Glanbia HY 2020 results

Glanbia plc the global nutrition group, has published its financial results for the six month period ended 4 July 2020.

Results summary for the financial half year 2020

• Glanbia delivered a resilient operating performance whilst navigating the challenges resulting from the Covid-19 pandemic;

• All Group activities continued throughout HY 2020 due to a tremendous effort from Glanbia employees, suppliers and customer partners;
• Adjusted earnings per share of 31.05 cent, a decline of 17.2% constant currency (down 15.4% reported);
• Group is in a strong financial position, net debt improved by €126.7 million versus prior half year. Net debt to adjusted EBITDA ratio 1.95 times;
• Wholly-owned revenues of €1,836.7 million (HY 2019: €1,758.4 million), up 2.3% constant currency on prior half year (up 4.5% reported);
• Wholly-owned EBITA pre-exceptional of €85.0 million (HY 2019: €111.4 million), down 25.4% constant currency on prior half year (down 23.7% reported);
• Glanbia Performance Nutrition EBITA impacted by Covid-19 with conditions improving as the period ended. Transformation project expanded;
• Glanbia Nutritionals delivered EBITA in line with the prior half year as demand in key categories sustained during H1 2020;
• Joint Ventures delivered a robust performance with pre-exceptional share of profit after tax of €31.8 million up €5.0 million on prior half year;
• Exceptional items after tax of €14.6 million; primarily relating to GPN transformation project;
• Basic earnings per share of 18.73 cent (HY 2019: 28.22 cent) a decline of 33.6% reported on prior half year;
• Interim dividend of 10.68 cent per share (HY 2019: 10.68 cent), recommended by the Board, representing a payout ratio of 34.4%; and
• Today, announcing agreement to acquire Foodarom for CAD 60 million, a specialist flavours solutions business based in Canada.

 

Commenting today Siobhán Talbot, Group Managing Director, said:

“In my entire career at Glanbia, I have never been prouder of my colleagues, whose response to the extraordinary challenges of 2020 have been exemplary. I am hugely appreciative of the agility, dedication and commitment that Glanbia employees and particularly our frontline workers, suppliers, and customer partners showed in quickly adopting new radical ways of working and maintaining operations throughout the pandemic. When the crisis emerged we set three priorities; to protect our people, to continue food supply and to maintain our strong financial position. Since then, our business continuity planning teams have managed health and safety rigorously, we have altered our operational plans where needed and executed those plans very well and our balance sheet strength has improved.

In the first six months of 2020 wholly-owned revenues grew by 2.3%, on a constant currency basis. Glanbia Nutritionals (“GN”) delivered a good performance with earnings in line with prior year as key end market demand sustained throughout H1 2020. Joint Ventures delivered a robust performance growing profits in the period. Glanbia Performance Nutrition (“GPN”) was impacted by Covid-19, with International market disruption and challenges in the North American specialty and distributor channels. As a result, adjusted earnings per share declined in the period by 17.2% on a constant currency basis. The issues encountered by GPN were most pronounced in Q2 with performance improving as the period ended.

Our compelling belief is that consumers increasing focus on health and wellbeing, as well as greater importance on trust and quality, positions Glanbia well for the future, given our core purpose of the delivery of better nutrition via our brands and ingredient solutions. While navigating Covid-19 we have maintained a strategic focus across the Group; we have broadened the ambition within the transformation project in GPN and we have continued to scale our capabilities in GN as demonstrated by the acquisition of Foodarom. We continue to selectively pursue opportunities which meet our strategic and financial criteria. While the short term outlook remains uncertain, the Board is confident that Glanbia has the portfolio, the consumer insight and the operational expertise to succeed in this new environment.”

 

2020 financial half year results summary

				Constant
€m	HY 2020	HY 2019	Change	Currency Change1
Wholly-owned business
Revenue	1,836.7	1,758.4	+4.5%	+2.3%
EBITA2	85.0	111.4	-23.7%	-25.4%
EBITA margin	4.6%	6.3%	-170bps	-170bps
Equity accounted investees - Joint Ventures
Share of profit after tax	31.8	26.8	+18.7%	+17.3%
Total Group profit for the period (pre-exceptional)	69.9	86.8	-19.5%
Reported basic earnings per share	18.73c	28.22c	-33.6%
Adjusted earnings per share	31.05c	36.69c	-15.4%	-17.2%

 

1. To arrive at the constant currency change, the average exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. The average Euro US Dollar exchange rate for the first half of 2020 was €1 = $1.102 (HY 2019: €1 = $1.130).
2. EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items.

 

2020 half year overview

In the first half of 2020 Glanbia wholly-owned revenue was €1,836.7 million, an increase of 2.3% constant currency (up 4.5% reported). This was driven by growth in GN which more than offset declines in GPN. Wholly-owned EBITA pre-exceptional was €85.0 million, down 25.4% constant currency (down 23.7% reported). Wholly-owned EBITA margins from operations were 4.6%, down 170 basis points on a constant currency and reported basis. The decline in wholly-owned EBITA and margin arose from the impact of Covid-19 on the second quarter performance of GPN where lower revenue drove significant negative operating leverage for the period. 

Glanbia’s pre-exceptional share of equity accounted investees (Joint Ventures) profit after tax increased by €5.0 million to €31.8 million for the first half of 2020 with all Joint Ventures growing profit in the period. 

Total Group profit (pre-exceptional items) for the period was €69.9 million, down €16.9 million on prior half year. 

Adjusted earnings per share was 31.05 cent. This was a decrease on prior year of 17.2% constant currency (down 15.4% reported).

 

Capital investment

Glanbia’s total investment in capital expenditure (tangible and intangible assets) was €29.2 million in the first half of 2020 of which €20.2 million was strategic investment. While Glanbia’s capital investment programme was managed tightly in response to Covid-19, investment continued in key strategic projects including investment in the Body & Fit direct-to-consumer ecommerce platform in GPN and value-added ingredients filling technology in GN. Total capital expenditure for the year is expected to be €65 million to €75 million.

 

Dividend per share

Consistent with Glanbia’s target annual dividend payout ratio of between 25% and 35% of adjusted earnings per share and as a result of the strong cash performance in the period, the Board is recommending an interim dividend of 10.68 cent per share (HY 2019: 10.68 cent per share). The payment which is in line with the prior year interim dividend represents a payout ratio of 34.4% on half year 2020 earnings. Glanbia’s dividend payout ratio policy remains unchanged. The dividend will be paid on 2 October 2020 to shareholders on the register of members as at 21 August 2020. Irish withholding tax will be deducted at the standard rate where appropriate.

 

Covid-19 update

From the onset of the Covid-19 crisis the Group quickly implemented business continuity planning teams with three priorities; protect employees, continue food supply and maintain the Group’s strong financial position.

 

Protecting employees and maintaining food supply

Since mid-March, a large proportion of the Group’s employees have been working remotely and a restriction on all travel has been in place. A comprehensive set of health and safety measures has been implemented at all production sites worldwide with particular emphasis on protecting front line workers.

Glanbia employees, suppliers and customer partners have done an exceptional job and to date all plants across the Group have maintained and adapted production as needed. Customer engagements including innovation projects continued by utilising new ways of working. When conditions allow, Glanbia intends to gradually bring remote workers back to the office but only in a safe working environment and dependent on local Government guidance.

 

Protecting the Group’s strong financial position

In the first half of 2020, Glanbia Group delivered a resilient performance in the context of the priorities set in response to the crisis. The Group’s financial priority from the onset of the pandemic was its financial strength. This focus led to a good operating cash flow performance in the first half of 2020. Net debt at 4 July 2020 was €650.9 million, which is a decrease of €126.7 million versus the net debt position at the end of HY 2019. This represents a net debt to adjusted EBITDA ratio of 1.95 times. This financial strength positions Glanbia well to emerge strongly from the effects of the pandemic and provides the confidence to undertake strategic M&A such as the Foodarom acquisition which was agreed after the period end and announced today. Glanbia has not availed of any Government financial support related to the Covid-19 pandemic.

 

Market dynamics

Many of the trends that are aligned with the Group’ strategy were accelerated by the pandemic. Consumer focus on health and wellness has deepened, in particular in the areas of weight management, general health and immunity. Lockdowns closed certain routes to market across the globe and caused a surge in ecommerce as well as increased shopping in mass and club retail as consumers compensated for a decline in out of home consumption. Trust and quality criteria were elevated when making purchasing choices and this benefitted category leading brands. Glanbia owns the number one brand in performance nutrition and the number two brand in weight management and these performed well in channels that were not disrupted by lockdowns. GPN now has 34% of its sales in online channels, a category leading level of online penetration. Glanbia Nutritionals, through its portfolio of essential micro-nutrients, where it is the number two player globally, and protein solutions, where it is the number one in the US, was able to meet demand from its customers for value-added functional ingredients that again met key end market consumer health and wellness needs. Although accelerated channel shift and short term market disruption in GPN has caused a headwind to the Group’s earnings in the second quarter, Glanbia is well positioned to navigate and emerge strongly from this crisis.

 

Trading performance

Glanbia Nutritionals traded in line with the prior year as the breadth of the portfolio across key consumer nutrition segments enabled the business to optimise opportunities in areas such as general health and immunity while navigating more challenging end market conditions for certain ‘food-to-go’ brand customers. The core GN portfolio continues to trade well through July 2020 although some customers in ‘food-to-go’ categories may take a longer period to fully recover dependant on the evolution of the pandemic. Joint Ventures (“JVs”) delivered good profit growth in the period, demonstrating the strong demand for certain dairy staples and while pricing was volatile, the robust nature of the economic models in place protected margins within the Group’s JVs.

Glanbia Performance Nutrition suffered the main impact from Covid-19. Many International markets were severely disrupted by lockdowns as routes to market in many countries were essentially closed. In North America the overall portfolio of GPN delivered a robust performance in the context of particular challenges in the specialty and distributor channels. The impact of lockdowns, particularly outside the US, led to material negative operating leverage in the second quarter as sales declined significantly. As the period ended and into July 2020 ordering patterns for GPN brands improved in North America and International markets began to reopen. Recovery is expected in H2 with its pace influenced by the evolution of Covid-19.

Prior to the pandemic, GPN had commenced a transformation project focused on core brands, route-to-market and business reorganisation to support its growth agenda. This project is on plan and key initiatives across these pillars are either delivered or in the execution phase. The project will deliver margin improvements through H2 2020. The trends, such as health and wellness and ecommerce have accelerated due to Covid-19 and as a result Glanbia has broadened the reach of this project to drive further opportunities across all aspects of the business.

 

Financial guidance remains withdrawn

Glanbia withdrew its 2020 full year financial guidance on 22 April 2020 due to the uncertainty of duration and impact of the Covid-19 pandemic. Those conditions are still in place and therefore 2020 full year financial guidance remains withdrawn.

First Published 12 August 2020