Glanbia HY 2021 results
Glanbia delivers strong first half 2021, ahead of expectations
2021 Full year guidance of 17% to 22% growth in adjusted EPS
12 August 2021 - Glanbia plc (“Glanbia”, the “Group”, the “Company”, the “plc”), the global nutrition group, is publishing its financial results for the six month period ended 3 July 2021 (“financial half year 2021”, “half year 2021”, “first half of 2021”, “HY 2021” or “H1 2021”).
Results summary for the financial half year 2021
Glanbia delivered a performance ahead of expectations in the first half of 2021 as strong revenue growth and margin improvements delivered adjusted earnings per share (“EPS”) growth of 85% on a constant currency basis (up 70.2% reported); the Group also delivered strong cash conversion in the period which has funded capital allocation towards an acquisition, increased dividend and a further share buyback programme. Full year guidance is for adjusted EPS growth of 17% to 22% (constant currency) versus the prior year.
Highlights include:
- Wholly-owned revenues of €2,042.2 million (HY 2020: €1,836.7 million), up 20.3% constant currency on prior half year (up 11.2% reported);
- Glanbia Performance Nutrition (“GPN”) delivered revenue growth of 28.1% constant currency on prior half year (up 19.9% reported);
- Glanbia Nutritionals, Nutritional Solutions (“NS”) delivered like-for-like volume growth of 14.9% constant currency on prior half year;
- GPN delivered EBITA pre-exceptional of €90.2 million, up 418.4% constant currency on prior half year (up 360.2% reported) driven by strong revenue growth and margin improvement;
- Glanbia Nutritionals (“GN”) delivered EBITA pre-exceptional of €69.7 million, up 17.1% constant currency on prior half year (up 6.6% reported) driven by a strong performance in NS;
- Joint Ventures (“JVs”) delivered pre-exceptional share of profit after tax of €29.9 million, down €1.9 million on prior half year;
- Adjusted EPS of 52.86 cent, an increase of 85% constant currency (up 70.2% reported);
- Exceptional items in the first half of 2021 resulted in a charge of €52.2m (HY 2020: €14.6m) related to GPN transformation programme and legacy pension scheme restructuring;
- Basic EPS of 27.90 cent (HY 2020: 18.73 cent), up 49.0% reported on prior half year;
- Operating cash flow of €161.4 million, up €114.2m on prior half year and a cash conversion ratio of 84.4%;
- Net debt to adjusted EBITDA ratio of 1.51 times (HY 2020 1.95 times), a reduction on prior year due to strong cash flow;
- Acquisition completed in H1 2021 of a 60% stake in LevlUp, a European direct-to-consumer (DTC) gaming nutrition brand;
- Interim dividend of 11.75 cent per share (HY 2020: 10.68 cent) recommended by the Board, an increase of 10.0% on prior year; and
- Announcing the launch of a new share buyback programme of up to €50 million.
Commenting today Siobhán Talbot, Group Managing Director, said:
“I am delighted to announce that Glanbia has delivered a very strong performance in the first half of 2021 when compared to the prior year. The dedication of our people, supply chain partners and customers as we navigated the pandemic together, has positioned Glanbia well on its growth agenda.
In the first six months of 2021 wholly-owned revenues grew by 20.3%, on a constant currency basis. This was driven by very strong demand across our GPN branded business relative to the pandemic related challenges in 2020, and our NS ingredients business, which built on a very resilient 2020 performance. This performance drove a significant improvement in profit with adjusted earnings per share (“EPS”) of 52.86 cent in the period which was an increase of 85% on a constant currency basis versus the prior year. The Glanbia team has navigated the pandemic well to date keeping a clear focus on both tactical activity and key strategic initiatives. While the Group remains vigilant to the continued volatile and disruptive potential of the Covid-19 pandemic, this focused approach gives us the confidence to guide to delivery of full year 2021 adjusted EPS growth of 17% to 22% on a constant currency basis versus the prior year.
We made strong progress on our strategic agenda in the first half with significant progress on the GPN transformation programme driving revenue and margin growth, the acquisition of a 60% stake in LevlUp, a European gaming nutrition brand, commissioning of a $470 million JV plant in Michigan, the progression of our environmental, social and governance (“ESG”) strategy, and the restructure of legacy pension liabilities to de-risk our balance sheet.
In the first half, we generated over €160 million of operating cash flow and reduced our net debt by over €100 million. As a result of this strong performance we plan to increase returns to shareholders by raising our interim dividend by 10% as well as launching a share buyback programme today of up to €50 million.
Our compelling belief has always been that consumers increasing focus on health and wellbeing positions Glanbia well for the future, given our portfolio of nutrition brands and ingredient solutions. Our focused actions to drive demand coupled with the consumer response to market reopenings in the first half of 2021 has strengthened our belief that these trends will continue to deliver long-term growth for Glanbia.”
2021 financial half year results summary
1. To arrive at the constant currency change, the average exchange rate for the current period is applied to the relevant reported result from the same period in the prior year. The average euro US dollar exchange rate for the first half of 2021 was €1 = $1.204 (HY 2020: €1 = $1.102).
2. EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items.
This release contains certain alternative performance measures. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found on pages 34 to 40.
2021 half year overview
In the first half of 2021 the Group’s results were driven by a very strong performance in both the GPN and GN segments. Glanbia wholly-owned revenue was €2,042.2 million, an increase of 20.3% constant currency (up 11.2% reported). GPN revenues grew by 28.1% constant currency (up 19.9% reported) on prior year driven by a 22.2% increase in volumes, favourable pricing of 5.6% and the positive impact of the recent LevlUp acquisition of 0.3% of revenues. GPN volume growth was driven by a strong consumer response to both specific actions to drive demand as part of the GPN transformation programme and market reopenings relative to pandemic restrictions of the second quarter of 2020. GN revenues were up 17.1% constant currency (up 7.6% reported ) on prior period driven by volume increases of 17% offset by net negative pricing of 1.1%, related primarily to cheese markets, and the positive impact of the Foodarom acquisition of 1.2%. GN volume growth was strong, particularly in the non-dairy portfolio, building further on a very resilient performance in 2020.
Wholly-owned EBITA pre-exceptional was €159.9 million, up 107.9% constant currency (up 88.1% reported). GN pre-exceptional EBITA increased by 17.1% constant currency (up 6.6% reported) to €69.7 million (HY 2020: €65.4 million).
GPN pre-exceptional EBITA increased by 418.4% constant currency (up 360.2% reported) to €90.2 million (HY 2020: €19.6 million). GPN pre-exceptional EBITA margin at 14.1% (HY 2020 3.7%) was 1,040 basis points higher than prior year reported due to increased price, positive operating leverage and crystallisation of benefits from the GPN transformation programme. Positive phasing of input costs in the first half of 2021 also contributed to margin improvement and these are expected to reverse in the second half of the year. GN pre-exceptional EBITA margin was maintained at 5.0% (HY 2020: 5.0%). GN EBITA growth was driven entirely by NS which offset declines in US Cheese.
Glanbia’s pre-exceptional share of profit after tax in equity accounted investees (Joint Ventures) performed as expected with profit after tax decreasing by €1.9 million to €29.9 million for the first half of 2021. Total Group profit (pre-exceptional items) for the period was €133.5 million, up €63.6 million on prior half year.
This very strong performance in H1 2021 drove a significant improvement in adjusted EPS for the period to 52.86 cent. This was an increase on prior half year of 85.0% constant currency (up 70.2% reported).
Capital investment
Glanbia’s total cash outflow investment in capital expenditure (tangible and intangible assets) was €39.7 million in the first half of 2021 (HY 2020: €29.2 million) of which €33.9 million was strategic investment. Key strategic investment included supply chain consolidation as part of the GPN transformation programme. Total capital expenditure for the year is expected to be €80 million to €90 million.
Dividend per share
As a result of the strong performance in the period, the Board is recommending an interim dividend of 11.75 cent per share (HY 2020: 10.68 cent per share) representing a 10% increase on prior year interim dividend. Glanbia’s overall dividend policy remains unchanged at a target annual dividend payout ratio of between 25% and 35% of adjusted EPS. The interim dividend will be paid on 1 October 2021 to shareholders on the register of members as at 20 August 2021. Irish withholding tax will be deducted at the standard rate where appropriate.
Share buyback
Shareholders have recently given approval for the Group to pursue a share buyback programme following votes at the Company’s AGM on 6 May 2021 on Resolutions 10 (purchase of own shares) and 12 (rule 37 waiver) where 99.83% of shareholders and 68.94% of Independent shareholders voted in favour respectively for the Company having the authority to execute a share buyback at its discretion. In light of the voting outcome on Resolution 12 being below 80%, Glanbia consulted with shareholders to better understand the reasons behind the vote. This consultation took place in June and July 2021 and found that the Group’s shareholders were supportive of Glanbia’s capital allocation strategy. As a result of the strong cash flows in the business, Glanbia is announcing today that it intends to launch a share repurchase programme of up to €50 million. The intention is to acquire Glanbia shares on the open market and subsequently cancel them. A separate announcement with further details will be made immediately prior to its formal launch. Glanbia has previously completed a successful €50 million share repurchase programme on 9 April 2021.
ESG agenda
In January 2021 the Board approved a new long term sustainability strategy across all dimensions of ESG which sets out Glanbia’s commitment to positive change. Glanbia has mapped the relevant UN Sustainable Development Goals to this strategy and will follow a systems’ approach that focuses on areas which can be influenced.
On the environmental pillar with the ‘Pure Food + Pure Planet’ strategy, Glanbia has committed to a 31% reduction in carbon emissions at all manufacturing sites under operational control by 2030 (scope 1 and 2) and to reduce scope 3 emissions from purchased goods and services by 25% per tonne of dairy product produced by 2030 (from a 2018 base year). The plc’s targets under this strategy have now been validated by the Science Based Targets initiative (SBTi), the most ambitious global standard for best practice in emissions reduction.
On the social agenda, the Group has accelerated its commitment to having a more diverse and inclusive working culture, with the development of a new Group-wide diversity and inclusion strategy, to ensure that everyone has equal opportunities regardless of gender, religious belief, ethnicity, nationality or sexual orientation.
Governance changes have been implemented to support delivery and oversight of this ambitious sustainability strategy including the addition of ESG metrics for executive remuneration. During the period a new Board ESG Committee was established and a member of the Executive Leadership Team (“ELT”) was nominated to oversee the delivery of the ESG strategy. Michael Patten, Group HR and Corporate Affairs Director, took on the new role of Chief ESG and Corporate Affairs Officer in June 2021. This role is a member of the Group ELT and reports to the Group Managing Director. The Group will report on progress towards meeting the recommendations of the Task Force on Climate-related Financial Disclosures (‘TCFD’) at full year 2021.
Board update
Following on from the appointment of the first independent Chairman of the Company on 8th October 2020 the Board has decided that Donard Gaynor will continue as Chairman, until his successor is appointed in 2025, in order to facilitate the board composition changes announced in February 2021, which will result in the appointment of three new independent non-executive directors together with ongoing effective board renewal.
Outlook
Previously Glanbia guided full year 2021 adjusted EPS growth to be in the upper end of 6% to 12% on a constant currency basis versus prior year. As a result of the strong performance in H1 2021, Glanbia raised its expectations for the year and published updated guidance on 15 July 2021. Glanbia expects to deliver full year 2021 adjusted EPS growth of 17% to 22% on a constant currency basis versus the prior year.
While the Group remains vigilant to the continued volatile and disruptive potential of the Covid-19 pandemic, strategic actions have enabled a strong recovery in the first half of 2021 from the comparative challenges of 2020.
The strong first half performance positions the Group well for FY 2021. While cost inflation will be a headwind for the Group in the second half of the year, in particular in GPN, price increases and margin management are expected to mitigate some of the impact and will also provide the opportunity to increase investment behind brand marketing and NS capabilities, to drive long-term sustainable growth.
Inside Information
This announcement contains inside information as set out in the paragraphs titled Share Buyback and Board update. The person responsible for arranging for the release of this announcement on behalf of Glanbia plc is Michael Horan, Company Secretary. The time and date of this announcement is, at 7am BST, 12 August 2021.
Financial half year 2021 operations review
Commentary on percentage movements is on a constant currency basis throughout.
GPN revenue increased by 28.1% in HY 2021 versus prior year. This was driven by volume growth of 22.2% and price increase of 5.6%. Volume increase was driven by all markets as a result of strong underlying consumption trends as well as the effects of channel reopening as Covid-19 restrictions were eased during the period in most key markets. Volume growth accelerated in the second quarter as the scale of market reopening increased globally compared to the most challenged pandemic related restrictions of 2020. Price increase was driven by previous increases implemented in the second half of 2020 and focused revenue growth management. Excluding the impact of contract business, branded like-for-like revenues increased by 30.5%. The acquisition of LevlUp was completed on 31 May 2021 and contributed 0.3% revenue growth in the period.
GPN EBITA increased by 418.4% versus prior year to €90.2 million. This was driven by the strong sales growth and improved margin. Margin increase was driven by increased price, operating leverage and realisation of benefits from the GPN transformation programme. Positive phasing of input costs in the first half of 2021 also contributed to margin improvement, a timing benefit that is expected to reverse in the second half of the year as inflation trends crystallise.
GPN transformation programme
The delivery of revenue and margin enhancing initiatives under the GPN transformation programme has been a significant contributor to the result for the half year 2021. The programme was set up at the end of 2019 and has gained momentum since inception. Since 2020 the transformation initiative has been key to delivering improving margins and focused growth, which continued in the first half of 2021. The programme remains on track with key initiatives delivering to or above plan across supply chain consolidation, brand prioritisation, revenue growth management and the refocus of talent to drive the growth agenda. In the second half of the year part of the programme of margin management includes the planned execution of price increases to counter expected cost inflation. Overall, while delivering on the net margin improvement target of 200bps from the 2019 base, the crystallisation of programme benefits provides the opportunity to increase investment in brand marketing.
Americas
GPN Americas like-for-like revenues increased by 23.8% in the first half of 2021 compared to prior year. This was driven by volume growth in all channels and brands, the impact of prior year pricing decisions as well as ongoing strong revenue growth management. The ON brand had a very strong performance in the period. ON consumption1 growth in the 12 weeks to mid-June 2021 was 30.5%. ON has benefitted from its strong position in its category, ongoing marketing investment and broad channel positioning. SlimFast brand performance was broadly in line with prior year reflecting headwinds in the diet category in Q1 in particular. SlimFast consumption1 growth in the 12 weeks to mid-June 2021 was 6.6%. SlimFast has a strong pipeline of marketing activity and consumer engagement planned for the second half of the year supported by increased marketing investment. The think! and Amazing Grass brands also delivered strong growth in the period due to improved consumer trends.
International
GPN International, which includes direct-to-consumer (DTC), grew like-for-like revenues by 37.2% in the first half of 2021 compared to prior year. This was driven by volume growth in all regional markets and by price increases implemented in the prior year. The re-alignment, through the GPN transformation programme, of the international operating model to focus on key brands in key markets is delivering significant momentum. The second quarter was particularly strong with volumes accelerating as the quarter progressed which were related to the easing of Covid-19 related restrictions and the resumption of consumer activity and fitness routines.
LevlUp acquisition
On 31 May 2021 Glanbia completed the acquisition of a 60% stake in LevlUp GmbH (“LevlUp”), a DTC gaming nutrition brand based in Germany, for an initial consideration of €31.4m.
Operating in a high growth market, LevlUp’s product portfolio offers a range of ready-to-mix powder (RTM) products to gamers and e-sports athletes through its DTC channel. LevlUp products are designed to support performance and concentration while gaming and the brand has a high level of awareness across its target consumer base. The business is highly complementary to GPN’s DTC business and the investment provides GPN with a presence in the rapidly growing adjacent gaming nutrition category, expanding its reach to new consumers.
LevlUp’s consumer base is largely in Germany with a growing presence in adjacent European markets. 2020 full year net revenues were approximately €19 million. Glanbia has an option to acquire and the owners have an option to sell the remaining 40% stake subject to certain performance conditions by 2025.
1 Consumption growth is measured in North American channels and includes Online, FDMC (Food, Drug, Mass, Club) and Specialty channels. Data compiled from published external sources and Glanbia estimates to 13 June 2021.
Glanbia Nutritionals
Commentary on percentage movements is on a constant currency basis throughout.
Nutritional Solutions
NS revenues increased in the first half of 2021 by 20.7% delivering a strong performance which built further on a resilient prior year comparator. This was driven by a 14.9% increase in volume, a 1.8% increase in price and the Foodarom acquisition delivering 4.0% of the revenue growth. Volume growth was driven by the continued strong demand for vitamin and mineral premixes from customers oriented to health, wellbeing and immune enhancing trends as well as mainstream food and beverage in a range of product formats. In the second quarter demand for healthy snacking solutions also increased due to improved mobility trends in North America which drove improved volume growth in dairy solutions. Price increase was driven by dairy ingredients due to stronger market trends.
The Foodarom acquisition, which closed in August 2020, is performing well and is adding key flavour technology offerings to the NS portfolio.
NS EBITA was €56.6 million, 29.2% higher than prior year due to improved revenues and margins. Margins improved versus prior year due to operating leverage and mix. NS expects some margin headwinds in the second half of the year due to the rebalancing of business mix.
US Cheese
US Cheese revenue increased in the first half of 2021 by 15.6%. This was driven by an 18.0% increase in volume offset by a 2.4% decrease in price. Volume growth was related to the new joint venture plant in Michigan which completed commissioning in the period. Price decline was related to a strong prior year comparator.
US Cheese EBITA declined by 16.6% to €13.1 million in H1 2021. This was driven by a decline in margin as a result of higher operating costs in the period.
Equity accounted investees (Glanbia share)
Glanbia’s principal joint ventures (“JVs”) include Glanbia Ireland, Glanbia Cheese UK, Glanbia Cheese EU and MWC‐Southwest Holdings. Glanbia uses the equity method of accounting for its joint ventures and includes its share of joint venture profit after tax in the adjusted EPS calculation.
Glanbia’s share of JVs’ pre-exceptional profit after tax, decreased as expected by €1.9 million to €29.9 million in the first half of 2021 as a result of reduced performance in European JVs when compared to prior year. JV performance in H2 2021 is expected to be lower than prior year as a result of strong comparators.