Half year results. Delivering better nutrition for every step of life s journey. Wednesday, 19 August Glanbia plc 2013 half year results

Transcription

1 2015 Half year results Delivering better nutrition for every step of life s journey Wednesday, 19 August Glanbia plc 2013 half year results

2 Good performance in first half driven by Global Performance Nutrition Guidance of 9% to 11% constant currency (c25% reported) adjusted EPS growth in August Glanbia plc ( Glanbia, the Group, the plc ), the global nutrition group, announces its results for the six months ended 4 July Results highlights for the half year Adjusted earnings per share cent, up 4.2% constant currency (up 25.1% reported); EBITA from wholly owned business million, up 7.5% on prior half year, constant currency (up 29.1% reported); EBITA margins from wholly owned business 9.7%, up 110 bps on prior half year, constant currency (up 140 bps reported); Strong result from Global Performance Nutrition with EBITA of 60.7 million a 17.4% increase on prior half year, constant currency (up 41.5% reported); Satisfactory performance by Global Ingredients in the context of challenging dairy markets with EBITA of 60.3 million a 9.5% decrease on prior half year, constant currency (up 11.9% reported); Good result from Dairy Ireland with EBITA of 17.5 million, as margins recovered to 4.7%; Joint Ventures & Associates performed in line with expectations in the first half; and Recommended interim dividend of 4.88 cent per share, an increase of 10% on prior year. Note on foreign exchange: Glanbia generates a significant proportion of its earnings in US dollar and reports in Euro. Constant currency reporting is used to eliminate the translational effect of foreign exchange on the Group s results. The average Euro US dollar exchange rate for the first half of 2015 was $1.115 compared to an average rate of $1.371 for the first half of 2014 leading to an improved reported result when compared to constant currency. Note, constant currency guidance incorporates certain trading headwinds in the period as a result of a strong US dollar. Commenting today Siobhán Talbot, Group Managing Director, said: Glanbia delivered a good performance in the first six months of 2015 driven by a strong result from Global Performance Nutrition. Total Group revenue for the half year was 1.9 billion with adjusted earnings per share of cent. Today we are reiterating full year guidance of adjusted earnings per share growth of between 9% and 11%, on a constant currency basis. Given the strength of the US dollar this is likely to translate to reported adjusted earnings per share growth of circa 25% for the full year if foreign exchange rates remain at current levels. Today s results demonstrate that our strategy is on track. As a global nutrition company, whose purpose is delivering better nutrition for every step of life's journey, we are focused on the development of a branded and ingredient product portfolio to serve the growing consumer demand for nutritional products in formats suitable for healthy and active lifestyles. This has provided some insulation from the challenges of volatile global dairy markets half year results Reported Constant currency m HY 2015 HY 2014 Change Change 1 Wholly-owned business Revenue 1, , % -3.9% EBITA % +7.5% EBITA margin 9.7% 8.3% bps +110 bps Joint Ventures & Associates Revenue % -20.4% EBITA % -17.6% EBITA margin 4.5% 4.4% +10bps +10bps Total Group 3 Revenue 1, , % -8.4% EBITA % +3.5% EBITA margin 8.5% 7.2% +130bps +100bps Adjusted earnings per share c 32.45c +25.1% +4.2% 1. To arrive at the Constant Currency change, the average FX rate for the current period is applied to the relevant reported result from the same period in the prior year. The average FX rate for the first half of 2015 was 1 = $1.115 (HY 2014: 1 = $1.371). 2. EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items. 3. Total Group includes Glanbia s share of Joint Ventures & Associates. 4. Adjusted earnings per share is reconciled in Note 11 of the financial statements. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 2

3 2015 half year overview and outlook Glanbia delivered a good performance in the first half of Total Group revenue for the period, including the Group s share of Joint Ventures & Associates, was 1.9 billion. Total Group revenue declined 8.4% constant currency (up 4.4% reported) as good branded revenue growth was offset by pricing declines as a result of global dairy market weakness. Total Group EBITA was million, up 3.5% constant currency (up 22.5% reported). Total Group EBITA margin was 8.5%, up 100 bps, constant currency. Adjusted earnings per share for the half year were cent, up 4.2%, constant currency (up 25.1% reported). Capital investment and corporate development Glanbia s total investment in capital expenditure was 59 million in the first half of 2015, of which 45 million was strategic investment reflecting the ongoing focus on the organic growth potential of the business. The investment programme in Global Ingredients to increase capacity in high end whey proteins and other added value dairy ingredients continues to plan in Idaho, with commissioning scheduled for Q In April, the Group disposed of its investment in Nutricima to PZ Cussons plc for a cash consideration of 21 million ( 28.5 million), the impact of which will be immaterial to the ongoing profitability of the Group. Board changes On 12 June 2015, Henry Corbally was appointed Chairman replacing Liam Herlihy who retired at the AGM. Mr Corbally previously served as Vice Chairman for four years. Patrick Murphy was appointed Vice Chairman on the same date having served as a non-executive director for the past four years. Also in June three new non-executive directors were appointed; Patsy Ahern, Jim Gilsenan and Patrick Hogan, as nominees of Glanbia Co-operative Society Limited. David Farrell and Patrick Gleeson also retired at the AGM outlook Glanbia reiterates its guidance for 2015 of 9% to 11% growth in adjusted earnings per share, constant currency. If the Euro US dollar exchange rate remains at current levels for the full year Glanbia expects 2015 reported adjusted earnings per share growth of circa 25%. The constant currency guidance incorporates certain trading headwinds generated by a strong US dollar. Global Performance Nutrition is expected to be the main driver of 2015 growth as momentum returns to the US business albeit this is somewhat offset by currency and geopolitical related challenges in certain non US markets. Global Ingredients continues to make good progress in its strategy of growing the value added dairy and non dairy ingredient portfolio, however the scale of the weakness in global dairy markets will result in some reduction in performance year on year. Dairy Ireland is forecast to deliver some recovery in margins versus a challenging prior year reflecting the benefit of investment in operational efficiencies and new product development. Joint Ventures & Associates are expected to deliver a performance in line with the prior year. HY 2015 operations review Segmental analysis (as reported) HY 2015 HY 2014 m Revenue EBITA EBITA % Revenue EBITA EBITA % Global Performance Nutrition % % Global Ingredients % % Dairy Ireland % % Total wholly-owned businesses 1, % 1, % Joint Ventures & Associates % % Total Group 1, % 1, % Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 3

4 Global Performance Nutrition Reported Constant Currency m HY 2015 HY 2014 Change Change Revenue % +1.9% EBITA % +17.4% EBITA margin 13.4% 11.5% +190bps +180bps Commentary is on a constant currency basis throughout Global Performance Nutrition ( GPN ) delivered a strong performance in the first half of 2015 against high 2014 comparative metrics. Revenues increased 1.9% to million (revenue growth HY 2014, 21.8%). Drivers of revenue growth were a 0.6% improvement in price and an 8.4% revenue contribution from acquisitions offset by a 7.1% decline in volume, due to lower contract sales. Overall branded revenue growth was 16.4%; while on a like for like basis, branded revenue grew by 3.7%. EBITA increased strongly by 17.4% in the period as EBITA margin grew 180 bps to 13.4%. A number of factors contributed to the improvement in margin including continued investment driven operational efficiencies across the business, mix improvement from the increased proportion of branded sales, and some reduction in input costs. The business remains focused on branded revenue growth and in the period GPN saw renewed momentum in its US business. There continue to be trading headwinds in non US markets as geopolitical events and a strong US dollar impacts consumer purchasing power in certain geographies with Brazil, Oceania and Russia particularly affected. The global performance nutrition market remains very competitive and the business has increased the level of promotional investment where required to maintain market position. The innovation pipeline is good and recent launches such as Optimum Nutrition Gold Standard Pre-workout and BSN Clean Series are performing well. Global Ingredients Reported Constant Currency m HY 2015 HY 2014 Change Change Revenue % -11.7% EBITA % -9.5% EBITA margin 9.9% 9.5% +40bps +20bps Commentary is on a constant currency basis throughout Global Ingredients ( GI ) delivered a satisfactory performance in the first half of 2015 in the context of challenging global dairy markets. Revenues decreased by 11.7% to million as volume growth of 6.8% was offset by an 18.5% decrease in price. While the business made progress in its strategy of growing value added dairy and non dairy ingredient sales the scale of the decline in global dairy markets resulted in a 9.5% reduction in EBITA in the period. US Cheese US Cheese increased volumes compared to last year as milk procurement dynamics improved relative to a challenging first half of There was a decrease in revenues due to reduced US cheese market prices which were down on average by 26% compared to the same period last year. Performance marginally improved as the benefit of higher volumes and continued focus on operational performance offset the impact of the significant price reduction. Cheese demand remains solid across the US retail and foodservice market and this countered the reduction in export activity to non US markets as a result of a strong US dollar. Ingredient Technologies Ingredient Technologies revenue and performance was behind the prior year as weaker dairy market conditions drove lower market pricing across a number of product categories. There continues to be an imbalance between supply and demand of dairy ingredients on global markets and this was exacerbated by a strong US dollar. Glanbia continues to develop its value added systems portfolio with bar solutions performing well in the period. The $85 million capital expenditure investment to increase production capacity of high end whey proteins and dairy ingredients is on track for commissioning in Q Customised Solutions Customised Solutions had a strong first half benefiting from continued growth with key customers during the period. The business continues to leverage its global footprint, investing where appropriate, to sustain and build its relationships with key global and regional customers. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 4

5 Positioning for growth GI has commenced a programme to redesign the business to leverage future market opportunities. Building on its core strengths the current business unit structure will be integrated into one global GI organisation. This new organisation will have a regionally focused sales team to deliver the full suite of Glanbia s capability to its customers and markets, enabled by centres of excellence across key functions. It is envisaged that this programme will take months to complete and will involve an investment of approximately 15 million which will be treated as an exceptional item in the Group s 2015 and 2016 financial statements. Dairy Ireland Reported m HY 2015 HY 2014 Change Revenue % EBITA % EBITA margin 4.7% 3.0% +170bps Dairy Ireland had a good performance in the first half of 2015 against a relatively weak first half of Revenues increased 4.3% reflecting a 3.1% increase in volumes, 0.5% improvement in price and a 0.7% revenue contribution from acquisitions. A 170 bps recovery in margin drove an increase in EBITA versus the prior half year. Consumer Products Consumer Products delivered good growth in the period as the investment in operational efficiencies, new product development and some reduction in input costs has enabled a recovery in margins. Revenue growth was driven by increases in branded and value added milk sales plus bolt on acquisitions. Glanbia will continue to innovate and invest in its brand portfolio both domestically and internationally. Agribusiness Agribusiness delivered a satisfactory performance in the period. Lower animal feed and fertilizer sales were offset by cost improvement initiatives within the business. Joint Ventures & Associates (Glanbia Share) Reported Constant Currency m HY 2015 HY 2014 Change Change Revenue % -20.4% EBITA % -17.6% EBITA margin 4.5% 4.4% +10bps +10bps Commentary is on a constant currency basis throughout Joint Ventures & Associates delivered a satisfactory performance in the period. Key drivers of the revenue movement were a 20.1% decline in pricing reflecting the dairy market environment and a 0.2% increase in volumes. The disposal of Glanbia s interest in Nutricima in the period led to a 0.5% decline in revenues compared to the prior half year. All Joint Ventures & Associates had a good operating performance with a focus on costs off-setting some of the challenges of lower dairy markets. The significant 235 million investment programme in Glanbia Ingredients Ireland ( GII ) is largely complete and the commissioning of the new ingredient facility at Belview, Ireland is progressing with GII expecting to process an additional 15% milk volume from its suppliers in 2015 versus Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 5

6 Half year 2015 finance review HY 2015 results summary pre exceptional Constant Currency m HY 2015 HY 2014 Change Change Revenue 1, , % -3.9% EBITA % +7.5% EBITA margin 9.7% 8.3% +140bps +110bps - Amortisation of intangible assets (15.6) (10.6) - Net finance costs (10.7) (10.5) - Share of results of Joint Ventures Associates Income tax (19.1) (14.7) Profit for the half year Income statement For the first half of 2015, wholly owned revenue decreased 3.9%, constant currency (up 10.6% reported) to 1.4 billion (HY 2014: 1.3 billion). EBITA grew by 7.5%, constant currency (up 29.1% reported) to million (HY 2014: million). EBITA margin increased by 110 bps to 9.7%, constant currency. Net financing costs of 10.7 million were broadly in line with prior year (HY 2014: 10.5 million). The Group s average interest rate for the period was 3.9% (HY 2014: 4.8%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 85% of projected 2015 debt currently contracted at fixed rates for The HY 2015 pre-exceptional tax charge increased by 4.4 million to 19.1 million (HY 2014: 14.7 million). This represents an effective rate, excluding Joint Ventures & Associates, of 17.0% (HY 2014: 17.0%). The Group s share of results of Joint Ventures & Associates decreased by 2.0 million to 13.3 million (HY 2015: 15.3 million). Share of results of Joint Ventures & Associates is an after tax and interest amount. Adjusted earnings per share HY 2015 HY 2014 Change Constant Currency Change Adjusted earnings per share * 40.60c 32.45c +25.1% +4.2% * Adjusted earnings per share is reconciled in Note 11 of the financial statements. Total adjusted earnings per share grew 4.2% (25.1% reported), driven by growth in EBITA. Adjusted earnings per share is believed to be more reflective of the Group s underlying performance than basic earnings per share and is calculated based on the net profit attributable to equity holders of the parent before exceptional items and amortisation of intangible assets, net of related tax. Dividend per share The Board is recommending an interim dividend of 4.88 cent per share (HY 2014: interim dividend 4.43 cent per share). This represents an increase of 10% on the prior year interim dividend. The dividend will be paid on 16 October 2015 to shareholders on the register of members as at 04 September Irish withholding tax will be deducted at the standard rate where appropriate. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 6

7 Exceptional items m HY 2015 HY Rationalisation costs (1.1) (0.6) 2. Organisational redesign costs (3.1) - 3. Disposal of interest in Joint Venture (3.6) - 4. Transaction related costs - (3.0) Exceptional (charge) pre-tax (7.8) (3.6) Taxation credit Total exceptional (charge) (7.3) (2.7) Exceptional items incurred in the first half of 2015 resulted in an exceptional charge of 7.3 million compared to a charge of 2.7 million for the same period in Details of the exceptional items are as follows: 1. Rationalisation costs primarily relate to the ongoing redundancy programme in the Dairy Ireland segment. 2. GI has commenced a programme to redesign the business to leverage future market opportunities. Building on its core strengths the current business unit structure will be integrated into one global GI organisation. This new organisation will have a regionally focused sales team to deliver the full suite of Glanbia s capability to its customers and markets, enabled by centres of excellence across key functions. It is envisaged that this programme will take months to complete and will involve an investment of approximately 15 million which will be treated as an exceptional item in the Group s 2015 and 2016 financial statements. 3. On 01 April 2015 the Group disposed of its investment in Milk Ventures (UK) Limited which is the parent company of Nutricima Limited, a non-core Joint Venture business involved in the supply and distribution of evaporated and powdered milk, based in Nigeria. PZ Cussons plc, Glanbia s partner in the Joint Venture Nutricima, acquired Glanbia s 50% stake for cash consideration of 21 million ( 28.5 million). In line with IFRS 5 Non Current Assets Held for Sale and Discontinued Operations, the disposal of the Group s interest resulted in a non-cash loss of 3.6 million. This comprised a profit on disposal of 1.4 million (cash consideration of 28.5 million less carrying value 27.1 million including loan to Joint Venture) offset by the recycle of 5.0 million cumulative foreign currency translation losses previously recognised in equity. Milk Ventures (UK) Limited was previously included in the Joint Ventures & Associates segment. 4. Transaction related costs in 2014 were comprised of costs relating to acquisition activities that did not come to fruition and additional contingent consideration relating to the acquisition of Nutramino Holding ApS, in excess of its fair value at date of acquisition. Group financing and cash flow Financing key performance indicators HY 2015 FY 2014 HY 2014 Net debt m Net debt : adjusted EBITDA times 1.97 times 2.00 times Adjusted EBIT 1 : net finance cost 10.0 times 8.9 times 8.1 times 1. Definition of net debt, adjusted EBITDA and adjusted EBIT are as per financing agreements which include dividends from Joint Ventures & Associates and the pro forma effect of acquisitions. The Group s financial position continues to be strong. Net debt at the end of HY 2015 was 577 million. This is an increase of 105 million relative to the end of HY Net debt to adjusted EBITDA was just under 2 times and interest cover was 10 times, both metrics remaining well within financing covenants. Relative to the year end of 2014, net debt has increased by 67 million. The key drivers of the net debt increase from year end 2014, have been a seasonal increase in working capital and the FX impact on the conversion of US dollar private placement debt to Euro for reporting purposes. The main uses of cash since year end 2014 have been a seasonal increase in working capital of million, capital expenditure of 58.8 million, dividend payments of 19.4 million and interest of 14.0 million offset by the proceeds from the Nutricima disposal of 28.5 million. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 7

8 Pension On 04 July 2015, the Group s net pension liability under IAS 19 (revised) Employee Benefits, before deferred tax, decreased by 20.8 million to 94.0 million versus year end 2014(FY 2014 pension liability million). This decrease primarily relates to a change in actuarial assumptions for the discount rate used for the Irish defined benefit pension schemes from 2.1% to 2.4%. Principal risks and uncertainties affecting the Group s performance in 2015 The Board of Glanbia plc has the ultimate responsibility for risk management. The performance of the Group is influenced by global economic growth and consumer confidence in the markets in which it operates. In the second half of 2015 the principal risks and uncertainties affecting the Group s performance are: The competitive landscape for Global Performance Nutrition, recognising the impact of a stronger US dollar on the purchasing power of consumers in certain international markets; The overall impact on margins of movements in dairy pricing particularly in whey markets; and The potential impact of geopolitical unrest and macro-economic uncertainty on the international growth strategy. The principal risks and uncertainties are outlined in detail on pages 50 to 57 in the 2014 Annual Report. Cautionary statement This announcement contains forward-looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this report. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this announcement, whether as a result of new information, future events, or otherwise. Results webcast and dial-in details There will be a webcast and presentation to accompany this results announcement at 8.30 a.m. BST today. Please access the webcast from the Glanbia website at where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers: Ireland (01) UK (0203) USA (212) International The access code for all participants is: A replay of the call will be available for 30 days approximately two hours after the call ends. For further information contact Glanbia plc Siobhán Talbot, Group Managing Director Mark Garvey, Group Finance Director Liam Hennigan, Head of Investor Relations Mark Garrett, Director of Communications and Public Affairs Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 8

9 Responsibility statement The Directors are responsible for preparing the half yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 - Interim Financial Reporting, as adopted by the European Union. The Directors of Glanbia plc confirm that, to the best of their knowledge: The Group condensed interim financial statements have been prepared in accordance with the international accounting standard applicable to interim financial reporting (IAS34) adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002; The half yearly financial report includes a fair review of the development and performance of the business and the position of the Group; The half yearly financial report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group condensed financial statements for the half year ended 04 July 2015, and a description of the principal risks and uncertainties for the remaining six months; The half yearly financial report includes a fair review of related party transactions that have occurred during the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or the performance of the Group in the first six months of the current financial year; and The Directors of Glanbia plc are as listed in the Glanbia plc 2014 Annual Report, with the exception of the following changes in the period: David Farrell, Patrick Gleeson and Liam Herlihy * retired on 12 May James Gilsenan, Patsy Ahern and Patrick Hogan were appointed on 12 June *Liam Herlihy retired as Chairman on 12 May Henry Corbally was appointed Chairman on 12 June A list of current directors is maintained on the Glanbia plc website: On behalf of the Board Siobhán Talbot Group Managing Director Mark Garvey Group Finance Director 18 August 2015 Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 9

10 Condensed income statement Half year 2015 Half year 2014 Year 2014 Preexceptional Exceptional Total Preexceptional Exceptional Total Preexceptional Exceptional Total Notes (note 7) (note 7) (note 7) Revenue 6 1,431,590-1,431,590 1,294,157-1,294,157 2,538,368-2,538,368 Earnings before interest, tax and amortisation (EBITA) 138,473 (7,838) 130, ,314 (3,638) 103, ,634 (15,949) 192,685 Intangible asset amortisation (15,566) - (15,566) (10,565) - (10,565) (22,512) - (22,512) Operating profit 122,907 (7,838) 115,069 96,749 (3,638) 93, ,122 (15,949) 170,173 Finance income ,725-1,725 Finance costs 8 (11,588) - (11,588) (11,337) - (11,337) (22,050) - (22,050) Share of results of Joint Ventures & Associates 13,267-13,267 15,276-15,276 23,729-23,729 Profit before taxation 125,471 (7,838) 117, ,529 (3,638) 97, ,526 (15,949) 173,577 Income taxes 9 (19,075) 533 (18,542) (14,663) 874 (13,789) (28,252) 1,870 (26,382) Profit for the period 106,396 (7,305) 99,091 86,866 (2,764) 84, ,274 (14,079) 147,195 Attributable to: Equity holders of the Parent 98,674 83, ,313 Non-controlling interests ,091 84, ,195 Earnings per share attributable to the equity holders of the Parent Basic earnings per share (cents) Diluted earnings per share (cents) Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 10

11 Condensed statement of comprehensive income Half year Half year Year Notes Profit for the period 99,091 84, ,195 Items that are not reclassified subsequently to the Group income statement: Remeasurements defined benefit schemes 17 18,178 (16,857) (42,369) Deferred tax (charge)/credit on remeasurements (2,430) 1,760 4,868 Share of remeasurements Joint Ventures & Associates 4,811 (3,582) (8,900) Deferred tax (charge)/credit on remeasurements Joint Ventures & Associates (601) 452 1,120 Items that may be reclassified subsequently to the Group income statement: Currency translation differences 16 75,654 4,040 97,805 Recycle of currency reserve to the Group income statement on disposal of investment in Joint Venture 7 5, Net investment hedge 16 (6,980) (245) (9,544) Revaluation of available for sale financial assets 16 1,052 1,409 1,457 Fair value movements on cash flow hedges 16 2,476 2, Deferred tax on cash flow hedges and revaluation of available for sale financial assets 16 (444) (519) (140) Other comprehensive income/(expense) for the period, net of tax 96,753 (11,533) 44,804 Total comprehensive income for the period 195,844 72, ,999 Total comprehensive income attributable to: Equity holders of the Parent 195,427 72, ,117 Non-controlling interests Total comprehensive income for the period 195,844 72, ,999 Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 11

12 Condensed balance sheet as at 04 July 2015 Half year Half year Year Notes ASSETS Non-current assets Property, plant and equipment 551, , ,180 Intangible assets 704, , ,169 Investments in associates 91,564 86,380 81,365 Investments in joint ventures 62,665 68,098 69,945 Trade and other receivables 1,850 9,735 9,863 Deferred tax assets 26,152 24,224 28,503 Available for sale financial assets 10,522 10,111 10,621 1,449,276 1,080,108 1,352,646 Current assets Inventories 350, , ,802 Trade and other receivables 412, , ,027 Derivative financial instruments 1,686 1,861 1,279 Cash and cash equivalents 13 94,400 89, , , , ,478 Total assets 2,309,135 1,845,615 2,106,124 EQUITY Issued capital and reserves attributable to equity holders of the Parent Share capital and share premium , , ,728 Other reserves , , ,581 Retained earnings 572, , , , , ,882 Non-controlling interests 8,313 8,144 7,896 Total equity 980, , ,778 LIABILITIES Non-current liabilities Borrowings , , ,317 Deferred tax liabilities 135,153 98, ,002 Retirement benefit obligations 17 93,971 91, ,808 Provisions for other liabilities and charges 14 19,816 19,268 18,569 Capital grants 2,121 2,368 2, , , ,910 Current liabilities Trade and other payables 369, , ,350 Current tax liabilities 21, ,115 Borrowings 13 37,448 39, Derivative financial instruments 408 1, Provisions for other liabilities and charges 14 14,451 17,307 22, , , ,436 Total liabilities 1,328,414 1,149,700 1,301,346 Total equity and liabilities 2,309,135 1,845,615 2,106,124 Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 12

13 Condensed statement of changes in equity Attributable to equity holders of the Parent Share capital and share premium Other reserves Retained earnings Total Non controlling interests Total Half year 2014 Notes Balance at 04 January , , , ,886 7, ,520 Profit for the period ,592 83, ,102 Other comprehensive income/(expense) Remeasurements - defined benefit schemes (16,857) (16,857) - (16,857) Deferred tax on remeasurements - - 1,760 1,760-1,760 Share of remeasurements - Joint Ventures & Associates - - (3,130) (3,130) - (3,130) Fair value movements 16-3,418-3,418-3,418 Deferred tax on fair value movements 16 - (519) - (519) - (519) Currency translation differences 16-4,040-4,040-4,040 Net investment hedge 16 - (245) - (245) - (245) Total comprehensive income - 6,694 65,365 72, ,569 Dividends paid during the period (17,650) (17,650) - (17,650) Cost of share based payments 16-2,931-2,931-2,931 Transfer on exercise, vesting or expiry of share based 16 payments - 4,444 (4,444) Shares issued Premium on shares issued Purchase of own shares 16 - (5,793) - (5,793) - (5,793) Balance at 05 July , , , ,771 8, ,915 Attributable to equity holders of the Parent Share capital and share premium Other reserves Retained earnings Total Non controlling interests Total Half year 2015 Balance at 03 January , , , ,882 7, ,778 Profit for the period ,674 98, ,091 Other comprehensive income/(expense) Remeasurements - defined benefit schemes ,178 18,178-18,178 Deferred tax on remeasurements - - (2,430) (2,430) - (2,430) Share of remeasurements Joint Ventures & Associates - - 4,210 4,210-4,210 Fair value movements 16-3,528-3,528-3,528 Deferred tax on fair value movements 16 - (444) - (444) - (444) Currency translation differences 16-75,654-75,654-75,654 Recycle of currency reserve to the Group income statement on disposal of investment in Joint Venture - 5,037-5,037-5,037 Net investment hedge 16 - (6,980) - (6,980) - (6,980) Total comprehensive income - 76, , , ,844 Dividends paid during the period (19,448) (19,448) - (19,448) Cost of share based payments 16-3,565-3,565-3,565 Transfer on exercise, vesting or expiry of share based payments 16 - (208) Shares issued Premium on shares issued Purchase of own shares 16 - (4,660) - (4,660) - (4,660) Balance at 04 July , , , ,408 8, ,721 Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 13

14 Condensed statement of cash flows Half year Half year Year Notes Cash flows from operating activities Cash generated from operating activities 20 25,463 27, ,716 Interest received ,683 Interest paid (14,414) (10,418) (24,358) Tax refunded/(paid) 1,360 (14,514) (34,393) Net cash inflow from operating activities 12,826 2, ,648 Cash flows from investing activities Acquisition of subsidiaries purchase consideration (544) (21,135) (125,812) Acquisition of subsidiaries liabilities settled at completion (802) - (16,138) Acquisition of subsidiaries cash and cash equivalents - - 2,768 Disposal of investment in Joint Venture 28, Insurance proceeds - - 1,035 Purchase of property, plant and equipment 12 (52,241) (53,020) (101,953) Purchase of intangible assets 12 (6,523) (4,155) (13,532) Dividends received from Joint Ventures 3,237 3,171 12,648 Decrease in available for sale financial assets 1, Proceeds from sale of property, plant and equipment Net cash (outflow) from investing activities (27,079) (74,277) (240,587) Cash flows from financing activities Proceeds from issue of ordinary shares Purchase of own shares (4,660) (5,793) (7,981) Sale of shares held by subsidiary - - 2,092 (Decrease)/Increase in borrowings (21,471) 77, ,242 Redemption of preference shares - - (39,062) Dividends paid to Company shareholders 10 (19,448) (17,650) (30,751) Dividends paid to non-controlling interests - - (620) Finance lease payments (204) (238) (313) Net cash (outflow)/inflow from financing activities (45,175) 54,157 62,338 Net decrease in cash and cash equivalents (59,428) (17,519) (4,601) Cash and cash equivalents at the beginning of the period 110, , ,259 Effects of exchange rate changes on cash and cash equivalents 6, ,712 Cash and cash equivalents at the end of the period 13 57,360 89, ,370 Half year Half year Year Reconciliation of net cash flow to movement in net debt Net decrease in cash and cash equivalents (59,428) (17,519) (4,601) Cash movements from debt financing 21,675 (77,262) (98,867) Acquisition of subsidiary debt acquired - (1,401) (1,401) (37,753) (96,182) (104,869) Fair value movement of currency swaps (209) (269) (453) Exchange translation adjustment on net debt (28,738) (869) (30,597) Movement in net debt in the period (66,700) (97,320) (135,919) Net debt at the beginning of the period (510,363) (374,444) (374,444) Net debt at the end of the period (577,063) (471,764) (510,363) Net debt comprises: Borrowings 13 (634,423) (560,778) (620,733) Cash and cash equivalents 13 57,360 89, ,370, (577,063) (471,764) (510,363) Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 14

15 1. General information Glanbia plc (the Company ) and its subsidiaries (together the Group ) is a leading global nutrition Group with its main operations in Europe, USA, Middle East, Africa, Asia Pacific and Latin America. The Company is a public limited company incorporated and domiciled in Ireland. The address of its registered office is Glanbia House, Kilkenny, Ireland. The Group is controlled by Glanbia Co-operative Society Limited ( the Society ). The Society can nominate up to 14 members of the Board of Directors of Glanbia plc for 2015 and currently holds, together with its subsidiaries, 39.8% of the issued share capital of the Company and is the ultimate parent of the Group. The Company s shares are quoted on the Irish and London Stock Exchanges. These condensed interim financial statements were approved for issue by the Board of Directors on 18 August Basis of preparation The condensed interim financial statements for the six months ended 04 July 2015 and for the six months ended 05 July 2014 have not been audited by the Group s auditors. These are not the statutory financial statements of the Group as defined in the Companies Act The amounts disclosed for the full year ended 03 January 2015 represent an abbreviated version of the Group s financial statements for that year, which received an unqualified audit report. The statutory accounts for the financial year ended 03 January 2015 were approved by the Board of Directors on 24 February 2015 and have been filed with the Companies Registration Office. The Group s condensed interim financial statements for the six months ended 04 July 2015 have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 Interim Financial Reporting. The condensed interim financial statements should be read in conjunction with the financial statements for the year ended 03 January 2015, which have been prepared in accordance with International Financial Reporting Standards ( IFRS ). The Group meets its day-to-day working capital requirements through its bank facilities. The Group s forecasts and projections, taking account of changes in trading performance, show that the Group expects to be able to operate within the level of its current facilities. After making enquiries, the Directors have a reasonable expectation that the Group has sufficient resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group s budget for a period of not less than 12 months, the medium term plans as set out in the four year strategic plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group s committed borrowing facilities and Group financing key performance indicators ( KPIs ). The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements for the six months ended 04 July Accounting policies The methods of computation, presentation and accounting policies adopted in the preparation of the Group s condensed interim financial statements are consistent with those applied in the Annual Report for the year ended 03 January 2015 ( 2014 Annual Report ). The Group s accounting policies are set out in the financial statements in the 2014 Annual Report. The following standard, issued by the IASB and the International Financial Reporting Interpretations Committee ( IFRIC ), is effective for the Group for the first time in the period ended 04 July 2015 and has been adopted by the Group. Amendment to IAS 19 Employee benefits regarding defined benefit plans (effective for periods beginning on or after 01 July 2014). The above standard did not have a significant impact on the results or the financial position of the Group during the six months ended 04 July The following standards, amendments and interpretations have been published. The Group will apply the relevant standards from their effective dates and is currently assessing their impact on the Group s Financial Statements. The standards are mandatory for future accounting periods but are not yet effective and have not been early adopted by the Group. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 15

16 Amendment to IAS16, Property, plant and equipment and IAS 38, Intangible assets, on depreciation and amortisation (effective on or after 1 January 2016). This amendment clarifies that the use of revenue-based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. The IASB has also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. Amendment to IAS 1, Presentation of financial statements on the disclosure initiative (effective on or after 1 January 2016). This amendment looks to improve presentation and disclosure in financial reports, effective for annual periods beginning on or after 1 January 2016, subject to EU endorsement. Amendments to IFRS 11, Joint arrangements on acquisition of an interest in a joint operation (effective on or after 01 January 2016). This amendment adds new guidance on how to account for the acquisition of an interest in a joint operation that constitutes a business. The amendments specify the appropriate accounting treatment for such acquisitions. Amendments to IAS 27, Separate financial statements on the equity method (effective on or after 01 January 2016). These amendments allow entities to use the equity method for investments in subsidiaries, joint ventures and associates in their separate financial statements. Amendments to IFRS 10, Consolidated financial statements and IAS 28, Investments in associates and joint ventures (effective on or after 01 January 2016). These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associates or joint venture. The main consequence of the amendment is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. IFRS 15 Revenue from contracts with customers (effective on or after 01 January 2018). IFRS 15, Revenue from contracts with customers is a converged standard from the IASB and FASB on revenue recognition. The standard will improve the financial reporting of revenue and improve comparability of the top line in financial statements globally. IFRS 9 Financial instruments (effective on or after 01 January 2018). This standard replaces the guidance in IAS 39. It includes requirements on the classification and measurement of financial assets and liabilities; it also includes an expected credit losses model that replaces the current incurred loss impairment model. Amendments to IFRS 9, Financial instruments, regarding general hedge accounting (effective on or after 01 January 2018). These amendments to IFRS 9, Financial instruments, bring into effect a substantial overhaul of hedge accounting that will allow entities to better reflect their risk management activities in the financial statements. 4. Changes in estimates and assumptions In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 03 January Financial risk management The Group s activities expose it to a variety of financial risks as follows: market risk, currency risk, interest rate risk, price risk, liquidity risk, cash flow risk and credit risk. The interim condensed financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group s 2014 Annual Report. There have been no changes to the risk management procedures or policies since 2014 year end. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 16

17 Fair value estimation The fair value of financial instruments traded in active markets (such as available for sale financial assets) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined by using generally accepted valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. In accordance with IFRS 13 Fair Value Measurements, the Group has disclosed the fair value of instruments by the following fair value measurement hierarchy: quoted prices (unadjusted) in active markets for identical assets and liabilities (level 1); inputs, other than quoted prices included in level 1, that are observable for the asset and liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and, inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3). The following table presents the Group s assets and liabilities that are measured at fair value at 04 July 2015 and 03 January 2015: Level 1 Level 2 Level 3 Total 04 July Assets Derivatives used for hedging - 1,686-1,686 Available for sale financial assets - equity securities 212 4,474-4,686 Total assets 212 6,160-6,372 Liabilities Derivatives used for hedging - (408) - (408) Total liabilities - (408) - (408) Level 1 Level 2 Level 3 Total 03 January Assets Derivatives used for hedging - 1,279-1,279 Available for sale financial assets - equity securities 272 3,281-3,553 Total assets 272 4,560-4,832 Liabilities Derivatives used for hedging - (574) - (574) Deferred acquisition payments - - (6,504) (6,504) Total liabilities - (574) (6,504) (7,078) There were no transfers between levels 1, 2 and 3 during the period. There were no changes in valuation techniques during the periods. Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 17

18 Valuation techniques used to derive level 2 fair values Level 2 equities are fair valued using the latest prices quoted in the grey market as at 04 July Level 2 trading and hedging derivatives comprise mainly of foreign exchange contracts. These foreign exchange contracts have been fair valued using forward exchange rates that are quoted in an active market. The effects of discounting are generally insignificant for level 2 derivatives. Group s valuation process The Group s finance department includes a team that performs the valuations of financial assets and financial liabilities required for financial reporting purposes including level 3 fair values. The Group did not hold any level 3 financial assets at 04 July 2015 or 03 January The Group did not hold any level 3 financial liabilities at 04 July The level 3 financial liability held at 03 January 2015 related to a deferred acquisition payment (see note 7). This team reports directly to the Group Finance Director who in turn reports to the Audit Committee. Discussions of valuation processes and results are held between the Group Finance Director and the Audit Committee. Changes in level 2 and level 3 fair values are analysed at each reporting date. As part of this discussion, the valuation team presents a report that explains the reasons for the fair value movements. Fair value of financial assets and liabilities measured at amortised cost The fair value of borrowings are as follows: 04 July January 2015 Non-current 658, ,781 Current 37, The fair value of the following financial assets and liabilities approximate their carrying amount: 695, ,197 Trade and other receivables Cash and cash equivalents Trade and other payables Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 18

19 6. Segment information In accordance with IFRS 8 Operating Segments, the Group has four segments, as follows: Global Performance Nutrition, Global Ingredients, Dairy Ireland and Joint Ventures & Associates. These segments align with the Group s internal financial reporting system and the way in which the Chief Operating Decision Maker assesses performance and allocates the Group s resources. A segment manager is responsible for each segment and is directly accountable for the performance of that segment to the Glanbia Operating Executive Committee which acts as the Chief Operating Decision Maker for the Group. Each segment derives its revenues as follows: Global Performance Nutrition earns its revenue from performance nutrition products; Global Ingredients earns its revenue from the manufacture and sale of cheese, dairy and non dairy nutritional ingredients and vitamin and mineral premixes; Dairy Ireland earns its revenue from the manufacture and sale of a range of consumer products and farm inputs and Joint Ventures & Associates revenue arises from the manufacture and sale of cheese and dairy ingredients. Each segment is reviewed in its totality by the Chief Operating Decision Maker. The Glanbia Operating Executive Committee assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items. Amounts stated below for Joint Ventures & Associates represents the Group s share. 6.1 The segment results for the period ended 04 July 2015 are as follows: Global Performance Nutrition Global Ingredients Dairy Ireland JVs & Associates Group including JVs & Associates Total gross segment revenue (a) 453, , , ,327 1,894,739 Inter-segment revenue (346) (17,476) - - (17,822) Segment external revenue 453, , , ,327 1,876,917 Segment earnings before interest, tax, amortisation and exceptional items (b) 60,686 60,342 17,445 20, ,677 Segment assets (c) 867, , , ,082 2,181,415 Segment liabilities (d) 153, , , ,449 Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of 8 million and related party sales between Global Ingredients and Joint Ventures & Associates of 7.6 million. Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties. 6.1(a) Total gross segment revenue is reconciled to reported external revenue as follows: Total gross segment revenue 1,894,739 Inter-segment revenue (17,822) Joint Ventures & Associates revenue (445,327) Reported external revenue 1,431,590 Glanbia plc Delivering better nutrition for every step of life s journey 2015 half year results Page 19