Final Results

RNS Number : 9350P
Glanbia PLC
24 February 2016
 

2015

Glanbia full year results

 

Delivering better nutrition for every step of life's journey

 

Wednesday, 24 February 2016

 

 

 

Glanbia delivers sixth consecutive year

of double digit earnings growth

 

24 February 2016 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutrition group, announces its results for the year ended 2 January 2016.

 

Full Year 2015 Results highlights

·      Adjusted earnings per share 79.14 cent, up 10.6% constant currency (up 29.4% reported);

·      EBITA in the wholly owned business €271.0 million, up 10.5%, constant currency (up 29.9% reported);

·      EBITA margins in the wholly owned business 9.8%, up 130 basis points, constant currency (up 160 basis points reported);

·      Strong result from Glanbia Performance Nutrition with EBITA of €135.6 million a 28.3% increase, constant currency (up 52.0% reported);

·      Global Ingredients delivered a resilient result in difficult dairy markets with EBITA of €106.6 million an 11.6 % decrease, constant currency (up 6.2% reported);

·      Dairy Ireland EBITA of €28.8 million as margins recovered to 4.5%;

·      Joint Ventures & Associates performed in line with expectations;

·      Operating cash flow improved by €75.2 million to €281.4 million; and

·      Recommended full year dividend of 12.1 cent per share, an increase of 10%.

 

Commenting today Siobhán Talbot, Group Managing Director, said:

 

"I am pleased to announce the sixth consecutive year of double digit growth for Glanbia in 2015 with a 10.6% increase in adjusted earnings per share, constant currency. On a reported basis earnings per share grew by 29.4% reflecting the translation effect of a strong US dollar.  The results demonstrate the resilience and diversification of the Glanbia model during a difficult year for dairy markets. Glanbia Performance Nutrition was the main driver of earnings growth supported by Dairy Ireland which saw a recovery in performance in 2015. The outlook for 2016 is positive and we are guiding 8% to 10% growth in adjusted earnings per share, constant currency."

 

2015 full year results

Reported

Constant currency

€m

FY 2015

FY 2014

Change

Change1

Wholly-owned business





Revenue

2,774.3

2,538.3

+9.3%

-3.6%

EBITA2

 

271.0

208.6

+29.9%

+10.5%

EBITA margin

9.8%

8.2%

+160 bps

+130 bps

Share of Joint Ventures & Associates





Revenue

893.1

984.0

-9.2%

-17.3%

EBITA

39.7

36.4

+9.1%

-

EBITA margin

4.4%

3.7%

+70bps

+70bps

Total Group3

 





Revenue

3,667.4

3,522.3

+4.1%

-7.4%

EBITA

310.7

245.0

+26.8%

+9.0%

EBITA margin

8.5%

7.0%

+150bps

+130bps






 Adjusted earnings per share4

 

79.14c

61.16c

+29.4%

+10.6%

 

 

1.         To arrive at the Constant Currency change, the average FX rate for the current period is applied to the relevant reported result from the same period in the prior year.  The average Euro US dollar FX rate for 2015 was €1 = $1.109 (FY 2014:  €1 = $1.327).

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

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

4.         Adjusted earnings per share is reconciled in note 6 of the financial statements.


 

2015 overview and 2016 outlook

 

Glanbia delivered a strong performance in 2015. Total Group revenue including the Group's share of Joint Ventures & Associates was €3,667.4 million (2014: €3,522.3 million), down 7.4% constant currency (up 4.1% reported). Total Group EBITA was €310.7 million (2014: €245.0 million), up 9.0% constant currency (up 26.8 % reported). Total Group EBITA margin was 8.5% (2014: 7.0%), up 130 basis points constant currency (up 150 basis points reported). Adjusted earnings per share was 79.14 cent (2014: 61.16 cent), up 10.6% constant currency (up 29.4% reported).

 

Capital investment and corporate development

Glanbia's investment programme to underpin the development of its nutrition strategy continued in 2015. Total capital expenditure investment was €123.6 million in 2015, of which €86.2 million was strategic investment in support of the organic growth potential of the business. This primarily included the commissioning of a new high-end whey production facility by Global Ingredients in Idaho and the construction of additional packing capability in the Glanbia Performance Nutrition plant in Chicago.  

 

In April 2015, the Group disposed of its investment in a Nigerian based company, Nutricima, to its joint venture partner PZ Cussons plc for cash consideration of £21 million (€28.5 million). The impact of this disposal on 2015 Group earnings was immaterial.

 

In December 2015, the Group completed the acquisition of thinkThin, LLC ("thinkThin") for a total acquisition cost of €202.4 million.  thinkThin is a leading lifestyle nutrition brand in the US operating in the rapidly expanding protein enriched nutrition bar and snacks category.

 

Balance sheet and financing

At year end the Group had a net debt position of €584.2 million compared to €510.4 million in 2014. The increase in net debt was mainly due to funding the thinkThin acquisition completed during the year and the foreign exchange impact on the translation of US dollar denominated debt to Euro at year end. This was offset by strong cash conversion with the Group delivering €281.4 million in operating cash flow during 2015, a 16.6%, constant currency improvement year on year (up 36.5% reported).  The result was a net debt to adjusted EBITDA* ratio at year end 2015 of 1.75 times (2014: 1.97 times) and interest cover of 10.8 times (2014: 8.9 times). Overall, the Group's financial position remains strong with significant available headroom in banking facilities to finance future investment.

 

Dividend and TSR

The Board is recommending a final dividend of 7.22 cent per share, bringing the total dividend for the year to 12.10 cent per share, representing an increase of 10% and returning over €35 million to shareholders. In 2015, the share price increased 32.3% from €12.81 to €16.95. Total Shareholder Return (TSR) in 2015 was 33.2% outperforming the Stoxx 600 Food and Beverage Index by 12.1% for the year.

 

Board changes

On 12 June 2015, Henry Corbally was appointed Group Chairman replacing Liam Herlihy who retired at the AGM.  Mr Corbally previously served as Vice Chairman for four years. Patrick Murphy was appointed Vice Chairman on the same date having served as a non-executive director for the past four years.  During the year four new non-executive directors were appointed as nominees of Glanbia Co-operative Society Limited; Patsy Ahern, Jim Gilsenan, Patrick Hogan and Tom Grant replacing Liam Herlihy, David Farrell, Patrick Gleeson and William Carroll who retired from the Board.

In 2016, Glanbia Co-operative Society's representation on the plc Board will reduce by four Directors as part of the agreement in place to reduce its representation to seven Directors by 2020.

 

2016 outlook

The Group expects to achieve an 8% to 10% increase in adjusted earnings per share in 2016, constant currency. Glanbia Performance Nutrition is expected to be the main driver of Group performance as it continues to drive branded revenue growth from increased channel penetration and innovation. Global Ingredients is expected to grow earnings as a result of improved product mix following capital investment in 2015 and continued development of higher value nutritional systems business with customers. Dairy Ireland and Joint Ventures & Associates are expected to be broadly in line with 2015 performance.  While there are challenges in the global economic and dairy market landscape, Glanbia's market leading positions and strong execution skills will sustain growth in 2016.

* Definition of adjusted EBITDA per Glanbia's financing agreements and includes dividends from Joint Ventures & Associates.

 

2015 operations review

 

Segmental analysis (as reported)


2015

2014

€m

Revenue

EBITA

EBITA %

Revenue

EBITA

EBITA %

Glanbia Performance Nutrition

923.1

135.6

14.7%

746.2

89.2

12.0%

Global Ingredients

1,218.0

106.6

8.8%

1,175.4

100.4

8.5%

Dairy Ireland

633.2

28.8

4.5%

616.7

19.0

3.1%

Total wholly-owned businesses

2,774.3

271.0

9.8%

2,538.3

208.6

8.2%

Joint Ventures & Associates

893.1

39.7

4.4%

984.0

36.4

3.7%

Total Group

3,667.4

310.7

8.5%

3,522.3

245.0

7.0%

 

Glanbia Performance Nutrition


Reported

Constant Currency

€m

2015

2014

Change

Change

Revenue

923.1

746.2

+23.7%

+6.7%

EBITA

135.6

89.2

+52.0%

+28.3%

EBITA margin

14.7%

12.0%

+270bps

+250bps

 

Commentary is on a constant currency basis throughout

 

Glanbia Performance Nutrition (GPN) delivered a strong performance in 2015. Revenues increased 6.7% to €923.1 million reflecting volume growth of 1.5%, the impact of acquisitions of 7.8% and a net pricing decline of 2.6%. EBITA increased 28.3% in the period and EBITA margins increased 250 basis points to 14.7%. The improvement in margins was driven by operating leverage, improved branded product mix and raw material price deflation.

 

Branded revenue growth, excluding the impact of acquisitions, was 5.6% in 2015. This was led by the US market where branded revenue growth was ahead of market growth rates. Growth was broad based as GPN experienced growth in branded sell-through in specialty, internet and club channels. In non-US markets performance was mixed as growth in certain regions was offset by country specific challenges, particularly in Brazil and Russia as a result of a strong US dollar, geopolitical and macro-economic events. Contract sales declined in 2015 and for the year represented less than 15% of 2015 GPN revenues (22% of 2014 GPN revenues).

 

Isopure, which was acquired in Q4 2014, was successfully integrated and performed well in 2015.

 

The acquisition in December 2015 of thinkThin, a leading lifestyle nutrition brand of protein enriched bars and snacks, has strengthened GPN's position in the rapidly expanding nutrition bar segment which is currently valued at $2.8 billion in US retail channels. thinkThin is distributed primarily in food, natural and mass retail channels in the US and provides a platform for GPN to enter the "better for you" snack products category as well as augment the GPN brand portfolio in its existing channels. Net sales for thinkThin in the twelve months to the end of December 2015 were $87 million.

 

In Q4 2015 GPN launched a new brand, trusource, aimed at lifestyle consumers in a US mass retailer. An investment programme to support the brand will continue through 2016 as the brand is at the early stages of launch. 

 

 

Global Ingredients


Reported

Constant Currency

€m

2015

2014

Change

Change

Revenue

1,218.0

1,175.4

+3.6%

-12.8%

EBITA

106.6

100.4

+6.2%

-11.6%

EBITA margin

8.8%

8.5%

+30bps

+20bps

 

Commentary is on a constant currency basis throughout

 

Global Ingredients (GI) had a reduced performance in 2015 as a result of difficult dairy markets which impacted US Cheese and Ingredient Technologies. Revenues decreased 12.8% to €1,218.0 million reflecting market related price decreases of 17.8% which were partially offset by a volume increase of 5.0%. As a result EBITA decreased 11.6% to €106.6 million.

 

US Cheese

US Cheese revenues decreased in 2015 due to market related pricing declines.  On average, cheese pricing in the US was down 25% year on year. Volumes improved in 2015 as cheese plants operated at close to full capacity throughout the year.  Although the US Cheese business model has a robust mechanism to manage dairy price volatility it did not provide full protection from dairy markets due to the scale of price declines year on year which resulted in a decreased financial performance.

 

Ingredient Technologies

The market environment for Ingredient Technologies was challenging in 2015 due to deteriorating dairy markets throughout the year. This impacted overall pricing with market prices down substantially across the portfolio. Volumes also declined and this led to a reduction in performance year on year.

 

Production capacity to increase the volume of high-end whey ingredients produced in Idaho was commissioned successfully in Q4 2015. This will improve the product mix of whey based ingredients produced by GI. Good progress was made on the development of the value added ingredients based business.  Functional systems in particular had a strong performance in 2015 reflecting GI's capability to help customers reliably incorporate dairy protein into everyday nutrition products.

 

Customised Solutions

Customised Solutions delivered a good performance in 2015 due to volume growth with pricing marginally down.  Sales of high quality micro nutrient premixes continued to grow during the year reflecting growth in customer end markets.

 

Global Ingredients reorganisation

The project to create one integrated GI organisation is progressing to plan. Over the next 12 months the business structure will be fully reorganised into a single commercial team focused on GI's nutritional ingredient portfolio. This will be supported by centres of excellence across areas such as product supply, innovation and strategy. These changes will enable GI to be a more agile, integrated and consumer insight driven organisation delivering to customers the full suite of Glanbia's capability.  The total cost of this project will be approximately €15 million to €20 million.

 

 

Dairy Ireland


Reported

€m

2015

2014

Change

 

Revenue

633.2

616.7

+2.7%

 

EBITA

28.8

19.0

+51.6%

 

EBITA margin

4.5%

3.1%

+140bps

 

 

Dairy Ireland delivered a good performance in 2015 driven primarily by Consumer Products. Revenues increased 2.7% reflecting a 1.8% increase in volumes and a 0.5% decline in pricing. Bolt on acquisitions in Consumer Products contributed 1.4%.  EBITA margins recovered by 140 basis points to 4.5%.

 

Consumer Products

Consumer Products delivered a good performance in 2015. The investment in operational efficiencies, mix improvement and some reduction in input costs enabled a recovery in margins. Revenue growth was driven by increases in value added milk and cream sales plus bolt on acquisitions. Glanbia will continue to innovate and invest in its brand portfolio both domestically and internationally.

 

Agribusiness

Agribusiness' performance in 2015 was broadly in line with prior year.  Returns from fertiliser and feed sales declined as a result of reduced demand for fertiliser and reduced margins in feed.  This was offset by an increase in sales of food grade oats as customer demand for this high quality consumer product continues to expand.

 

Joint Ventures & Associates (Glanbia Share)


Reported

Constant Currency

€m

2015

2014

Change

Change

Revenue

893.1

984.0

-9.2%

-17.3%

EBITA

39.7

36.4

+9.1%

-

EBITA margin

4.4%

3.7%

+70bps

+70bps

 

Commentary is on a constant currency basis throughout

 

Revenues from Glanbia's share of Joint Ventures & Associates decreased 17.3% in 2015. The main drivers of this were the decline in global dairy market prices during the year which led to a price reduction of 19.7% and the disposal of the Group's interest in Nutricima which resulted in a 2.5% decrease.  This was offset by a volume increase of 4.9% largely driven by increased throughput in Glanbia Ingredients Ireland following the abolition of EU milk quotas in April 2015. EBITA of €39.7 million was similar to prior year with margins improving by 70 basis points.

 

Glanbia Ingredients Ireland (GII)

GII performance in 2015 was slightly ahead on the prior year. A challenging dairy market environment reduced margins in the business and this was offset by higher volumes and cost reduction. GII milk suppliers responded to the abolition of EU milk quotas in April 2015 with an increase in production in 2015 by 18.1% versus the prior year. 

 

During the year GII completed the construction of a new dairy nutrition plant in Belview, Co. Kilkenny,  Ireland to produce a range of value added ingredients.  This plant processed over 300 million litres of milk in 2015 and has additional available capacity to support the growth ambitions of the business and its supply base.

 

GII also recently announced plans for the expansion of cheddar cheese capacity at its plant in Wexford, Ireland at a cost of €35 million. This facility is expected to be commissioned in 2017.

 

 

Southwest Cheese (SWC)

Performance in SWC was broadly in line with prior year. Raw material price reductions and improved ingredient yields offset a significant reduction in price as a result of US cheese market price declines.  Cheese volumes were flat as the plant continued to operate at close to full capacity throughout the year.

 

In Q3 2015 Glanbia announced it was in advanced discussions with its SWC joint venture partner to expand cheese and whey production capacity by 25% at its plant in New Mexico, US. It is expected that the total project cost of approximately $140 million will be independently financed by SWC. The project is expected to be commissioned by 2018.

 

Glanbia Cheese

Glanbia Cheese performance declined marginally year on year due to a significant reduction in European mozzarella prices. While production volumes increased as a result of good underlying demand in the sector this was not enough to offset the decline in pricing.

 

Nutricima

In Q2 2015, the Group disposed of its investment in Nutricima to PZ Cussons plc for a cash consideration of £21 million (€28.5 million). The impact of this disposal on 2015 Group earnings was immaterial. As part of the transaction GII has entered into a long term agreement with Nutricima for the sale of dairy ingredients thereby maintaining a route to market in West Africa.

 

Capital markets day 2016

Glanbia will hold a capital markets day on Wednesday, 18 May 2016 in London. The day will focus on Glanbia Performance Nutrition and provide an opportunity to get a detailed perspective on this segment. For those interested in attending please email: investorday@glanbia.com. Further details will be available on the Investor Relations section of the Glanbia.com website.

 

 

2015 finance review

 

2015 results summary (pre-exceptional)

 



Constant

 





Currency

 €m

2015

2014

Change

Change

Revenue (wholly owned)

2,774.3

2,538.3

+9.3%

-3.6%

EBITA

271.0

208.6

+29.9%

+10.5%

EBITA margin

9.8%

8.2%

+160bps

+130bps

- Intangible asset amortisation

(31.1)

(22.5)



- Net finance costs

(21.1)

(20.3)



- Share of results of JVs & Associates

26.3

23.7



- Income taxes

(37.3)

(28.3)



Profit for the year (pre-exceptional)

207.8

161.2



 

Income statement

In 2015, wholly owned revenue declined 3.6% constant currency (9.3% reported increase) to €2.8 billion (2014: €2.5 billion). EBITA grew by 10.5% constant currency (29.9% reported) to €271.0 million (2014: €208.6 million). EBITA margin increased by 130 basis points constant currency (160 basis points reported) to 9.8%.

 

Net financing costs increased by €0.8 million to €21.1 million (2014: €20.3 million). This was driven by the adverse impact of foreign exchange on translation of US dollar denominated debt and increased debt due to the net impact of acquisitions offset somewhat by the repayment of €39 million cumulative redeemable preference shares in 2014.  The Group's average interest rate in 2015 was 4.0% (2014: 4.4%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 70% of projected 2016 debt currently contracted at fixed rates.

 

The 2015 pre-exceptional tax charge increased by €9.0 million to €37.3 million (2014: €28.3 million). This represents an effective tax rate, excluding Joint Ventures & Associates, of 17.1% (2014: 17.0%). The Group anticipates an effective tax rate in 2016 of between 17% and 18%.

 

The Group's share of results of Joint Ventures & Associates increased by €2.6 million to €26.3 million (2014: €23.7 million). Share of results of Joint Ventures & Associates is an after tax and interest amount.

 

 

Joint Ventures & Associates - Reconciliation of EBITA to share of results

€m

2015

2014

EBITA of Joint Ventures & Associates

39.7

36.4

Amortisation

(0.5)

(0.4)

Finance costs

(5.0)

(5.3)

Income tax

(7.9)

(7.0)

Share of results as reported in the Income Statement

26.3

23.7

 

Adjusted earnings per share


2015

2014

Change

Constant Currency Change

Adjusted earnings per share

79.14c

61.16c

+29.4%

+10.6%

 

Total adjusted earnings per share grew 10.6% constant currency (29.4% reported), driven by growth in EBITA. Adjusted earnings per share is believed to be more reflective of the Group's underlying performance than basic earnings per share and is calculated based on the net profit attributable to equity holders of the parent before exceptional items and amortisation of intangible assets, net of related tax.

 

Exceptional items

€m


2015

2014

 

1. Organisational redesign costs

(7.0)

-

2. Acquisition integration costs

(2.9)

-

3. Rationalisation costs

(7.8)

(6.4)

4. Group pension scheme costs

(5.0)


5. Disposal of interest in Joint Venture

(3.6)

 -

 Transaction related costs

-

(9.6)

Exceptional charge pre-tax

(26.3)

(16.0)

Taxation credit

2.5

1.9

Total exceptional charge

(23.8)

(14.1)

 

The total cash outflow during the year in respect of exceptional charges was €15.1 million (2014: €16.4 million) of which €7.1 million (2014: €10.8 million) was in respect of prior year exceptional charges.  Details of the exceptional items are as follows:

 

1.     Organisational redesign costs relate to the project to create one integrated Global Ingredients (GI) organisation as described in page 4 in the GI operations review  The project will continue for 12 months at a total cost of approximately €15 million to €20 million.

2.     Acquisition integration costs comprise costs incurred by Glanbia Performance Nutrition relating to restructuring and the redesign of route to market capabilities in acquired businesses.

3.     Rationalisation costs primarily relate to the completion of the restructuring programme in the Dairy Ireland segment. There was no related write down of tangible assets in 2015 (2014: €3.2 million).

4.     The Group undertook a review of its pension arrangements in 2015 and agreed with the pension trustees to wind up three of its smaller Irish defined benefit pension schemes. This transaction resulted in an exceptional charge in the year of €5.0 million.  This charge relates to net losses on settlement of €4.3 million, in accordance with IAS19, and professional fees of €0.7 million in relation to the transaction. This settlement reduced the gross retirement benefit obligations by €60.2 million.

5.     On 01 April 2015 the Group disposed of its investment in Milk Ventures (UK) Limited, which is the parent company of Nutricima Limited, a Joint Venture business involved in the supply and distribution of evaporated and powdered milk, based in Nigeria. The disposal of the Group's interest resulted in a loss of €3.6 million.

 

Dividend per share

The Board is recommending a final dividend of 7.22 cent per share (2014: final dividend 6.57 cent per share). This represents an increase of 10% in the year and brings the total dividend for the year to 12.10 cent per share (2014: 11.00 cent per share) and a return of over €35 million to shareholders.

 

 

Cash flow

€m

2015

2014

EBITDA pre-exceptional

313.9

240.6

Movement in working capital (pre-exceptional)

4.9

8.2

Business sustaining capital expenditure

(37.4)

(42.6)

Operating cash flow

281.4

206.2

Net interest and tax paid

(33.6)

(57.1)

Dividends from Joint Ventures & Associates

14.9

12.6

Other outflows

(6.7)

(9.1)

Free cash flow 

256.0

152.6

Strategic capital expenditure

(86.2)

(72.9)

Acquisitions

(196.8)

(142.0) 

Disposals

29.0

3.2

Equity dividends

(33.9)

(30.8)

Exceptional costs paid

(15.1)

(16.4)

Cash flow pre currency exchange/fair value adjustments

(47.0)

(106.3)

Exchange translation adjustments

(33.8)

(31.1)

Net debt movement

(80.8)

(137.4)

Net debt at the beginning of the year

(510.4)

(374.4)

Net cash acquired on acquisition of subsidiary

7.0

1.4

Net debt at the end of the year

(584.2)

(510.4)

 

Overall free cash flow was €256.0 million in 2015, a strong increase from €152.6 million in 2014. Operating cash flow increased from €206.2 million to €281.4 million representing an increase of 16.6% when the impact of currency is excluded. Corporation tax payments in 2015 were €24.4 million lower than the previous year, primarily due to the availability of accelerated capital allowances on capital expenditure in the US.

 

Operating working capital

€m

2015

2014

Inventories

344.4

336.8

Trade and other receivables

350.0

305.0

Trade and other payables

(442.7)

(390.4)

Net operating working capital

251.7

251.4

 

During 2015 Glanbia continued to focus on working capital management and has implemented a number of initiatives focusing on payables, receivables and inventory. Total operating working capital at the end of 2015 was €251.7 million, an increase of €0.3 million compared to the previous year. Excluding the impact of currency movements, acquisitions and other non-operational movements this represents a decrease in year on year operating working capital of €8.9 million.

 

Investing for growth

In 2015 Glanbia continued its programme of organic and external investments to drive growth, investing €283.0 million in acquisitions and strategic capital expenditure programmes.

 

In December 2015, Glanbia acquired thinkThin, a leading range of protein enriched bars and snacks targeted at lifestyle consumers in the US for a total acquisition cost of €202.4 million, including liabilities assumed/settled on completion, of which €195.2 million was paid immediately and the balance is payable in 2016. The organic investment programme continued with a €123.6 million investment in capital expenditure during 2015. This included €86.2 million of strategic capital expenditure, primarily the completion of a high-end whey production facility by Global Ingredients in Idaho and the construction of additional packing capability in Glanbia Performance Nutrition's plant in Chicago. Total capital expenditure investment is expected to be between €115 million and €125 million in 2016.

 

 

Group financing

Financing key performance indicators

2015

2014

Net debt : adjusted EBITDA1

1.75 times

1.97 times

Adjusted EBIT1 : net finance cost

10.8 times

8.9 times

1. Definition of adjusted EBITDA and adjusted EBIT are as per Glanbia's financing agreements and include dividends from Joint Ventures & Associates.

 

The Group's financial position continues to be strong.  Net debt at the end of 2015 was €584.2 million. This is an increase from €510.4 million in 2014 and can be primarily attributed to funding the thinkThin acquisition completed during the year as well as the impact of a stronger dollar at year end on translation of US dollar debt.  Net debt to adjusted EBITDA was 1.75 times and interest cover was 10.8 times, both metrics remaining well within financing covenants.  At year end 2015 Glanbia had available bank facilities of €721 million which will mature in January 2020 and private placement debt of $325 million which will mature in June 2021.

 

Glanbia's capital structure has considerable capacity to finance future investments.

 

Return on capital employed


2015

2014

Change

Return on capital employed2

13.9%

13.4%

+50bps

 

2.  Return on capital employed (ROCE) is calculated as Group earnings before interest and amortisation, net of tax plus Group's share of results of Joint Ventures & Associates after interest and tax, over capital employed. Capital employed is defined as the Group's total assets less current liabilities excluding all borrowings, cash and deferred tax balances plus cumulative intangible asset amortisation.

 

The return on capital employed in 2015 increased by 50 basis points to 13.9% (2014: 13.4%). This was driven primarily by the growth in reported EBITA, including the impact of currency, somewhat offset by the dilutive effect of recent acquisitions. The Group has a strategic target to maintain a minimum return on capital employed of 12%.

 

Pension

The Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, decreased in 2015 by €27.5 million to €87.3 million (2014: €114.8 million). A significant driver of this decrease was the increase in the discount rate used in valuing the net pension obligation, from 2.1% at the end of 2014 to 2.25% at end of 2015, reflecting the rise in AA Corporate Bond yields during the year.

 

The Group settled the liabilities of three Irish defined benefit pension schemes in 2015, resulting in an exceptional charge of €5.0 million.  This settlement reduced the gross retirement benefit obligations by €60.2 million.

 

Delivering returns to shareholders

The past year was another strong year for shareholder returns. Total shareholder return for the year was 33.2% following 16.9% in 2014 and 35.4% in 2013.  The Glanbia share price at the end of the financial year was €16.95 compared to €12.81 at the 2014 year end.  The share price outperformed the STOXX Europe 600 Food & Beverage Index by 12.1% in 2015.

 

Principal risks and uncertainties

The performance of the Group is influenced by global economic conditions and consumer confidence in the markets in which it operates. In 2016 the principal risks and uncertainties affecting the Group's performance continue to be:

·      The competitive landscape for Glanbia Performance Nutrition, recognising the impact of a stronger US dollar on the purchasing power of consumers in certain non-US markets;

·      The overall impact on margins from movements in dairy market pricing; and

·      The potential impact of geopolitical unrest and macro-economic uncertainty on Glanbia's international growth strategy.

 

The Board has the ultimate responsibility for risk management and principal risks and uncertainties will be outlined in detail in the 2015 Annual Report.

 

 

Financial strategy

Glanbia's financial strategy is very much aligned with the Group's overall strategy of ensuring the Group delivers on its key financial goals to 2018 of adjusted EPS growth on a constant currency basis of 8% to 10% while maintaining a minimum return on capital employed of 12%.

 

Specific financial goals to enable this strategy include:

 

·      Assessing both external and organic investment opportunities against a minimum benchmark of 12% return after tax by year three;

·      Focusing the organisation on cash conversion through improved working capital management and moderate business sustaining capital expenditure;

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

·      Maintaining the capital structure of the Group within an implicit investment grade credit profile.

 

Investor Relations

The Group Managing Director, Group Finance Director, Executive Directors and Head of Investor Relations presented at 13 investor conferences globally and conducted over 400 meetings with the investor community in 2015. Glanbia's dedicated investor relations team engages with investors on a daily basis outside of closed periods and travel to various financial centres around the world to meet with shareholders and potential shareholders alike. Glanbia is now covered by equity analysts from 10 leading stockbroking firms who regularly publish detailed independent research reports on Glanbia for their clients. Glanbia will hold a capital markets day in London on 18 May 2016 focusing on the Glanbia Performance Nutrition business.

 

Annual General Meeting (AGM)

The Glanbia plc AGM will be held on Wednesday, 27 April 2016, in the Lyrath Estate Hotel, Old Dublin Road, Kilkenny, 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 results announcement. 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. GMT today. Please access the webcast from the Glanbia website at: https://www.glanbia.com/investors/results-centre

 

In addition, a dial-in facility is available using the following numbers:

Ireland                   +353 1 246 5605

UK / Europe          +44(0)203 427 1927

USA:                        +(646) 254 3375

The access code for all participants is: 4238856

 

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

 

For further information contact

Glanbia plc +353 56 777 2200 

Siobhán Talbot, Group Managing Director

Mark Garvey, Group Finance Director

Liam Hennigan, Head of Investor Relations +353 86 046 8375

Martha Kavanagh, Head of Media Relations  +353 87 646 2006

 

 

Group income statement 
for the financial year ended 02 January 2016

 

 

 


Notes

Pre-exceptional

2015

€'000

 

Exceptional

2015

€'000

(note 3)

Total

2015

€'000

 

Pre-exceptional

2014

€'000

 

Exceptional

2014

€'000

(note 3)

Total

2014

€'000

 

Revenue

2

2,774,326

-

2,774,326

2,538,368

-

2,538,368









Earnings before interest, tax and amortisation (EBITA)


271,003

(26,342)

244,661

208,634

(15,949)

192,685

Intangible asset amortisation


(31,125)

-

(31,125)

(22,512)

-

(22,512)









Operating profit


239,878

(26,342)

213,536

186,122

(15,949)

170,173









Finance income

4

1,706

-

1,706

1,725

-

1,725

Finance costs

4

(22,816)

-

(22,816)

(22,050)

-

(22,050)

Share of results of Joint Ventures & Associates

26,270

-

26,270

23,729

-

23,729









Profit before taxation


245,038

(26,342)

218,696

189,526

(15,949)

173,577

Income taxes

5

(37,322)

2,543

(34,779)

(28,252)

1,870

(26,382)









Profit for the year


207,716

(23,799)

183,917

161,274

(14,079)

147,195









Attributable to:








Equity holders of the Parent




183,271



146,313

Non-controlling interests




646



882













183,917



147,195









Earnings per share attributable to the equity holders of the Parent





Basic earnings per share (cent)

6



62.08



49.60









Diluted earnings per share (cent)

6



61.87



49.32

 

 

 

Group statement of comprehensive income
for the financial year ended 02 January 2016

 

 

Notes

2015

€'000

2014

€'000

Profit for the year


183,917

147,195





Other comprehensive income




Items that are not reclassified subsequently to the Group income statement:




Remeasurements - defined benefit schemes

9

20,856

(42,369)

Deferred tax (charge)/credit on remeasurements

9

(2,334)

4,868

Share of remeasurements - Joint Ventures & Associates

9

4,254

(8,900)

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

9

(612)

1,120





Items that may be reclassified subsequently to the Group income statement:




Currency translation differences


91,102

97,805

Net investment hedge


(8,684)

(9,544)

Revaluation of available for sale financial assets


1,273

1,457

Fair value movements on cash flow hedges


145

507

Recycle of currency reserve to the Group income statement on disposal of Investment in Joint Venture


5,037

-

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


(480)

(140)

Other comprehensive income for the year, net of tax


110,557

44,804





Total comprehensive income for the year


294,474

191,999





Total comprehensive income attributable to:




Equity holders of the Parent


293,828

191,117

Non-controlling interests


646

882





Total comprehensive income for the year


294,474

191,999

 

 

 

Group balance sheet
as at 02 January 2016

 

 

Notes

2015

€'000

2014

€'000

ASSETS




Non-current assets




Property, plant and equipment


586,190

490,180

Intangible assets


951,527

662,169

Investments in Associates


97,897

81,365

Investments in Joint Ventures


60,585

69,945

Trade and other receivables


1,850

9,863

Deferred tax assets


36,474

28,503

Available for sale financial assets


10,754

10,621



1,745,277

1,352,646

Current assets




Inventories


344,353

336,802

Trade and other receivables


350,020

305,027

Derivative financial instruments


414

1,279

Cash and cash equivalents

8

210,889

110,370



905,676

753,478





Total assets


2,650,953

2,106,124





EQUITY




Issued capital and reserves attributable to equity holders of the Parent




Share capital and share premium


105,370

104,728

Other reserves


306,425

218,581

Retained earnings

9

642,763

473,573



1,054,558

796,882

Non-controlling interests


8,515

7,896

Total equity


1,063,073

804,778





LIABILITIES




Non-current liabilities




Borrowings

8

752,963

620,317

Derivative financial instruments


47

-

Deferred tax liabilities


201,646

128,002

Retirement benefit obligations


87,288

114,808

Provisions


18,984

18,569

Capital grants


2,787

2,214



1,063,715

883,910

Current liabilities




Trade and other payables


442,713

390,350

Current tax liabilities


18,969

3,115

Borrowings

8

42,169

416

Derivative financial instruments


902

574

Provisions


19,128

22,981

Capital grants


284

-



524,165

417,436

Total liabilities


1,587,880

1,301,346





Total equity and liabilities


2,650,953

2,106,124

 

On behalf of the Board

H Corbally          S Talbot                    M Garvey 

Directors

 

 

Group statement of changes in equity

for the financial year ended 02 January 2016

 

 

 

Attributable to equity holders of the Parent




Share capital and share premium €'000

 

Other

reserves

€'000

 

 

Retained earnings €'000

(note 9)

Total

€'000

 

Non-controlling

interests

€'000

 

Total

€'000

 

 

Balance at 04 January 2014

103,997

126,600

405,289

635,886

7,634

643,520

 








 

Profit for the year

-

-

146,313

146,313

882

147,195

 








 

Other comprehensive income/(expense)







 

Remeasurements - defined benefit schemes

-

-

(42,369)

(42,369)

-

(42,369)

 

Deferred tax on remeasurements

-

-

4,868

4,868

-

4,868

 

Share of remeasurements - Joint Ventures & Associates (net of deferred tax)

-

-

(7,780)

(7,780)

-

(7,780)

 

Fair value movements

-

1,964

-

1,964

-

1,964

 

Deferred tax on fair value movements

-

(140)

-

(140)

-

(140)

 

Currency translation differences

-

97,805

-

97,805

-

97,805

 

Net investment hedge

-

(9,544)

-

(9,544)

-

(9,544)

 

Total comprehensive income for the year

-

90,085

101,032

191,117

882

191,999

 








 

Dividends paid during the year

-

-

(30,751)

(30,751)

(620)

(31,371)

 

Cost of share based payments

-

5,516

-

5,516

-

5,516

 

Transfer on exercise, vesting or expiry of share based payments 

-

4,361

(4,361)

-

-

-

 

Deferred tax on share based payments

-

-

272

272

-

272

 

Sale of shares held by subsidiary

-

-

2,092

2,092

-

2,092

 

Shares issued

14

-

-

14

-

14

 

Premium on shares issued

717

-

-

717

-

717

 

Purchase of own shares

-

(7,981)

-

(7,981)

-

(7,981)

 

Balance at 03 January 2015

104,728

218,581

473,573

796,882

7,896

804,778

 








 

Profit for the year

-

-

183,271

183,271

646

183,917

 








 

Other comprehensive income/(expense)







 

Remeasurements - defined benefit schemes

-

-

20,856

20,856

-

20,856

 

Deferred tax on remeasurements

-

-

(2,334)

(2,334)

-

(2,334)

 

Share of remeasurements - Joint Ventures & Associates (net of deferred tax)

-

-

3,642

3,642

-

3,642

 

Fair value movements

-

1,418

-

1,418

-

1,418

 

Deferred tax on fair value movements

-

(480)

-

(480)

-

(480)

 

Currency translation differences

-

91,102

-

91,102

-

91,102

 

Recycle of currency reserve to the Group income statement on disposal of Investment in Joint Venture

-

5,037

-

5,037

-

5,037

 

Net investment hedge

-

(8,684)

-

(8,684)

-

(8,684)

 

Total comprehensive income for the year

-

88,393

205,435

293,828

646

294,474

 








 

Dividends paid during the year

-

-

(33,895)

(33,895)

(427)

(34,322)

 

Cost of share based payments

-

8,724

-

8,724

-

8,724

 

Transfer on exercise, vesting or expiry of share based payments

-

4,078

(4,078)

-

-

-

 

Deferred tax on share based payments

-

-

1,728

1,728

-

1,728

 

Shares issued

9

-

-

9

-

9

 

Premium on shares issued

633

-

-

633

-

633

 

Purchase of own shares

-

(13,351)

-

(13,351)

-

(13,351)

 

Additions during the year

-

-

-

-

400

400

 








 

Balance at 02 January 2016

105,370

306,425

642,763

1,054,558

8,515

1,063,073

 

 

 

Group statement of cash flows
for the financial year ended 02 January 2016

 

 

 

Notes

2015

€'000

2014

€'000

Cash flows from operating activities




Cash generated from operating activities

10

307,865

230,716

Interest received


1,773

1,683

Interest paid


(22,939)

(22,361)

Tax paid


(9,987)

(34,393)

Net cash inflow from operating activities


276,712

175,645

Cash flows from investing activities




Acquisition of subsidiaries - purchase consideration

11

(195,579)

(125,812)

Acquisition of subsidiaries - liabilities settled at completion

11

(1,296)

(16,138)

Acquisition of subsidiaries - cash and cash equivalents acquired

11

6,991

2,768

Disposal of investment in Joint Venture


28,516

-

Capital grants received


1,132

-

Insurance proceeds


-

1,035

Purchase of property, plant and equipment


(103,792)

(101,953)

Purchase of intangible assets


(19,798)

(13,532)

Interest paid in relation to property, plant and equipment


(2,403)

(1,997)

Dividends received from Joint Ventures & Associates


14,924

12,648

Net redemption and additions in available for sale financial assets


1,140

334

Proceeds from property, plant and equipment


428

63

Net cash outflow from investing activities


(269,737)

(242,584)

Cash flows from financing activities




Proceeds from issue of Ordinary Shares


642

731

Sale of shares held by subsidiary


-

2,092

Purchase of own shares


(13,351)

(7,981)

Increase in borrowings


91,577

138,242

Redemption of preference shares


-

(39,062)

Finance lease payments


(468)

(313)

Dividends paid to Company shareholders

7

(33,895)

(30,751)

Dividends paid to non-controlling interests


(427)

(620)

Net cash inflow from financing activities


44,078

62,338





Net increase/(decrease) in cash and cash equivalents


51,053

(4,601)

Cash and cash equivalents at the beginning of the year


110,370

106,259

Effects of exchange rate changes on cash and cash equivalents


7,702

8,712

Cash and cash equivalents at the end of the year


169,125

110,370

 

Reconciliation of net cash flow to movement in net debt


2015

€'000

2014

€'000

Net increase/(decrease) in cash and cash equivalents


51,053

(4,601)

Cash movements from debt financing


(91,109)

(98,867)

Acquisition of subsidiaries - debt acquired


-

(1,401)



(40,056)

(104,869)

Exchange translation adjustment on currency swaps


1,108

(453)

Exchange translation adjustment on net debt


(34,932)

(30,597)

Movement in net debt in the year


(73,880)

(135,919)

Net debt at the beginning of the year


(510,363)

(374,444)

Net debt at the end of the year


(584,243)

(510,363)





Net debt comprises:




Borrowings


(753,368)

(620,733)

Cash and cash equivalents


169,125

110,370


8

(584,243)

(510,363)

 

 

Notes to the financial statements
for the financial year ended 02 January 2016

 

 

1.   Basis of preparation

 

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 02 January 2016 (referred to as the 2015 Financial Statements). The Group Financial Statements are prepared under International Financial Reporting Standards (IFRS) as adopted by the EU. The 2015 Financial Statements have been audited and have received an unqualified audit report. Amounts are stated in euro thousands (€'000) unless otherwise stated. The financial information is prepared for a 52 week period ending on 02 January 2016. Comparatives are for the 52 week period ending on 03 January 2015. The balance sheets for 2015 and 2014 have been drawn up as at 02 January 2016 and 03 January 2015 respectively.

The financial information has been prepared under the historical cost convention as modified by use of fair values for available for sale financial assets, share based payments, derivative financial instruments and retirement benefit obligations. The Group's accounting policies which will be included in the 2015 Financial Statements are broadly consistent with those as set out in the 2014 Financial Statements.

The Financial Statements were approved by the Board of Directors on 23 February 2016 and signed on its behalf by H Corbally,
S Talbot, and M Garvey.

 

 

2.   Segment information

 

In accordance with IFRS 8 'Operating Segments', the Group has four segments as follows: Glanbia 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 which acts as the Chief Operating Decision Maker for the Group.

Each segment derives its revenues as follows: Glanbia Performance Nutrition earns its revenue from performance nutrition products; Global Ingredients earns its revenue from the manufacture and sale of cheese, dairy and non-dairy nutritional ingredients and vitamin and mineral premixes; 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 and dairy ingredients.

Each segment is reviewed in its totality by the Chief Operating Decision Maker. The Glanbia Operating Executive assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items.

Amounts stated below for Joint Ventures & Associates represents the Group's share.

 

 

2.1  The segment results for the year ended 02 January 2016 are as follows:

 
 
Glanbia Performance Nutrition
€’000
Global Ingredients
€’000
Dairy
Ireland
€’000
JVs & Associates
€’000
Group including
 JVs & Associates
€’000
Total gross segment revenue
(a)
924,165
1,272,795
633,787
893,089
3,723,836
Inter-segment revenue
 
(1,050)
(54,814)
(557)
(56,421)
Total Group Revenue 
 
923,115
1,217,981
633,230
893,089
3,667,415
Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)
(b)
135,610
106,642
28,751
39,690
310,693

 

Included in external revenue are related party sales between Global Ingredients and Joint Ventures & Associates of €15.3 million and related party sales between Dairy Ireland and Joint Ventures & Associates of €17.0 million.  Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

 

 

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


2015

€'000

Total gross segment revenue

3,723,836

Inter-segment revenue

(56,421)

Joint Ventures & Associates revenue

(893,089)



Reported external revenue

2,774,326

 

 

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


Notes

2015

€'000

Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)


310,693

Amortisation


(31,125)

Exceptional items


(26,342)

Joint Ventures & Associates interest, tax and amortisation


(13,420)

Finance income

4

1,706

Finance costs

4

(22,816)

Reported profit before tax


218,696

Income taxes

5

(34,779)




Reported profit after tax


183,917

 

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.

 

Other segment items included in the income statement for the year ended 02 January 2016 are as follows:


Glanbia Performance Nutrition

€'000

Global Ingredients

€'000

Dairy

Ireland

€'000

JVs & Associates

€'000

Group including

 JVs & Associates

€'000

Depreciation of property, plant and equipment

10,352

23,777

9,008

14,863

58,000

Amortisation of intangibles

19,471

9,209

2,445

476

31,601

Capital grants released to income statement

(17)

(38)

(227)

(1,212)

(1,494)

 

 

The segment assets and liabilities at 02 January 2016 and segment capital expenditure and acquisitions for the year then ended are as follows:



Glanbia Performance Nutrition

€'000

Global Ingredients

€'000

Dairy

Ireland

€'000

JVs & Associates

€'000

Group including

JVs & Associates

€'000

Segment assets

(c)

1,150,637

794,155

302,000

160,332

2,407,124

Segment liabilities

(d)

257,148

237,853

181,146

-

676,147

Capital expenditure - additions

(e)

34,437

64,399

13,484

35,522

147,842

Capital expenditure - business combinations

(e)

235,359

-

1,109

-

236,468

 

 

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


2015

€'000

Segment assets

2,407,124

Unallocated assets

243,829



Reported assets

2,650,953

 

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

 

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


2015

€'000

Segment liabilities

676,147

Unallocated liabilities

911,733



Reported liabilities

1,587,880

 

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

 

 

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


2015

€'000

Capital expenditure - additions

147,842

Capital expenditure - business combinations

236,468

Joint Ventures & Associates capital expenditure

(35,522)

Unallocated capital expenditure

8,086



Reported capital expenditure and acquisitions

356,874

 

 

2.2  The segment results for the year ended 03 January 2015 are as follows:



Glanbia Performance Nutrition

€'000

Global Ingredients

€'000

Dairy

Ireland

€'000

JVs & Associates

€'000

Group including

 JVs & Associates

€'000

Total gross segment revenue

 (a)

746,381

1,210,376

616,744

984,016

3,557,517

Inter-segment revenue


(154)

(34,979)

-

-

(35,133)








Total Group Revenue


746,227

1,175,397

616,744

984,016

3,522,384








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

 (b)

89,188

100,426

19,020

36,427

245,061

 

Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €21.2 million, and related party sales between Global Ingredients and Joint Ventures & Associates of €18.2 million. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.

 

2.2 (a)  Total gross segment revenue is reconciled to reported external revenue as follows:


2014

€'000

Total gross segment revenue

3,557,517

Inter-segment revenue

(35,133)

Joint Ventures & Associates revenue

(984,016)



Reported external revenue

2,538,368

 

 

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


2014

€'000

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

245,061

Amortisation

(22,512)

Exceptional items

(15,949)

Joint Ventures & Associates interest, tax and amortisation

(12,698)

Finance income

1,725

Finance costs

(22,050)

Reported profit before tax

173,577

Income taxes

(26,382)



Reported profit after tax

147,195

 

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.

 

Other segment items included in the income statement for the year ended 03 January 2015 are as follows:


Glanbia Performance Nutrition

€'000

Global Ingredients

€'000

Dairy

Ireland

€'000

JVs & Associates

€'000

Group including

JVs & Associates

€'000

Depreciation of property, plant and equipment

5,609

18,359

8,262

14,394

46,624

Amortisation of intangibles

12,727

7,416

2,369

394

22,906

Capital grants released to the income statement

(15)

(53)

(196)

(1,142)

(1,406)

 

The segment assets and liabilities at 03 January 2015 and segment capital expenditure and acquisitions for the year then ended are as follows:



Glanbia Performance Nutrition

€'000

Global Ingredients

€'000

Dairy

Ireland

€'000

JVs & Associates

€'000

Group including

JVs & Associates

€'000

Segment assets

(c)

801,572

709,810

293,186

161,173

1,965,741

Segment liabilities

(d)

160,139

230,678

197,583

-

588,400

Capital expenditure - additions

(e)

27,933

64,439

29,367

56,469

178,208

Capital expenditure - business combinations

(e)

158,767

-

-

-

158,767

 

 

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


2014

€'000

Segment assets

1,965,741

Unallocated assets

140,383



Reported assets

2,106,124

 

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

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


2014

€'000

Segment liabilities

588,400

Unallocated liabilities

712,946



Reported liabilities

1,301,346

 

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

 

 

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


2014

€'000

Capital expenditure - additions

178,208

Capital expenditure - business combinations

158,767

Joint Ventures & Associates capital expenditure

(56,469)

Unallocated capital expenditure

3,119



Reported capital expenditure and acquisitions

283,625

 

2.3 Entity wide disclosures

Revenue from external customers in the Glanbia Performance Nutrition, Global Ingredients, Dairy Ireland and Joint Ventures & Associates segments is outlined in section 2.1(a) and 2.2(a) above.

 

 

Geographical information

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


2015

€'000

2014

€'000

USA

2,008,164

1,823,565

Ireland

746,215

745,524

UK

227,268

212,774

Rest of Europe

291,194

312,492

Other

394,574

428,029





3,667,415

3,522,384

 

Revenue of approximately €291.4 million (2014: €350.3 million) is derived from a single external customer within the Global Ingredients segment.

The total of non-current assets, other than the financial instruments and deferred tax assets, located in Ireland is €828.3 million (2014: €767.5 million) and located in other countries, mainly the USA, is €880.5 million (2014: €556.7 million).

 

 

3.   Exceptional items


Notes

2015

€'000

2014

€'000

Organisation redesign costs

(a)

(6,945)

-

Acquisition integration costs

(b)

(2,919)

-

Rationalisation costs

(c)

(7,841)

(6,379)

Irish defined benefit pension schemes

(d)

(5,006)

-

Disposal of Joint Venture

(e)

(3,631)

-

Transaction related costs

(f)

-

(9,570)

Total exceptional charge before tax


(26,342)

(15,949)

Exceptional tax credit


2,543

1,870





Total exceptional charge


(23,799)

(14,079)

 

The nature of the total exceptional charge before tax is as follows:



2015

€'000

2014

€'000

Employee benefit expense


(7,416)

(1,678)

Defined benefit pension scheme settlement loss


(4,306)

-

Other operating costs


(14,620)

(14,271)

Total exceptional charge before tax


(26,342)

(15,949)

 

The total cash outflow during the year in respect of exceptional charges was €15.1 million (2014: €16.4 million) of which €7.1 million (2014: €10.8 million) was in respect of prior year exceptional charges.

(a) The project to create one integrated Global Ingredients (GI) organisation is progressing to plan. Over the next 12 months the business structure will be fundamentally reorganised into a single commercial team focused on GI's nutritional ingredient portfolio. This will be supported by centres of excellence across areas such as product supply, innovation and strategy. These changes will enable GI to be a more agile integrated consumer insight driven organisation delivering to customers the full suite of Glanbia's capability.  Costs of €6.9 million include consultancy of €4.9 million, employee benefit expense of €0.6 million and other costs of €1.4 million. The total cost of this project will be approximately €15 million to €20 million.

(b) Acquisition integration costs of €2.9 million comprise costs incurred by Glanbia Performance Nutrition relating to restructuring and the redesign of route to market capabilities in acquired businesses.  Costs of €2.9 million include consultancy of €1.6 million, employee benefit expense of €0.8 million and other costs of €0.5 million.

(c)  Rationalisation costs primarily relate to the completion of the restructuring programme in the Dairy Ireland segment. Costs of €7.8 million include employee benefit expense of €5.9 million and other costs of €1.9 million. There were no related impairments of tangible assets in 2015 (2014: €3.2 million).

(d) The Group undertook a review of its pension arrangements in 2015 and agreed with the pension trustees to wind up three of its smaller Irish defined benefit pension schemes. This transaction resulted in an exceptional charge in the year of €5.0 million. This charge relates to gains and losses on settlement of €4.3 million, in accordance with IAS 19 'Employee Benefits', and professional fees of €0.7 million in relation to the transaction. This settlement reduced the gross retirement benefit obligation by €60.2 million.

(e) On 01 April 2015, the Group disposed of its investment in Milk Ventures (UK) Limited which is the parent company of Nutricima Limited, a non-core Joint Venture business involved in the supply and distribution of evaporated and powered milk, based in Nigeria. PZ Cussons plc, Glanbia's partner in the Joint Venture Nutricima, acquired Glanbia's 50% stake for cash consideration of £21 million (€28.5 million). In line with IFRS 5 'Non Current Assets Held for Sale and Discontinued Operations', the disposal of the Group's interest resulted in a non-cash loss of €3.6 million. This comprised a profit on disposal of €1.4 million (cash consideration of €28.5 million less carrying value €27.1 million including loan to Joint Venture) offset by the recycle of €5.0 million cumulative foreign currency translation losses previously recognised in equity. Milk Ventures (UK) Limited was previously included in the Joint Ventures & Associates segment.

(f)  Transaction related costs in 2014 comprised of costs relating to acquisition activities that did not come to fruition and additional contingent consideration relating to the acquisition of Nutramino Holding ApS, in excess of its fair value at date of acquisition.

 

 

4.   Finance income and costs



2015

€'000

2014

€'000

Finance income




Interest income


1,706

1,725





Total finance income


1,706

1,725





Finance costs




Bank borrowing costs


(4,109)

(4,767)

Facility fees


(2,761)

(2,045)

Unwinding of discounts


(142)

(165)

Finance lease costs


(127)

(70)

Finance cost of private debt placement


(15,677)

(13,442)

Finance cost of preference shares


-

(1,561)





Total finance costs


(22,816)

(22,050)





Net finance costs


(21,110)

(20,325)

 

Net finance costs do not include borrowing costs of €2.4 million (2014: €2.0 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 4.0% (2014: 4.4%).

 

 

5.   Income taxes



2015

€'000

2014

€'000

Current tax




Irish current tax


16,388

14,124

Adjustments in respect of prior years


489

787

Irish current tax for the year


16,877

14,911

Foreign current tax


14,282

16,332

Adjustments in respect of prior years


(5,488)

1,925

Foreign current tax for the year


8,794

18,257





Total current tax


25,671

33,168





Deferred tax




Deferred tax - current year


5,898

(3,681)

Adjustments in respect of prior years


5,753

(1,235)





Total deferred tax


11,651

(4,916)





Pre-exceptional tax charge


37,322

28,252

Exceptional tax credit




Current tax


(2,302)

(1,469)

Deferred tax


(241)

(401)





Total tax charge for the year


34,779

26,382

 

Notes on exceptional tax credit:

(a) The Group incurred exceptional costs in the Global Ingredients and Glanbia Performance Nutrition segments during 2015 relating to restructuring projects aimed at redesigning the businesses to meet future market needs. These costs resulted in an exceptional current tax credit of €1.29 million (2014: nil).

(b) The rationalisation costs in the Dairy Ireland segment resulted in an exceptional current tax credit of €0.95 million (2014: €0.40 million) and an exceptional deferred tax credit of €0.03 million (2014: €0.40 million).

(c)  In 2015, there was an exceptional current tax credit of €0.06 million (2014: nil) and exceptional deferred tax credit of €0.21 million (2014: nil) relating to revisions to the Group's Irish pension arrangements.

(d) During 2015, the Group disposed of its investment in Milk Ventures (UK) Limited which is the parent company of Nutricima Limited, a non-core Joint Venture business involved in the supply and distribution of evaporated and powdered milk, based in Nigeria. While this transaction gave rise to an exceptional loss of €3.6 million in the Financial Statements, there is no current tax or deferred tax impact arising.

(e) In 2014, the Group incurred transaction costs relating to acquisition activities that did not come to fruition, which resulted in an exceptional current tax credit of €1.1 million.

The exceptional net tax credit in 2015 and 2014 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:


2015

€'000

2014

€'000

Profit before tax

218,696

173,577

Income tax calculated at Irish rate of 12.5% (2014: 12.5%)

27,337

21,697

Earnings at higher Irish rates

24

2

Difference due to overseas tax rates

10,632

7,305

Adjustment to tax charge in respect of previous periods

754

1,477

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

(3,284)

(2,966)

Other reconciling differences

(684)

(1,133)

Total tax charge

34,779

26,382

 

Factors that may affect future tax charges and other disclosure requirements

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

 

6.   Earnings per share

 

Basic

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


2015

2014

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

183,271

146,313

Weighted average number of Ordinary Shares in issue

295,196,003

295,011,089




Basic earnings per share (cent per share)

62.08

49.60

 

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. In respect of share options and share awards, a calculation is performed to determine the number of shares that could have been acquired at market price (determined as the average annual market price of the Company's shares) and the fair value (determined as the fair value at the date of grant) attached to outstanding share options and awards. The number of shares calculated above is compared with the number of shares that would have been issued assuming the exercise of all share options and awards.


2015

2014

Weighted average number of Ordinary Shares in issue

295,196,003

295,011,089

Adjustments for share awards

1,002,678

1,510,550

Adjustments for share options

42,617

134,881

Adjusted weighted average number of Ordinary Shares

296,241,298

296,656,520




Diluted earnings per share (cent per share)

61.87

49.32

 

Adjusted

Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before exceptional items (net of related tax) and intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective of the Group's overall underlying performance and reflects the metrics used by the Group to measure profitability and financial performance.


2015

€'000

2014

€'000

Profit attributable to equity holders of the Parent

183,271

146,313

Amortisation of intangible assets (net of related tax)

26,126

19,698

Amortisation of Joint Ventures & Associates intangible assets (net of related tax)

417

345

Exceptional items (net of related tax)

23,799

14,079

Adjusted net income

233,613

180,435




Adjusted earnings per share (cent per share)

79.14

61.16




Diluted adjusted earnings per share (cent per share)

78.86

60.82

 

 

7.   Dividends


2015

€'000

2014

€'000

Dividends paid per Ordinary Share are as follows:



Final dividend for the year ended 03 January 2015 of 6.57 cent per share paid on 15 May 2015

19,449


Final dividend for the year ended 04 January 2014 of 5.97 cent per share paid on 16 May 2014


17,650




Interim dividend for the year ended 02 January 2016 of 4.88 cent per share paid on 16 October 2015

14,446


Interim dividend for the year ended 03 January 2015 of 4.43 cent per share paid on 10 October 2014


13,101


33,895

30,751

 

The Directors have recommended the payment of a final dividend of 7.22 cent per share on the Ordinary Shares which amounts to €21.4 million. Subject to shareholder approval, this dividend will be paid on 29 April 2016 to shareholders on the register of members at 18 March 2016, the record date. These Financial Statements do not reflect this final dividend. There are no income tax consequences for the Company in respect of dividends proposed prior to issuance of the Financial Statements.

8.   Net debt


2015

€'000

2014

€'000

Borrowings due within one year

42,169

416

Borrowings due after one year

752,963

620,317

Less:



Cash and cash equivalents

(210,889)

(110,370)




Net debt

584,243

510,363

 

 

9.   Retained earnings




Group

€'000

Balance at 04 January 2014



405,289





Profit for the year



146,313





Other comprehensive income/(expense)




Remeasurements - defined benefit schemes



(42,369)

Deferred tax on remeasurements



4,868

Share of remeasurements - Joint Ventures & Associates



(7,780)

Total comprehensive income for the year



101,032





Dividends paid during the year



(30,751)

Transfer on exercise, vesting or expiry of share based payments



(4,361)

Deferred tax credit on share based payments



272

Sale of shares held by subsidiary



2,092

Balance at 03 January 2015



473,573





Profit for the year



183,271





Other comprehensive income/(expense)




Remeasurements - defined benefit schemes



20,856

Deferred tax on remeasurements



(2,334)

Share of remeasurements - Joint Ventures & Associates



3,642

Total comprehensive income for the year



205,435





Dividends paid during the year



(33,895)

Transfer on exercise, vesting or expiry of share based payments



(4,078)

Deferred tax credit on share based payments



1,728





Balance at 02 January 2016



642,763

 

 

10. Cash generated from operations




Notes

2015

Group

€'000

2014

Group

€'000

Profit before taxation




218,696

173,577







Write-off of intangibles




-

73

Non-cash element of exceptional charge




18,299

10,290

Share of results of Joint Ventures & Associates




(26,270)

(23,729)

Depreciation




43,137

32,230

Amortisation




31,125

22,512

Cost of share based payments




8,724

5,516

Difference between pension charge and cash contributions




(6,027)

(7,019)

Loss/(profit) on disposal of property, plant and equipment




209

(226)

Finance income



4

(1,706)

(1,725)

Finance expense



4

22,816

22,050

Amortisation of government grants received




(282)

(264)







Cash generated before changes in working capital




308,721

233,285

Change in net working capital:






- Decrease in inventory




20,287

15,740

- (Increase)/decrease in short term receivables




(12,187)

(16,264)

- (Decrease)/increase in short term liabilities




846

9,321

- (Decrease) in provisions




(9,802)

(11,366)







Cash generated from operating activities




307,865

230,716

 

 

11. Business combinations

 

The acquisitions completed by the Group during the year were as follows:

·     On 28 June 2015, the Group acquired 100% of Cold Chain Food Distributors Limited (Cold Chain). Cold Chain's principal activity is the sale and distribution of dairy products in Ireland. The acquisition will allow the Group to broaden its product range for customers in the growing food service channel and its customer base. Goodwill is attributable to the profitability and development opportunities associated with the extension of the Group's portfolio by complementing and enhancing existing sales and distribution channels. Goodwill is not deductible for tax purposes.

·     On 10 December 2015, the Group acquired 100% of PHTT Acquisition, LLC (thinkThin). thinkThin is a US based provider of premium lifestyle nutrition products. The reason for the acquisition was to complement the portfolio of the Group's Glanbia Performance Nutrition business and to further consolidate the Group's market leading position. 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. The goodwill reflects the expectation that the business will continue to generate new customers and new products over time, the acquired workforce (which is not an identifiable asset for financial reporting purposes) and synergies. Goodwill of €12.5 million is deductible for tax purposes.

 

Acquisition related costs charged to the Group income statement, included within other expenses, during the year ended 02 January 2016 amounted to €0.8 million (2014: €1.1 million).

No contingent liabilities arose as part of the acquisitions.

 

Summary of acquisitions

 

Details of the net assets acquired and goodwill arising from the acquisitions during the year are as follows:


Cold Chain

€'000

thinkThin

€'000

Total

€'000

Purchase consideration

872

193,274

194,146

Add/(less): fair value of liabilities acquired/(assets acquired)

227

(108,583)

(108,356)





Goodwill

1,099

84,691

85,790

 

 

The fair value of assets and liabilities arising from the acquisitions during the year are as follows:


Cold Chain

€'000

thinkThin

€'000

Total

Fair Value

€'000

Property, plant and equipment

10

795

805

Intangible assets - brands

-

78,589

78,589

Intangible assets - customer relationships

-

71,278

71,278

Intangible assets - software

-

6

6

Inventories

108

3,088

3,196

Trade and other receivables

1,374

9,367

10,741

Trade and other payables

(1,217)

(9,283)

(10,500)

Deferred income tax asset/(liabilities)

22

(42,829)

(42,807)

Liabilities assumed at completion

-

(8,647)

(8,647)

Liabilities settled at completion

(802)

(494)

(1,296)

Cash and cash equivalents

278

6,713

6,991





Fair value of (liabilities)/assets acquired

(227)

108,583

108,356

 

The total purchase consideration is as follows:


Cold Chain

€'000

thinkThin

€'000

Total

€'000

Purchase consideration - cash paid

872

194,707

195,579

Refund of consideration due from vendor

-

(1,433)

(1,433)

Purchase consideration

872

193,274

194,146

 

The fair value of Cold Chain's trade and other receivables at the acquisition date amounted to €1.4 million. The gross contractual amount for trade receivables due is €1.5 million, an amount of €0.1 million is provided for as an allowance for doubtful debts.

The fair value of thinkThin's trade and other receivables at the acquisition date amounted to €9.4 million. The gross contractual amount for trade receivables due is €6.3 million, an amount €0.2 million is provided for as an allowance for doubtful debts. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect of the thinkThin business combination given the timing of closure of this transaction. Any amendments to these fair values within the 12 month timeframe from the date of acquisition will be disclosed in the 2016 Annual Report as stipulated by IFRS 3 'Business Combinations'.

For the acquisitions completed in 2014 there were no material revisions of the provisional fair value adjustments since the initial values were established.

 

Combined impact of acquisitions

The revenue and profit (net of transaction costs) of the Group including the impact of acquisitions completed during the financial year ended 02 January 2016 were as follows:


2015 Acquisitions

€'000

Group excluding acquisitions

€'000

Consolidated Group including acquisitions

€'000

Revenue

9,892

2,764,434

2,774,326

Profit before taxation and exceptional items

373

244,665

245,038

 

The revenue and profit (including transaction costs) of the Group for the financial year ended 02 January 2016 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:


2015 Acquisitions

€'000

Group excluding acquisitions

€'000

Pro Forma Consolidated Group

€'000

Revenue

86,606

2,764,434

2,851,040

(Loss)/profit before taxation and exceptional items

(4,748)

244,665

239,917

 

 

12  Events after the reporting period

See note 7 for the final dividend, recommended by the Directors, to be paid on 29 April 2016.

 

 

13. Statutory financial statements

 

The financial information in this preliminary announcement is not the statutory Financial Statements of the Company, a copy of which is required to be annexed to the Company's annual return filed with the Companies Registration Office. A copy of the Financial Statements in respect of the financial year ended 02 January 2016 will be annexed to the Company's annual return for 2016. 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 02 January 2016, which were approved by the Directors on 23 February 2016. A copy of the Financial Statements of the Group in respect of the year ended 03 January 2015 has been annexed to the Company's annual return for 2015 and filed with the Companies Registration Office.


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