segment revenue is reconciled to reported external revenue as follows:
	€'000
Total  gross segment revenue	1,817,035
Inter-segment revenue	(19,434)
Joint Ventures & Associates revenue	(503,444)
Reported external revenue	1,294,157

6.1(b) Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax as follows:
	€'000
Segment earnings before interest, tax, amortisation and exceptional items	129,472
Amortisation	(10,565)
Exceptional items	(3,638)
Joint Ventures & Associates interest, tax and amortisation	(6,882)
Finance income	841
Finance costs	(11,337)
Reported profit before tax	97,891
Income tax	(13,789)
Reported profit after tax	84,102

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

6.1(c) Segment assets are reconciled to reported assets as follows:
	€'000
Segment assets	1,734,585
Unallocated assets	111,030
Reported assets	1,845,615

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

6.1(d) Segment liabilities are reconciled to reported liabilities as follows:
	€'000
Segment liabilities	484,807
Unallocated liabilities	664,893
Reported liabilities	1,149,700

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

6.2 The segment results for the period ended 29 June 2013 are as follows:

		Global Performance Nutrition		Global Ingredients		Dairy Ireland		JVs & Associates		Group  including JVs & Associates
		€'000		€'000		€'000		€'000		€'000
Total gross segment revenue	(a)	320,202		550,048		383,247		426,797		1,680,294
Inter-segment revenue		-		(17,148)		-		-		(17,148)
Segment external revenue		320,202		532,900		383,247		426,797		1,663,146
Segment earnings before interest, tax, amortisation and exceptional items	(b)	33,606		56,636		12,027		19,907		122,176
Segment assets	(c)	562,496		585,989		357,879		154,257		1,660,621
Segment liabilities	(d)	111,959		207,975		207,454		-		527,388

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures and Associates of €6.6 million, and related party sales between Global Ingredients and Joint Ventures & Associates of €7.5 million. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.

6.2(a) Total gross segment revenue is reconciled to reported external revenue as follows:
	€'000
Total gross segment revenue	1,680,294
Inter-segment revenue	(17,148)
Joint Ventures & Associates revenue	(426,797)
Reported external revenue	1,236,349

6.2(b) Segment earnings before interest, tax, amortisation and exceptional items is reconciled to reported profit before tax and profit after tax as follows:
	€'000
Segment earnings before interest, tax, amortisation and exceptional items		122,176
Amortisation		(10,020)
Joint Ventures & Associates interest, tax and amortisation		(6,327)
Finance income		1,077
Finance costs		(11,870)
Reported profit before tax		95,036
Income taxes		(13,847)
Reported profit after tax		81,189

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

6.2(c) Segment assets are reconciled to reported assets as follows:
	€'000
Segment assets	1,660,621
Unallocated assets	85,428
Reported assets	1,746,049

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

6.2(d) Segment liabilities are reconciled to reported liabilities as follows:
	€'000
Segment liabilities	527,388
Unallocated liabilities	596,178
Reported liabilities	1,123,566

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

 6.3 The segment results for the year ended 04 January 2014 are as follows:

		Global Performance Nutrition		Global Ingredients		Dairy Ireland		JVs & Associates		Group  including JVs & Associates
		€'000		€'000		€'000		€'000		€'000
Total gross segment revenue	(a)	655,289		1,118,526		652,192		900,466		3,326,473
Inter-segment revenue		-		(43,874)		-		-		(43,874)
Segment external revenue		655,289		1,074,652		652,192		900,466		3,282,599
Segment earnings before interest, tax, amortisation and exceptional items	(b)	70,545		101,982		15,138		39,026		226,691
Segment assets	(c)	539,849		600,543		273,305		152,762		1,566,459
Segment liabilities	(d)	104,231		222,620		166,059		-		492,910

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €11.0 million and related party sales between Global Ingredients and Joint Ventures & Associates of €15.8 million. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.

6.3(a) Total gross segment revenue is reconciled to reported external revenue as follows:
	€'000
Total gross segment revenue	3,326,473
Inter-segment revenue	(43,874)
Joint Ventures & Associates revenue	(900,466)
Reported external revenue	2,382,133

6.3(b) Segment earnings before interest, tax, amortisation and exceptional items is reconciled to reported profit before tax and profit after tax as follows:
	€'000
Segment earnings before interest, tax, amortisation and exceptional items	226,691
Amortisation	(21,011)
Exceptional items	5,804
Joint Ventures & Associates interest, tax and amortisation	(12,538)
Finance income	2,168
Finance costs	(25,110)
Reported profit before tax	176,004
Income taxes	(25,008)
Reported profit after tax	150,996

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

6.3(c) Segment assets are reconciled to reported assets as follows:
	€'000
Segment assets	1,566,459
Unallocated assets	126,429
Reported assets	1,692,888

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

6.3(d) Segment liabilities are reconciled to reported liabilities as follows:
	€'000
Segment liabilities	492,910
Unallocated liabilities	556,458
Reported liabilities	1,049,368

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

7.    Exceptional items

			Half year		Half year		Year
			2014		2013		2013
	Notes		€'000		€'000		€'000
Irish defined benefit pension schemes	(a)		-		-		13,833
Rationalisation costs	(b)		(644)		-		(8,029)
Transaction costs	(c)		(2,994)		-		-
Total exceptional (charge)/credit before tax			(3,638)		-		5,804
Exceptional tax credit/(charge)			874		-		(316)
Total exceptional (charge)/credit			(2,764)		-		5,488

(a)           The Group undertook a review of pension arrangements during 2009 and 2010 across its main Irish defined benefit pension schemes. In 2013, revisions to the Group's pension arrangements for two smaller Irish defined benefit schemes was completed giving rise to an exceptional gain in the year, in accordance with IAS 19, of €13.8 million. This gain relates to negative past service cost, settlement, and curtailment of €8.9 million, €4.0 million and €0.9 million respectively. The curtailment gains and negative past service costs arise following the removal of guaranteed increases to pensions in payment for all members and the provision of benefits for members in employment on a career average basis from a final salary basis.

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

(c)           Transaction costs relate to acquisition activities that did not come to fruition. The primary costs incurred were legal, taxation, due diligence, other consultancy and loan facility fees.

8.    Finance income and costs

	Half year		Half year		Year
	2014		2013		2013
	€'000		€'000		€'000
Finance income
Interest income	841		1,077		2,168
Total finance income	841		1,077		2,168
Finance costs
Bank borrowings repayable within five years	(3,416)		(3,982)		(9,327)
Unwinding of discounts	(158)		(58)		(118)
Finance lease costs	(40)		-		-
Finance cost of private debt placement	(6,385)		(6,492)		(12,989)
Finance cost of preference shares	(1,338)		(1,338)		(2,676)
Total finance costs	(11,337)		(11,870)		(25,110)
Net finance costs	(10,496)		(10,793)		(22,942)

 

9.    Income taxes

The Group's income tax charge after exceptional items of €13.8 million (HY 2013: €13.8 million) has been prepared based on the Group's best estimate of the weighted average tax rate that is expected for the full financial year.

10.  Dividends

A final dividend in respect of the year ended 04 January 2014 of 5.97 cents per share was paid during the period. On 19 August 2014, the Directors declared the payment of an interim dividend for 2014 of 4.43 cents per share (2013 interim dividend: 4.03 cents per share).  The interim dividend will be reflected in the financial statements for the full year 2014 in line with IAS 10 - Events After the Reporting Period.

 

11.  Earnings per share

	Half year		Half year		Year
	2014		2013		2013
Basic
Profit attributable to equity holders of the Parent (€'000)	83,592		80,738		150,330
Weighted average number of ordinary shares in issue	295,028,064		294,804,164		294,712,649
Basic earnings per share (cents per share)	28.33		27.39		51.01
Diluted
Weighted average number of ordinary shares in issue	295,028,064		294,804,164		294,712,649
Adjustments for share options and share awards	1,420,214		1,807,398		2,041,339
Adjusted weighted average number of ordinary shares	296,448,278		296,611,562		296,753,988
Diluted earnings per share (cents per share)	28.20		27.22		50.66
Adjusted
Profit attributable to equity holders of the Parent (€'000)	83,592		80,738		150,330
Amortisation of intangible assets (net of related tax) (€'000)	9,244		8,768		18,385
Amortisation of joint ventures and associates intangible assets (net of related tax) (€'000)	129		94		222
Net exceptional charge/(credit) (€'000)	2,764		-		(5,488)
Adjusted net income (€'000)	95,729		89,600		163,449
Adjusted earnings per share (cents per share)	32.45		30.39		55.46
Diluted adjusted earnings per share (cents per share)	32.29		30.21		55.08

 

12.  Property, plant & equipment and intangible assets

During the six month period to 05 July 2014 the Group spent €57.2 million (HY 2013: €46.5 million) on additions to property, plant & equipment and intangible assets. In addition, the Group also acquired Nutramino Holding ApS which included €2.2 million property, plant & equipment, €15.1 million intangible assets and €7.3 million goodwill. There were no significant disposals during the period. At 05 July 2014 the Group had entered into contractual commitments for the acquisition of property, plant and equipment amounting to €48.8 million (HY 2013: €39.0 million).

13.  Net debt

	Half year		Half year		Year
	2014		2013		2013
	€'000		€'000		€'000
Borrowings due within one year	39,447		-		39,062
Borrowings due after one year	521,331		517,753		441,641
Less:
Cash and cash equivalents	(89,014)		(73,060)		(106,259)
Net debt	471,764		444,693		374,444

The Group has the following undrawn borrowing facilities:
		Half year				Half year		Year
		2014				2013		2013
		€'000				€'000		€'000
Expiring within one year		63,351				65,256		63,020
Expiring beyond one year		185,545				238,006		263,394
		248,896				303,262		326,414
Movement in net borrowings to the period ended 29 June 2013 is analysed as follows:
									€'000
Balance  at 29 December 2012									376,560
- Net drawdown of borrowings									68,232
- Fair value of interest rate swaps qualifying as fair value hedges									(1,106)
- Exchange translation adjustment on net debt									1,007
Balance at 29 June 2013									444,693

Movement in net borrowings to the period ended 05 July 2014 is analysed as follows:
					€'000
Balance at 04 January 2014					374,444
- Acquisition of subsidiary					21,135
- Acquisition of subsidiary  - net debt					1,401
- Other borrowings					73,646
- Fair value movement of currency swaps					269
- Exchange translation adjustment on net debt					869
Balance at 05 July 2014					471,764

On 31 July 2014 all of the Group's remaining cumulative preference shares were redeemed. The shares were redeemed at their issue price for a total of €39 million in accordance with their terms.

 

14.  Provisions for other liabilities and charges

		Restructuring		UK pension		Legal claims		Property & lease commitments		Operational		Total
		€'000		€'000		€'000		€'000		€'000		€'000
		note (a)		note (b)		note (c)		note (d)		note (e)
At 04 January 2014		13,320		18,126		6,046		1,554		5,747		44,793
Charged in the period		644		-		-		-		-		644
Utilised in the period		(9,159)		(233)		(174)		(217)		(124)		(9,907)
Exchange differences		-		863		12		8		4		887
Unwinding of discounts		-		128		-		30		-		158
At 05 July 2014		4,805		18,884		5,884		1,375		5,627		36,575
Non-current		-		18,021		-		1,247		-		19,268
Current		4,805		863		5,884		128		5,627		17,307
		4,805		18,884		5,884		1,375		5,627		36,575

(a)           The restructuring provision relates to the rationalisation programme that the Group is currently undertaking. The provision, which relates mainly to termination payments is expected to be fully utilised during 2014.

(b)          The UK pension provision relates to administration and certain costs associated with pension schemes attached to businesses disposed of in prior years. This provision is expected to be fully utilised over the next 29 years.

(c)           The legal claims provision represents legal claims brought against the Group. Due to the nature of these claims there is some uncertainty around the amount and timing of payments. In the opinion of the Directors, after taking appropriate legal advice, the outcome of these legal claims is not expected to give rise to any significant loss beyond the amounts provided for at 05 July 2014. 

(d)          The property and lease commitments provision relates to onerous leases in respect of three properties where the Group has a present and future obligation to make lease payments. It is expected that €0.1 million will be utilised during 2014 and the balance will be fully utilised over the next 3 years.

(e)           It is expected that €5.6 million of this provision will be utilised during 2014. Due to the nature of these items, there is some uncertainty around the amount and timing of payments.

15.  Share capital and share premium

	Number of shares		Ordinary shares		Share premium		Total
Half year 2013	(thousands)		€'000		€'000		€'000
At 29  December 2012	294,956		17,697		84,398		102,095
Shares issued	600		36		1,529		1,565
At 29 June 2013	295,556		17,733		85,927		103,660

	Number of shares		Ordinary shares		Share premium		Total
Half year 2014	(thousands)		€'000		€'000		€'000
At 04 January 2014	295,646		17,738		86,259		103,997
Shares issued	85		5		333		338
At 05 July 2014	295,731		17,743		86,592		104,335

During the period ended 05 July 2014 85,000 of the 2002 Long Term Incentive Plan ('the 2002 LTIP') shares were exercised with exercise proceeds of €0.3 million. The related weighted average exercise price was €3.98 per share.

The total authorised number of ordinary shares is 350 million shares (HY 2013: 306 million shares) with a par value of €0.06 per share (HY 2013: €0.06 per share). All issued shares are fully paid.

 

16.  Other reserves

	Capital and merger reserve		Currency reserve		Hedging reserve		Available for sale financial asset reserve		Own shares		Share based payment reserve		Total
Half year 2013	€'000		€'000		€'000		€'000		€'000		€'000		€'000
Balance at 29 December 2012	115,973		32,655		(2,254)		441		(8,221)		6,695		145,289
Currency translation differences	-		4,187		-		-		-		-		4,187
Net investment hedge	-		(588)		-		-		-		-		(588)
Revaluation of interest rate swaps - gain in period	-		-		532		-		-		-		532
Foreign exchange contracts - loss in period	-		-		(503)		-		-		-		(503)
Transfers to income statement:
- Foreign exchange contracts - loss in period	-		-		155		-		-		-		155
- Forward commodity contracts - loss in period	-		-		161		-		-		-		161
Revaluation of forward commodity contracts - loss in period	-		-		(81)		-		-		-		(81)
Revaluation of available for sale financial assets - gain in period	-		-		-		779		-		-		779
Deferred tax on fair value movements	-		-		(35)		(257)		-		-		(292)
Cost of share based payments	-		-		-		-		-		2,292		2,292
Transfer on exercise, vesting or expiry of share based payments	-		-		-		-		9,094		(2,777)		6,317
Purchase of own shares	-		-		-		-		(4,642)		-		(4,642)
Balance at 29 June 2013	115,973		36,254		(2,025)		963		(3,769)		6,210		153,606

	Capital and merger reserve		Currency reserve		Hedging reserve		Available for sale financial asset reserve		Own shares		Share based payment reserve		Total
Half year 2014	€'000		€'000		€'000		€'000		€'000		€'000		€'000
Balance at 04 January 2014	115,973		10,535		(1,427)		1,396		(8,191)		8,314		126,600
Currency translation differences	-		4,040		-		-		-		-		4,040
Net investment hedge	-		(245)		-		-		-		-		(245)
Revaluation of interest rate swaps - gain in period	-		-		105		-		-		-		105
Foreign exchange contracts - gain in period	-		-		1,539		-		-		-		1,539
Transfers to income statement:
- Foreign exchange contracts - loss in period	-		-		271		-		-		-		271
- Forward commodity contracts - gain in period	-		-		(79)		-		-		-		(79)
Revaluation of forward commodity contracts - gain in period	-		-		173		-		-		-		173
Revaluation of available for sale financial assets - gain in period	-		-		-		1,409		-		-		1,409
Deferred tax on fair value movements	-		-		(54)		(465)		-		-		(519)
Cost of share based payments	-		-		-		-		-		2,931		2,931
Transfer on exercise, vesting or expiry of share based payments	-		-		-		-		8,188		(3,744)		4,444
Purchase of own shares	-		-		-		-		(5,793)		-		(5,793)
Balance at 05 July 2014	115,973		14,330		528		2,340		(5,796)		7,501		134,876

 

17.  Retirement benefit obligations

The movement in the liability recognised in the  Condensed balance sheet is as follows:

	Half year		Half year		Year
	2014		2013		2013
	€'000		€'000		€'000
At the beginning of the period	(78,035)		(98,133)		(98,133)
Exchange differences	(1,134)		1,137		436
Total expenses	(4,174)		(4,318)		(8,801)
Negative past service costs, gains and losses on settlements	-		-		13,833
Remeasurements - defined benefit schemes	(16,857)		8,512		(1,546)
Contributions paid by employer	8,840		7,914		16,176
At the end of the period	(91,360)		(84,888)		(78,035)

The amounts recognised in the Condensed balance sheet are determined as follows:

	Half year		Half year		Year
	2014		2013		2013
	€'000		€'000		€'000
Fair value of plan assets	374,343		341,576		346,484
Present value of funded obligations	(465,703)		(426,464)		(424,519)
Liability in Condensed balance sheet	(91,360)		(84,888)		(78,035)

The following actuarial assumptions have been made in determining the Group's retirement benefit obligations for the half year ended 05 July 2014 and full year ended 04 January 2014:

	Half year 2014				Year 2013
	IRL		UK		IRL		UK
Discount rate	3.00%		4.25%		3.60%		4.40%
Inflation rate	1.70%		2.25%  - 3.25%		2.00%		2.35% - 3.35%
Future salary increases	2.70%		4.00%		3.00%		4.10%
Future pension increases	0.00%		2.30% - 3.00%		0.00%		2.40% - 3.05%

Mortality rates

The mortality assumptions imply the following life expectancies in years of an active member on retiring at age 65, 20 years from now:

	Half year 2014				Year 2013
	Irish mortality		UK mortality		Irish mortality		UK mortality
	rates		rates		rates		rates
Male	24.5		22.7		24.5		22.6
Female	27.3		25.3		27.3		25.2

The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:

	Half year 2014				Year 2013
	Irish mortality		UK mortality		Irish mortality		UK mortality
	rates		rates		rates		rates
Male	21.0		21.4		21.0		21.3
Female	23.8		23.7		23.8		23.7

 

18.  Related party transactions

The Group is controlled by Glanbia Co-operative Society Limited (the "Society") which holds 41.3% of the issued share capital of Glanbia plc (the "Company") and is the ultimate parent of the Group.

During the six months to 05 July 2014, sales to related parties amounted to €15.8 million (HY 2013: €16.1 million), purchases from related parties amounted to €23.9 million (HY 2013: €21.0 million) and net balances owed to related parties were €40.4 million (HY 2013: €23.9 million). The related party transactions relate primarily to trading between the Group, Southwest Cheese Company, LLC, Glanbia Ingredients Ireland Limited, Milk Ventures (UK) Limited and the Society.

In the opinion of the Directors, there have been no related party transactions, or changes therein, since the year ended 04 January 2014, that have materially affected the Group's financial position or performance during the six months ended 05 July 2014.

19.  Contingent liabilities

Group bank guarantees amounting to €2.9 million (HY 2013: €2.1 million) are outstanding at 05 July 2014, mainly in respect of the payment of EU subsidies. The Group does not expect any material loss to arise from these guarantees.

20.  Cash generated from operations

	Half year		Half year		Year
	2014		2013		2013
	€'000		€'000		€'000
Profit before taxation	97,891		95,036		176,004
Development costs capitalised	-		-		(5,803)
Write-off of intangibles	-		-		76
Exceptional loss/(gain)	3,638		-		(5,804)
Share of results of Joint Ventures & Associates	(15,276)		(13,580)		(26,488)
Depreciation	14,914		13,108		27,203
Amortisation	10,565		10,020		21,011
Cost of share based payments	2,931		2,292		4,568
Difference between pension charge and cash contributions	(4,666)		(3,596)		(7,375)
(Profit)/loss on disposal of property, plant and equipment	(9)		(102)		206
Finance income	(841)		(1,077)		(2,168)
Finance expense	11,337		11,870		25,110
Amortisation of government grants received	(109)		(110)		(219)
Cash generated from operations before changes in working capital	120,375		113,861		206,321
Changes in net working capital:
- Decrease/(increase) in inventory	14,697		862		(40,516)
- (Increase)/decrease in short term receivables	(110,351)		(124,567)		2,620
- Increase in short term liabilities	12,411		29,496		3,340
- (Decrease) in provisions	(9,907)		(1,853)		(8,272)
Cash generated from operations	27,225		17,799		163,493

 

21.  Business Combinations

On 17 January 2014 the Group acquired 100% of Nutramino Holding ApS ("Nutramino"). Nutramino is a leading Scandinavian sports nutrition business with operations in Denmark, Sweden and Norway.

Goodwill is attributable to the profitability and development opportunities associated with the extension of the Group's portfolio by complementing and enhancing existing performance nutrition capabilities. Goodwill is not deductible for tax purposes.

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

	€'000
Purchase consideration - cash paid	16,364
Contingent consideration	4,771
Total consideration	21,135
Less: Fair value of assets acquired	(13,849)
Goodwill	7,286

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

	Fair value €'000
Property, plant and equipment	2,200
Intangible assets - brands	9,918
Intangible assets - customer relationships	5,160
Inventories	994
Trade and other receivables	2,573
Trade and other payables	(2,287)
Deferred income tax liabilities	(3,308)
Net borrowings	(1,401)
Fair value of assets acquired	13,849

Acquisition related costs charged to the Condensed income statement during the period ended 5 July 2014 amounted to €0.1 million (FY 2013: €0.5 million).

The contingent consideration arrangement requires the Group to pay the former owners of Nutramino an earn out if the 2014 actual adjusted earnings before interest, tax, depreciation and amortisation ("EBITDA") exceeds the actual 2013 adjusted EBITDA by a minimum agreed amount. The fair value of the Group's estimated contingent consideration based on the earn out definition is €4.8 million but can fall somewhere between zero and €12.6 million depending on performance. The EBITDA used is based on management's forecast at the date of acquisition. Should the actual result change from the forecast, any increase or decrease will result in a corresponding charge or credit to the Income Statement.

The estimated contingent consideration of €4.8 million has been transferred to an escrow account and is due to be paid before 17 March 2015. As a result, the contingent consideration recognised of €4.8 million was not discounted as the effect of discounting was not material.

Revenue included in the Condensed income statement from 17 January 2014 to 05 July 2014 contributed by the new business was €8.0 million. The business also contributed profit before interest, tax and amortisation of €0.7 million over the same period.

The revenue and profit for the period ended 5 July 2014, determined in accordance with IFRS 3 - Business Combinations, as though the acquisition date for the Nutramino business effected during the year had been at the beginning of the year would not be materially different.

The fair value of trade and other receivables at the acquisition date amounted to €2.6 million. The Gross contractual amount for trade receivables due is €2.4 million of which €0.1 million is provided for as an allowance for doubtful debts.

No contingent liability arose as part of the acquisition.

22.  Events after the reporting period

There have been no material events subsequent to the end of the interim period 05 July 2014 which require disclosure in this report.

23.  Information

Copies of this half yearly financial report are available for download from the Group's website at www.glanbia.com.

 

END

 

 

IR EAXPNFAPLEFF