TIDMGLB
RNS Number : 3258Y
Glanbia PLC
29 February 2012
NEWS RELEASE
Glanbia Corporate Communications
Telephone + 353 56 777
2200
Facsimile + 353 56 777 A world of
2222 nutritional solutions
www.glanbia.com and cheese
2011 Full Year Results
29 February 2012
For further information contact
Glanbia plc +353 56 777 2200
Siobhan Talbot, Group Finance Director
TJ Kelly, Group Financial Controller
Geraldine Kearney, Corporate Communications Director + 353
87 231 9430
------------------------------------------------------------
EXCELLENT RESULTS IN 2011, Ahead of market expectations
26.7% growth in adjusted earningS per share
29 February 2012 - Glanbia plc ('Glanbia'), the global nutritional solutions and cheese Group, announces its results for the full year ended 31 December, 2011. Results commentary in this announcement is based primarily on constant currency.
Results summary pre exceptional(1) Constant Currency(2) Reported
2011 2010 Change 2011 Change
------------------------------------ ------------ ------------ --------- ------------ ---------
Revenue(3) EUR2,734.6m EUR2,166.7m + 26.2% EUR2,671.2m + 23.3%
------------------------------------ ------------ ------------ --------- ------------ ---------
EBITA EUR186.1m EUR151.6m + 22.8% EUR179.5m + 18.4%
------------------------------------ ------------ ------------ --------- ------------ ---------
EBITA margin 6.8% 7.0% - 20 bps 6.7% - 30 bps
------------------------------------ ------------ ------------ --------- ------------ ---------
Operating profit EUR166.8m EUR136.5m + 22.2% EUR161.0m + 17.9%
------------------------------------ ------------ ------------ --------- ------------ ---------
Operating margin 6.1% 6.3% - 20 bps 6.0% - 30 bps
------------------------------------ ------------ ------------ --------- ------------ ---------
EBITDA EUR219.4m EUR182.8m + 20.0% EUR212.2m + 16.1%
------------------------------------ ------------ ------------ --------- ------------ ---------
Share of results of Joint Ventures
& Associates(3) EUR14.7m EUR10.1m + 45.5% EUR14.3m + 41.6%
------------------------------------ ------------ ------------ --------- ------------ ---------
Adjusted earnings per share(4) 48.22c 38.07c + 26.7% 46.32c + 21.7%
------------------------------------ ------------ ------------ --------- ------------ ---------
Financing KPIs 2011 2010 Change
------------------------------- ---------- ---------- ---------
Net debt/Adjusted EBITDA(5) 2.1 times 2.1 times -
------------------------------- ---------- ---------- ---------
Return on capital employed(6) 12.7% 12.5% + 20 bps
------------------------------- ---------- ---------- ---------
(1) An exceptional item of EUR8.7 million relates to rationalisation costs including the costs of the integration of the liquid milk business acquired from Kerry Group plc in the first half.
(2) Constant currency is based on translating 2011 results at the 2010 average market exchange rate. The 2010 average exchange rate was EUR1 = US$1.3260 which compares with the reported average exchange rate for 2011 of EUR1 = US$1.3923.
(3) Total Group revenue, including Glanbia's share of the revenue of Joint Ventures & Associates, was EUR3.2 billion, EUR3.3 billion on a constant currency basis for the year (2010: EUR2.6 billion). Share of results of Joint Ventures & Associates is an after interest and tax amount.
(4) Adjusted earnings per share is calculated as the profit for the year attributable to the owners of the Group before exceptional items and amortisation of intangible assets (net of tax).
(5) Adjusted EBITDA for the purpose of financing ratios reflects Group EBITDA plus dividends from Joint Ventures & Associates.
(6) Return on capital employed is calculated as EBITA, including share of Joint Ventures & Associates EBITA, (post tax) over capital employed. Capital employed is defined as non-current assets plus working capital.
2011 full year results summary
-- Strong performance by Global Nutritionals, with organic revenue growth well ahead of market growth rates
-- BSN(R) , acquired in January 2011 for $144 million, performed in line with expectations
-- Good performance by Dairy Ireland underpinned by positive global dairy markets
-- Revenue increased 26.2% to EUR2.7 billion; EBITA grew 22.8% to EUR186.1 million
-- EBITA margin down 20 basis points to 6.8%, due largely to input cost pressures in Performance Nutrition
-- Strategic Joint Ventures & Associates profit after tax increased by 45.5% to EUR14.7 million
-- Adjusted earnings per share grew 26.7% to 48.22 cents
-- Dividend per share in respect of the full year increased 10% to 8.27 cents
-- $325 million Private Debt Placement of 10 year senior loan notes completed
John Moloney, Group Managing Director, said:
"Glanbia achieved excellent results in 2011 delivering 26.7% growth in adjusted earnings per share, on a constant currency basis. The acquisition and successful integration of BSN(R) into Performance Nutrition complemented strong organic revenue growth in our three nutritional businesses. These businesses continue to outpace market growth rates, driven by strong market positions and science based, customer focused innovation. Positive global dairy markets underpinned a solid performance by Dairy Ireland despite the challenges of the Consumer Products business.
We expect the operating environment in 2012 to be more challenging than in recent years. Current global economic uncertainty has the potential to impact global dairy markets and fragile consumer confidence. The Group's focus on driving growth in nutritionals, combined with deep dairy market expertise and strong execution capability, position us well for the future. Our guidance for 2012 is for 5-7% growth in adjusted earnings per share, on a constant currency basis."
2011 full year results
For the full year ended 31 December 2011
Market commentary
Global dairy markets
2011 was a positive year for global dairy markets following a good year in 2010. Despite a significant increase in global milk production, overall demand proved to be resilient, resulting in a modest market correction in the second half. Many of the 2011 demand characteristics, including demand from developing economies, are expected to prevail in 2012. There is strong growth currently in global milk production. The key risk to the current global dairy market outlook for 2012 is the significant concern around a global economic downturn and the impact this could have at the consumer level. The current view on global dairy market performance is that prices will soften further in the first half of 2012, relative to the second half of 2011, with increased milk and dairy product availability. The second half of 2012 is forecast to be moderately weaker again. Overall, critical markets such as China, Russia and South East Asia are expected to remain solid throughout 2012, limiting market volatility.
US Cheese & Global Nutritionals
US Cheese: In 2011, US Cheese prices were strong, yet somewhat volatile, for most of the year, compared with 2010. This was due to a combination of market factors. US milk production increased 1.8% for the year and 3.7% in Idaho. However, higher prices for competing dairy products reduced milk volumes processed into cheese, thereby increasing prices. Retail cheese sales were down overall, mainly as a result of consumer resistance to retail price increases. This was more than offset by relatively strong demand from the foodservice sector and export sales of American-style cheddar cheese which were very strong, increasing over 30% in 2011, following a 60% increase in 2010. In 2012 US cheese prices have reduced year to date with the market tone currently driven by supply factors as milk production exceeds expectations. While retail demand is sluggish, demand from foodservice, industrial and exports continues to be robust.
Global Nutritionals: 2011 was a significant year for whey proteins as strong demand and tight supply lead to unprecedented high whey pricing. Demand was fuelled by strong growth in key nutritional markets, which continued throughout the year. Market growth estimates for 2011 for key global nutritional segments included 15% growth in the nutritional bar market, 7% growth in sports nutrition and 18% growth in nutritional beverages. Sports nutrition is the largest market segment and the latest research into this market confirms that growth is driven by an awareness of the benefits of these products by a growing population of nutrition-aware consumers with a desire to live healthy lifestyles. In 2011, the market for customised premix solutions continued to be strong driven by double digit growth in demand from beverages, breakfast cereals, product fortification requirements in infant formula, supplements and nutrition bars. Favourable market demand conditions in key nutritional segments are expected to continue in 2012, although with tight supply in key raw materials. Effective management of the buy/sell equation, particularly in Performance Nutrition, will be important in the face of further potential price inflation in raw material inputs.
Dairy Ireland
The performance of global dairy markets, outlined above, is the key market dynamic that impacts Dairy Ingredients Ireland, as substantially all of Irish dairy output is exported. The trading environment for Dairy Ingredients Ireland was therefore positive in 2011 with some weakness anticipated for 2012. Positive global dairy markets also underpinned the demand for farm inputs and benefited Agribusiness. The trading environment for the Consumer Products business is dictated by both the domestic Irish economy and the indirect impact of global dairy markets on input costs. In 2011, it was another difficult year for the food retail market in Ireland; consumer sentiment was weak and fell sharply towards year-end. Higher global dairy markets during the year resulted in increased milk costs for Consumer Products and while some modest price increases were implemented margins were still lower year-on-year. The Irish economic and fiscal backdrop offers little respite at present to consumers. As a result these market conditions are expected to persist in 2012.
Abolition of EU Milk Quotas in 2015
As previously outlined, Glanbia is in the process of reviewing the implications of the potential expansion of its supply base post the abolition of EU milk quotas in 2015. Glanbia plc, in common with its largest shareholder, Glanbia Co-operative Society Limited, recognises that Ireland has a range of competitive characteristics that facilitates growth in milk supply post 2015. The longer-term outlook for global dairy markets is also positive, driven by rising income levels in developing economies. Both parties and their advisors are working to evaluate possible options for expansion of dairy processing in Ireland. A conclusion on the best way forward for all stakeholders is expected to be reached in the second quarter of 2012.
Any investment opportunities arising would be considered by Glanbia plc in a portfolio context to ensure that Group resources are directed to business segments so as to maximise overall Group performance.
Operations review
Group strategy
Glanbia has invested significant resources in recent years to develop and enhance the US Cheese & Global Nutritionals division. Our key strategic investments and acquisitions in these areas have performed very well and are underpinning our strategic objective of delivering sustainable, profitable earnings growth.
Constant Currency
Glanbia's financial results are exposed to movements in the euro/US dollar currency exchange rate and the impact this has on the translation into euro of the significant portion of the Group's profits that are US dollar denominated. To reflect the underlying performance of the business Glanbia uses constant currency as a basis for discussing financial results and providing earnings guidance. In 2011 US dollar denominated profits represented approximately 65% of the Group's earnings before interest, taxation and amortisation (EBITA).
Revenue, profitability and margins, on a constant currency basis(1)
2011 2010
Revenue EBITA EBITA Margin Revenue EBITA EBITA Margin
EURm EURm EURm EURm
-------------------------------- ------- ----- ------------ ------- ----- ------------
US Cheese & Global Nutritionals 1,380.4 128.8 9.3% 1,021.9 104.5 10.2%
Dairy Ireland 1,353.3 57.9 4.3% 1,138.6 47.9 4.2%
Other Business 1.0 (0.6) (60.0%) 6.2 (0.8) (12.9%)
------- ----- ------------ ------- ----- ------------
Group excluding JVs
& Associates 2,734.7 186.1 6.8% 2,166.7 151.6 7.0%
JVs & Associates 541.0 26.0 4.8% 416.6 21.6 5.2%
------- ----- ------------ ------- ----- ------------
Total including JVs
& Associates 3,275.7 212.1 6.5% 2,583.3 173.2 6.7%
-------------------------------- ------- ----- ------------ ------- ----- ------------
(1) Constant currency is based on translating 2011 results at the 2010 average market exchange rate. The 2010 average exchange rate was EUR1 = US$1.3260 which compares with the reported average exchange rate for 2011 of EUR1 = US$1.3923.
Results overview
Total Group revenue, including share of Joint Ventures & Associates, grew by 26.8% to EUR3.3 billion on a constant currency basis, (2010: EUR2.6 billion). This growth is attributable to strong underlying organic volume growth of 8%, higher pricing and an enhanced product mix of 14%, and a 5% positive contribution by acquisitions, primarily Bio-Engineered Supplements and Nutrition (BSN(R) ) acquired in January 2011.
Total Group EBITA, including share of Joint Ventures & Associates, increased 22.5% to EUR212.1 million on a constant currency basis (2010: EUR173.2 million). Total Group EBITA margin fell 20 basis points to 6.5%, on a constant currency basis, (2010: 6.7%) mainly as a result of lower EBITA margins in US Cheese & Global Nutritionals. This was a solid performance given the scale and pace of the input cost pressures in the Performance Nutrition business, which consistently moved ahead of three product price increases effected during the year.
US Cheese & Global Nutritionals
Constant Currency (i) Reported
2011 2010 Change 2011 Change
----------------------------- -------------- ------------ ---------- ------------ ----------
Revenue EUR1,380.4m EUR1,021.9m + 35.1% EUR1,316.9m + 28.9%
----------------------------- -------------- ------------ ---------- ------------ ----------
EBITA pre exceptional EUR128.8m EUR104.5m + 23.3% EUR122.2m + 16.9%
--------------------------------- ---------- ------------ ---------- ------------ ----------
EBITA margin pre exceptional 9.3% 10.2% - 90 bps 9.3% - 90 bps
--------------------------------- ---------- ------------ ---------- ------------ ----------
Operating profit pre
exceptional EUR113.8m EUR93.8m + 21.3% EUR108.0m + 15.1%
--------------------------------- ---------- ------------ ---------- ------------ ----------
Operating margin pre
exceptional 8.2% 9.2% - 100 bps 8.2% - 100 bps
--------------------------------- ---------- ------------ ---------- ------------ ----------
EBITDA pre exceptional EUR142.7m EUR116.7m + 22.3% EUR135.4m + 16.0%
--------------------------- ---------------- ------------ ---------- --------- ------------ ----------
Analysis on a constant currency basis
In 2011, US Cheese & Global Nutritionals revenue increased 35.1% to EUR1.38 billion (2010: EUR1.02 billion). The strong growth in total revenue is attributable to underlying organic volume growth of 10%, higher pricing and an enhanced product mix of 14%, and the positive contribution of the acquisition of BSN(R) of 11%. Operating profit pre exceptional increased 21.3% to EUR113.8 million (2010: EUR93.8 million). EBITA pre exceptional increased 23.3% to EUR128.8 million (2010: EUR104.5 million). Operating and EBITA margins pre exceptional decreased by 100 and 90 basis points respectively.
US Cheese: 2011 performance and 2012 outlook
US Cheese delivered a solid performance in 2011. While the US Cheese market was volatile, average prices were higher than 2010 and importantly; the business has increasingly sought to reduce this market related risk through the adoption of a range of risk management tools. Production was down marginally in the year as cheese volumes were aligned with sales demand. Competition for milk was a feature of the year and led to some input cost pressures. These were offset by strong operational management including the implementation of a two year Total Quality Management ('TQM') programme referred to internally as the Glanbia Performance System 'GPS'. US Cheese was the pilot for this programme, which will be rolled out across key Group manufacturing sites. Export sales were strong in the year and significant investment was made in building internal resources to maximise this business opportunity over the longer-term. Revenue, EBITA and EBITA margins grew year-on-year.
US Cheese continues to invest in enhancing its product capabilities and an $11m investment in a cheese innovation centre is planned for 2012. This is to facilitate closer collaboration with customers in developing new products and formats. The trading environment for US Cheese in 2012 has some challenges. Higher US milk production is expected to result in a lower average US cheese market price in 2012. While retail demand was impacted by high prices in 2011, overall demand remains resilient in the foodservice, industrial and export sectors. In response to the current competitive environment for both milk suppliers and US cheese processors, Glanbia is in the process of reviewing the milk price formula for its milk supply base in Idaho. Overall US Cheese is forecast to deliver a performance in 2012 broadly in line with 2011.
Global Nutritionals: 2011 performance and 2012 outlook
Global Nutritionals had a strong year in 2011 and is now the largest business in the Group both by revenue and EBITA, which is a significant strategic transformation for Glanbia in recent years. Organic revenue growth was excellent in all three business units; Performance Nutrition, Customised Premix Solutions and Ingredient Technologies, driven by strong demand and good growth in prices and EBITA also improved in the year. However there were significant raw material price pressures which impacted EBITA margins in Performance Nutrition where significantly higher whey costs were not fully recovered in the market despite a series of price increases and margins declined as a result. This is reflected in the overall 90 basis points reduction in US Cheese & Global Nutritionals divisional EBITA margins for 2011.
On 19 January 2011, Glanbia announced the acquisition of BSN(a) for a total consideration of $144 million. The business was acquired on a debt free basis and was funded through Glanbia's existing banking facilities. BSN(a) is a leading developer, provider and distributor of nutritional products and enhances and extends Performance Nutrition's product portfolio. During the year there has been significant investment in organisation and product development including the re-launch of their flagship Brand, N.O.-XPLODE 2.0 for pre-training performance and energy. The integration of BSN(a) is progressing well and the business performed in line with expectations in 2011.
Market growth in all Glanbia's core nutritional sectors gathered pace in 2011 and the prospects are very good for 2012. These are underpinned by long-term positive structural market growth drivers including healthy living and healthy aging. While raw material availability and cost is expected to remain challenging for Performance Nutrition in the short term, this market dynamic is expected to ease as new supply sources become available in the latter part of 2012. There is a clear focus in Global Nutritionals on developing new products, both nutritional and functional; building a systematic approach to innovation and enhancing organisation and operational capacity. During 2011, all three nutritional businesses developed their international presence and each continues to build scale and global platforms that are customer centric. Overall Global Nutritionals is expected to perform well again in 2012.
Dairy Ireland
2011 2010 Change
---------------------------------- ------------ ------------ ---------
Revenue EUR1,353.3m EUR1,138.6m + 18.9%
---------------------------------- ------------ ------------ ---------
EBITA pre exceptional EUR57.9m EUR47.9m + 20.9%
---------------------------------- ------------ ------------ ---------
EBITA margin pre exceptional 4.3% 4.2% + 10 bps
---------------------------------- ------------ ------------ ---------
Operating profit pre exceptional EUR53.6m EUR43.5m + 23.2 %
---------------------------------- ------------ ------------ ---------
Operating margin pre exceptional 4.0% 3.8% + 20bps
---------------------------------- ------------ ------------ ---------
EBITDA pre exceptional EUR77.4m EUR66.9m + 15.7%
---------------------------------- ------------ ------------ ---------
In 2011 Dairy Ireland revenue grew 18.9% to EUR1.35 billion (2010: EUR1.14 billion). The revenue growth is attributable to underlying organic volume growth 4%, higher pricing and an enhanced product mix 13%, and the contribution of a small acquisition 2%. Operating profit pre exceptional increased 23.2% to EUR53.6 million (2010: EUR43.5 million) and the operating margin pre exceptional increased 20 basis points to 4.0% (2010: 3.8%). EBITA pre exceptional increased 20.9% to EUR57.9 million (2010: EUR47.9 million).
Dairy Ingredients Ireland: 2011 performance and 2012 outlook
In 2011, global dairy markets remained largely positive despite significant geopolitical and macroeconomic events during the year. This underpinned solid results from Dairy Ingredients. Volumes and prices were higher and the business also benefited from strong operational and cost management, combined with maximising market reach in emerging markets. Revenue and EBITA grew and EBITA margins also improved somewhat, despite significantly higher milk costs. In 2011, a EUR21.2 million investment in the whey processing facilities was approved which, when commissioned in 2012, will increase the volume of higher protein whey products produced. The 2012 performance of Dairy Ingredients is expected to be broadly in line with 2011.
Consumer Products: 2011 performance and 2012 outlook
Consumer Products had another difficult year in 2011. Irish macroeconomic circumstances have created unprecedented pressure on suppliers to the Irish food retail and foodservice sectors. Within retail, private label grew market share in all categories as consumers continued to focus on cost and managing their food budgets very tightly. Consumer sentiment is fragile at best as the outlook remains uncertain for European fiscal and monetary developments. Within the food category price promotions are now a permanent market fixture. Higher prices in global dairy markets impacted raw material input costs with only modest price increases passed onto the consumer. Volumes were up in fresh dairy products and natural cheese, but there were mid-single digit declines, on a like for like sales basis, in branded milk. While revenue increased in 2011, largely driven by a small liquid milk acquisition during the year, EBITA and EBITA margins declined. In response to the market challenges, the business has continued to focus on rationalising its operational cost base driven by both headcount reductions and process re-engineering, while also continuing to drive forward its innovation pipeline, with recent new product launches such as 'Heart Active' milk. No significant change in the market environment is expected in 2012 and Consumer Products is forecast to deliver a broadly similar performance to 2011.
Agribusiness: 2011 performance and 2012 outlook
Agribusiness had a good year in 2011 overall. Volumes were marginally down but strong cost focus, favourable production mix and management of key buy/sell equations helped to deliver growth in EBITA. EBITA margins were broadly similar to 2010. The performance of global dairy markets in 2012 is expected to underpin farm input demand at similar levels to this year but the management of milk quota limits the prospects of volume growth. Overall a solid performance is expected from Agribusiness in 2012.
Joint Ventures & Associates
Constant Currency Reported
2011 2010 Change 2011 Change
----------------------------------- ------------- ---------- ----------- ---------- ----------
Revenue(1) EUR541.0m EUR416.6m + 29.9% EUR524.2m + 25.8%
----------------------------------- ------------- ---------- ----------- ---------- ----------
EBITA pre exceptional EUR26.0m EUR21.6m + 20.4% EUR25.2m + 16.7%
----------------------------------- ------------- ---------- ----------- ---------- ----------
EBITA margin pre exceptional 4.8% 5.2% - 40bps 4.8% - 40bps
----------------------------------- ------------- ---------- ----------- ---------- ----------
Operating profit pre exceptional EUR26.0m EUR21.6m + 20.4% EUR25.2m + 16.7%
--------------------------------------- --------- ---------- ----------- ---------- ----------
Operating margin pre exceptional 4.8% 5.2% - 40bps 4.8% - 40bps
--------------------------------------- --------- ---------- ----------- ---------- ----------
EBITDA pre exceptional EUR33.6m EUR27.8m + 20.9% EUR32.6m + 17.3%
----------------------------------- ------------- ---------- ----------- ---------- ----------
(1) Not included in Group revenue.
Analysis on a constant currency basis
Joint Ventures & Associates had a good year. Revenue improved as a result of higher volumes and market price increases in US cheese and European mozzarella markets. Nutricima, in Nigeria, also delivered an improved performance and revenue grew year-on-year driven by volume growth. Glanbia's share of revenue grew 29.9% to EUR541.0 million (2010: EUR416.6 million).
Glanbia's share of operating profit increased 20.4% to EUR26.0 million (2010: EUR21.6 million), mainly as a result of a strong performance by Glanbia Cheese and an improved performance in Nutricima.
Operating margins declined 40 basis points year-on-year to 4.8%, driven by a decline in margins in Southwest Cheese, as a consequence of higher milk cost. This is as a result of the impact of relative market pricing of dairy products on milk cost during the year.
The Group's share of profit after interest and tax was up EUR4.2 million to EUR14.3 million (2010: EUR10.1 million). The table below reconciles operating profit with share of results of Joint Ventures & Associates, as reported in the income statement.
Reported
2011 2010 Change
EURm EURm EURm
------------------------------------ ------ ------ -------
Operating profit pre exceptional 25.2 21.6 3.6
Finance costs (4.7) (4.7) -
Income taxes (6.2) (6.8) 0.6
------ ------ -------
Share of results of Joint Ventures
& Associates 14.3 10.1 4.2
------------------------------------ ------ ------ -------
Finance review
Summary income statement, as reported
2011 2010
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
EUR'm EUR'm EUR'm EUR'm EUR'm EUR'm
----------------------------- --------------- ----------- ------- --------------- ----------- -------
Revenue 2,671.2 - 2,671.2 2,166.7 - 2,166.7
Operating profit 161.0 (8.7) 152.3 136.5 10.2 146.7
--------------- ----------- ------- --------------- ----------- -------
Net finance costs (27.9) - (27.9) (22.1) - (22.1)
Share of results of
Joint Ventures & Associates 14.3 - 14.3 10.1 - 10.1
--------------- ----------- ------- --------------- ----------- -------
Profit before taxation 147.4 (8.7) 138.7 124.5 10.2 134.7
Income taxes (27.0) 1.1 (25.9) (25.5) (0.6) (26.1)
Profit for the year 120.4 (7.6) 112.8 99.0 9.6 108.6
--------------- ----------- ------- --------------- ----------- -------
Basic earnings per share
(cents) 38.22 36.86
------- -------
Adjusted earnings per
share (cents) 46.32 38.07
----------------------------- --------------- ----------- ------- --------------- ----------- -------
For a review of revenue and operating performance, see the Operations Review on page 3.
Net finance costs
Net financing costs increased by EUR5.8 million to EUR27.9 million (2010: EUR22.1 million) mainly due to the drawdown of a $325 million private debt placement of 10 year senior loan notes during the year. These notes are unsecured, ranking pari passu with existing senior debt and have a fixed coupon rate of 5.4%. The Group's average interest rate for the full year 2011 was 5.0% (2010: 4.2%).
Joint Ventures and Associates
The Group's share of results of Joint Ventures & Associates was up 41.6% (EUR4.2 million) to EUR14.3 million (2010: EUR10.1 million). The improved result reflected strong profitable growth in Glanbia Cheese and improved performance in Nutricima.
Taxation
The 2011 tax charge pre exceptional increased by 5.9%, to EUR27.0 million (2010: EUR25.5 million) which represents an effective rate, excluding Joint Ventures & Associates, of 20.3% (2010: 22.3%). The decrease in the effective rate is driven by the change in mix and geographic locations in which profits are earned.
Exceptional items
Rationalisation costs of EUR8.7m, include redundancies related to the integration of the liquid milk business acquired from Kerry Group plc and were incurred in the first half by the Consumer Products business within Dairy Ireland.
Basic earnings per share
Basic earnings per share (EPS) increased by 3.7% to 38.22 cents per share (2010: 36.86 cents per share), as a net negative movement in exceptional items year on year was offset by an increase in pre exceptional Group profit after tax.
Adjusted earnings per share
Adjusted earnings per share is calculated as the profit for the year attributable to the equity holders of the Parent before exceptional items and amortisation of intangible assets (net of tax). Adjusted EPS increased 21.7% to 46.32 cents per share (2010: 38.07 cents per share) driven mainly by improved operating profit and share of profit after tax from Joint Ventures & Associates, offset by an increased net finance charge.
Dividend per share
The Board is recommending a final dividend of 4.94 cents per share (2010: final dividend 4.49 cents per share). This represents an increase of 10% in the year and brings the total dividend for the year to 8.27 cents per share (2010: 7.52 cents per share).
Summary cash flow
2011 2010 Change
EURm EURm EURm
-------------------------------------------- -------- -------- --------
EBITDA pre exceptional(1) 212.2 182.8 29.4
Working capital movement (39.0) (53.6) 14.6
Net interest and tax paid (39.3) (34.5) (4.8)
Business sustaining capital investment (27.3) (17.3) (10.0)
Other (19.1) (11.9) (7.2)
-------- -------- --------
Free cash flow 87.5 65.5 22.0
Dividends from joint ventures 14.8 11.2 3.6
Loans repaid by joint ventures - 23.3 (23.3)
Strategic acquisition/capital expenditure (133.8) (16.2) (117.6)
Restructuring costs (10.0) (9.8) (0.2)
Equity dividends (22.9) (20.5) (2.4)
-------- -------- --------
Cash flow pre currency exchange/fair value
adjustments (64.4) 53.5 (117.9)
Currency exchange/fair value adjustments (7.8) (19.0) 11.2
Net (increase)/decrease in debt during the
year (72.2) 34.5 (106.7)
Net debt at the beginning of the year (408.1) (442.6) 34.5
-------- -------- --------
Net debt at the end of the year (480.3) (408.1) (72.2)
-------------------------------------------- -------- -------- --------
(1) EBITDA pre exceptional comprises US Cheese & Global Nutritionals EUR135.4m, Dairy Ireland EUR77.4m and Other (EUR0.6m)
The Group generated strong free cash flow during the year of EUR87.5 million (2010: EUR65.5 million) an increase of EUR22.0 million year on year. Free cash flow is stated after charging working capital movements and business sustaining capital expenditure, but before dividends received from Joint Ventures, loans repaid by/advanced to Joint Ventures, strategic capital expenditure, restructuring costs, and equity dividends.
Higher EBITDA in 2011 of EUR212.2 million (2010: EUR182.8 million) was offset by year on year investment in working capital, increased business sustaining capital investment and interest outflows. The working capital outflow in the year primarily reflects the reduction of a debt purchase agreement which was in place with a financial institution since 2005. Dividends received from joint ventures during 2011 were EUR14.8 million an increase from the prior year of EUR3.6 million (2010: EUR11.2 million) and reflect a good cash return to the Group from both Southwest Cheese and Glanbia Cheese.
Financing KPIs
The Group remained focused on cash management in 2011 and delivered a robust year end net debt/adjusted EBITDA financing ratio of 2.1 times (2010: 2.1 times), notwithstanding significant strategic acquisition capital expenditure and one off working capital outflows. This is well within the Group's year end covenant of 3.3 times.
In 2011, adjusted EBIT to net financing cost cover was 6.3 times (2010: 6.7 times), reflecting the increased cost of the private debt senior loan notes in the year. The Group's average interest rate for the full year 2011 was 5.0% (2010: 4.2%), reflecting the mix of financing facilities of the Group. Glanbia operates a policy of fixing a significant amount of its interest exposure with approximately 75% of projected 2012 debt currently contracted at fixed rates.
Financing
The Group currently has three sources of debt finance; 10 year senior loan notes issued as a private debt placement in 2011, senior bank debt with nine banks under bilateral arrangements with common terms and conditions and cumulative redeemable preference shares. Committed debt facilities total EUR987.7 million encompassing the $325 million private debt placement (EUR251.2 million), EUR673.0 million from nine banks and EUR63.5 million cumulative redeemable preference shares. The tenure of these facilities ranges from EUR163.0 million renewable in July 2012, EUR510.0 million renewable in July 2013, EUR63.5 million maturing in July 2014 and EUR251.2 million maturing in June 2021. The Group will be reviewing the overall group financing in 2012 as part of the normal bank debt renewal process.
Key financial covenants Covenant 2011 2010 2009
-------------------------------------- --------- ----- ----- -----
Net debt(1) : Adjusted EBITDA(2)
(times) 3.3 2.1 2.1 2.6
Adjusted EBIT(3) : Net finance costs
(times) 3.5 6.3 6.7 5.4
-------------------------------------- --------- ----- ----- -----
(1) Year end net debt includes EUR63.5 million cumulative redeemable preference shares
(2) Adjusted EBITDA reflects Group EBITDA, pre exceptional items, plus dividends from Joint Ventures & Associates
(3) Adjusted EBIT reflects Group EBIT, pre exceptional items, plus dividends from Joint Ventures & Associates
Return on capital employed
The overall return on capital employed has improved by 20 basis point to 12.7% (2010: 12.5%). The return is defined as a post tax measure of the return earned by the Group on capital invested including Joint Ventures & Associates. The improvement was driven by the strong growth in operating performance of the Group allied with the prudent deployment and strong utilisation of capital across the Group.
Pension
At 31 December 2011 the Group's net pension liability under IAS 19 'Employee Benefits', before deferred tax, decreased by EUR0.2 million to EUR48.4 million (2010: EUR48.6 million). The marginal reduction in the Group's deficit reflected the negative movement in actuarial assumptions (EUR17.0 million), caused primarily by a weak return on invested assets and increased mortality assumptions used, offset by the employer contributions of EUR17.7 million (net of service cost).
The fair value of the assets of the pension schemes at 31 December 2011 was EUR400.0 million (2010: EUR389.3 million) and the value of the scheme liabilities was EUR448.4 million (2010: EUR437.9 million).
Financial Strategy
The Group has significantly restructured and re orientated its business strategy in recent years. As the Group has been in strategy delivery mode, the financial goals have remained consistent, that is; to diversify earnings, improve operating margin and deliver sustained earnings growth through rigorous cost management and prudent deployment of capital to the highest returning investment opportunities. The Group requires as part of its assessment of the business case for significant acquisition and development projects, that the projects achieve a minimum hurdle rate of 12% post tax return in year 3.
Annual General Meeting (AGM)
The Group's AGM will be held on Wednesday, 9 May 2012 in The Newpark Hotel, Castlecomer Road, Kilkenny. On the same day Glanbia will issue an Interim Management Statement.
Principal risks and uncertainties affecting the Group's performance in 2012
The Board of Glanbia plc has the ultimate responsibility for risk management. The performance of the Group is influenced by global economic growth, global dairy and US cheese markets, and consumer confidence in the markets in which it operates. Economic uncertainty or excessive volatility in global dairy pricing represents a material change to the Group's trading environment.
In 2012, the principal risks affecting the Group's performance are:
-- An uncertain global economic outlook;
-- Sustainability of demand / supply balance in global dairy markets
-- Buy / sell balance in US Cheese and Performance Nutrition; and
-- Consumer confidence in Ireland.
The principal risks and uncertainties will be outlined in detail in the 2011 Annual Report.
2012 Outlook
We expect the operating environment in 2012 to be more challenging than in recent years. Current global economic uncertainty has the potential to impact global dairy markets and fragile consumer confidence. The Group's focus on driving growth in nutritionals, combined with deep dairy market expertise and strong execution capability, position us well for the future. Our guidance for 2012 is for 5-7% growth in adjusted earnings per share, on a constant currency basis.
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 facility
There will be a webcast and presentation to accompany this results announcement at 8.30 a.m. today. Please access the webcast from our website at Link: http://www.glanbia.com/FYR-Webcast, where the presentation can also be viewed / downloaded. In addition, a dial-in facility is available using the following numbers:
Ireland: 01 2421074
UK: 01296 311600
Europe: +44 1296 311600
US: 171 835 41175
Passcode: 598033
Group income statement
for the financial year ended
31 December 2011
Pre-exceptional Exceptional Total Pre-exceptional Exceptional Total
2011 2011 2011 2010 2010 2010
Notes EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
(note (note
3) 3)
----------------------- ----- --------------- ------------ ----------- --------------- ------------ -----------
Revenue 2 2,671,151 - 2,671,151 2,166,695 - 2,166,695
Cost of sales (2,233,556) (2,959) (2,236,515) (1,784,263) - (1,784,263)
--------------- ------------ ----------- --------------- ------------ -----------
Gross profit 437,595 (2,959) 434,636 382,432 - 382,432
Distribution expenses (137,342) (3,598) (140,940) (115,896) - (115,896)
Administration expenses (139,227) (2,166) (141,393) (130,029) - (130,029)
Other gains and losses - - - - 10,238 10,238
--------------- ------------ ----------- --------------- ------------ -----------
Operating profit 161,026 (8,723) 152,303 136,507 10,238 146,745
Finance income 4 3,056 - 3,056 3,290 - 3,290
Finance costs 4 (30,997) - (30,997) (25,420) - (25,420)
Share of results
of Joint Ventures
& Associates 14,331 - 14,331 10,103 - 10,103
--------------- ------------ ----------- --------------- ------------ -----------
Profit before taxation 147,416 (8,723) 138,693 124,480 10,238 134,718
Income taxes 5 (26,975) 1,090 (25,885) (25,527) (558) (26,085)
--------------- ------------ ----------- --------------- ------------ -----------
Profit for the year 120,441 (7,633) 112,808 98,953 9,680 108,633
--------------- ------------ ----------- --------------- ------------ -----------
Attributable to:
Equity holders of
the Parent 112,178 108,047
Non-controlling
interests 630 586
----------- -----------
112,808 108,633
----------- -----------
Basic earnings per
share (cents) 6 38.22 36.86
----------- -----------
Diluted earnings
per share (cents) 6 37.90 36.63
----------------------- ----- --------------- ------------ ----------- --------------- ------------ -----------
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Group statement of comprehensive income
for the financial year ended 31 December 2011
---------------------------------------------------- -------- --------
2011 2010
EUR'000 EUR'000
---------------------------------------------------- -------- --------
Profit for the year 112,808 108,633
Other comprehensive income/(expense)
Actuarial (loss)/gain - defined benefit schemes (17,029) 13,379
Deferred tax credit/(charge) on actuarial gain/loss 2,615 (1,250)
Share of actuarial (loss)/gain - Joint Ventures
& Associates (38) 2,760
Deferred tax charge on actuarial loss/gain -
Joint Ventures & Associates (77) (316)
Currency translation differences 18,538 20,169
Net investment hedge 230 -
Revaluation of available for sale financial
assets (1,484) (5,381)
Fair value movements on cash flow hedges 3,563 3,936
Deferred tax on cash flow hedges and revaluation
of available for sale financial assets 1,214 2,267
-------- --------
Other comprehensive income for the year, net
of tax 7,532 35,564
-------- --------
Total comprehensive income for the year 120,340 144,197
-------- --------
Total comprehensive income attributable to:
Equity holders of the Parent 119,710 143,611
Non-controlling interests 630 586
-------- --------
120,340 144,197
---------------------------------------------------- -------- --------
Group statement of changes in equity
for the financial year ended 31 December 2011
Attributable to equity holders
of the Parent
------------------------------------------
Share
capital
and share Other Retained Non-controlling
premium reserves earnings Total interests Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 2 January 2010 99,219 108,672 83,004 290,895 6,493 297,388
Profit for the year - - 108,047 108,047 586 108,633
Other comprehensive income/(expense)
Actuarial gain - defined
benefit schemes - - 13,379 13,379 - 13,379
Deferred tax on actuarial
gain - - (1,250) (1,250) - (1,250)
Share of actuarial gain
- Joint Ventures & Associates - - 2,444 2,444 - 2,444
Fair value movements - (1,445) - (1,445) - (1,445)
Deferred tax on fair value
movements - 2,267 - 2,267 - 2,267
Currency translation differences - 20,169 - 20,169 - 20,169
---------- --------- --------- -------- --------------- --------
Total comprehensive income
for the year - 20,991 122,620 143,611 586 144,197
Dividends paid during
the year - - (20,453) (20,453) (187) (20,640)
Cost of share based payments - 2,937 - 2,937 - 2,937
Transfer on exercise,
vesting or expiry of share
based payments - (373) 373 - - -
Shares issued 17 - - 17 - 17
Premium on shares issued 505 - - 505 - 505
---------- --------- --------- -------- --------------- --------
Balance at 1 January 2011 99,741 132,227 185,544 417,512 6,892 424,404
Profit for the year - - 112,178 112,178 630 112,808
Other comprehensive income/(expense)
Actuarial loss - defined
benefit schemes - - (17,029) (17,029) - (17,029)
Deferred tax on actuarial
loss - - 2,615 2,615 - 2,615
Share of actuarial loss
- Joint Ventures & Associates - - (115) (115) - (115)
Fair value movements - 2,079 - 2,079 - 2,079
Deferred tax on fair value
movements - 1,214 - 1,214 - 1,214
Currency translation differences - 18,538 - 18,538 - 18,538
Net investment hedge - 230 - 230 - 230
---------- --------- --------- -------- --------------- --------
Total comprehensive income
for the year - 22,061 97,649 119,710 630 120,340
Dividends paid during
the year - - (22,942) (22,942) (387) (23,329)
Cost of share based payments - 2,388 - 2,388 - 2,388
Transfer on exercise,
vesting or expiry of share
based payments - (1,057) 1,057 - - -
Shares issued 42 - - 42 - 42
Premium on shares issued 1,179 - - 1,179 - 1,179
Purchase of own shares - (2,075) - (2,075) - (2,075)
---------- --------- --------- -------- --------------- --------
Balance at 31 December
2011 100,962 153,544 261,308 515,814 7,135 522,949
------------------------------------- ---------- --------- --------- -------- --------------- --------
Goodwill previously written off amounting to EUR93.0 million (2010: EUR93.0 million) is included in opening and closing retained earnings.
Group statement of financial position
as at 31 December 2011
---------------------------------------------- ------ ---------- ----------
2011 2010
Notes EUR'000 EUR'000
---------------------------------------------- ------ ---------- ----------
ASSETS
Non-current assets
Property, plant and equipment 394,552 369,346
Intangible assets 467,277 356,830
Investments in associates 12,178 11,757
Investments in joint ventures 58,484 58,945
Trade and other receivables 14,575 23,084
Deferred tax assets 11,255 7,388
Available for sale financial assets 11,165 14,127
Derivative financial instruments - 1,643
---------- ----------
969,486 843,120
---------- ----------
Current assets
Inventories 336,855 303,881
Trade and other receivables 304,301 246,831
Derivative financial instruments 6,161 3,912
Cash and cash equivalents 8 231,373 229,101
---------- ----------
878,690 783,725
---------- ----------
Total assets 1,848,176 1,626,845
---------- ----------
EQUITY
Issued capital and reserves attributable
to equity holders of the Parent
Share capital and share premium 100,962 99,741
Other reserves 153,544 132,227
Retained earnings 9 261,308 185,544
---------- ----------
515,814 417,512
Non-controlling interests 7,135 6,892
---------- ----------
Total equity 522,949 424,404
---------- ----------
LIABILITIES
Non-current liabilities
Borrowings 8 658,896 636,251
Derivative financial instruments 1,319 3,315
Deferred tax liabilities 93,459 75,966
Retirement benefit obligations 48,425 48,560
Provisions for other liabilities and charges 22,120 22,392
Capital grants 17,161 18,609
---------- ----------
841,380 805,093
---------- ----------
Current liabilities
Trade and other payables 400,850 366,246
Current tax liabilities 6,656 2,538
Borrowings 8 52,808 972
Derivative financial instruments 5,657 6,487
Provisions for other liabilities and charges 17,876 21,105
---------- ----------
483,847 397,348
---------- ----------
Total liabilities 1,325,227 1,202,441
---------- ----------
Total equity and liabilities 1,848,176 1,626,845
---------------------------------------------- ------ ---------- ----------
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Group statement of cash flows
for the financial year ended 31 December
2011
------------------------------------------------- ----- --------- ---------
2011 2010
Notes EUR'000 EUR'000
------------------------------------------------- ----- --------- ---------
Cash flows from operating activities
Cash generated from operations 10 145,386 107,214
Interest received 3,134 3,054
Interest paid (29,729) (25,613)
Tax paid (12,738) (11,955)
--------- ---------
Net cash inflow from operating activities 106,053 72,700
--------- ---------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (114,252) -
Payment of deferred consideration on acquisition
of subsidiaries (1,146) (644)
Purchase of property, plant and equipment (47,239) (31,631)
Purchase of intangible assets (1,646) (4,333)
Dividends received from joint ventures 14,761 11,210
Loans repaid by joint ventures - 23,280
Decrease in available for sale financial
assets 2,283 438
Proceeds from sale of property, plant and
equipment 420 1,163
--------- ---------
Net cash outflow from investing activities (146,819) (517)
--------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary shares 1,221 522
Purchase of own shares (2,075) -
Private debt placement 226,828 -
(Decrease)/increase in borrowings (160,780) 21,823
Finance lease principal payments (968) (926)
Dividends paid to Company shareholders 7 (22,942) (20,453)
Dividends paid to non-controlling interests (387) (187)
Capital grants received 564 1,432
--------- ---------
Net cash inflow from financing activities 41,461 2,211
--------- ---------
Net increase in cash and cash equivalents 695 74,394
Cash and cash equivalents at the beginning
of the year 229,101 152,789
Effects of exchange rate changes on cash
and cash equivalents 1,577 1,918
--------- ---------
Cash and cash equivalents at the end of the
year 231,373 229,101
--------- ---------
Reconciliation of net cash flow to movement
in net debt 2011 2010
EUR'000 EUR'000
------------------------------------------------- ----- --------- ---------
Net increase in cash and cash equivalents 695 74,394
Cash movements from debt financing (65,080) (20,897)
--------- ---------
(64,385) 53,497
Fair value movement of interest rate swaps
qualifying as fair value hedges 387 (2,165)
Exchange translation adjustment on net debt (8,211) (16,836)
Movement in net debt in the year (72,209) 34,496
Net debt at the beginning of the year (408,122) (442,618)
--------- ---------
Net debt at the end of the year (480,331) (408,122)
--------- ---------
Net debt comprises:
Borrowings (711,704) (637,223)
Cash and cash equivalents 231,373 229,101
--------- ---------
8 (480,331) (408,122)
------------------------------------------------- ----- --------- ---------
Notes to the financial information
for the financial year ended 31 December 2011
1 Basis of preparation
The financial information has been prepared under the historical cost convention as modified by use of fair values for available for sale financial assets and derivative financial instruments, and the accounting policies that the Group has adopted for 2011.
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 31 December 2011 (referred to as the 2011 financial statements). The 2011 financial statements have been audited and have received an unqualified audit report. Amounts are stated in euro thousands (EUR'000) unless otherwise stated. The financial information is prepared for a 52 week year ending on 31 December 2011. Comparatives are for the 52 week year ended on 1 January 2011. The statements of financial position for 2011 and 2010 have been drawn up as at 31 December 2011 and 1 January 2011 respectively.
The financial statements were approved by the Board of Directors on 28 February 2012 and signed on its behalf by L Herlihy, J Moloney and S Talbot.
2 Segment information
In accordance with IFRS 8, Operating Segments the Group has four segments as follows: US Cheese & Global Nutritionals, Dairy Ireland, Joint Ventures & Associates and Other Business. 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 Group Operating Executive Committee which acts as the Chief Operating Decision Maker for the Group.
Each segment derives its revenue as follows: US Cheese & Global Nutritionals earns its revenue from the manufacture and sale of cheese, whey protein and other nutritional solutions; Dairy Ireland incorporates the manufacture and sale of a range of dairy products and farm inputs; Joint Ventures & Associates revenue arises from the manufacture and sale of cheese, whey proteins and dairy consumer products. The Other Business segment refers to all other businesses which comprise of a Property business unit, a small dairy processing operation in Mexico which was disposed of in September 2010 and a small dairy sales office in Mexico which ceased trading in June 2011. Each segment is reviewed in its totality by the Chief Operating Decision Maker.
The Group Operating Executive Committee assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items.
2.1 The segment results for the year ended 31 December 2011 are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ---- ------------- ------------- ----------- -------------- -----------
Total gross segment revenue (a) 1,319,944 1,365,823 524,293 1,046 3,211,106
Inter-segment revenue (3,023) (12,639) - - (15,662)
------------- ------------- ----------- -------------- -----------
Segment external revenue 1,316,921 1,353,184 524,293 1,046 3,195,444
------------- ------------- ----------- -------------- -----------
Segment earnings before
interest, tax, amortisation
and exceptional items (b) 122,194 57,854 25,226 (550) 204,724
----------------------------- ---- ------------- ------------- ----------- -------------- -----------
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of EUR98.7 million and related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of EUR12.4 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.
2.1 (a): Segment revenue is reconciled to reported external revenue as follows:
2011
EUR'000
------------------------------------ ---------
Segment revenue 3,211,106
Inter-segment revenue (15,662)
Joint Ventures & Associates revenue (524,293)
---------
Reported external revenue 2,671,151
------------------------------------ ---------
2.1 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax as follows:
2011
EUR'000
-------------------------------------------------------------------- --------
Segment earnings before interest, tax, amortisation and exceptional
items 204,724
Amortisation (18,472)
Exceptional items - rationalisation costs (8,723)
Joint Ventures & Associates interest and tax (10,895)
Finance income 3,056
Finance costs (30,997)
--------
Reported profit before tax 138,693
Income taxes (25,885)
--------
Reported profit after tax 112,808
-------------------------------------------------------------------- --------
Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury and taxation functions, which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 31 December 2011 are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ ------------- ------------- ----------- -------------- -----------
Depreciation of property,
plant and equipment 13,272 20,868 7,653 - 41,793
Amortisation of intangibles 14,198 4,274 - - 18,472
Capital grants released
to the income statement (57) (1,383) (268) - (1,708)
Exceptional items - rationalisation
costs - 8,723 - - 8,723
------------------------------------ ------------- ------------- ----------- -------------- -----------
The segment assets and liabilities at 31 December 2011 and segment capital expenditure and acquisitions for the year then ended are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------- ---- ------------- ------------- ----------- -------------- -----------
Segment assets (c) 931,923 571,681 85,237 14,215 1,603,056
------------- ------------- ----------- -------------- -----------
Segment liabilities (d) 268,418 266,542 - 1,190 536,150
------------- ------------- ----------- -------------- -----------
Segment capital expenditure
and acquisitions (e) 140,833 30,432 4,042 - 175,307
---------------------------- ---- ------------- ------------- ----------- -------------- -----------
2.1 (c): Segment assets are reconciled to reported assets as follows:
2011
EUR'000
------------------- ---------
Segment assets 1,603,056
Unallocated assets 245,120
---------
Reported assets 1,848,176
------------------- ---------
Unallocated assets primarily include taxation, cash and cash equivalents, available for sale financial assets and derivatives.
2.1 (d): Segment liabilities are reconciled to reported liabilities as follows:
2011
EUR'000
------------------------ ---------
Segment liabilities 536,150
Unallocated liabilities 789,077
---------
Reported liabilities 1,325,227
------------------------ ---------
Unallocated liabilities primarily include items such as taxation, borrowings and derivatives.
2.1 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:
2011
EUR'000
------------------------------------------------ --------
Segment capital expenditure and acquisitions 175,307
Joint Ventures & Associates capital expenditure (4,042)
Unallocated capital expenditure 215
--------
Reported capital expenditure and acquisitions 171,480
------------------------------------------------ --------
2.2 The segment results for the year ended 1 January 2011 are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------- ---- ------------- ------------- ----------- -------------- -----------
Total gross segment revenue (a) 1,024,653 1,154,023 416,564 6,244 2,601,484
Inter-segment revenue (2,752) (15,473) - - (18,225)
------------- ------------- ----------- -------------- -----------
Segment external revenue 1,021,901 1,138,550 416,564 6,244 2,583,259
------------- ------------- ----------- -------------- -----------
Segment earnings before
interest, tax, amortisation
and exceptional items 104,506 47,943 21,560 (831) 173,178
----------------------------------- ------------- ------------- ----------- -------------- -----------
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of EUR69.2 million and related party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of EUR9.4 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.
2.2 (a): Segment revenue is reconciled to reported external revenue as follows:
2010
EUR'000
------------------------------------ ---------
Segment revenue 2,601,484
Inter-segment revenue (18,225)
Joint Ventures & Associates revenue (416,564)
---------
Reported external 2,166,695
------------------------------------ ---------
2.2 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax as follows:
2010
EUR'000
-------------------------------------------------------------------- --------
Segment earnings before interest, tax, amortisation and exceptional
items 173,178
Amortisation (15,111)
Exceptional items - defined benefit pension schemes 10,238
Joint Ventures & Associates interest and tax (11,457)
Finance income 3,290
Finance costs (25,420)
--------
Reported profit before tax 134,718
Income taxes (26,085)
--------
Reported profit after tax 108,633
-------------------------------------------------------------------- --------
Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury and taxation functions, which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 1 January 2011 are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------- ------------- ------------- ----------- -------------- -----------
Depreciation of property,
plant and equipment 12,514 19,997 6,823 58 39,392
Amortisation of intangibles 10,711 4,400 6 - 15,117
Capital grants released
to the income statement (330) (1,089) (526) (1,945)
Exceptional items - defined
benefit pension schemes - (10,238) - - (10,238)
---------------------------- ------------- ------------- ----------- -------------- -----------
The segment assets and liabilities at 1 January 2011 and segment capital expenditure and acquisitions for the year then ended are as follows:
Group
US Cheese including
& Global JV's & JV's &
Nutritionals Dairy Ireland Associates Other Business Associates
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------- ---- ------------- ------------- ----------- -------------- -----------
Segment assets (c) 725,960 556,455 87,362 17,041 1,386,818
------------- ------------- ----------- -------------- -----------
Segment liabilities (d) 200,380 288,125 - 1,536 490,041
------------- ------------- ----------- -------------- -----------
Segment capital expenditure
and acquisitions (e) 23,085 13,522 11,901 124 48,632
---------------------------- ---- ------------- ------------- ----------- -------------- -----------
2.2 (c): Segment assets are reconciled to reported assets as follows:
2010
EUR'000
------------------- ---------
Segment assets 1,386,818
Unallocated assets 240,027
---------
Reported assets 1,626,845
------------------- ---------
Unallocated assets primarily include taxation, cash and cash equivalents, available for sale financial assets and derivatives.
2.2 (d): Segment liabilities are reconciled to reported liabilities as follows:
2010
EUR'000
------------------------ ---------
Segment liabilities 490,041
Unallocated liabilities 712,400
---------
Reported liabilities 1,202,441
------------------------ ---------
Unallocated liabilities primarily include items such as taxation, borrowings and derivatives.
2.2 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:
2010
EUR'000
------------------------------------------------ --------
Segment capital expenditure and acquisitions 48,632
Joint Ventures & Associates capital expenditure (11,901)
Unallocated capital expenditure 466
--------
Reported capital expenditure and acquisitions 37,197
------------------------------------------------ --------
2.3 Entity wide disclosures
Revenue from external customers for each group of similar product in the US Cheese & Global Nutritionals, Dairy Ireland, Joint Ventures & Associates and Other Business segments are outlined at section 2.1 and 2.2 above.
Geographical information
Revenue by geographical destination is reviewed by the Chief Operating Decision Maker. The breakdown of revenue by geographical destination is as follows:
2011 2010
EUR'000 EUR'000
--------------- --------- ---------
Ireland 799,489 725,834
UK 162,028 137,874
Rest of Europe 254,991 189,308
USA 1,119,417 901,717
Other 335,226 211,962
--------- ---------
2,671,151 2,166,695
--------------- --------- ---------
Revenue of approximately EUR320.0 million (2010: EUR249.6 million) is derived from a single external customer. The breakdown of revenue by geographical destination in 2010 has been updated to reflect the current year classification.
The total of non-current assets, other than financial instruments and deferred tax assets, located in Ireland is EUR267.8 million (2010: EUR271.5 million) and located in other countries, mainly the USA is EUR690.4 million (2010: EUR562.6 million).
3 Exceptional items
2011 2010
Notes EUR'000 EUR'000
----------------------------------------- ----- -------- --------
Rationalisation costs (a) (8,723) -
Irish defined benefit pension scheme (b) - 10,238
-------- --------
Total exceptional (charge)/credit before
tax (8,723) 10,238
Exceptional tax credit/(charge) 5 1,090 (558)
-------- --------
Net exceptional (charge)/credit (7,633) 9,680
----------------------------------------- ----- -------- --------
(a) An exceptional charge of EUR8.7 million was incurred during 2011, primarily relating to rationalisation costs in the Dairy Ireland segment.
(b) During 2010, revisions to the Group's pension arrangements for three Irish defined benefit pension schemes, consistent with the revisions made to the Group's main pension schemes, were finalised giving rise to an exceptional gain, in accordance with IAS 19 - Employee benefits, in the year of EUR10.2 million. This gain relates to curtailment gains and negative past service costs of EUR1.7 million and EUR10.9 million respectively offset by a change in the estimate of the prior year curtailment of EUR2.4 million.
4 Finance income and costs
2011 2010
EUR'000 EUR'000
------------------------------------------------- -------- --------
Finance income
Interest income 2,874 3,008
Interest income on deferred consideration 182 282
-------- --------
Total finance income 3,056 3,290
-------- --------
Finance costs
Bank borrowings repayable within five years (14,092) (13,001)
Interest cost on deferred consideration (106) (80)
UK pension provision (113) (121)
Finance lease costs (188) (256)
Interest rate swaps, transfer from equity (4,876) (7,613)
Interest rate swaps, fair value hedges 2,308 2,733
Fair value adjustment to borrowings attributable
to interest rate risk (2,308) (2,733)
Finance cost of private debt placement (7,273) -
Finance cost of preference shares (4,349) (4,349)
-------- --------
Total finance costs (30,997) (25,420)
-------- --------
Net finance costs (27,941) (22,130)
------------------------------------------------- -------- --------
Net finance costs exclude borrowing costs attributable to the acquisition, construction or production of a qualifying asset.
5 Income taxes
2011 2010
Notes EUR'000 EUR'000
------------------------------------------- ------ -------- --------
Current tax
Irish current tax 8,641 11,620
Adjustments in respect of prior years (435) (422)
-------- --------
Irish current tax on income for the year 8,206 11,198
Foreign current tax 6,223 2,285
Adjustments in respect of prior years 1,539 1,050
-------- --------
Foreign current tax on income for the year 7,762 3,335
-------- --------
Total current tax 15,968 14,533
Deferred tax 11,007 10,994
-------- --------
Pre exceptional tax charge 26,975 25,527
Exceptional tax (credit)/charge
Current tax (a) (1,090) -
Deferred tax (b) - 558
-------- --------
Total tax charge 25,885 26,085
--------------------------------------------------- -------- --------
(a) The rationalisation cost charged during the year resulted in an exceptional current tax credit of EUR1.1 million.
(b) The curtailment gains and negative past service costs recognised in the defined benefit pension schemes in 2010 resulted in an exceptional deferred tax charge of EUR0.6 million.
The exceptional net tax credit and charge in 2011 and 2010, relating to income and costs which have been presented as exceptional, have been separately disclosed above.
The tax on the Group's profit before tax differs from the theoretical amount that would arise applying the corporation tax rate in Ireland, as follows:
2011 2010
EUR'000 EUR'000
------------------------------------------------------- -------- --------
Profit before tax 138,693 134,718
-------- --------
Income tax calculated at Irish rate of 12.5% (2010:
12.5%) 17,337 16,840
Earnings at higher/(reduced) Irish rates 836 (902)
Difference due to overseas tax rates 7,496 6,999
Adjustment to tax charge in respect of previous
periods (1,170) (1,811)
Tax on post tax profits of Joint Ventures & Associates
included in profit before tax (1,791) (1,263)
Expenses not deductible for tax purposes and other
differences 3,177 6,222
-------- --------
Total tax charge 25,885 26,085
------------------------------------------------------- -------- --------
Factors that may affect future tax charges and other disclosure requirements
The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group operates and other relevant changes in tax legislation including amendments impacting on the excess of tax depreciation over accounting depreciation. The total tax charge of the Group may also be influenced by the effects of corporate development activity.
6 Earnings per share
Basic
Basic earnings per share is calculated by dividing the net profit attributable to the equity holders of the Parent by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as own shares.
2011 2010
---------------------------------------------------- ----------- -----------
Profit attributable to equity holders of the Parent
(EUR'000) 112,178 108,047
----------- -----------
Weighted average number of ordinary shares in issue 293,536,350 293,105,068
----------- -----------
Basic earnings per share (cents per share) 38.22 36.86
---------------------------------------------------- ----------- -----------
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all potential dilutive ordinary shares. Share options are potential dilutive ordinary shares. In respect of share options, a calculation is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company's shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated above is compared with the number of shares that would have been issued assuming exercise of the share options.
2011 2010
---------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares in issue 293,536,350 293,105,068
Adjustments for share options 2,413,436 1,874,570
----------- -----------
Adjusted weighted average number of ordinary shares 295,949,786 294,979,638
----------- -----------
Diluted earnings per share (cents per share) 37.90 36.63
---------------------------------------------------- ----------- -----------
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before net exceptional items and intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective of the Group's overall underlying performance.
2011 2010
EUR'000 EUR'000
------------------------------------------------------ -------- --------
Profit attributable to equity holders of the Parent 112,178 108,047
Amortisation of intangible assets (net of related
tax) 16,163 13,222
Net exceptional items 7,633 (9,680)
-------- --------
Adjusted net income 135,974 111,589
-------- --------
Adjusted earnings per share (cents per share) 46.32 38.07
-------- --------
Diluted adjusted earnings per share (cents per share) 45.94 37.83
------------------------------------------------------ -------- --------
7 Dividends
The dividends paid in 2011 and 2010 were EUR22.9 million (7.82 cents per share) and EUR20.5 million (6.98 cents per share) respectively. On 14 October 2011 an interim dividend of 3.33 cents per share on the ordinary shares amounting to EUR9.7 million was paid to shareholders on the register of members as at 2 September 2011. The Directors have recommended the payment of a final dividend of 4.94 cents per share on the ordinary shares which amounts to EUR14.5 million. Subject to shareholders approval this dividend will be paid on 11 May 2012 to shareholders on the register of members at 30 March 2012, the record date. This announcement does not reflect the final dividend.
If a shareholder's registered address is in the UK and a shareholder has not previously provided the Company with a mandate form for an Irish euro account, a shareholder will default to a sterling payment. All other shareholders will default to a euro payment.
8 Net debt
2011 2010
EUR'000 EUR'000
------------------------------- --------- ---------
Borrowings due within one year 52,808 972
Borrowings due after one year 658,896 636,251
Less:
Cash and cash equivalents (231,373) (229,101)
--------- ---------
Net debt 480,331 408,122
------------------------------- --------- ---------
9 Retained earnings
Company Group Group
retained retained goodwill Group
earnings earnings write-off Total
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------- --------- --------- ---------- --------
Balance at 2 January 2010 59,913 175,965 (92,961) 83,004
Profit for the year 745 108,047 - 108,047
Other comprehensive income/(expense)
Actuarial gain - defined benefit
schemes - 13,379 - 13,379
Deferred tax on actuarial gain - (1,250) - (1,250)
Share of actuarial gain - Joint
Ventures & Associates - 2,444 - 2,444
--------- --------- ---------- --------
Total comprehensive income for the
year 745 122,620 - 122,620
Dividends paid during the year (20,453) (20,453) - (20,453)
Transfer on exercise, vesting or
expiry of share based payments 373 373 - 373
--------- --------- ---------- --------
Balance at 1 January 2011 40,578 278,505 (92,961) 185,544
Profit for the year 59,114 112,178 - 112,178
Other comprehensive income/(expense)
Actuarial loss - defined benefit
schemes - (17,029) - (17,029)
Deferred tax on actuarial loss - 2,615 - 2,615
Share of actuarial loss - Joint
Ventures & Associates - (115) - (115)
--------- --------- ---------- --------
Total comprehensive income for the
year 59,114 97,649 - 97,649
Dividends paid during the year (22,942) (22,942) - (22,942)
Transfer on exercise, vesting or
expiry of share based payments 1,057 1,057 - 1,057
--------- --------- ---------- --------
Balance at 31 December 2011 77,807 354,269 (92,961) 261,308
------------------------------------- --------- --------- ---------- --------
10 Cash generated from operations
2011 2011 2010 2010
Company Group Company Group
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------ -------- -------- -------- --------
Profit before taxation 59,114 138,693 745 134,718
Development costs capitalised - (4,042) - (2,821)
Impairment charge - 1,195 - 1,372
Non-cash exceptional loss/(gain) - 8,723 - (10,238)
Share of results of Joint Ventures
& Associates - (14,331) - (10,103)
Depreciation - 34,140 - 32,569
Amortisation - 18,472 - 15,111
Cost of share based payments 2,388 2,388 2,937 2,937
Difference between pension charge
and cash contributions - (17,706) - (14,598)
Loss on disposal of property, plant
and equipment - 363 - 957
Interest income - (3,056) - (3,290)
Interest expense - 30,997 - 25,420
Non cash-movement in investments (761) - - -
Amortisation of government grants
received - (1,440) - (1,419)
-------- -------- -------- --------
Cash generated from operations
before changes in working capital 60,741 194,396 3,682 170,615
Change in net working capital:
- (Increase) in inventory - (19,087) - (97,009)
- Decrease/(increase) in short
term receivables 103 (29,122) 66,449 (28,065)
- (Decrease)/increase in short
term liabilities (40,829) 11,219 (36,693) 66,048
- (Decrease) in provisions (204) (12,020) (246) (4,375)
-------- -------- -------- --------
Cash generated from operations 19,811 145,386 33,192 107,214
------------------------------------ -------- -------- -------- --------
11 Business combinations
On 19 January 2011 the Group acquired the business and assets of a US based performance nutrition business, Bio-Engineered Supplements and Nutrition ("BSN"). BSN is a leading developer, provider and distributor of nutritional products designed for health, physique development and training.
Details of net assets acquired and goodwill arising from the acquisition is as follows:
EUR'000
------------------------------------ -------
Purchase consideration - cash paid 103,369
Less: Fair value of assets acquired 85,853
-------
Goodwill 17,516
------------------------------------ -------
The acquisition of BSN significantly enhances the Group's Performance Nutrition portfolio and delivers further growth opportunities in this area. In particular, the acquisition builds on the Group's scale position in the sports nutrition sector; broadens Performance Nutrition's product portfolio into new categories and channels and represents a further step change in international growth opportunities for Performance Nutrition. The goodwill is attributable to the profitability and development opportunities through combined R&D and the benefits associated with the extension of Glanbia's scale and specific capabilities to the acquired business.
The fair value of assets and liabilities arising from the acquisition is as follows:
Fair value
EUR'000
--------------------------------------------- ----------
Property, plant and equipment 1,700
Intangible assets - brands/know-how 47,641
Intangible assets - customer relationships 36,721
Inventories 9,433
Trade and other receivables 7,419
Trade and other payables (10,290)
Provisions for other liabilities and charges (2,181)
Deferred tax (4,590)
----------
Fair value of assets acquired 85,853
--------------------------------------------- ----------
The revenue included in the Group income statement from 19 January 2011 to 31 December 2011 contributed by BSN was EUR105 million. BSN contributed profit before interest, tax and amortisation of EUR12.4 million over the same period.
On 1 April 2011, the Group also acquired the business and assets of Kerry Group plc's Limerick based liquid milk business for EUR10.3 million. This consisted of EUR6.0 million intellectual property, EUR0.7 million working capital and property, plant & equipment and EUR3.6 million goodwill.
The revenue and profit of the Group determined in accordance with IFRS for the year ended 31 December 2011 would not have been materially different than that reported above if the acquisition date for all business combinations completed during the period had been at the beginning of the year.
Acquisition related costs included in administration expenses in the Group income statement for the period ended 31 December 2011 amounted to EUR0.4 million (2010: EUR0.6 million).
No contingent liabilities were recognised on the acquisitions completed during the period. The gross contractual value and fair value of trade and other receivables as at the respective dates of acquisition amounted to EUR7.4 million. No allowance for doubtful debts is included as the full amount is expected to be recoverable.
12 Events after the reporting period
There were no significant events, outside the ordinary course of business affecting the Group since 31 December 2011.
13 Statutory financial statements
The financial information in this preliminary announcement is not the statutory financial statements of the Company, a copy of which is required to be annexed to the Company's annual return filed with the Companies Registration Office. A copy of the financial statements in respect of the financial year ended 31 December 2011 will be annexed to the Company's annual return for 2012. 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 31 December 2011, which were approved by the Directors on 28 February 2012. A copy of the financial statements of the Group in respect of the year ended 1 January 2011 has been annexed to the Company's annual return for 2011 and filed with the Companies Registration Office.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFLAFVITFIF
