Glanbia plc 2018 Full Year Results

RNS Number : 5373Q

Glanbia PLC

20 February 2019

 

Glanbia delivers 9.0% constant currency growth in adjusted earnings per share and announces acquisition of non-dairy ingredient solutions business, Watson

20 February 2019 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutrition group, announces its results for the financial year ended 29 December 2018.

Results highlights for the full year 2018

·     Adjusted earnings per share 91.01 cent, up 9.0% constant currency on prior year on a pro-forma basis, (up 4.5% reported);

·     Wholly-owned revenue €2,386.3 million (2017: €2,387.1 million) up 4.1% on prior year, constant currency (in line with prior year on a reported basis);

·     Wholly-owned EBITA €284.9 million (2017: €283.2 million) up 5.2% on prior year, constant currency (up 0.6% reported);

·     Wholly-owned EBITA margin up 10 bps constant currency on prior year (in line with prior year on a reported basis);

·     Glanbia Performance Nutrition ("GPN") delivered revenue growth of 9.5% constant currency (up 5.2% reported) with like-for-like branded volume growth of 9.2% and EBITA of €173.1 million, a 6.7% increase on prior year, constant currency (up 2.0% reported);

·     Glanbia Nutritionals ("GN") revenue declined 0.6% constant currency (down 4.7% reported) and delivered EBITA of €111.8 million, a 3.0% increase on prior year, constant currency (down 1.5% reported).  Volume growth in GN Nutritional Solutions was 8.5% in 2018;

·     Completed the acquisition of SlimFast for $350 million in November 2018, a complementary brand within the GPN portfolio;

·     Glanbia announces that it has agreed to acquire Watson, a US based non-dairy ingredient solutions business, for $89 million;

·     Joint Ventures reported share of profits after tax (before exceptional items) of €45.3 million up €2.5 million on prior year. A number of JV investments announced during 2018;

·     Reported profit for the year €234.0 million  up €2.6 million on prior year on a pre-exceptional basis;

·     Operating cash flow of €301.7 million representing an operating cash conversion rate of 92%;

·     Recommended final dividend of 14.49 cent per share. Full year dividend of 24.20 cent, a 10% increase on prior year and representing a pay-out ratio of 26.6% of adjusted earnings per share; and

·      Glanbia announces plans to reorganise the composition of its Board of Directors during 2019 with appointment of three new Independent non-executive Directors to its Board.

Commenting today Siobhán Talbot, Group Managing Director, said:

"I am pleased to announce 9.0% growth in pro-forma adjusted earnings per share, constant currency, for Glanbia for 2018. This was largely driven by strong volume growth across our business, in particular in the branded portfolio of GPN and the Nutritional Solutions component of GN.  Consumer demand for our brands and nutritional ingredients remains strong underpinned by positive long-term global health and wellness trends. Glanbia also delivered a strong cash performance with an operating cash conversion rate in 2018 of 92%. We continue to invest in expanding our business and its capabilities and we completed the acquisition of SlimFast in November 2018.  Today, I am happy to announce that we have agreed to acquire Watson for $89 million.  Watson is a non-dairy ingredient solutions business headquartered in Connecticut, USA.  It is a highly complementary addition to our Nutritional Solutions business and will help broaden our capabilities in the ingredients sector.

We continue to drive sustainable growth and are on track to deliver our 2022 strategic ambitions. The outlook for 2019 is positive and Glanbia expects to deliver 5% to 8% growth in adjusted earnings per share, constant currency.  If the Euro : US Dollar exchange rate remains at current levels, the reported 2019 result will be 3% higher than the constant currency outlook."

2018 full year income statement highlights

2018 full year results		Reported	Reported	Constant
€m	FY 2018	FY 2017	Change	Currency Change
Wholly-owned business (continuing operations)
Revenue	2,386.3	2,387.1	0.0%	+ 4.1%
EBITA2	284.9	283.2	+ 0.6%	+ 5.2%
EBITA margin	11.9%	11.9%	0 bps	+10 bps
JVs (continuing operations)
Share of profit after tax (pre-exceptional items)	45.3	42.8
Discontinued operations
Profit from discontinued operations	-	92.2
Total reported Group profit	234.0	329.4
Basic earnings per share - continuing operations	79.28c	80.40c
		Pro - Forma
Pro-forma adjusted earnings per share1	91.01c	87.11c	+ 4.5%	+ 9.0%

1.    Pro-forma adjusted earnings per share for the continuing Group is prepared on a like-for-like basis.  It includes the full year contribution of continuing operations in the 2017 result.  A reconciliation is set out on pages 33 and 34 of the glossary.

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

This release contains certain alternative performance measures. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found in the glossary on pages 31 to 39.

Foreign currency exchange

Glanbia generates over 80% of its revenues in US Dollars and reports in Euro. To eliminate the impact of foreign currency exchange rates on the translation of results the Group uses constant currency reporting. To arrive at the constant currency change, the average exchange rate for the current year is applied to the relevant reported result from the prior year. The average Euro US Dollar exchange rate for 2018 was €1 = $1.1812 (FY 2017: €1 = $1.1295). Therefore this leads to a difference between the constant currency basis and the reported result.

2018 full-year overview

Glanbia delivered a good performance in 2018. Wholly-owned revenue from continuing operations was €2,386.3 million, which was in line with prior year on a reported basis (up 4.1% constant currency). The drivers of revenue growth were a 6.7% growth in volume, a 4.7% decrease in price and a 2.1% revenue contribution from acquisitions. Wholly-owned EBITA from continuing operations was €284.9 million, up 0.6% reported (up 5.2% constant currency). Wholly-owned EBITA margin from continuing operations was 11.9%, which was flat on a reported basis (up 10 basis points constant currency).

Glanbia's reported share of profit after tax (before exceptional items) from JVs increased by €2.5 million to €45.3 million in 2018.

Total Group profit in 2018 was €234.0 million. The prior year Group profit of €329.4 million included €98.0 million of net exceptional gains in 2017 relating to a profit on disposal of discontinued operations and a tax credit arising on the reduction of the US federal corporate tax rate.

Adjusted earnings per share was 91.01 cent. Comparing to prior year on a pro-forma basis, eliminating the impact of discontinued operations, this was an increase of 4.5% on a reported basis (up 9.0% constant currency).

Dividend and total shareholder return

The Board is recommending a final dividend of 14.49 cent per share which brings the total dividend for the year to 24.20 cent per share, a 10% increase on prior year. This total dividend represents a return of €71.6 million to shareholders from 2018 earnings and a pay-out of 26.6% of 2018 adjusted earnings per share. The final dividend will be paid on 26 April 2019 to shareholders on the share register on 15 March 2019. Glanbia's total shareholder return ("TSR") in 2018 was 11.4%.

Board changes

Glanbia plans to reorganise the composition of its Board of Directors effective 1 May 2019. The reorganised Board will be comprised of 16 members, as follows:

·     Two Executive Directors; Group Managing Director and Group Finance Director;

·     Six Independent Non-Executive Directors; and

·     Eight Non-Executive Directors nominated by Glanbia Co-operative Society Limited (the "Society"). This is in accordance with the amended and restated relationship agreement dated 2 July 2017 (the "Relationship Agreement") between the Company and the Society.

As a result of these changes, Glanbia plans to appoint three new Independent Non-Executive Directors during 2019.

Full details of these and related Board changes, as well as biographies of announced new Independent Non-Executive Directors, are contained in a separate announcement published today.

Capital investment

In 2018 total cash outflow in respect of capital expenditure amounted to €62.6 million which includes €46.2 million of strategic capital expenditure. Key strategic projects completed in 2018 included investments in innovation, supply chain, manufacturing and IT systems in GPN and GN.

Corporate development

Glanbia continued to progress its growth strategy in 2018 through strategic investments and complementary acquisitions.  Glanbia's priority on acquisitions is to invest to further build and develop the branded portfolio of GPN and the Nutritional Solutions capability in GN.  In addition, during 2018 the Group participated with its strategic joint venture partners in a number of dairy related investments.  These investments are consistent with the ambition of the Group to deploy capital on opportunities which can build on its existing strengths and drive future sustainable growth.

Acquisition of Watson

Subsequent to year end, on 19 February 2019, Glanbia agreed to acquire Watson Inc. and Polymer Films, Inc. (collectively known as "Watson") for $89 million in cash (the "Transaction").  Watson is a US based non-dairy ingredient solutions business and will be a complementary acquisition for the Group.  In 2018 Watson delivered $101 million in revenue.  On completion, Watson will be part of GN Nutritional Solutions.  It is anticipated that the Transaction will close by Q2 2019 subject to customary completion conditions. There is no deferred component to the purchase price.  The Transaction will be fully financed by Glanbia's existing banking facilities and based on the anticipated close date it is expected to be marginally accretive to earnings per share in 2019.

Acquisition of SlimFast

Glanbia completed the acquisition of SlimFast on 19 November 2018 for $350 million (plus acquired working capital). This acquisition has enabled GPN to enter into the adjacent $8 billion consumer category of weight management. SlimFast delivered a strong performance in 2018 and on a pro-forma basis the business grew its full year revenue by 17% year-on-year to $247 million as a result of innovation and strong in-market execution.

Strategy and medium-term targets

On 23 May 2018 at its capital markets day, Glanbia outlined its strategic ambition to 2022. The Group is focused on long-term sustainable growth via its three platforms of GPN, GN and Strategic Joint Ventures. This will be enabled by driving organic growth and selective M&A.

The Group's five year ambition set out on 23 May 2018 was as follows:

Key performance indicator	Metric	2018 result
Total Group revenue (including Glanbia's share of Joint Ventures) by 2022	€5.0 billion	€3.7 billion
5 year average adjusted earnings per share growth, constant currency, 2018 to 2022	5% to 10%	9.0%
Annual return on capital employed	10% to 13%	13.2%
Annual operating cash conversion	Greater than 80%	92%

1.    Note, with the adoption of the IFRS 15 accounting standard ("Revenue from Contracts with Customers") in 2019, the new Total Group revenue target by 2022 will be €6 billion, based on current foreign exchange rates.  Further details of the impact of IFRS 15 can be found in the Glanbia Nutritionals operations review on page 6 and the Finance review on page 12.

2019 Outlook

Glanbia expects adjusted earnings per share to grow between 5% to 8%, constant currency in 2019.

Glanbia generates over 80% of its earnings in US Dollar and reports in Euro.  If the Euro US Dollar foreign exchange rate remains at today's level for all of 2019, Glanbia expects the reported result to be 3% higher than the constant currency outlook.

In 2019, Glanbia expects to meet the metrics it has set out for return on capital employed and operating cash conversion as described in the table above (Strategy and medium-term targets).

Operations review

		FY 2018		FY 2017
€m	Revenue	EBITA	EBITA %	Revenue	EBITA	EBITA %
Glanbia Performance Nutrition	1,179.6	173.1	14.7%	1,121.1	169.7	15.1%
Glanbia Nutritionals	1,206.7	111.8	9.3%	1,266.0	113.5	9.0%
Total wholly-owned business	2,386.3	284.9	11.9%	2,387.1	283.2	11.9%

Glanbia Performance Nutrition

	Reported			Constant Currency
€m	FY 2018	FY 2017	Change	Change
Revenue	1,179.6	1,121.1	+5.2%	+9.5%
EBITA	173.1	169.7	+2.0%	+6.7%
EBITA margin	14.7%	15.1%	- 40bps	- 40bps

Commentary is on a constant currency basis throughout

GPN delivered a good performance in 2018 with an overall increase in revenue of 9.5%. This was primarily driven by a strong volume performance which increased by 9.1% year-on-year as a result of demand growth in all regions. Acquisitions drove revenue growth of 4.5%. Price declined 4.1% due to brand investment, innovation support and pricing initiatives to negate the impact at consumer level of foreign exchange headwinds and tariffs in certain key markets with the rate of pricing decline moderating in the fourth quarter.

Like-for-like branded revenue growth versus the prior year was 5.3% with like-for-like branded volume growth up 9.2%. As in recent years, GPN had a significant seasonal uplift in the fourth quarter across all regions as retail partners prepared for specific consumer health and wellness initiatives ahead of the new year.  North America delivered good growth in the second half of the year driven by the expansion of the online and FDMC channels with the market remaining particularly competitive for ready-to-eat formats. In LAPAC strong momentum continued throughout the year and in EMEA, GPN's dedicated direct-to-consumer platform, Body & Fit, was a key driver of growth. 

GPN EBITA in 2018 was €173.1 million which was a 6.7% increase on the prior year with EBITA margin of 14.7%, down 40 basis points somewhat impacted by tariff costs, foreign exchange headwinds and brand investment.

Innovation continued to be a key element of branded growth with new products in energy, isolates and plant-based formats performing strongly. GPN has a target of delivering at least 15% of revenue from products launched within the last three years and exceeded this metric in 2018.  This enabled GPN to navigate the various consumer shifts in its markets, differentiate its brands as well as deliver on regional preferences in meeting the needs of its performance and lifestyle consumers.

Glanbia completed the acquisition of SlimFast on 19 November 2018 and this enabled GPN to enter into the adjacent $8 billion weight management category. The SlimFast brand provides GPN with an incremental growth opportunity within the US and UK markets where GPN has a strong existing presence.  In addition, it will provide GPN with scale in the growing FDMC channel via its ready-to-drink products in particular.  GPN will use its existing capability to further develop SlimFast across channels and geographies. Innovation will continue to be a core part of the SlimFast portfolio and the recent launch of the SlimFast Keto range in the US is performing well.

Glanbia Nutritionals

	Reported			Constant Currency
€m Revenue	FY 2018	FY 2017	Change	Change
Nutritional Solutions ("NS")	526.7	531.9	- 1.0%	+ 3.0%
US Cheese	680.0	734.1	- 7.4%	- 3.1%
Total Glanbia Nutritionals	1,206.7	1,266.0	- 4.7%	- 0.6%
Glanbia Nutritionals EBITA	111.8	113.5	-1.5%	+ 3.0%
Glanbia Nutritionals EBITA margin	9.3%	9.0%	+30bps	+40bps

Commentary is on a constant currency basis throughout

GN delivered a good profit performance in 2018. Total GN revenues were €1,206.7 million, a decrease on prior year of 0.6%, as volume growth of 4.6% was offset by price decline of 5.2%. Volume growth was largely driven by Nutritional Solutions ("NS") and price decline related primarily to lower dairy markets.  GN's EBITA in 2018 was €111.8 million, a 3.0% improvement versus prior year, with a 40 basis point improvement in EBITA margin to 9.3%.

Nutritional Solutions

NS is a leading provider of customised nutrient premixes, advanced-technology protein solutions, functional beverages and flavours. NS has a diverse product portfolio and supports its customers on both a global and regional basis, supplying solutions that improve product functionality and nutritional profile. 

NS represents the majority of GN EBITA with a margin in the mid-teens range.  NS delivered a good performance in 2018 with revenue of €526.7 million, an increase of 3.0% on the prior year.  Volume growth of 8.5% was broadly based across major product groups with both global and regional customers. These customers operate in a variety of end market categories, with growth for NS driven by the ever-increasing trend of consumers seeking nutritional products with added protein, clean label, convenience and functionality. Pricing declined by 5.5% mainly reflecting relatively lower whey markets in 2018 versus the prior year.

NS supports a range of solutions in ready-to-eat, value added beverages and powder based formats in a number of categories including performance & lifestyle nutrition, infant & clinical nutrition, mainstream food & beverage and supplements.

Acquisition of Watson

NS has strong growth ambitions and aims to achieve this via a combination of organic growth and complementary acquisitions.  In line with this Glanbia has agreed to acquire Watson, a family owned business based in the US focused on non-dairy ingredient solutions. Watson specialises in vitamin and mineral pre-mix solutions, edible films and material conditioning for global and regional customers in the food, nutritional, supplement and personal care categories. Watson will broaden the NS customer base and category reach and provide additional US East Coast production capability.  Watson has over 300 employees across three production facilities in Connecticut and Illinois. 

US Cheese

US Cheese is a leading producer and marketer of American-style cheddar cheese in the US supplying brand owners and private label companies who in turn supply major retail and food service operators. US Cheese operates all of the dairy processing plants within GN and also the Southwest Cheese JV plant which produces cheese and whey ingredients. GN will also operate the new Michigan JV plant when commissioned in 2021.

US Cheese delivers an EBITA margin in the low-to-mid single digit range.  US Cheese delivered a good operational performance in 2018 increasing volumes by 1.7%. Overall revenue was €680.0 million, a decrease of 3.1% with volume growth offset by a price decrease of 4.8%. Volume growth was achieved mainly through improved yields year-on-year. Pricing was lower as a result of reduced market prices but this did not impact earnings or margins due to the milk procurement model in place.

IFRS 15

Glanbia will adopt the new revenue accounting standard IFRS 15 ("Revenue from Contracts with Customers") in 2019. This standard sets out new criteria for assessing principal / agent relationships. GN commercialises all of the cheese and whey output from the Southwest Cheese Joint venture earning commission for these sales which were recognised within revenue.  As a result of the implementation of the new standard in 2019, based on the existing contract arrangements with SWC, the relationship with SWC will change from an agent to a principal. Consequently, GN will be required to recognise 100% of the sales of SWC within revenue and cost of sales. While there will be no change to EBITA within GN or Group, as a result of the increase in revenue there will be a dilution in the EBITA margin. Further details of the impact of IFRS 15 on the Group are described in the Finance review on page 12.

Joint Ventures (Glanbia Share)

			Reported	Constant Currency
€m	FY 2018	FY 2017	Change	Change
Revenue*	1,283.8	1,093.4	+17.4%	+19.3%
EBITA	65.8	63.4	+3.8%	+5.4%
EBITA margin	5.1%	5.8%	-70bps	-70bps
Share of JVs' PAT pre-exceptional items	45.3	42.8	+5.8%	+7.1%

*     Share of JVs revenue is calculated as the share of revenue attributed to Glanbia based on Glanbia's percentage ownership of the JV.

Commentary is on a constant currency basis throughout

Glanbia's share of profit after tax ("PAT") from JVs, pre-exceptional, increased by €2.5 million to €45.3 million in 2018 when compared to the prior year result driven by revenue growth. Glanbia's share of JVs' revenues increased by 19.3% versus the prior year. This was driven by a volume increase of 9.4%, as a result of capacity expansion at Southwest Cheese and a good operating performance at Glanbia Ireland and Glanbia Cheese UK. This was offset by a price decline of 5.0% as a result of lower year-on-year dairy markets. The impact of the Dairy Ireland transaction, completed in 2017, contributed 14.9% of JV revenue growth. The Group accounts for all of its JVs using the equity method of accounting with only its share (based on percentage ownership) of the JV's PAT contributing to the adjusted earnings per share calculation. Any trade between Glanbia and JVs is done at arms-length.  All JVs are independently financed with their own dedicated banking facilities, each of which are non-recourse to the plc.

Glanbia Ireland

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

GI delivered a good performance in 2018 driven by volume growth which more than offset declines in price as a result of lower year-on-year dairy markets. Milk volumes processed increased by 5.1% to a total GI milk pool of 2.7 billion litres.

Royal A-ware partnership

On 22 January 2019, GI announced plans to enter into a strategic partnership with Royal A-ware, a leading global cheese and dairy producer in the Netherlands. This partnership plans to invest €140 million in building a new continental cheese manufacturing facility in Belview, Co. Kilkenny, Ireland with commissioning expected by 2022.

This investment will be funded by a combination of equity from the partners (GI and Royal A-ware), non-recourse bank lending in the partnership as well as government grants. Glanbia plc will not be directly financing this investment.

Southwest Cheese & Michigan JV

Southwest Cheese (SWC)

SWC is a large scale producer of American-style cheddar cheese and whey ingredients in the US with a production facility located in the State of New Mexico, USA.  All of SWC cheese and whey ingredients are sold through GN's route-to-market channels at market prices.  SWC delivered a good performance in 2018 as a result of strong volume growth related to expansion in production capacity more than offsetting negative pricing as a result of lower year-on-year dairy markets. The $140 million investment to expand production capacity at SWC by 25% was completed in Q2 2018 and is now operating to full capacity.

Michigan joint venture ("Michigan JV")

During 2018 a new 50:50 joint venture (the "Michigan JV") was established between Glanbia and Michigan Dairy Partners LLC which is owned by two US dairy co-operatives, Dairy Farmers of America, Inc. and Select Milk Producers, Inc. The Michigan JV is a previously announced project to invest $470 million to build and operate a large scale American-style cheddar cheese and whey ingredients plant in St. John's, State of Michigan. Construction is underway with commissioning expected to be completed by 2021. Glanbia's total equity investment in this project is $82.5 million with this investment being made over the construction phase of the project.  The remaining financing coming from the joint venture partner and non-recourse bank lending within the Michigan JV.

Glanbia Cheese UK

Glanbia Cheese UK is a large scale mozzarella cheese producer with two production facilities in the United Kingdom.  Glanbia Cheese UK primarily supplies customers in the pizza industry across Europe.  It is owned 51% by Glanbia plc and 49% by Leprino Foods Company ("Leprino").  Glanbia Cheese UK delivered a reduced performance in 2018 versus prior year as a result of reduced dairy market pricing.  

Glanbia Cheese EU

On 16 July 2018, Glanbia announced the establishment of a new 50:50 JV with Leprino to construct a mozzarella cheese production plant in Portlaoise, Ireland. The €130 million project is expected to be commissioned by 2020. Glanbia will invest approximately €35 million into the JV over the construction phase of the project with remaining financing coming from Leprino, government grants and non-recourse bank lending directly within the JV.

2018 Finance Review

2018 Group Income Statement

		2018			2017
€m	Pre-exceptional	Exceptional	Total	Pre-exceptional	Exceptional	Total
Revenue	2,386.3	-	2,386.3	2,387.1	-	2,387.1
Earnings before interest, tax and amortisation (EBITA)	284.9	-	284.9	283.2	(5.5)	277.7
EBITA margin	11.9%	-	11.9%	11.9%		11.6%
Intangible asset amortisation	(45.9)	-	(45.9)	(43.1)	(19.4)	(62.5)
Operating profit	239.0		239.0	240.1	(24.9)	215.2
Finance income	3.9	-	3.9	3.0	-	3.0
Finance costs	(21.4)	-	(21.4)	(26.0)	(14.0)	(40.0)
Share of results of Joint Ventures	45.3	-	45.3	42.8	8.7	51.5
Profit before taxation	266.8	-	266.8	259.9	(30.2)	229.7
Income taxes	(32.8)	-	(32.8)	(38.3)	45.8	7.5
Profit for the year - continuing operations	234.0	-	234.0	221.6	15.6	237.2
Profit from discontinued operations	-	-	-	9.8	82.4	92.2
Profit for the year - Group	234.0	-	234.0	231.4	98.0	329.4

Revenue

Wholly-owned revenue from continuing operations increased by 4.1% on a constant currency basis in 2018 to €2.4 billion, which is largely in line with the prior year on a reported basis. Sales volumes accounted for 6.7% of the increase primarily driven by branded revenue growth within GPN and volume growth in GN's Nutritional Solutions. Pricing was adverse in the year impacting revenue by 4.7%, driven primarily by lower dairy market pricing within GN and brand investment, innovation support, foreign exchange headwinds and tariff costs in certain key markets within GPN. Acquisitions, which include the results of Body & Fit for quarter one and SlimFast for just over one month, accounted for 2.1% of the increase in revenue. Detailed analysis of revenue by wholly owned segments is set out within the operations review.

EBITA

Wholly-owned EBITA from continuing activities before exceptional items grew 5.2% constant currency (up 0.6% reported) to €284.9 million (2017: €283.2 million). Increased EBITA was reported from both wholly-owned segments on a constant currency basis.  Overall wholly-owned EBITA margins remained in line with the prior year at 11.9%. GPN EBITA increased from €169.7 million to €173.1 million, an increase of 6.7% on a constant currency basis. This was primarily driven by increased branded revenue and reduced input costs in the year. EBITA margins at 14.7% decreased marginally compared to 15.1% in 2017 with reduced input costs being offset by higher brand investment, investment in the D2C business and higher freight costs in the year. In addition, one off transaction costs associated with the SlimFast transaction impacted margin.  GN EBITA decreased from €113.5 million to €111.8 million on a reported basis driven largely by the impact of foreign exchange. On a constant currency basis EBITA increased by 3.0%. EBITA margins improved by 40bps in the year on a constant currency basis to 9.3%.

Net finance costs

Net finance costs pre-exceptional items decreased by €5.5 million to €17.5 million (2017: €23.0 million). The decrease is driven primarily by lower average levels of debt throughout the year. New facilities were drawn down in Q4 to facilitate the acquisition of SlimFast, however, as this was in November there was only a marginal impact to the 2018 interest charge. The Group's average interest rate in 2018 was 4.3% (2017: 6.3%, 3.9% excluding the exceptional costs associated with the interest on settlement of part of a private placement debt). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 75% of projected 2019 debt currently contracted at fixed rates.

Share of results of joint ventures

The Group's share of joint venture profits increased by €2.5 million to €45.3 million (2017: €42.8 million) in the year. The share of profits in the prior year includes 40% of Dairy Ireland from 2 July 2017 following the disposal of 60% of Dairy Ireland to Glanbia Co-operative Society Limited. The results of Dairy Ireland up to the date of disposal are reflected within prior year profit from discontinued operations. The share of results of equity accounted investees is stated after tax.

Income taxes

The 2018 pre-exceptional tax charge decreased by €5.5 million to €32.8 million (2017: €38.3 million). This represents an effective tax rate, excluding equity accounted investees, of 14.8% (2017: 17.6%). This reduction is driven primarily by the reduction in the US federal corporation tax rate from 35% to 21% under the Tax Cuts and Jobs Act which was signed into US law on 22 December 2017. The overall tax charge in the prior year includes an exceptional credit of €38.7 million relating to a deferred tax credit arising from the above mentioned change in the US tax rate. The Group currently expects that its effective tax rate for 2019 will be in the range of 13.0% to 14.0%. However, there is some uncertainty as the US authorities have until 22 June 2019 to finalise the regulations in respect of the Tax Cuts and Jobs Act and due to the evolving international tax landscape.

Exceptional items

There were no material exceptional items to highlight in 2018. Prior year exceptional items amounted to a gain of €98.0 million. Prior year exceptional items included rationalisation costs (€5.5 million), debt restructuring costs (€14.0 million), intangible asset amortisation (€19.4 million), tax credits (€54.5 million), including a credit in deferred tax as a result of the change in the US corporate tax rate and the tax credits relating to the other exceptional costs noted above, and the gain on the disposal of the Dairy Ireland segment (€82.4 million). The total net cash outflow during the year in respect of exceptional items was €2.6 million relating to 2017 exceptional items (2017: inflow of €177.5 million).

Profit after tax

Profit for the year amounted to €234.0 million (2017: €329.4 million) which represents a decrease of €95.4 million on the prior year. This decrease is primarily due to the net exceptional gains in the prior year of €98.0 million primarily driven by a gain of €82.4 arising on the disposal of 60% of Dairy Ireland and €38.7 million from deferred tax credits arising on the reduction in the US corporate tax rate. On a pre-exceptional basis overall profit for the year increased by €2.6 million from €231.4 million to €234.0 million. This increase is driven by profit growth in both of the wholly owned segments, an increase in share of profit of joint ventures, and a reduction in finance costs and taxation as discussed above offset partially by higher amortisation costs and inclusion of profit from discontinued operations (Dairy Ireland) in the prior year.

Earnings per share (EPS)

	2018	2017	Reported Change	Constant Currency Change
Basic EPS (continuing activities)	79.28	80.40	(1.4%)
Pro-forma adjusted EPS	91.01	87.11	4.5%	9.0%

Basic EPS from continuing activities decreased by 1.4% driven by exceptional gains in the prior year not repeated in 2018. Pro-forma adjusted EPS has been presented as it is more reflective of the revised structure of the Group following the disposal in the prior year of 60% of Dairy Ireland. Pro-forma adjusted EPS assumes the Dairy Ireland disposal was completed at the beginning of the 2016 financial year and consequently 2017 earnings is calculated based on the net profit attributable to equity holders of the parent from continuing activities plus 40% of the share of profits after tax for Dairy Ireland, before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax. This ensures a like-for-like comparison with 2018. Pro-forma adjusted EPS is a KPI of the Group and a key metric guided to the market. Pro-forma adjusted EPS grew 9.0% constant currency (4.5% reported) in the year, driven by the strong results of the wholly-owned segments GPN and GN together with the positive impact of reduced net finance costs and tax.

Cash flow

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

€m	2018	2017
EBITDA pre-exceptional	327.8	328.2
Movement in working capital (pre-exceptional)	(9.7)	(123.3)
Business sustaining capital expenditure	(16.4)	(19.9)
Operating cash flow*	301.7	185.0
Net interest and tax paid	(42.2)	(58.4)
Dividends from Joint Ventures	31.6	15.8
Other inflows/outflows	4.3	(5.5)
Free cash flow*	295.4	136.9
Strategic capital expenditure	(46.2)	(46.9)
Equity dividends	(76.0)	(41.0)
Acquisitions	(313.0)	(168.2)
Disposals	1.3	208.8
Exceptional items paid	(2.6)	(29.3)
Loans to / equity in Joint Ventures	(58.9)	-
Cash flow pre- foreign exchange translation/other adjustments	(200.0)	60.3
Exchange translation/other adjustments	(9.0)	51.4
Dairy Ireland cash flows	-	(41.9)
Net debt movement	(209.0)	69.8
Net debt at the beginning of the year	(367.7)	(437.5)
Net debt at the end of the year	(576.7)	(367.7)

*     2017 numbers are on a pro-forma basis to exclude Dairy Ireland cash flows

2018 was a strong year for cash conversion driven by improvements in working capital management. The Group will continue to focus on further working capital improvements in 2019 to maintain its OCF cash conversion target of greater than 80%. OCF was €301.7 million in the year which represents an increase of €116.7 million compared to prior year (prior year was prepared on a pro forma basis to exclude Dairy Ireland related cash flows). The improvement from last year is driven primarily by improvements in working capital. The OCF of €301.7 million represents a cash conversion on EBITDA of 92% (2017: 56.4%). The OCF conversion target for the year was greater than 80% and this remains the medium target for the Group.

FCF also remains strong driven by the OCF set out above and the increase in dividends from joint ventures. This increase in dividends received compared to prior year was as a result of higher Glanbia Cheese UK dividends but also the commencement of dividends from the newly formed Glanbia Ireland joint venture. FCF was deployed to increase the Groups equity dividend following the change of dividend policy in 2018 to move to a pay-out ratio of 25%-35% of adjusted EPS. Total dividend increase amounted to €35 million. Acquisitions spend relates to the cost of SlimFast which was acquired in November 2018. Loans to / equity in Joint Ventures includes the initial investment in Glanbia Cheese EU, the mozzarella cheese joint venture in Portlaoise, Ireland and the investment in the new Joint Venture cheese and whey plant in Michigan, USA.

Group financing

Financing Key Performance Indicators	2018	2017
Net debt: adjusted EBITDA	1.55 times	1.07 times
Adjusted EBIT: net finance cost	14.8 times	7.0 times

The Group's financial position continues to be strong. Net debt at the end of 2018 was €576.7 million. This is an increase of €209.0 million from the prior year end net debt of €367.7 million and can be primarily attributed to the acquisition of SlimFast. A new two year facility of $351 million was drawn down to support the SlimFast acquisition. Additionally in December 2018 the Group completed a refinancing of all long term debt (excluding the US private placement debt) to put in place new five year facilities. At year-end 2018, Glanbia had committed debt facilities of €1.1 billion with a weighted average maturity of 3.8 years. Glanbia's ability to generate cash as outlined above and available debt facilities ensures the Group has considerable capacity to finance future investments. Net debt to adjusted EBITDA was 1.55 times and interest cover was 14.8 times, both metrics remaining well within financing covenants. Interest cover has significantly improved compared to the prior year as finance costs in 2017 included the once off interest cost associated with the early repayment of part of the private placement debt. Excluding this once-off cost the cover would have been 11.2 times in 2017.

Use of capital

Capital expenditure

The cash outflow relating to capital expenditure for the year amounted to €62.6 million (2017; €66.8 million) which includes €16.4 million of business-sustaining capital expenditure and €46.2 million of strategic capital expenditure. Key strategic projects completed in 2018 included investments in innovation, supply chain, manufacturing and IT systems in GPN and GN.

Strategic acquisitions

In November 2018 the Group completed the acquisition of KSF Holdings LLP and HNS Intermediate Corporation ("SlimFast")  for$350 million (purchase price excluding acquired working capital). SlimFast is a leading weight management and health & wellness brand family distributed primarily in the food, drug, mass and club (FDMC) channel in the US and UK. It is a well-established and growing brand with high levels of brand awareness in the US, its largest market. As noted in the Glanbia capital markets day in May 2018, acquisitions will continue to be an important part of the growth strategy of Glanbia and, as outlined above. Subsequent to year end, on 19 February 2019, Glanbia agreed to acquire Watson LLC and Polymer Films LLC (collectively known as "Watson") for $89 million in cash.  Watson is a US based non-dairy ingredient solutions business and will be a complementary acquisition for the Group. The Group has capacity to make further acquisitions should an opportunity arise that is in line with the strategic and financial objectives of the Group.

Investments in Joint Ventures

During 2018 the Group made two strategic investments in new and existing Joint Ventures. Glanbia Nutritionals finalised agreements with Dairy Farmers of America, Inc. and Select Milk Producers, Inc. existing joint venture partners in the Southwest Cheese joint venture, to build, supply and operate the planned new large scale cheese and whey facility in Michigan, US at a total cost of $470 million. Construction commenced on the site in 2018 and commissioning is expected to be completed by 2021. Overall investment in the year in this Joint Venture amounted to $40.0 million. A further $42.5 million investment will be made in this project over the remaining construction phase of the project. The Group also announced a new Joint Venture partnership (Glanbia Cheese EU) with Leprino Foods Company to build a mozzarella cheese plant in Portlaoise, Ireland at a total cost of €130 million. The total investment in this Joint Venture in the year amounted to €8 million. The Group expects to invest a further €27 million to Glanbia Cheese EU over the construction phase of the project. The remaining financing for these projects will come from the other joint venture partners, dedicated joint venture banking facilities, which are non-recourse to Glanbia and government grants. Glanbia Ireland continues to invest to support the growth ambitions of its Irish supply base including the creation of a new partnership with Royal A-ware to build a cheese plant in Belview, Kilkenny, Ireland for €140 million. This investment will not be directly financed by Glanbia and will be funded largely by non-recourse financing within the new partnership.

Return on Capital Employed (ROCE)

	2018	2017	Change
Return on Capital Employed	13.2%	13.4%	-20bps

ROCE decreased in 2018 by 20 basis points to 13.2%. This was driven primarily by the near-term dilutive effect of recent acquisitions. As communicated at the Glanbia capital markets day in May 2018, acquisitions are going to be a key part of the growth strategy and consequently maintaining a ROCE range of between 10% and 13% is the aim of the Group over the medium-term. The Group monitors the performance of acquisitions on an on-going basis and completes annual impairment reviews in respect of goodwill and intangible assets. No impairments were identified from this review; however during 2018 the headroom on these investments representing the difference between the carrying value of assets and their value in use decreased primarily as a result of the increase in the associated discount rates.

Dividends

During 2018 the Group adopted a revised dividend policy of an annual dividend pay-out ratio between 25% and 35% of adjusted EPS. In line with this policy the recommended final 2018 dividend will be 14.49 cent per share (2017: final dividend 16.09 cent per share) and brings the total dividend for the year to 24.2 cent per share (2017: 22.0 cent per share) and a payout ratio of 26.6%. This represents a 10% increase on prior year and a return of €71.6 million to shareholders from 2018 earnings.

Total Shareholder returns

Total Shareholder Return (TSR) for 2018 was 11.4%. The STOXX Europe 600 Food & Beverage Index, a key benchmark for the Group, decreased by 6.8% in 2018. The three-year period 2016 to 2018 was negative 0.6% and five-year TSR to 2018 was 54.9%. Glanbia's share price at the end of the financial year was €16.35 compared to €14.90 at the 2017 year end, a 9.7% increase.

Impact of new accounting standards

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

IFRS 15 'Revenue from Contracts with Customers'

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

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

·     Revenue and cost of sales within GN will be grossed up for all sales of SWC products on which previously only commission was recognised.

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

·     Although there is no change to EBITA, as a result of the increase in revenue, there will be a dilution to the EBITA margin percentage of GN, largely in the US Cheese component of GN, and consequently of the wholly owned Group. If the IFRS 15 standard was applied to the 2018 financial results wholly-owned margin would be reduced by 290 bps.

·     During the Glanbia capital markets day margin ambition for the Group's segments to 2022 was outlined. As a result of the adoption of IFRS 15 the EBITA margin ambition for GN's Nutritional Solutions has been reduced from 14%-16% to 13%-15% and in GN US Cheese from mid-single digits to low-to-mid single digits.  There is no change to GPN margin ambition to 2022 as a result of the adoption of IFRS 15.

·     Revised 2018 revenue numbers reflecting IFRS 15 are set out in the table below which will form the comparatives for 2019 results.

2018 restatement on an IFRS 15 basis	Reported 2018	Restated 2018
GN Revenue:
US Cheese	680.0	1,413.9
NS	526.7	577.0
Total GN revenue	1,206.7	1,990.9
Total GN EBITA	111.8	111.8
Total GN EBITA margin	9.3%	5.6%
Wholly-owned Revenue	2,386.3	3,170.5
Wholly-owned EBITA	284.9	284.9
Wholly-owned EBITA margin	11.9%	9.0%

IFRS 9 'Financial Instruments'

IFRS 9 is effective and will be adopted by the Group in the 2019 financial year. A full impact assessment has been completed and there are no significant impacts from the adoption of this new standard.

IFRS 16 'Leases'

IFRS 16 'Leases' comes into effect for the financial year commencing on 5 January 2020. Under the new accounting standard the fair value of all qualifying operating leases, representing the present value of the lease payments over the life of the lease, will be recognised as a right of use asset with a corresponding liability. The new standard will result in the removal of a rental charge from the Income Statement for the leases and will be replaced with a depreciation charge in respect of the right of use asset and an interest charge relating to the lease liability. The estimated impact is currently being assessed including its impact on the Group's financial KPI's such as EBITA, EPS and ROCE. An update will be provided in the 2019 interim financial statements.

Foreign exchange

Glanbia generates over 80% of its earnings in US Dollar currency and has significant assets and liabilities denominated in US Dollars. As a result, and as Glanbia's reporting currency is Euro, there can be a significant impact to reported numbers arising from currency movements year-on-year and on translation of US Dollar non- monetary assets and liabilities in the preparation of the Consolidated Financial Statements. Commentary has been provided within the income statement on a constant currency basis to provide a better reflection of the underlying operating results in the year, as this removes the translational currency impact. To arrive at the constant currency change, the average foreign exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. At the balance sheet date, due to the strengthening of the US Dollar compared to prior year, there was a translation gain arising on the translation of US assets and liabilities into Euro. The gain on translation of non-monetary assets and liabilities from US Dollar to Euro is presented within other comprehensive income and amounted to €58.5 million in the year. The retranslation of non-Euro denominated debt resulted in a loss of €9.0 million within the cash flow statement. Average and year-end US$ to Euro rates were as follows:

	Average		Year end
	2018	2017	2018	2017
1 Euro converted to US Dollar	1.1812	1.1295	1.1454	1.1993

Brexit and international trade challenges

Today, the outcome of the UK departure from EU membership ("Brexit") process remains unclear and its impact is difficult to quantify in this context. Whereas the wholly-owned businesses of the Group have a relatively limited risk in a no-deal scenario, the implications for two joint venture businesses, Glanbia Cheese UK and Glanbia Ireland, may be more significant depending on how the situation unfolds. The Group has been actively preparing, as far as possible, for a no-deal outcome and remains very alert to the risks that may crystallise in the coming months. International trading, and in particular trading with China, will continue to be monitored by the Group and the impact of tariffs on imports. All divisions trading with China, and other tariff impacted countries, have plans in place to mitigate as much as possible the exposure to these risks.

Pension

The Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, decreased in 2018 by €3.4 million to €38.5 million (2017: €41.9 million). On 26th October 2018, the high court in the UK made a judgement against the Lloyds banking Group regarding the rights of members to equality in defined benefit schemes. This judgement concluded that schemes have a duty to equalise benefits for all members, regardless of gender, in relation to minimum pension benefits. As a result of this ruling, the Group have recognised an additional past service cost in the year of €2.1 million in the Group Income statement.

Financial strategy

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

·     Assessing both external and organic investment  opportunities

·     Target minimum benchmark investment return of 12% after tax by end of year three, with a Group goal of between 10% to 13% ROCE in any one year;

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

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

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

·     Dividend policy with a pay-out ratio of 25%-35%.

Investor relations

Glanbia continued its active investor relations initiatives in 2018. During the year, representatives from Glanbia presented at 12 investor conferences globally and held over 300 meetings with institutional investors. Glanbia is focused on ensuring that a broad geographic base of institutional investors is reached via the investor relations programme. To do this Glanbia senior management increased the level of investor meetings in the US, Canada and Asia. In addition, in May 2018 the Group held a capital markets day in Chicago with presentations from the Group Managing Director, the CEOs of GPN and GN and a financial presentation from the Group Finance Director.

Details of the Glanbia capital markets day 2018 are available on the investor relations section of the Glanbia website www.glanbia.com

Principal Risks

The Board of Glanbia plc has the ultimate responsibility for the Group's systems of risk management and internal control. The Directors of Glanbia have carried out a robust assessment of the emerging and principal risks facing the Group, including those that may threaten the business model, future performance, solvency or liquidity.

The Group's principal risks and uncertainties are summarised in the risk profile diagram below. While no new principal risks were identified in 2018, the risk trend and associated volatility of a number of the Group's principal risks did fluctuate as outlined in the table. There may be other risks and uncertainties that are not yet considered material or not yet known and this list will change if these risks assume greater importance in the future. Likewise some of the current risks will drop off the key risks schedule as management actions are implemented or changes in the operating environment occur.

	Strategic and commercial	Financial	Operational and regulatory
Risk where trend is stable	·  Market risk ·  Acquisition risk	·  Tax risk	·  Product safety and compliance risks ·  Supplier risk ·  Site compliance, environmental and health & safety regulation risks
Risk where trend is increasing	·  Economic, industry and political risks ·  Customer Concentration risk		·  Talent Management risk ·  IT, data protection and cyber security risks

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

·     Economic, industry and political risk - Macroeconomic and global trade uncertainty continues to increase, partly as a result of the geo-political climate where the potential introduction of further trade tariffs may have negative impacts to Glanbia's strategic growth objectives. In addition, the nature of the United Kingdom's future trading relationship with the European Union post Brexit is still to be determined. From a Group perspective this uncertainty has increased the potential risk of raw material pricing, cross border trade costs, volatility in currency, product pricing volatility and changing customer and competitor dynamics.

The Board have focused on ensuring the short and medium-term impacts to the Group are clearly understood. This focus includes ensuring that appropriate action plans across a broad range of issues are developed and implemented where possible, by the senior management teams across the Group, established to assess and monitor potential impacts to the Group's performance;

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

·     Talent management risk. The on-going success of the Group is dependent upon its ability to retain, attract and develop key talent particularly to support organic and acquisitive growth plans; and

·     IT, data protection and cyber security risks. This risk is increasing due to the growth in the volume and sophistication of cyber threats and the enhanced data protection regulatory requirements. Glanbia has a dedicated IT Security and data protection team in place to limit risk in this area.      

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

Annual General Meeting (AGM)

Glanbia plc's AGM will be held on Wednesday, 24 April 2019, 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 report. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this announcement, whether as a result of new information, future events, or otherwise.

On behalf of the Board

Siobhán Talbot                                                                      Mark Garvey

Group Managing Director                                                  Group Finance Director

20 February 2019

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 http://www.glanbia.com/investors/results-centre, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

Ireland:                                  01 246 5638

UK / International:              [phone]

USA:                                       [phone]

The access code for all participants is: 9871795

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

For further information contact

Glanbia plc [phone] 

Investor contact:

Liam Hennigan, Group Director of Strategic Planning & Investor Relations:                            [phone]

Media contact:

Martha Kavanagh, Head of Corporate Communications:                                                              [phone]

Group Income Statement

for the financial year ended 29 December 2018

		2018			2017
	Notes	Pre- exceptional €'m	Exceptional €'m	Total €'m	Pre- exceptional €'m	Exceptional €'m	Total €'m
Continuing operations
Revenue		2,386.3	-	2,386.3	2,387.1	-	2,387.1
Earnings before interest, tax and amortisation (EBITA)		284.9	-	284.9	283.2	(5.5)	277.7
Intangible asset amortisation		(45.9)	-	(45.9)	(43.1)	(19.4)	(62.5)
Operating profit		239.0	-	239.0	240.1	(24.9)	215.2
Finance income	3	3.9	-	3.9	3.0	-	3.0
Finance costs	3	(21.4)	-	(21.4)	(26.0)	(14.0)	(40.0)
Share of results of Equity accounted investees		45.3	-	45.3	42.8	8.7	51.5
Profit before taxation		266.8	-	266.8	259.9	(30.2)	229.7
Income taxes	4	(32.8)	-	(32.8)	(38.3)	45.8	7.5
Profit from continuing operations		234.0	-	234.0	221.6	15.6	237.2
Discontinued operations
Profit from discontinued operations		-	-	-	9.8	82.4	92.2
Profit for the year		234.0	-	234.0	231.4	98.0	329.4
Attributable to:
Equity holders of the Company - Continuing operations				234.0			237.2
Equity holders of the Company - Discontinued operations				-			92.2
				234.0			329.4
Earnings Per Share from continuing and discontinued operations attributable to the equity holders of the Company
Basic Earnings Per Share (cent)
Continuing operations	5			79.28			80.40
Discontinued operations	5			-			31.25
				79.28			111.65
Diluted Earnings Per Share (cent)
Continuing operations	5			79.04			80.19
Discontinued operations	5			-			31.17
				79.04			111.36

Group Statement of Comprehensive Income

for the financial year ended 29 December 2018

		2018 €'m	2017 €'m
Profit for the year		234.0	329.4
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to the Group income statement:
Remeasurements - defined benefit plans
- Continuing operations		(0.5)	7.1
- Discontinued operations		-	12.0
Deferred tax on remeasurements - defined benefit plans
- Continuing operations		0.2	(0.3)
- Discontinued operations		-	(1.5)
Share of remeasurements - defined benefit plans - Equity accounted investees - net of deferred tax
- Continuing operations		(2.0)	(0.6)
- Discontinued operations		-	1.9
Items that may be reclassified subsequently to the Group income statement:
Currency translation differences - Continuing operations		58.6	(149.8)
Reclassification of foreign currency differences on disposal of Dairy Ireland		-	(0.2)
Currency translation difference arising on net investment hedge		(3.9)	11.3
Revaluation of available for sale financial assets		-	1.6
Deferred tax on revaluation of available for sale financial assets		-	(0.7)
Disposal of available for sale financial assets		(5.3)	-
Deferred tax on disposal of available for sale financial assets		1.8	-
Net fair value movements on cash flow hedges		(0.2)	(0.6)
Deferred tax on cash flow hedges		0.1	-
Net fair value movements on cash flow hedges - Equity accounted investees, net of deferred tax		(4.2)	2.8
Other comprehensive income/(expense) for the year, net of tax		44.6	(117.0)
Total comprehensive income for the year		278.6	212.4
Total comprehensive income attributable to:
Equity holders of the Company - Continuing operations		278.6	108.0
Equity holders of the Company - Discontinued operations		-	104.5
Non-controlling interests - Discontinued operations		-	(0.1)
Total comprehensive income for the year		278.6	212.4

Group Balance Sheet

as at 29 December 2018

	Notes	29 December 2018 €'m	30 December 2017 €'m
ASSETS
Non-current assets
Property, plant and equipment		453.0	442.2
Intangible assets		1,304.0	959.8
Equity accounted investees		334.5	266.9
Available for sale financial assets		3.7	11.1
Trade and other receivables		29.8	-
Deferred tax assets		2.1	1.6
Retirement benefit assets		1.1	1.7
		2,128.2	1,683.3
Current assets
Current tax assets		9.6	11.3
Inventories		384.6	321.6
Trade and other receivables		350.2	302.4
Derivative financial instruments		1.5	2.2
Cash and cash equivalents	7	224.6	162.2
		970.5	799.7
Total assets		3,098.7	2,483.0
EQUITY
Issued capital and reserves attributable to equity holders of the Company
Share capital and share premium		105.4	105.4
Other reserves		240.9	190.0
Retained earnings		1,242.8	1,086.3
Total equity		1,589.1	1,381.7
LIABILITIES
Non-current liabilities
Financial liabilities	7	752.4	499.6
Deferred tax liabilities		160.3	125.6
Retirement benefit obligations		39.6	43.6
Provisions		24.9	24.0
Capital grants		-	0.1
Other payables		13.0	10.1
		990.2	703.0
Current liabilities
Trade and other payables		407.0	307.9
Current tax liabilities		59.7	52.0
Financial liabilities	7	48.9	30.3
Derivative financial instruments		0.5	0.3
Provisions		3.3	7.8
		519.4	398.3
Total liabilities		1,509.6	1,101.3
Total equity and liabilities		3,098.7	2,483.0

On behalf of the Board

Mn Keane Directors

S Talbot

M Garvey

Group Statement of Changes in Equity

for the financial year ended 29 December 2018

	Attributable to equity holders of the Company
	Share capital and share premium €'m	Other reserves €'m	Retained earnings €'m	Total €'m
Balance at 30 December 2017	105.4	190.0	1,086.3	1,381.7
Profit for the year	-	-	234.0	234.0
Other comprehensive income/(expense)
Remeasurements - defined benefit plans	-	-	(0.5)	(0.5)
Deferred tax on remeasurements - defined benefit plans	-	-	0.2	0.2
Share of remeasurements - defined benefit plans - Equity accounted investees - net of deferred tax	-	-	(2.0)	(2.0)
Currency translation differences	-	58.6	-	58.6
Net investment hedge	-	(3.9)	-	(3.9)
Fair value movements	-	(10.5)	-	(10.5)
Deferred tax on fair value movements	-	2.8	-	2.8
Total comprehensive income for the year	-	47.0	231.7	278.7
Transactions with equity holders of the Company
Contributions and distributions
Dividends	-	-	(76.0)	(76.0)
Cost of share-based payments	-	8.8	-	8.8
Transfer on exercise, vesting or expiry of share-based payments	-	(0.6)	0.6	-
Deferred tax on share-based payments	-	-	0.2	0.2
Purchase of own shares	-	(4.3)	-	(4.3)
Total contributions and distributions	-	3.9	(75.2)	(71.3)
Balance at 29 December 2018	105.4	240.9	1,242.8	1,589.1

Group Statement of Changes in Equity continued

for the financial year ended 29 December 2018

	Attributable to equity holders of the Company
	Share capital and share premium €'m	Other reserves €'m	Retained earnings €'m	Total €'m	Non- controlling interests €'m	Total €'m
Balance at 31 December 2016	105.4	331.6	779.0	1,216.0	11.1	1,227.1
Profit for the year	-	-	329.4	329.4	-	329.4
Other comprehensive income/(expense)
Remeasurements - defined benefit plans	-	-	19.2	19.2	(0.1)	19.1
Deferred tax on remeasurements - defined benefit plans	-	-	(1.8)	(1.8)	-	(1.8)
Share of remeasurements - defined benefit plans - Equity accounted investees - net of deferred tax	-	-	1.3	1.3	-	1.3
Currency translation differences	-	(149.8)	-	(149.8)	-	(149.8)
Reclassification of foreign currency differences on disposal of Dairy Ireland	-	(0.2)	-	(0.2)	-	(0.2)
Net investment hedge	-	11.3	-	11.3	-	11.3
Fair value movements	-	3.9	-	3.9	-	3.9
Deferred tax on fair value movements	-	(0.8)	-	(0.8)	-	(0.8)
Total comprehensive (expense)/income for the year	-	(135.6)	348.1	212.5	(0.1)	212.4
Transactions with equity holders of the Company
Contributions and distributions
Dividends	-	-	(40.9)	(40.9)	-	(40.9)
Sale of shares held by a subsidiary	-	-	2.4	2.4	-	2.4
Cost of share-based payments	-	7.8	-	7.8	-	7.8
Transfer on exercise, vesting or expiry of share-based  payments	-	2.4	(2.4)	-	-	-
Deferred tax on share-based payments	-	-	0.1	0.1	-	0.1
Purchase of own shares	-	(16.2)	-	(16.2)	-	(16.2)
Total contributions and distributions	-	(6.0)	(40.8)	(46.8)	-	(46.8)
Changes in ownership interests
Disposal of non-controlling interests	-	-	-	-	(11.0)	(11.0)
Balance at 30 December 2017	105.4	190.0	1,086.3	1,381.7	-	1,381.7

Group Statement of Cash Flows

for the financial year ended 29 December 2018

	Notes	2018 €'m	2017 €'m
Cash flows from operating activities
Cash generated from operating activities	8	316.5	162.2
Interest received		4.8	3.1
Interest paid		(21.0)	(39.5)
Tax paid		(25.2)	(34.7)
Net cash inflow from operating activities		275.1	91.1
Cash flows from investing activities
Acquisition of subsidiaries - purchase consideration	9	(337.8)	(162.2)
Acquisition of subsidiaries - liabilities settled at completion		-	(7.6)
Acquisition of subsidiaries - net cash and cash equivalents acquired	9	24.8	1.6
Purchase of property, plant and equipment		(32.0)	(38.0)
Purchase of intangible assets		(30.6)	(34.5)
Interest paid in relation to property, plant and equipment	3	(0.8)	(0.8)
Dividends received from Equity accounted investees		31.6	15.8
Loans advanced to Equity accounted investees		(17.0)	-
Investment in Joint Ventures		(41.9)	-
Disposals/redemption of available for sale financial assets		7.9	2.4
Additions to available for sale financial assets		(0.3)	(2.0)
Disposal of undertaking and investment in Equity accounted investee (net of cash disposed)		-	208.8
Proceeds from property, plant and equipment		1.3	0.1
Sale of shares held by a subsidiary		-	2.4
Net cash outflow from investing activities		(394.8)	(14.0)
Cash flows from financing activities
Purchase of own shares		(4.3)	(16.2)
Drawdown of borrowings		370.7	182.0
Repayment of borrowings		(130.5)	(242.7)
Finance lease payments		(0.3)	(2.2)
Dividends paid to Company shareholders		(76.0)	(41.0)
Net cash inflow/(outflow) from financing activities		159.6	(120.1)
Net increase/(decrease) in cash and cash equivalents		39.9	(43.0)
Cash and cash equivalents at the beginning of the year		132.1	187.3
Effects of exchange rate changes on cash and cash equivalents		3.7	(12.2)
Cash and cash equivalents at the end of the year	7	175.7	132.1
Reconciliation of net cash flow to movement in net debt		2018 €'m	2017 €'m
Net increase/(decrease) in cash and cash equivalents		39.9	(43.0)
Cash movements from debt financing		(239.9)	62.9
		(200.0)	19.9
Exchange translation adjustment on net debt		(9.0)	49.9
Movement in net debt in the year		(209.0)	69.8
Net debt at the beginning of the year		(367.7)	(437.5)
Net debt at the end of the year	7	(576.7)	(367.7)

Notes to the Financial Statements

for the financial year ended 29 December 2018

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 29 December 2018 (referred to as the 2018 financial statements). The Group financial statements are prepared under EU adopted International Financial Reporting Standards (IFRS). The 2018 financial statements have been audited and have received an unqualified audit report. Amounts are stated in euro millions (€'m) unless otherwise stated. The financial information is prepared for a 52 week period ended on 29 December 2018. Comparatives are for the 52 week period ended on 30 December 2017. The balance sheets for 2018 and 2017 have been drawn up as at 29 December 2018 and 30 December 2017 respectively. After making enquiries, the Directors have reasonable expectation that the Group has adequate resources to continue operating for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group Financial Statements.

The financial information has been prepared under the historical cost convention as modified by use of fair values for 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 2018 Financial Statements are consistent with those as set out in the 2017 Financial Statements. There are no new IFRS standards or amendments effective for the Group in 2018 which had a material impact on the financial statements.

The financial statements were approved by the Board of Directors on 19 February 2019 and signed on its behalf by Mn Keane, S Talbot, and M Garvey.

2.  Segment information

In accordance with IFRS 8 'Operating Segments' the Group, including its Joint Ventures, has identified three reportable segments as follows: Glanbia Performance Nutrition, Glanbia Nutritionals and Glanbia Ireland. 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. 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 (EBITA). As outlined in note 9 the Group completed the acquisition of SlimFast in November 2018. SlimFast has been fully incorporated in the Glanbia Performance Nutrition segment.

Glanbia Performance Nutrition earns its revenue from the manufacture and sale of sports nutrition and lifestyle nutrition products, Glanbia Nutritionals earns its revenue from the manufacture and sale of cheese, dairy and non-dairy nutritional ingredients, and vitamin and mineral premixes. Glanbia Ireland earns its revenue from the manufacture and sale of cheese and dairy ingredients, and the manufacture and sale of a range of consumer products and farm inputs. Glanbia Ireland is an Equity accounted investee and the amounts stated represent the Group's share. All other segments and unallocated include both the results of other Equity accounted investees who manufacture and sell cheese and dairy ingredients and unallocated corporate costs. These investees did not meet the quantitative thresholds for reportable segments in 2018 or 2017.

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

The segment results for continuing operations are as follows:

2018	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Total gross segment revenue	1,179.6	1,242.7	-	2,422.3	-	2,422.3
Inter-segment revenue	-	(36.0)	-	(36.0)	-	(36.0)
Revenue	1,179.6	1,206.7	-	2,386.3	-	2,386.3
Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)	173.1	111.8	-	284.9	-	284.9
Share of results of Equity accounted investees	-	-	22.0	22.0	23.3	45.3

2017	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Total gross segment revenue	1,121.1	1,304.7	-	2,425.8	-	2,425.8
Inter-segment revenue	-	(38.7)	-	(38.7)	-	(38.7)
Revenue	1,121.1	1,266.0	-	2,387.1	-	2,387.1
Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)	169.7	113.5	-	283.2	-	283.2
Share of results of Equity accounted investees (pre-exceptional)	-	-	16.4	16.4	26.4	42.8

Included in external revenue are related party sales between Glanbia Nutritionals and Joint Ventures of €18.1 million (2017: €14.1 million) and between Glanbia Performance Nutrition and Joint Ventures of €0.9 million (2017: €0.6 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.

Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax for continuing operations as follows:

	Notes	2018 €'m	2017 €'m
Earnings before interest, tax, amortisation and exceptional items - Continuing operations		284.9	283.2
Amortisation - pre-exceptional		(45.9)	(43.1)
Exceptional items		-	(30.2)
Share of results of Equity accounted investees		45.3	42.8
Finance income	3	3.9	3.0
Finance costs	3	(21.4)	(26.0)
Reported profit before taxation - Continuing operations		266.8	229.7
Income taxes	4	(32.8)	7.5
Reported profit for the year - Continuing operations		234.0	237.2

Other segment information pre-exceptional for continuing operations are as follows:

2018	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Depreciation and impairment of PPE	16.1	26.9	-	43.0	-	43.0
Amortisation and impairment of intangibles	34.9	11.0	-	45.9	-	45.9
Capital expenditure - additions	28.2	34.3	-	62.5	5.3	67.8
Capital expenditure - business combinations	321.0	-	-	321.0	-	321.0

2017	Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Depreciation and impairment of PPE	14.8	30.3	-	45.1	2.7	47.8
Amortisation and impairment of intangibles	33.2	9.9	-	43.1	-	43.1
Capital expenditure - additions	32.8	29.4	-	62.2	10.5	72.7
Capital expenditure - business combinations	166.9	-	-	166.9	-	166.9

The segment assets and liabilities are as follows:

2018		Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Segment assets		1,728.6	737.5	225.4	2,691.5	407.2	3,098.7
Segment liabilities		367.8	193.9	-	561.7	947.9	1,509.6

2017		Glanbia Performance Nutrition €'m	Glanbia Nutritionals €'m	Glanbia Ireland €'m	Total reportable segments €'m	All other segments and unallocated €'m	Total Group €'m
Segment assets		1,331.5	759.7	187.1	2,278.3	204.7	2,483.0
Segment liabilities		232.2	181.0	-	413.2	688.1	1,101.3

Geographical information

The following represents a geographical analysis of the segment information in accordance with IFRS 8, which requires disclosure of information about the country of domicile (Ireland) and countries with material revenue and non-current assets. The analysis of revenue represents revenue from continuing operations.

	2018 €'m	2017 €'m
US	1,588.5	1,723.8
Ireland	4.0	23.4
UK	82.3	72.1
Australia	34.5	53.2
Rest of Europe	270.5	217.1
Other	406.5	297.5
Total	2,386.3	2,387.1

Revenue of approximately €302.3 million (2017: €312.5 million) is derived from a single external customer within the Glanbia Nutritionals segment.

The total of non-current assets, other than financial instruments and deferred tax assets, located in Ireland is €816.0 million (2017: €821.3 million) and located in other countries, mainly the US, is €1,305.2 million (2017: €849.3 million).

3.  Finance income and costs - Continuing operations

	2018			2017
	Pre- exceptional €'m	Exceptional   €'m	Total €'m	Pre- exceptional €'m	Exceptional   €'m	Total €'m
Finance income
Interest income on loans to related parties	0.4	-	0.4	0.7	-	0.7
Interest income on deposits and others	3.1	-	3.1	2.3	-	2.3
Net interest income on currency swaps	0.4	-	0.4	-	-	-
Total finance income	3.9	-	3.9	3.0	-	3.0
Finance costs
Bank borrowing costs	(12.2)	-	(12.2)	(7.3)	-	(7.3)
Facility fees including cost amortisation	(2.0)	-	(2.0)	(2.6)	(0.1)	(2.7)
Unwinding of discounts	-	-	-	(0.1)	-	(0.1)
Finance lease costs	-	-	-	(0.1)	-	(0.1)
Net interest expense on currency swaps	-	-	-	(1.2)	-	(1.2)
Finance cost of private placement debt	(7.2)	-	(7.2)	(14.7)	(13.9)	(28.6)
Total finance costs	(21.4)	-	(21.4)	(26.0)	(14.0)	(40.0)
Net finance costs	(17.5)	-	(17.5)	(23.0)	(14.0)	(37.0)

Net finance costs do not include bank borrowing costs of €0.8 million (2017: €0.8 million) attributable to the acquisition, construction or production of a qualifying asset, which have been capitalised. Interest is capitalised at the Group's average interest rate (excluding exceptional items) for the period of 4.3% (2017: 3.9%). Where relevant, tax deduction for capitalised interest was taken in accordance with Sec 81(3), TCA 1997.

4.  Income taxes

	2018			2017
	Continuing operations €'m	Discontinued operations €'m	Total €'m	Continuing operations €'m	Discontinued operations €'m	Total €'m
Current tax
Irish current tax charge	(15.7)	-	(15.7)	(12.3)	(0.9)	(13.2)
Adjustments in respect of prior years	0.9	-	0.9	0.5	0.1	0.6
Irish current tax for the year	(14.8)	-	(14.8)	(11.8)	(0.8)	(12.6)
Foreign current tax	(17.9)	-	(17.9)	(12.4)	-	(12.4)
Adjustments in respect of prior years	(1.0)	-	(1.0)	3.2	-	3.2
Foreign current tax for the year	(18.9)	-	(18.9)	(9.2)	-	(9.2)
Total current tax	(33.7)	-	(33.7)	(21.0)	(0.8)	(21.8)
Deferred tax
Deferred tax - current year	0.7	-	0.7	28.2	(0.6)	27.6
Adjustments in respect of prior years	0.2	-	0.2	0.3	0.2	0.5
Total deferred tax	0.9	-	0.9	28.5	(0.4)	28.1
Tax (charge)/credit	(32.8)	-	(32.8)	7.5	(1.2)	6.3

The tax credit on exceptional items and the exceptional deferred tax credit included in the above amounts is as follows:

	2018			2017
	Continuing operations €'m	Discontinued operations €'m	Total €'m	Continuing operations €'m	Discontinued operations €'m	Total €'m
Current tax credit/(charge) on exceptional items	-	-	-	4.8	(0.7)	4.1
Deferred tax credit/(charge) on exceptional items	-	-	-	2.3	(0.2)	2.1
Deferred tax credit due to US tax reform	-	-	-	38.7	-	38.7
Total tax credit/(charge) on exceptional items and exceptional deferred tax credit for the year	-	-	-	45.8	(0.9)	44.9

The net tax credit on exceptional items in 2017 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 for continuing operations differs from the theoretical amount that would arise applying the corporation tax rate in Ireland, as follows:

	2018 €'m	2017 €'m
Profit before tax - Continuing operations	266.8	229.7
Income tax calculated at Irish rate of 12.5% (2017: 12.5%)	(33.3)	(28.7)
Earnings at higher Irish rates	(0.4)	(2.5)
Difference due to overseas tax rates (capital and trading)	(3.3)	(6.7)
Reduction in US tax rate	-	38.7
Adjustment to tax charge in respect of previous periods	0.1	4.0
Tax on share of results of Equity accounted investees included in profit before tax	5.7	5.4
Other reconciling differences	(1.6)	(2.7)
Total tax (charge)/credit - Continuing operations	(32.8)	7.5

Factors that may affect future tax charges and other disclosure requirements

The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group operates and other relevant changes in tax legislation, including amendments impacting on the excess of tax depreciation over accounting depreciation and clarification on certain application matters in relation to the Tax Cuts and Jobs Act enacted in December 2017 in the US (due by 22 June 2019). The total tax charge of the Group may also be influenced by the effects of corporate development activity and the resolution of uncertain tax positions where the final outcome of those matters is different than the amounts recorded using the probability weighted expected value approach.

5.  Earnings Per Share

Basic

Basic Earnings Per Share is calculated by dividing the net profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as own shares.

The weighted average number of ordinary shares in issue used in the calculation of basic Earnings Per Share is 295,159,530 (2017: 295,010,462).

	2018			2017
	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
Profit after tax attributable to equity holders of the Company (€'m)	234.0	-	234.0	237.2	92.2	329.4
Basic Earnings Per Share (cent)	79.28	-	79.28	80.40	31.25	111.65

Diluted

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

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

	2018	2017
Weighted average number of ordinary shares in issue	295,159,530	295,010,462
Shares deemed to be issued for no consideration in respect of:
Share awards	858,826	759,074
Share options	28,182	29,639
Weighted average number of shares used in the calculation of Diluted Earnings Per Share	296,046,538	295,799,175

	2018			2017
	Continuing operations	Discontinued operations	Total	Continuing operations	Discontinued operations	Total
Diluted Earnings Per Share (cent)	79.04	-	79.04	80.19	31.17	111.36

Pro-forma Adjusted Earnings Per Share (Non-IFRS information)

Pro-forma Adjusted Earnings Per Share is a non-IFRS performance measure. Pro-forma calculation of Adjusted Earnings Per Share from continuing operations has been provided as it reflects the metrics used by the Group to measure profitability and financial performance and represents the revised and ongoing structure of the Group following the disposal of 60% of Dairy Ireland and related assets in 2017. Refer to Glossary of KPIs and non-IFRS performance measures for details on calculation.

6.  Dividends

	2018 €'Cent	2017 €'Cent
Dividends recommended per ordinary share are as follows:
Final dividend recommended for the year ended 29 December 2018	14.49
Final dividend recommended for the year ended 30 December 2017		16.09
Interim dividend for the year ended 29 December 2018	9.71
Interim dividend for the year ended 30 December 2017		5.91
	24.2	22.0

On 5 October 2018 an interim dividend for the year ended 29 December 2018 of 9.71 cent per share (total €28.7 million) was paid. On 6 October 2017 an interim dividend for the year ended 30 December 2017 of 5.91 cent per share (total €17.5 million) was paid.

On 27 April 2018 a final dividend for the year ended 30 December 2017 of 16.09 cent per share (total €47.6 million) was paid. On 28 April 2017 a final dividend for the year ended 31 December 2016 of 7.94 cent per share (total €23.5 million) was paid.

Of the €76.3 million dividends paid during 2018, €0.3 million are waived in relation to own shares.

The Directors have recommended the payment of a final dividend of 14.49 cent per share on the ordinary shares which amounts to €42.9 million. Subject to shareholder approval, this dividend will be paid on 26 April 2019 to shareholders on the register of members at 15 March 2019, the record date. These financial statements do not reflect this final dividend. There is no income tax consequences for the Company in respect of dividends proposed prior to issuance of the financial statements.

7.  Net debt

	2018 €'m	2017 €'m
Non-current
Bank borrowings	616.2	369.4
Private placement debt	136.2	130.1
Finance lease liabilities	-	0.1
	752.4	499.6
Current
Bank overdrafts	48.9	30.1
Finance lease liabilities	-	0.2
	48.9	30.3

Net debt includes the following for the purposes of the Group statement of cash flows at the reporting date:

	2018 €'m	2017 €'m
Total financial liabilities	801.3	529.9
Less cash and cash equivalents	(224.6)	(162.2)
Net Debt	576.7	367.7
Cash at bank and in hand	216.4	153.6
Short term bank deposits	8.2	8.6

Cash and cash equivalents include the following for the purpose of the Group statement of cash flows at the reporting date:

	2018 €'m	2017 €'m
Cash and cash equivalents in the Group balance sheet	224.6	162.2
Bank overdrafts used for cash management purposes	(48.9)	(30.1)
Cash and cash equivalents in the Group statement of cash flows	175.7	132.1

8.  Cash generated from operating activities

	Notes	2018 €'m	2017 €'m
Profit after taxation		234.0	329.4
Income taxes	4	32.8	(6.3)
Net (write back)/write down of inventories		(0.3)	0.5
Impairment of tangible assets		-	10.8
Non-cash movement in allowance for impairment of receivables		1.5	-
Non-cash element of exceptional charge		-	3.0
Non-cash movement in provisions		(1.1)	-
Non-cash movement on cross currency swaps and fair value hedges		1.0	-
Share of results of Equity accounted investees		(45.3)	(51.8)
Depreciation of tangible assets		43.0	49.1
Amortisation of intangible assets		45.9	63.2
Cost of share-based payments		8.8	7.8
Difference between pension charge and cash contributions		(3.7)	(4.2)
(Profit)/loss on disposal of property, plant and equipment		(0.3)	0.9
Finance income	3	(3.9)	(3.0)
Finance expense	3	21.4	40.1
Amortisation of government grants received		(0.1)	(0.3)
Net loss on disposal of investments		0.2	-
Recycle of available for sale reserve to the Group income statement on disposal of investment		(5.3)	-
Profit on disposal of discontinued operations		-	(96.3)
Operating cash flows before movement in working capital		328.6	342.9
Increase in inventories		(18.4)	(14.6)
(Increase)/decrease in short-term receivables		(27.7)	(149.9)
Increase/(decrease) in short-term liabilities		39.0	(13.9)
(Decrease)/increase in provisions		(5.0)	(2.3)
Cash generated from operating activities		316.5	162.2

9.  Business Combinations

Acquisitions in 2018

On 19 November 2018, the Group acquired 100% of the equity of KSF Holdings LLP and HNS Intermediate Corporation who collectively own SlimFast and other brands ("SlimFast"). SlimFast is a leading weight management and health & wellness brand family distributed primarily in the food, drug, mass and club (FDMC) channel in the United States of America and the United Kingdom. The SlimFast brand is an adjacency to the Glanbia Performance Nutrition brand portfolio and has been included in the Glanbia Performance Nutrition segment. The Goodwill relates to the acquired workforce, the expectation that the business is self-sustaining and will generate future sales beyond the existing customer base, as well as the opportunity to expand the business into new markets, where there are no existing customers and the brands are not known. Goodwill of €131.6 million is not deductible for tax purposes.

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

	Total €'m
Purchase consideration	335.2
Less: Fair value of assets acquired	(198.2)
Goodwill	137.0

	Total €'m
Purchase consideration - cash paid	337.8
Refund due from vendor	(2.6)
Purchase consideration	335.2

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

	Total €'m
Property, plant and equipment	0.4
Intangible assets - software	0.1
Intangible assets - customer relationships	62.3
Intangible assets - brands	120.7
Inventories	32.0
Trade and other receivables	22.2
Trade and other payables	(31.9)
Cash and cash equivalents	28.7
Bank overdraft	(3.9)
Deferred tax liability	(32.4)
Fair value of net assets acquired	198.2

The fair value of SlimFast trade and other receivables at the acquisition date amounted to €22.2 million. The gross contractual amount for trade receivables due is €22.2 million. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis. Any amendments to these fair values within the 12 month timeframe from the date of acquisition will be disclosed in the 2019 Annual Report as stipulated by IFRS 3 'Business Combinations'. The fair value assignment is provisional as the acquisition was completed within six weeks before the balance sheet date. Completion accounts have not been formally agreed between the purchaser and seller at the date of signing the financial statements. It is therefore possible the provisional amounts for inventories, trade and other receivables, trade and other payables, cash and cash equivalents, bank overdraft or deferred tax liability may differ from the provisional values presented. Any change to these balances will result in a consequent change to Goodwill.

Combined impact of acquisitions

The revenue and profit before taxation of the Group (including transaction costs), including the impact of acquisitions completed during the financial year ended 29 December 2018, were as follows:

	2018 Acquisitions €'m	Group excluding acquisitions €'m	Consolidated group including acquisitions €'m
Revenue	30.0	2,356.3	2,386.3
Profit before taxation	2.5	264.3	266.8

The revenue and profit before taxation (including transaction costs) of the Group for the financial year ended 29 December 2018 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:

	2018 Acquisitions €'m	Group excluding acquisitions €'m	Pro-forma consolidated group €'m
Revenue	209.4	2,356.3	2,565.7
(Loss)/Profit before taxation	(1.8)	264.3	262.5

Profit before taxation in respect of the acquisitions includes one-off transaction costs during the post-acquisition period of €1.3 million and €3.1 million for the full year.

Acquisitions in 2017

The Group acquired Grass Advantage LLC (Amazing Grass) and B&F Vastgoed B.V. (Body & Fit) in 2017 for which the fair value of assets and liabilities were determined provisionally. There have been no revisions to the provisional values other than an increase of €0.5 million in Goodwill in relation to the acquisition of Body & Fit.

10.   Events after the reporting period

See note 6 for the final dividend, recommended by the Directors, to be paid on 26 April 2019.

Subsequent to year end, on 19 February 2019, Glanbia agreed to acquire Watson LLC and Polymer Films LLC (collectively known as 'Watson') for $89 million in cash (the 'Transaction').  Watson is a US based non-dairy ingredient solutions business and will be a complementary acquisition for the Group.  In 2018 Watson delivered $101 million in revenue.  On completion, Watson will be part of GN Nutritional Solutions.  It is anticipated that the Transaction will close by Q2 2019 subject to customary completion conditions. There is no deferred component to the purchase price.  The Transaction will be fully financed by the Group's existing banking facilities and based on the anticipated close date it is expected to be marginally accretive to earnings per share in 2019. Due to the proximity of the acquisition to the date of signature of the financial statements, it is not possible to provide the fair values of the net assets acquired.

11. Statutory financial statements

The financial information in this preliminary announcement does not constitute the full 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 and will be published on www.glanbia.com. A copy of the full statutory Financial Statements in respect of the financial year ended 29 December 2018 will be annexed to the Company's annual return for 2018. The auditors of the Company have made a report, without any qualification, on their audit of the Financial Statements of the Group and Company in respect of the financial year ended 29 December 2018, which were approved by the Directors on 19 February 2019. A copy of the Financial Statements of the Group in respect of the year ended 30 December 2017 has been annexed to the Company's annual return for 2017 and filed with the Companies Registration Office and is available on www.glanbia.com.

Glossary

Key Performance Indicators and non-IFRS performance measures

NOT COVERED BY INDEPENDENT AUDITOR'S REPORT

Non-IFRS performance measures

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

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

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

G 1. Constant currency

G 2. Total Group

G 3. Revenue

G 4. EBITA

G 5. EBITA margin %

G 6. IFRS 15

G 7. EBITDA                    

G 8. Pro-forma Adjusted Earnings Per Share

G 9. Financing Key Performance Indicators

G 10. Exceptional items

G 11. Volume and pricing increase/(decrease)

G 12. Like-for-like branded revenue increase/(decrease)

G 13. Innovation rate

G 14. Effective tax rate

G 15. Average interest rate

G 16. Operating cash flow and free cash flow

G 17. Operating cash conversion

G 18. Return on capital employed (ROCE)

G 19. Total shareholder return (TSR)

G 20. Dividend payout ratio

G 21. Compound annual growth rate (CAGR)

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

G 1. Constant currency

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

The principal average exchange rates used to translate results for 2018 and 2017 are set out below:

Euro 1 =	2018	2017
US dollar	1.1812	1.1295
Pound sterling	0.8847	0.8764

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

G 2. Total Group

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

Total Group pro-forma Revenue and EBITA have been provided for 2017 as the Group believes it is more reflective of the revised and on-going structure of the Group following the disposal of 60% of Dairy Ireland and related assets in 2017. Total Group pro-forma Revenue and EBITA are defined as Total Group Revenue/EBITA plus the Group's share (40%) of the Revenue/EBITA of Dairy Ireland in 2017.

G 3. Revenue

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

G 3.1 Total Group pro-forma revenue:

	Reference to the Financial Statements/Glossary	2018 €'m	2017 Reported €'m	2017 Retranslated €'m	Constant currency growth %
US Cheese		680.0	734.1	702.0	(3.1%)
Nutritional Solutions		526.7	531.9	511.6	3.0%
Glanbia Nutritionals	Note 2	1,206.7	1,266.0	1,213.6	(0.6%)
Glanbia Performance Nutrition	Note 2	1,179.6	1,121.1	1,077.7	9.5%
Wholly-owned (continuing operations)		2,386.3	2,387.1	2,291.3	4.1%
Equity accounted investees	G 3.2	1,283.8	1,093.4	1,075.7	19.3%
40% share of discontinued operations*		-	143.2	143.2
Pro-forma Equity accounted investees		1,283.8	1,236.6	1,218.9	5.3%
Total Group pro-forma revenue		3,670.1	3,623.7	3,510.2	4.6%

* Excludes inter segment revenue in 2017 of €0.5 million.

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

2018	Reference to the Financial Statements/Glossary	Glanbia Ireland DAC €'m	Midwest/ Southwest Cheese Group €'m	Glanbia Cheese Limited €'m	Total €'m
Equity accounted investees revenue (100%)		1,809.9	802.4	311.0	2,923.3
% of ownership interest		40%	50%	51%
Group's share of revenue of Equity accounted investees		724.0	401.2	158.6	1,283.8

2017
Equity accounted investees revenue (100%)		1,407.1	738.0	316.7	2,461.8
% of ownership interest		40%	50%	51%
Group's share of revenue of Equity accounted investees		562.9	369.0	161.5	1,093.4

G 4. EBITA

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

G 4.1 Total Group pro-forma EBITA:

	Reference to the Financial Statements/Glossary	2018 €'m	2017 Reported €'m	2017 Retranslated €'m	Constant currency growth %
Glanbia Nutritionals	Note 2	111.8	113.5	108.5	3.0%
Glanbia Performance Nutrition	Note 2	173.1	169.7	162.3	6.7%
Wholly-owned (continuing operations)		284.9	283.2	270.8	5.2%
Equity accounted investees	G 4.2	65.8	63.4	62.4	5.4%
40% share of discontinued operations		-	4.2	4.2
Pro-forma Equity accounted investees		65.8	67.6	66.6	(1.2%)
Total Group pro-forma EBITA		350.7	350.8	337.4	3.9%

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

	2018 €'m	2017 €'m
EBITA of Equity accounted investees	65.8	63.4
Adjustment in respect of unrealised profit on sales to the Group	0.6	(0.2)
Amortisation	(2.5)	(1.7)
Finance costs	(9.0)	(7.1)
Income tax	(10.1)	(11.8)
Share of results of Equity accounted investees	1.0	0.4
Non-controlling interest	(0.5)	(0.2)
Share of results of Equity accounted investees per the Group income statement - pre-exceptional	45.3	42.8
Impact of retranslating 2017	-	(0.5)
Share of results of Equity accounted investees on a constant currency basis - pre-exceptional	45.3	42.3
Constant currency change	7.1%

G 5. EBITA margin %

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

G 6. IFRS 15

IFRS 15 'Revenue from Contracts with Customers' is effective and will be adopted by the Group for the 2019 financial year. Following a detailed review by the Group there were no material changes to revenue recognition and profits across the Group with the exception of the matter outlined below.

The Group concluded that the relationship between Glanbia Nutritionals and the Group Joint Venture partner Southwest Cheese (SWC), will transition from an agent relationship to that of a principal.

The impact is as follows:

G 6.1 Wholly-owned pro-forma revenue - IFRS 15 restatement:

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2018 IFRS 15 Impact €'m	2018 IFRS 15 Restated €'m
US Cheese		680.0	733.9	1,413.9
Nutritional Solutions		526.7	50.3	577.0
Glanbia Nutritionals	Note 2	1,206.7	784.2	1,990.9
Glanbia Performance Nutrition	Note 2	1,179.6	-	1,179.6
Wholly-owned (continuing operations)	Note 2	2,386.3	784.2	3,170.5

G 7. EBITDA

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

	Reference to the Financial Statements/Glossary	2018 €'m	Continuing operations 2017 €'m	Discontinued operations 2017 €'m	Total 2017 €'m
Earnings before interest, tax and amortisation (pre-exceptional EBITA)	G 4.1	284.9	283.2	10.6	293.8
Depreciation	Note 8	43.0	45.1	4.0	49.1
Grant amortisation	Note 8	(0.1)	(0.1)	(0.2)	(0.3)
Earnings before interest, tax, depreciation and amortisation (pre-exceptional EBITDA)		327.8	328.2	14.4	342.6

G 8. Pro-forma Adjusted Earnings Per Share (EPS)

Pro-forma Adjusted EPS has been provided as the Group believes it is more reflective of the revised and on-going structure of the Group following the disposal of 60% of Dairy Ireland and related assets in 2017. It is defined as the net profit from continuing operations attributable to the equity holders of Glanbia plc, before exceptional items and intangible asset amortisation (excluding software amortisation), net of related tax, plus the Group's share (40%) of the profits after tax for Dairy Ireland and related assets, before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax, divided by the weighted average number of ordinary shares in issue during the year.

Pro-forma Adjusted EPS has been calculated to set out the Adjusted EPS on the basis that the Dairy Ireland transaction had taken place on 1 January 2017.

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

	Notes	Reference to the Financial Statements/Glossary	2018 €'m	2017 Reported €'m	2017 Retranslated €'m
Profit attributable to equity holders of the Company - pre-exceptional		Group income statement	234.0	231.4	221.8
Amortisation and impairment of intangible assets (excluding software amortisation) net of related tax of €6.1 million (2017: €7.5 million)			34.6	31.7	30.4
Discontinued operations adjusted net income (100%)	(a)		-	(10.1)	(10.1)
40% share of discontinued operations adjusted net income	(b)		-	4.0	4.0
Pro-forma Adjusted net income			268.6	257.0	246.1
Weighted average number of ordinary shares in issue (thousands)		Note 5	295,159	295,010	295,010
Pro-forma Adjusted Earnings Per Share (cent)			91.01	87.11	83.46
Pro-forma constant currency change			9.0%

(a)    Discontinued activities - removal of 100% of the profit after tax before exceptional items and intangible asset amortisation (excluding software amortisation costs), net of related tax, from discontinued activities. The on-going retained element of Dairy Ireland (40%) is added back as part of adjustment (b) below.

(b)    Add back of 40% of the Dairy Ireland profit after tax before exceptional items and intangible asset amortisation (excluding software amortisation), net of related tax, (reflecting Dairy Ireland as an Equity accounted investee from 1 January 2017).

G 9. Financing Key Performance Indicators

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

G 9.1 Net debt: adjusted EBITDA

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

	Reference to the Financial Statements/Glossary	2018 €'m	2017 €'m
Net debt	Note 7	576.7	367.7
EBITDA	G 7	327.8	328.2
Adjustments in line with lenders' facility agreements		45.2	15.8
Adjusted EBITDA		373.0	344.0
Net debt: adjusted EBITDA		1.55	1.07

G 9.2 Adjusted EBIT: Net finance cost

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

	Reference to the Financial Statements/Glossary	2018 €'m	2017 €'m
Operating profit - continuing operations (pre-exceptional)	Group income statement	239.0	240.1
Operating profit - discontinued operations (pre-exceptional)		-	9.9
Operating profit - continuing and discontinued operations (pre-exceptional)		239.0	250.0
Dividends received from Equity accounted investees	Group statement of cash flows	31.6	15.8
Adjusted EBIT		270.6	265.8
Net finance costs	Note 3	18.3	37.9
Adjusted EBIT: net finance cost		14.8	7.0

The 2017 Adjusted EBIT: net finance cost calculation include a once-off finance cost of €14.0 million recognised as an exceptional item in 2017. Excluding this once-off cost, Adjusted EBIT: net finance cost would be 11.2 times.

G 10. Exceptional Items

The Group has adopted an income statement format that seeks to highlight significant items within the Group results for the year. Such items may include restructuring, impairment of assets including material adjustments arising from the re-assessment of asset lives, adjustments to contingent consideration, material acquisition integration costs, restructuring costs, profit or loss on disposal or termination of operations, material acquisition costs, litigation settlements, legislative changes, gains or losses on defined benefit pension plan restructuring and profit or loss on disposal of investments. Judgement is used by the Group in assessing the particular items which by virtue of their scale and nature should be disclosed in the income statement and notes as exceptional items.

G 11. Volume and pricing increase/(decrease)

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

Nutritional Solutions volume increase/(decrease) is one of the Glanbia Nutritionals segment's Key Performance Indicators. It is one of the performance conditions in Glanbia's Annual Incentive Plan for the Glanbia Nutritionals Chief Executive Officer.

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

G 11.1 Reconciliation of volume and pricing increase/(decrease) to pro-forma constant currency revenue growth

	Reference to the Financial Statements/Glossary	Volume increase/ (decrease)	Price increase/ (decrease)	Acquisitions/ disposals	Revenue increase/ (decrease)
US Cheese	G 3.1	1.7%	(4.8%)	-	(3.1%)
Nutritional Solutions	G 3.1	8.5%	(5.5%)	-	3.0%
Glanbia Nutritionals	G 3.1	4.6%	(5.2%)	-	(0.6%)
Glanbia Performance Nutrition	G 3.1	9.1%	(4.1%)	4.5%	9.5%
2018 increase/(decrease) % - wholly-owned (continuing operations) revenue	G 3.1	6.7%	(4.7%)	2.1%	4.1%
2018 increase/(decrease) % - Equity accounted investees revenue	G 3.1	9.4%	(5.0%)	14.9%	19.3%

G 12. Like-for-like branded revenue increase/(decrease)

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

G 13. Innovation rate

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

G 14. Effective tax rate

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

	Reference to the Financial Statements/Glossary	2018 €'m	2017 €'m
Profit before tax	Group income statement	266.8	259.9
Less share of results of Equity accounted investees	Group income statement	(45.3)	(42.8)
		221.5	217.1
Income tax (pre-exceptional)	Group income statement	32.8	38.3
Effective tax rate		14.8%	17.6%

G 15. Average interest rate

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

G 16. Operating cash flow and free cash flow

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

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

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

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m	2017 Discontinued Operations €'m	2017 Pro-forma €'m
Earnings before interest, tax, depreciation and amortisation (pre-exceptional EBITDA)	G 7	327.8	342.6	(14.4)	328.2
Movement in working capital (pre-exceptional)	G 16.3	(9.7)	(170.8)	47.5	(123.3)
Business sustaining capital expenditure	G 16.5	(16.4)	(23.8)	3.9	(19.9)
Operating cash flow	G 16.1	301.7	148.0	37.0	185.0
Net interest and tax paid	G 16.4	(42.2)	(57.9)	(0.5)	(58.4)
Dividends from Equity accounted investees	Group statement of cash flows	31.6	15.8	-	15.8
Other inflows/(outflows)	G 16.6	4.3	(5.5)	-	(5.5)
Free cash flow		295.4	100.4	36.5	136.9
Strategic capital expenditure	G 16.5	(46.2)	(48.7)	1.8	(46.9)
Dividends paid	Group statement of cash flows	(76.0)	(41.0)	-	(41.0)
Loans/Investment in Equity accounted investees	Group statement of cash flows	(58.9)	-	-	-
Exceptional costs paid	G 16.2	(2.6)	(31.4)	2.1	(29.3)
Acquisitions	Group statement of cash flows	(313.0)	(168.2)	-	(168.2)
Disposals	Group statement of cash flows	1.3	208.8	-	208.8
Net cash flow		(200.0)	19.9	40.4	60.3
Exchange translation/other adjustments	Group statement of cash flows	(9.0)	49.9	1.5	51.4
Dairy Ireland cash flows	G 16.7	-	-	(41.9)	(41.9)
Net debt movement	Group statement of cash flows	(209.0)	69.8	-	69.8
Opening net debt	Group statement of cash flows	(367.7)	(437.5)	-	(437.5)
Closing net debt	Group statement of cash flows	(576.7)	(367.7)	-	(367.7)

G 16.1 Reconciliation of operating cash flow to the Group statement of cash flows in the Financial Statements:

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Cash generated from operating activities	Note 8	316.5	162.2
Add back exceptional cash flow in the year	G 16.2	2.6	17.3
Less business sustaining capital expenditure	G 16.5	(16.4)	(23.8)
Non-cash items not adjusted in computing operating cash flow:
Impairment of tangible assets (excluding exceptional items 2017: €8.1m)	Note 8	-	(2.7)
Net write down of inventories	Note 8	-	(0.5)
Cost of share based payments	Note 8	(8.8)	(7.8)
Difference between pension charge and cash contributions	Note 8	3.7	4.2
Profit/(loss) on disposal of property, plant and equipment	Note 8	0.3	(0.9)
Recycle of available for sale reserve to the Group income statement on disposal of investment	Note 8	5.3	-
Net loss on disposal of investments	Note 8	(0.2)	-
Amounts payable to Spartan-Southwest Holdings joint venture partners		(1.3)	-
Operating cash flow	G 16	301.7	148.0

G 16.2 Exceptional cash flow in the year:

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Pre-tax exceptional profit/(loss) for year		-	53.1
Intangible asset amortisation		-	19.4
Finance costs		-	14.0
Deferred tax		-	(8.7)
Profit on disposal of Dairy Ireland		-	(96.3)
Impairment of tangible assets		-	8.1
Non-cash element of exceptional charge	Note 8	-	3.0
Current year exceptional items paid in the year		-	(7.4)
Prior year exceptional items paid in the year		(2.6)	(9.9)
Exceptional cash outflow in the year - included in operating cash flow		(2.6)	(17.3)
Interest paid		-	(14.0)
Disposal of undertaking in Investment in Equity accounted investees	Group statement of cash flows	-	208.8
Total exceptional cash (outflow)/inflow paid in the year		(2.6)	177.5

G 16.3 Movement in working capital:

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Movement in working capital (pre-exceptional)	G 16	(9.7)	(170.8)
Net write back of inventories	Note 8	0.3	-
Non cash movement in allowance for impairment of receivables	Note 8	(1.5)	-
Prior year exceptional items paid in the year	G 16.2	(2.6)	(9.9)
Non cash movement in provisions	Note 8	1.1	-
Non cash movement on cross currency swaps and fair value hedges	Note 8	(1.0)	-
Amounts payable to Spartan-Southwest Holdings joint venture partners		1.3	-
Change in net working capital	Note 8	(12.1)	(180.7)

G 16.4 Net interest and tax paid:

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Interest received	Group statement of cash flows	4.8	3.1
Interest paid	Group statement of cash flows	(21.0)	(39.5)
Tax paid	Group statement of cash flows	(25.2)	(34.7)
Interest paid in relation to property, plant and equipment	Group statement of cash flows	(0.8)	(0.8)
Interest paid - exceptional item	G 16.2	-	14.0
Net interest and tax paid		(42.2)	(57.9)

G 16.5 Capital expenditure

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Business sustaining capital expenditure	G 16	16.4	23.8
Strategic capital expenditure	G 16	46.2	48.7
Total capital expenditure		62.6	72.5
Purchase of property, plant and equipment	Group statement of cash flows	32.0	38.0
Purchase of intangible assets	Group statement of cash flows	30.6	34.5
Total capital expenditure per the Group statement of cash flows		62.6	72.5

Business sustaining capital expenditure

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

Strategic capital expenditure

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

G 16.6 Other inflows/(outflows)

	Reference to the Financial Statements/Glossary	2018 Reported €'m	2017 Reported €'m
Cost of share based payments	Note 8	8.8	7.8
Difference between pension charge and cash contributions	Note 8	(3.7)	(4.2)
(Profit)/loss on disposal of property, plant and equipment	Note 8	(0.3)	0.9
Disposals/redemption of available for sale financial assets	Group statement of cashflows	7.9	2.5
Additions to available for sale financial assets	Group statement of cashflows	(0.3)	(2.0)
Purchase of own shares	Group statement of cashflows	(4.3)	(16.2)
Sale of shares held by subsidiary	Group statement of cashflows	-	2.4
Impairment of tangible assets (excluding exceptional items 2017: €8.1m)	Note 8	-	2.7
Net write down of inventories	Note 8	-	0.5
Proceeds from property, plant and equipment	Group statement of cashflows	-	0.1
Recycle of available for sale reserve to the Group income statement on disposal of investment	Note 8	(5.3)	-
Amounts payable to Spartan-Southwest Holdings joint venture partners		1.3	-
Net loss on disposal of investments	Note 8	0.2	-
Total other inflows/(outflows)		4.3	(5.5)

G 16.7 Reconciliation of discontinued operations net cash flow:

	Reference to the Financial Statements/Glossary	2017 €'m
Dairy Ireland cash flows	G 16	(41.9)
Share redemption	(a)	154.2
Other reconciling items		3.6
Discontinued operations cash generated		115.9

(a)    Included in discontinued operations cash generated is an amount of €154.2 million. This amount related to the redemption of ordinary shares in Glanbia Foods Ireland Limited by Glanbia plc which occurred on the date of the transaction, 2 July 2017.

G 17. Operating cash conversion

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

G 18. Return on capital employed (ROCE)

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

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

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

	Reference to the Financial Statements/Glossary	2018 €'m	2017 €'m
Operating profit - pre-exceptional	Group income statement	239.0	240.1
Tax on operating profit		(35.4)	(42.3)
Amortisation and impairment of intangible assets (net of related tax)		38.7	33.7
Share of results of Equity accounted investees	Group income statement	45.3	42.8
Adjustment for discontinued operations	G 18.1	-	9.6
Return		287.6	283.9
Total assets	Group balance sheet	3,098.7	2,483.0
Current liabilities	Group balance sheet	(519.4)	(398.3)
Deferred tax liabilities	Group balance sheet	(160.3)	(125.6)
Less cash and cash equivalents	Group balance sheet	(224.6)	(162.2)
Less current financial liabilities	Group balance sheet	48.9	30.3
Less retirement benefit assets	Group balance sheet	(1.1)	(1.7)
Plus accumulated amortisation		301.3	243.1
Capital employed before acquisition adjustment		2,543.5	2,068.6
Adjustment for acquisitions	G 18.2	(242.8)	147.2
Capital employed		2,300.7	2,215.8
Average capital employed		2,184.6	2,125.6
Return on capital employed		13.2%	13.4%

G 18.1 Adjustment for discontinued operations (Dairy Ireland):

	Reference to the Financial Statements/Glossary		2017 €'m
Operating profit - discontinued operations			9.9
Amortisation net of tax			0.6
Tax on EBIT			(1.2)
Share of results of Equity accounted for investees			0.3
Total adjustment for discontinued operations			9.6

G 18.2. Adjustment for acquisitions

This adjustment is required to ensure the capital employed of the acquisitions (SlimFast (2018), Amazing Grass (2017) and Body & Fit (2017)) are appropriately time apportioned in the denominator.

G 19. Total Shareholder Return (TSR)

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

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

G 20. Dividend Payout Ratio

Dividend payout ratio is defined as the annual dividend per ordinary share divided by the Adjusted Earnings Per Share. The dividend payout ratio for 2017 is defined as the annual dividend per ordinary share divided by the pro-forma Adjusted Earnings Per Share as the Group believes it is more reflective of the revised and ongoing structure of the Group following the disposal of 60% of Dairy Ireland and related assets in 2017. The dividend payout ratio provides an indication of the value returned to shareholders relative to the Group's total earnings.

	Reference to the Financial Statements/Glossary	2018 € cent	2017 € cent
Pro-forma adjusted Earnings Per Share	G. 8	91.01	87.11
Dividend recommended/paid per ordinary share	Note 6	24.20	22.00
Dividend payout %		26.6%	25.3%

G 21. Compound Annual Growth Rate (CAGR)

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

 

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