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Glanbia plc publishes results for 2020

Co-op Corporate

Global nutrition group Glanbia plc announces its preliminary results for the 2020 financial year ended 2 January 2021.

Summary

  • Group navigated Covid-19 well with the business portfolio delivering a resilient performance in 2020;
  • Solid top line with revenue of €3,823.1 million (2019: €3,875.7 million), up 0.6% constant currency on prior year (down 1.4% reported). Like-for-like* revenue grew 1.8% constant currency on prior year;
  • Strong operating cash flow (“OCF”) of €334.8 million (2019 €279.9 million); 122.4% cash conversion rate;
  • Robust performance from Glanbia Nutritionals (“GN”) which drove like-for-like revenue growth of 10.0% constant currency on prior year;
  • Glanbia Performance Nutrition (“GPN”) impacted by Covid-19 restrictions, in particular in Q2, delivered like-for-like revenue decline of 13.3%, constant currency;
  • Pre-exceptional EBITA of €209.6 million in full year 2020 (FY 2019: €276.8 million) was down 22.6% constant currency (down 24.3% reported); primarily related to challenges associated with Covid-19 in GPN in Q2; improving trends resulted in delivery of €124.6 million EBITA in the second half 2020;
  • Joint Ventures (“JVs”) delivered a strong performance with reported share of profits up €13.0 million to €61.6 million;
  • Adjusted earnings per share (“EPS”) of 73.78 cent (2019: 88.10 cent) was down 14.9% constant currency (down 16.3% reported); 
  • Profit after tax of €143.8 million (2019: €180.2 million); exceptional items after tax of €31.5 million (2019: €34.6 million);
  • Basic EPS of 48.72 cent (2019: 61.04 cent);
  • Group in a strong financial position with net debt reduced by €120.4 million versus prior year to €493.9 million; Net debt to adjusted EBITDA ratio of 1.70 times;
  • Share buyback programme of up to €50 million successfully launched in Q4 2020 and ongoing in 2021;
  • Total dividend maintained at 2019 levels representing a payout ratio of 36.1% ahead of target range of 25% to 35% due to strong cash flow. Recommended final dividend per share of 15.94 cent, total 2020 dividend 26.62 cent;
  • Strong progress on the Group’s ESG agenda; Significant changes to Board composition proposed to facilitate increased Board diversity with a Group-wide Diversity and Inclusion strategy launched; and on the Environmental agenda, targets are now in place for the reduction of carbon emissions;
  • Positive outlook; in FY 2021 the Group expects to deliver 6% to 12% growth in adjusted EPS, constant currency, driven by wholly-owned businesses, GPN and GN.

 

Commenting today Siobhán Talbot, Group Managing Director, said:

“I am exceptionally proud of how our people responded to the many challenges of Covid-19. Throughout the pandemic, we lived our purpose and our values, delivering essential, nutritious food during the most challenging of circumstances and proving the resilience of our business. We delivered on our priorities of protecting our people, continuing the supply of food and maintaining our strong financial position. We kept our operations running safely with the aid of enhanced health and safety measures. Our business portfolio delivered a robust operating performance supported by our swift and decisive actions which resulted in improving trends across the Group in the second half of the year. Our focused approach to liquidity resulted in cash conversion of over 122% and our financial position has improved materially with net debt reducing by over €120 million during the course of 2020.

We also maintained delivery of our strategic agenda by making significant progress on GPN’s transformation programme; keeping all major projects on track, which included the completion of construction of two new large-scale JV plants; completing the Foodarom acquisition in GN; and launching a €50 million share buyback programme to enhance shareholder returns whilst maintaining our dividend level. This pandemic is by no means over and we remain vigilant in managing the risks associated with it but we are confident that earnings growth will be restored in 2021.

In 2020 like-for-like wholly-owned revenues grew by 1.8%, on a constant currency basis. GN delivered a good performance versus prior year as the majority of its end-market demand was sustained throughout 2020 and it continued to execute its strategic growth agenda. GPN was impacted by Covid-19 related restrictions which caused significant disruption to International markets and the North American specialty and distributor channels. However we maintained our focus on the key transformation programme with revenue and margin trends both improving in the second half of the year. Our full year adjusted EPS was down 14.9% on a constant currency basis versus prior year as a good start to 2020 was severely impacted by Covid-19 in the second quarter but improved market conditions and focused actions drove a sequential improvement in earnings in the second half of 2020.

Today we also outline the evolution of our sustainability strategy, “Pure Food + Pure Planet”. As part of this strategy, we are signing up to Science Based Targets and aiming to reduce manufacturing emissions by 30% and supply chain emission intensity by 25% by 2030, while achieving net zero carbon emissions no later than 2050. We also launched our diversity and inclusion strategy which will continue to foster a strong and inclusive culture in our organisation.

We expect the disruptive impact of Covid-19 will abate during the course of 2021 and based on this we expect adjusted EPS to increase by 6% to 12% on a constant currency basis in FY 2021 with growth driven by both wholly-owned businesses of GPN and GN. We anticipate that 2021 will see consumers continue to focus on health and wellbeing: prioritising functional nutrition including immunity enhancing products; maintaining a healthy weight; and supplementing protein-rich foods to support performance and healthy lifestyle goals. This positions Glanbia very well for the future given our core focus on nutrition, health and wellbeing.”

*As defined in the glossary on page 36, like-for like excludes the impact of acquisitions during year and the 53rd week of 2019 that was not present in 2020.

 

FY 2020 Summary Financials

2020 full year results

Reported

Reported

Reported

Constant

€m

FY 2020

FY 2019

Change

Currency Change1

Wholly-owned business (pre-exceptional)

 

 

   

Revenue

3,823.1

3,875.7

 -1.4%

+ 0.6%

EBITA2

209.6

276.8

- 24.3%

- 22.6%

EBITA margin

5.5%

7.1%

- 160 bps

- 160 bps

Joint Ventures

 

 

 

 

Share of profit after tax (pre-exceptional)

61.6

48.6

+ 26.7%

 

Total Group profit after tax (pre-exceptional)

175.3

214.8

- 18.4%

 

Adjusted earnings per share3

73.78c

88.10c

- 16.3%

- 14.9%

Exceptional costs (after tax)

(31.5)

(34.6)

 

 

Basic earnings per share

48.72c

61.04c

 

 

 

  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 FY 2020 was €1 = $1.142 (FY 2019: €1 = $1.120). Reported and constant currency movements are on a pre-exceptional basis.
  2. EBITA is defined as earnings before interest, tax and amortisation.
  3. This release contains certain alternative performance measures. Detailed explanation of the key performance indicators and non-IFRS performance measures can be found in the glossary on pages 36 to 42.

 

FY 2020 constant currency summary of revenue progression

 

Reported Revenue

Summary of FY 2020 constant currency movement

 

FY 2019

FY 2020

Volume

Price

Like-for-like

FY19 53rd week*

Acquisitions

Total movement

Glanbia Performance Nutrition

 1,363.8

1,138.0

-13.4%

0.1%

-13.3%

-1.7%

0.0%

-15.0%

Nutritional Solutions

 744.9

746.8

2.4%

-1.6%

0.8%

-1.9%

3.1%

2.0%

US Cheese

 1,767.0

1,938.3

5.0%

8.8%

13.8%

-1.9%

0.0%

11.9%

Glanbia Nutritionals

 2,511.9

2,685.1

4.2%

5.8%

10.0%

-1.9%

0.9%

9.0%

Total wholly-owned businesses

 3,875.7

3,823.1

-2.0%

3.8%

1.8%

-1.8%

0.6%

0.6%

* The FY 2020 results are for a 52 week period ended 2 January 2021 while the FY 2019 results are for the 53 week period ended 4 January 2020. The 53rd week adjustment is to allow for like-for-like comparison.

 

FY 2020 Financial review

In FY 2020 Glanbia wholly-owned revenue was €3,823.1 million, an increase on prior year of 0.6% constant currency (down 1.4% reported). Like-for-like wholly-owned revenue was up 1.8% constant currency compared to FY 2019. The drivers of this were growth in price of 3.8% offset by volume decline of 2.0%. GN delivered like-for-like volume growth which was more than offset by declines in GPN. Both GN and GPN delivered price improvement versus prior year. Revenue from acquisitions made within 12 months delivered 0.6% revenue growth in FY 2020. Acquisition revenue related to Watson and Foodarom which were acquired by GN in February 2019 and August 2020 respectively.

Wholly-owned EBITA pre-exceptional was €209.6 million, down 22.6% constant currency (down 24.3% reported). Wholly-owned EBITA margins were 5.5%, down 160 basis points on a constant currency and reported basis due to margin declines in both GPN and GN. The decline in wholly-owned EBITA and margin was primarily driven by the impact of Covid-19 on GPN where lower revenue drove significant negative operating leverage in the second quarter of 2020 and GN margins were primarily impacted by dairy market dynamics. GPN margin improved materially, with double-digit EBITA margins in the second half of the year.

Glanbia’s pre-exceptional share of equity accounted investees (Joint Ventures) profit after tax increased by €13.0 million to €61.6 million for FY 2020 and this was driven by a strong performance from the MWC-Southwest Holdings joint venture in the US which more than offset marginal declines in the remaining joint ventures. 

Total Group profit (pre-exceptional items) for the period was €175.3 million, down €39.5 million on prior year.

Adjusted earnings per share was 73.78 cent. This was a decrease on prior year of 14.9% constant currency (down 16.3% reported). Including exceptional costs basic earnings per share was 48.72 cent (2019: 61.04 cent).

Dividend

The Board is recommending a final dividend of 15.94 cent per share which brings the total dividend for the year to 26.62 cent per share, in line with the prior year. This total dividend represents a return of over €78 million to shareholders from 2020 earnings and a payout ratio of 36.1% of 2020 adjusted earnings per share. While the planned 2020 dividend payout ratio is marginally ahead of the target payout ratio of 25% to 35%, the Board has decided to maintain the dividend in line with prior year due to the strong cash performance during 2020, the reduction in net debt during the year and the robust financial position of the Group. The final dividend will be paid on 7 May 2021 to shareholders on the share register on 26 March 2021.

 

Share buyback

Glanbia shareholders approved the Company’s general authority to repurchase shares at the 2020 annual general meeting (“AGM”) on 22 April 2020. This authority remains in place until the next AGM of the Company on 6 May 2021.

On 9 November 2020 Glanbia announced a share buyback programme of up to €50 million in total value of Glanbia plc ordinary shares. At the end of FY 2020 Glanbia had repurchased 1,643,907 ordinary shares (representing 0.6% of total issued ordinary shares) at a total cost of €16.6 million. The share buyback has not had a material impact on the Company’s earnings per share, total shareholder return or net asset value per share in 2020. This buyback programme has continued in 2021.

The Board will seek to retain the option of share buybacks by seeking the required shareholder authority at the next AGM. During 2021 the Board will continue to evaluate share buybacks as part of Glanbia’s capital allocation policies.

 

Capital investment

Glanbia’s total investment in capital expenditure (tangible and intangible assets) was €64.2 million in FY 2020 of which €47.7 million was strategic investment. Glanbia’s capital investment programme continued in key strategic projects throughout the year including investment in the direct-to-consumer (“DTC”) e-commerce platform and production plant reconfiguration in GPN as well as extending solutions capabilities in GN. Total capital expenditure for 2021 is expected to be €80 million to €90 million.

 

Covid-19 update

From the onset of the Covid-19 crisis the Group quickly implemented business continuity planning teams with three priorities; protect the health and welfare of employees, continue food supply and maintain the Group’s strong financial position. Day-to-day operations continue to be managed on this basis and this will remain in place while disruption from the pandemic continues. The strength of the Glanbia portfolio was evident through 2020 as while Covid-19 brought significant market disruption to GPN, particularly in the second quarter, GN delivered a good result as the range of capabilities, depth of customer relationships and broad sector exposures enabled the Group to navigate the demand disruption of Covid-19. Joint Ventures delivered a strong performance overall as their operating models protected the business from dairy market volatility. The Group has continued to execute against its strategic agenda throughout 2020 and will continue to do so utilising the digital tools that have been adopted very effectively in the business. During the year significant progress was made on the GPN transformation and all major capital investment projects are on track including the completion of the construction phase of two large-scale greenfield production plants; MWC-Southwest Holdings in Michigan and Glanbia Cheese EU in Ireland. The Group continued its growth agenda with the completion of the Foodarom acquisition within GN and given its strong balance sheet remains ambitious to pursue further acquisition opportunities in the future.

Glanbia expects the disruption to its markets associated with the pandemic will abate gradually during the course of 2021 and this has been the basis on which the Group’s plans have been developed. Glanbia is confident that as Covid-19 related restrictions are reduced GPN’s trading performance can recover quickly. After delivering good growth in Q1 2020, Q2 was challenging and during the second half of 2020 GPNs’ sales trends recovered in markets where restrictions were eased. Furthermore, GPN now has leading positions in the destinations where consumers are shopping for better-for-you nutrition products with 70% of sales in FY 2020 in the e-commerce and the food, drug, mass and club (“FDMC”) channels.

 

Growth strategy

Now more than ever, consumers are mindful of their health and wellbeing: prioritising functional nutrition including immunity; maintaining a healthy weight; and supplementing their diet with protein-rich foods to support their performance and healthy lifestyle goals. Glanbia plays into these trends via its two growth platforms, GPN and GN. GPN has a focused brand strategy centred on the ON and SlimFast brands and GN Nutritional Solutions has market leading platforms in essential micro-nutrients and protein solutions. Glanbia will continue to invest in its core brands and ingredient solutions to drive growth as well as expand into adjacencies via innovation and acquisition. This is enabled by continued investment in talent and technology. Glanbia has a strong balance sheet and liquidity to facilitate and fuel this growth.

 

Board changes

Appointment of independent board director

Today, Glanbia is announcing that Paul Duffy will be appointed to the board as an independent non-executive director effective 1 March 2021. Paul (aged 55) is the former Chairman and CEO of Pernod Ricard North America, a global leader in the Wine and Spirits industry. He brings extensive strategic and brand experience of the consumer packaged goods sector to the Board including brand prioritisation, brand planning, route-to-market, portfolio management and restructuring.

During his 25 year career with Pernod Ricard, Paul held a number of senior management positions including Chairman and CEO roles at Pernod Ricard UK, The Absolut Company (Sweden) and Irish Distillers. He served on the Pernod Ricard worldwide management executive committee. He is currently a director of W.A. Baxter & Sons (a United Kingdom Food Group) and is a former director of Corby Spirit and Wine Limited, a leading Canadian marketer and distributor of spirits and wines listed on the Toronto Stock Exchange. He is a Fellow of Chartered Accountants Ireland and is a graduate of Trinity College Dublin.

Paul has notified Glanbia plc that, save as disclosed herein, he does not have any details to be disclosed as required under Paragraph 6.6.7, Chapter 6 of the Euronext Dublin Listing Rules and Paragraph 9.6.13, Chapter 9 of the UK Listing Rules.

 

Glanbia Co-operative Society representation changes

Glanbia has been informed by its largest shareholder, Glanbia Co-operative Society Limited (the "Society"), that it has taken a strategic decision to reduce the Society’s representation on the board of Glanbia plc in order to facilitate the appointment of additional diverse, independent non-executive directors to that board.

The current plc board size is 15. The Society currently nominates seven directors to the plc board and in 2022 it had previously been agreed that the number of Society nominees would reduce to 6. Under the Society’s new proposals, announced today, it will progressively reduce its number of directors on the plc board to three by June 2023 and the overall board size will reduce from 15 currently to 13 by 2023.

The Chairman and two Vice-Chairmen of the Society will be the nominees to the plc board at that point. This change will create three additional independent non executive board director positions on the plc board. While the nomination and governance committee of the plc board will run the process to select and appoint the three new diverse independent directors in place of the Society’s nominees, the Society’s officers will be invited to participate in the selection process for these roles.

The Society’s representation on the plc board is set by a contract (the “Relationship Agreement”) dated 2 July 2017 entered into by Glanbia and the Society. The Society and the plc have further agreed that these changes will remain applicable for a period of five years and will be reviewed thereafter by both parties. The Society and Glanbia plan to formally amend the Relationship Agreement to reflect the changes announced today.

It is agreed that over the next three years the plc board of directors will be constituted as follows:

  • At all times there will be two executive directors on the plc board;
  • In 2021, the number of independent (of the Society) non-executive directors will increase from six to seven and the number of nominee directors from the Society reduce to six;
  • In 2022, the number of independent (of the Society) non-executive directors remains at seven and the number of nominee directors from the Society will reduce to five; and
  • In 2023, the number of independent (of the Society) non-executive directors increases from seven to eight and the number of nominee directors from the Society will reduce to three.

 

ESG Agenda

The Group made significant progress in its environmental, social and governance (“ESG”) agenda in 2020. Following a Group-wide review Glanbia has significantly evolved its sustainability strategy, “Pure Food + Pure Planet”. As part of this strategy, Glanbia is setting an ambitious commitment to decarbonise its operations and value chain by committing to science based targets. The commitment will see a reduction in manufacturing emissions by 30% and supply chain emissions by 25% by 2030 and aims to achieve net zero carbon emissions no later than 2050. On waste, Glanbia has committed to zero waste to landfill from all operational sites by 2025 and a 50% reduction in food waste by 2030. Glanbia will complete water risk assessments for all manufacturing sites in 2021 with water audits at most material sites. Following this, target setting for water and packaging usage will be conducted in 2021 to inform the further evolution of the strategy. Progress against these targets will be measured and published annually by the Group.

On social areas the Group has supported a number of initiatives across the communities within which it operates to alleviate the impact of Covid-19 restrictions. Highlights have included: various donations to first responders, healthcare workers, foodbanks and charities globally; provision of protective equipment to several charities; and live virtual workouts for consumers with donations going to help personal trainers during lockdowns. During 2020 no employees were furloughed and the Group has not availed of any government support related to Covid-19.

Glanbia has also made significant progress in the development of a Diversity and Inclusion (“D&I”) strategy. Through its actions, Glanbia is committed to fostering a truly inclusive culture nurturing a diverse workforce reflective of the customers and consumers Glanbia proudly serves, where every employee feels that they belong and that they have equal opportunities to thrive. 2021 priorities will focus on: embedding inclusive leadership behaviours; ensuring that talent and recruitment processes are fair and equitable; building data capability to track and measure actions; and engaging with internal and external stakeholders on Glanbia’s commitment to D&I through a range of visible actions.

On governance, the Board has made further progress on its evolution during 2020 with the appointment of the Group’s first independent Chairman, Donard Gaynor on 8 October 2020 as well as an increase in female representation on the Board with the total number of female directors on the Board now three. In addition, the Society further reduced its representation on the Group Board by one during the year bringing its current representation to seven Board directors and less than 50% representation. Under new proposals, announced today, the Society will progressively reduce its number of nominee directors on the plc board to three by June 2023 and the overall board size will reduce from 15 currently to 13 by 2023.

 

Outlook

The Group currently expects pandemic related restrictions to ease in key regions during the course of 2021 assuming the widespread rollout of vaccines are successful in reducing Covid-19 infection rates, however the duration and impact of the pandemic remains volatile. In FY 2021 Glanbia expects to deliver adjusted earnings per share growth of 6% to 12%, constant currency, driven by revenue and EBITA growth in both GPN and GN. Glanbia’s focus on the GPN transformation programme will provide an opportunity to build on the achievements delivered in the second half of 2020 and drive further margin improvement in FY 2021 over FY 2020.

For further details, see full statement here.

First published: 24 February 2021

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