Glanbia Regulatory News (GLB)

Glanbia HY 2018 results in line with expectations,

reiterating FY 2018 guidance of 5% to 8% growth in pro-forma Adjusted EPS, Constant currency

9 August 2018 - Glanbia plc ("Glanbia", the "Group", the "plc"), the global nutrition group, announces its results for the six month period ended 30 June 2018 ("financial half year 2018", "first half of 2018", "HY 2018" or "H1 2018").

Results summary for the financial half year 2018

· Wholly owned revenues from continuing operations of €1,112.0 million (2017: €1,185.7 million), up 3.6% constant currency on prior half year (down 6.2% reported);

· Wholly owned volume growth of 5.7% versus prior half year;

· Wholly owned EBITA from continuing operations of €123.7 million (2017: €148.3 million), down 7.3% constant currency on prior half year (down 16.6% reported);

· On a pro-forma basis adjusted earnings per share1 of 38.83 cent, a decline of 7.1% constant currency (down 15.8% reported);

· Glanbia Performance Nutrition, revenue growth of 4.9% constant currency (down 4.4% reported) and EBITA decline of 16.4% constant currency (down 24.6% reported);

· Glanbia Nutritionals, revenue growth of 2.4% constant currency (down 7.8% reported) and EBITA growth of 4.5% constant currency (down 6.2% reported);

· Joint Ventures pro-forma share of pre-exceptional profit after tax from continuing operations was €17.8 million, down €8.2 million on prior half year;

· Operating cash flow from continuing operations of €59.8 million, up €93.1 million on prior half year on a pro-forma basis primarily due to working capital improvements;

· Interim dividend of 9.71 cent per share up 64.3% on prior half year reflecting revised dividend policy; and

· Full year 2018 guidance reiterated of 5% to 8% growth in pro-forma adjusted earnings per share1, constant currency.

Commenting today Siobhán Talbot, Group Managing Director, said:

"Glanbia delivered in line with expectations in the first half of 2018 and reiterates guidance for 2018 full year earnings growth. We continue to drive volume momentum with 5.7% growth in the first half and reiterate guidance for full year volume growth in the key portfolios of Glanbia Performance Nutrition and Glanbia Nutritional Solutions in the mid-to-high single digit range. We expect margins for the full year to be similar to 2017; we prioritised investment in our brands and operational infrastructure in the first half in advance of input cost reductions which are materialising as expected in the second half of the year."

2018 financial half year results highlights

1. Pro-forma adjusted earnings per share calculation excludes the impact of discontinued operations from the 2017 financial year. A reconciliation is set out on page 35 of the glossary to the financial statements.

2. 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 2018 was €1 = $1.211 (HY 2017: €1 = $1.083).

3. EBITA is defined as earnings before interest, tax and amortisation and is stated before exceptional items.

4. Prior year number are presented on a pro-forma basis to include the share of results of Dairy Ireland, consistent with current year reported numbers.

5. Total Group profit number for HY 2017 includes the impact of discontinued operations which were sold on 2 July 2017.

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 32 to 39.

Foreign exchange

Glanbia generates a significant amount of its revenues in US Dollars and reports in Euro. To eliminate the impact of exchange rates on translation of results the Group uses constant currency reporting. 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 2018 was €1 = $1.211 (HY 2017: €1 = $1.083). Therefore this leads to a difference between the constant currency change and the reported result.

2018 half year overview and outlook

Glanbia delivered in line with expectations in the first half of 2018. Wholly owned revenue from continuing operations was €1,112.0 million, an increase of 3.6% constant currency (down 6.2% reported). Wholly owned EBITA from continuing operations was €123.7 million, down 7.3% constant currency (down 16.6% reported). Wholly owned EBITA margins from continuing operations were 11.1%, down 130 basis points constant currency (down 140 bps reported).

Glanbia's pro-forma share of JVs profit after tax from continuing operations decreased by €8.2 million to €17.8 million for the first half of 2018.

Total Group profit (after discontinued activities and exceptional items) for the period was €98.2 million, down €16.7 million on prior half year.

On a pro-forma basis, excluding the impact of discontinued operations, adjusted earnings per share from continuing operations was 38.83 cent. This was a decrease on prior year of 7.1% constant currency (down 15.8% reported). Group EBITA, on a pro-forma basis, including Glanbia's share of EBITA from JVs was €150.5 million, down €35.1 million versus the prior year.

Long-term strategy

On 23 May 2018 at its capital markets day, Glanbia outlined its strategic ambition to 2022. The Group is focused on long-term sustainable growth via its three platforms of Glanbia Performance Nutrition, Glanbia Nutritionals and Strategic Joint Ventures. This will be enabled by organic growth and selective M&A.

The Group's five year ambition is as follows:

Chairman and Vice Chairman changes

On 1 June 2018 Henry Corbally retired as Chairman and retired as a Non-Executive Director of the Board on 21 June 2018. On 1 June 2018 Martin Keane was appointed Chairman and Pat Murphy was appointed Vice Chairman of the Board. John Murphy continues in his role as Vice Chairman of the Board. Martin Keane, Pat Murphy and John Murphy are all nominees of Glanbia Co-operative Society Limited to the plc Board, as was Henry Corbally prior to his retirement on 21 June 2018.

Capital investment

Glanbia's total investment in capital expenditure was €25.9 million in the first half of 2018 of which €18.9 million was strategic investment. The key strategic project completed in the period was the installation of new lines to produce ready-to-eat products in Glanbia Performance Nutrition. Glanbia expects to invest a total of €65 million to €75 million in capital expenditure in the full year 2018.

2018 outlook

Glanbia reiterates its full year 2018 guidance of 5% to 8% growth in pro-forma adjusted earnings per share from continuing operations, constant currency. If the average Euro US Dollar exchange rate remains at current levels for the remainder of 2018, Glanbia expects the full year 2018 reported pro-forma adjusted earnings per share growth from continuing operations to be approximately 5% lower than the constant currency result.

Full year earnings growth is expected to be delivered by mid-to-high single digit like-for-like volume growth in both the branded portfolio in Glanbia Performance Nutrition ("GPN") and the Nutritional Solutions component of Glanbia Nutritionals ("GN"). Overall full year margins in both GPN and GN are expected to be broadly in line with 2017 levels with a strong improvement in GPN margins expected in the second half of 2018. JVs are expected to deliver a reduced profit in 2018 versus prior year as a result of relatively lower dairy markets.

Financial half year 2018 operations review

Glanbia Performance Nutrition

Commentary on percentage movements is on a constant currency basis throughout

GPN delivered a result broadly in line with expectations in the first half of 2018. The expected margin decline in the first half which was driven largely by pricing investment will be offset by strong margins in the second half as contracted input cost reductions materialise.

Revenues increased 4.9% to €519.6 million. The key drivers of revenue growth were 5.4% volume growth offset by a 4.1% price decline with a 3.6% contribution from the Body & Fit acquisition which closed in the first quarter of 2017.

Like-for-like branded volume grew 5.0% in the period. Volume growth was mainly driven by the branded portfolio in non-US markets with Latin American and South East Asian markets delivering strong results. The US market remained competitive and GPN continues to navigate market channel shifts. Volume growth continues to be a focus of the business with like-for-like branded volume growth expected to be in the mid-to-high single digit range for the full year.

Negative pricing reflected both brand investment and the competitive nature of the market particularly in the US. While some level of investment is likely to continue into the second half, the year-on-year level is expected to moderate somewhat relative to the first half.

EBITA declined by 16.4% in the period as revenue growth was offset by EBITA margin compression of 310 basis points to 12.2%. Margin decrease was primarily as a result of the brand investment noted above, planned investments in the direct-to-consumer platform and increased freight costs. This margin decline is expected to be reversed in the second half of 2018 as planned lower whey input costs materialise.

GPN remains focused on growth and as noted at the recent capital markets event will be investing in brands, innovation, systems and organisational infrastructure to maintain momentum. GPN expect strong EBITA growth to be delivered in the second half of 2018 with full year like-for-like branded volume growth in the mid-to-high single digit range and full year EBITA margins in line with the prior year.

Glanbia Nutritionals

Commentary on percentage movements is on a constant currency basis throughout

GN delivered a good performance in the first half of 2018 versus the same period in 2017. Revenues increased by 2.4% to €592.4 million and this was driven by a volume increase of 5.9% offset by a price decline of 3.5%. Volume growth was driven by both Nutritional Solutions and US Cheese. Price decrease was primarily driven by a reduction in dairy market prices which impacted dairy ingredients in Nutritional Solutions and US Cheese. EBITA increased by 4.5% as a result of revenue growth and improved margins. EBITA margins were 10.2% which was a 20 basis point improvement versus the same period in the prior year.

GN expects EBITA growth in FY 2018 to be driven by both non-dairy ingredients in Nutritional Solutions and US Cheese as the margin on dairy ingredients will be impacted by relatively lower whey markets. For full year 2018 Nutritional Solutions is expected to deliver mid-to-high single digit volume growth and US Cheese is expected to deliver low single digit volume growth. FY 2018 GN EBITA margins are expected to be in line with prior year.

Nutritional Solutions

Nutritional Solutions is a leading marketer of advanced‐technology whey protein, specialist vitamin & mineral blends, plant based ingredients and functional beverages. Nutritional Solutions delivered in line with expectations in H1 2018 with revenue of €253.9 million, a 2.2% decrease on H1 2017. This was driven by a 3.1% increase in volume offset by a 5.3% decrease in price. Volume growth was broad based with customers across dairy and non-dairy Nutritional Solutions and the price decline was primarily as a result of lower dairy markets.

US Cheese

US Cheese is a leading producer of American‐style cheddar cheese in the US supplying a range of customers. US Cheese customers are predominantly US based and participate in the food service, retail, consumer branded and private label end markets. US Cheese had revenue of €338.5 million in H1 2018. Revenue increased by 6.1% versus the same period in 2017 and this was driven by an 8.1% improvement in volume offset by a 2.0% decline in price. Volume growth was primarily related to the timing of customer off-take in the first quarter with full year volume growth expected to be in the low single digit range. Price decline was related to lower year-on-year dairy market prices.

Joint Ventures (Glanbia share, pro-forma)

* Share of JVs revenue is calculated as the share of revenue attributed to Glanbia based on Glanbia's percentage ownership in the JV.

 1. Prior year number are presented on a pro-forma basis to include the share of results of Dairy Ireland, consistent with current year reported numbers.

Commentary on percentage movements is on a constant currency basis throughout

Joint Ventures ("JVs") delivered in line with expectations in the first half of 2018. Glanbia's share of revenue from the continuing operations of JVs increased by 4.7% in the period and the driver of this was a 7.3% increase in volume offset by a 2.6% reduction in price. All JVs grew volume in the period with lower pricing reflecting lower year-on-year global dairy markets. This also impacted EBITA margins which declined 170 basis points and this drove an EBITA reduction of 25.6%. As a result, Glanbia's share of JVs profit after tax ("PAT") from continuing operations, pre-exceptional, decreased by €8.2 million to €17.8 million in the first half of 2018.

JVs are expected to have an improved performance in the second half of 2018 versus the same period in 2017. However this will not be enough to offset the decline in H1 2018 and Glanbia's share of JVs PAT in FY 2018 is expected to be down versus the prior year.

Strategic development in JVs

Southwest Cheese

The US$140 million project to expand production capacity by 25% at Southwest Cheese was completed and fully commissioned in quarter two 2018. This project was funded directly by Southwest Cheese.

Glanbia Cheese EU

On 16 July 2018, Glanbia announced the establishment of a new 50:50 JV with Leprino Foods to construct a new cheese production plant in Portlaoise, Ireland. This facility will be integrated with the existing JV of Glanbia and Leprino Foods in the United Kingdom, Glanbia Cheese UK. The project is expected to be commissioned by 2020 and will produce 45,000 tonnes of mozzarella cheese on an annual basis once fully commissioned. The total project cost is expected to be €130 million of which Glanbia will invest approximately €35 million into the JV over the construction phase of the project with remaining financing coming from Leprino Foods, Governmental grants and bank financing directly within the JV.

Michigan Joint Venture

Glanbia's project to create a new JV to build a large scale cheese and whey plant in the State of Michigan, USA remains on track. Glanbia will own 50% of this new JV with Dairy Farmers of America and Select Milk Producers owning the other 50% share. A site location will be announced later today in the US with the project expected to commence before the end of 2018 and commissioning to be completed by 2021. The overall project cost is expected to be US$470 million of which Glanbia is expected to invest US$82.5 million in total over 2018 and 2019. The remaining financing will come from the other JV partners and bank financing directly within the new JV. 

Half year 2018 finance review

Income statement

Wholly owned revenue from continuing operations increased 3.6% on a constant currency basis (down 6.2% reported) to €1,112.0 million (HY 2017: €1,185.7 million) in the half year 2018. Increased revenue was driven primarily by volume growth of 5.7% and the impact of acquisitions of 1.7% offset by negative pricing of 3.8%. EBITA from continuing operations declined by 7.3% on a constant currency basis (16.6% reported) to €123.7 million (HY 2017: €148.3 million) driven primarily by reduced pricing and increased investment within the GPN segment and the impact of relatively weaker dairy market pricing within the GN segment. EBITA margin decreased by 130 bps on a constant currency basis (decreased by 140 bps reported) to 11.1%.

Net financing costs of €7.6 million decreased €4.2 million versus the prior year (HY 2017: €11.8 million) driven by the reduction in the Group's net debt compared to prior year. The Group's average interest rate for the period was 4.0% (HY 2017: 3.5%). Glanbia operates a policy of fixing a significant amount of its interest exposure, with 85% of projected 2018 debt currently contracted at fixed rates.

The Group's share of results of Joint Ventures is down €4.5 million on prior year driven primarily by relatively weaker dairy markets versus prior year, particularly in Glanbia Ireland and Glanbia Cheese. Share of results of Joint Ventures is stated after tax and interest.

The half year 2018 pre-exceptional tax charge decreased by €6.3 million. This represents an effective tax rate, excluding Joint Ventures & Associates, of 15% (HY 2017: 17.9%). The reduction in the effective tax rate is primarily driven by the reduction in the US corporate tax rate from 35% to 21%.

Profit after tax from discontinued operations in half year 2017 relates to the results of Dairy Ireland and related assets after tax and pre-exceptional costs. The disposal of 60% of Dairy Ireland and related assets was completed on 2 July 2017. The results of Dairy Ireland in 2018 are now part of the Glanbia Ireland Joint Venture ("Glanbia Ireland") and reflected within the share of results of Joint Ventures.

Profit for the period excluding exceptional items decreased by €27.6 million from €125.8 million to €98.2 million on a reported basis. There were no exceptional items in half year 2018. Details of exceptional items in the prior year are set out in note 7 to the financial statements.

Pro-forma adjusted earnings per share

Pro-forma adjusted earnings per share is provided as it is more reflective of the Group's underlying performance than basic earnings per share. Pro-forma adjusted earnings per share is calculated based on the net profit attributable to equity holders of the parent from continuing activities before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax. Further details and a reconciliation between the pro-forma and reported adjusted earnings per share can be found in the glossary of the financial statements on page 36.

In half year 2018, total pro-forma adjusted earnings per share declined 7.1% (down 15.8% reported), driven by a reduction in EBITA and share of results of Joint Ventures.

Dividend per share

The Board has determined an interim dividend of 9.71 cent per share (HY 2017: 5.91 cent per share). This represents an increase of 64.3% on the prior year interim dividend. This is reflective of the revised dividend policy put in place by the Board in 2018 which sets a target annual dividend pay-out of between 25% and 35% of adjusted earnings per share. The dividend will be paid on 5 October 2018 to shareholders on the register of members as at 24 August 2018. Irish withholding tax will be deducted at the standard rate where appropriate.

Exceptional items

There were no exceptional items incurred in half year 2018. Details of exceptional items in half year 2017 are set out in note 7 to the financial statements.

Group financing

1. Definitions of net debt, adjusted EBITDA and adjusted EBIT are as per financing agreements which include dividends from Joint Ventures and the pro-forma effect of acquisitions. A detailed glossary of the key performance indicators and non-IFRS performance measures can be found on pages 32 to 39.

The Group's financial position continues to be strong. Net debt at the end of half year 2018 was €402.1 million. This is a decrease of €206.3 million relative to the end of half year 2017. Net debt to adjusted EBITDA was 1.22 times and interest cover was 7.3 times. Both metrics remaining well within financing covenants. Relative to the 2017 year end, net debt has increased by €34.4 million.

Cash flow

Operating Cash Flow ("OCF") and Free Cash Flow ("FCF") are key performance indicators of the Group in monitoring cash flow and working capital performance. Set out in the table below is the OCF and FCF for half year 2018 on a pro-forma basis to exclude the impact of Dairy Ireland which is now within the results of the Glanbia Ireland Joint Venture.

OCF in the period amounted to €59.8 million which is €93.1 million favourable to prior year. This has been primarily driven by the improved working capital performance offset partially by reduced EBITDA. FCF of €58.2 million is €119.1 million favourable to prior year driven by favourable OCF, the impact of higher dividends received from Joint Ventures and reduced interest and tax payments.

Pension

On 30 June 2018, the Group's net pension liability under IAS 19 (revised) 'Employee Benefits', before deferred tax, decreased by €3.2 million to €38.7 million versus year end 2017 (FY 2017 pension liability €41.9 million). See note 8 to the financial statements for further details on the retirement benefit obligation at the reporting date.

Principal risks and uncertainties

The Board of Glanbia plc has the ultimate responsibility for the Group's systems of risk management and internal control. The Group's risk management framework outlines the key stakeholder risk management responsibilities. It is designed to ensure that there is input across all levels of the business to the management of risk and to enable the Group to remain responsive to the ever changing environment in which it operates. This framework, together with the processes to identify, manage and mitigate potential material risks to the achievement of the Group's strategic objectives are set out in detail on pages 44-51 of the plc's 2017 Annual Report.

The Group's principal risks and uncertainties are summarised in the risk profile diagram below, together with an overview of the risk trend identified for the year ended 30 December 2017, issued on 21 February 2018 which the plc Board believes to still remain applicable. There may be other risks and uncertainties that are not yet considered material or not yet known to the Group and this list will change if these risks assume greater importance in the future.

Key risk factors and uncertainties with the potential to impact on the Group's financial performance in the second half of 2018 include:

· Economic, industry and political risk - Macroeconomic and global trade uncertainty continues to increase, partly as a result of the geopolitical climate where the potential for the introduction of further trade tariffs may have negative impacts to Glanbia's strategic growth objectives. In addition, the nature of the United Kingdom's future trading relationship with the European Union post Brexit is still to be determined. From a Group perspective this uncertainty has increased the potential risk of raw material pricing, cross border trade costs, currency volatility and product pricing which together with other economic measures will require continued focus by the internal teams established to assess and monitor any potential impacts to the Group's performance;

· Market risk - The overall impact on margins of movements in dairy pricing and the importance of managing the evolving GPN channel mix as a key driver of category growth;

· Tax risk - It is possible that further legislative change in other jurisdictions may follow the recent US tax reform legislation. Any such legislative changes, together with the US tax reforms, will require on-going monitoring by Glanbia's in-house tax team and external advisors to assess the potential impacts to the Group's tax strategy and investment decisions; and

· Customer concentration risk - While from a strategic perspective the Group aims to build strong customer relationships with major customers, it can expose Glanbia to credit exposure and other balance sheet risks. The Board and management will be focussed on utilising available mitigation to limit such exposures while recognising that they cannot be fully eliminated.

The Group actively manages these and all other risks through its risk management and internal control processes.

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 announcement. Due to the inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially from those expressed or implied by these forward-looking statements. The Directors undertake no obligation to update any forward-looking statements contained in this announcement, whether as a result of new information, future events, or otherwise.

Results webcast and dial-in details

There will be a webcast and presentation to accompany this results announcement at 9.00 a.m. BST today. Please access the webcast from the Glanbia website at http://www.glanbia.com/investors/results-centre, where the presentation can also be viewed or downloaded. In addition, a dial-in facility is available using the following numbers:

The access code for all participants is: 1175882

A replay of the call will be available for 30 days approximately two hours after the call ends.

For further information contact

Glanbia plc +353 56 777 2200

Responsibility statement

The Directors are responsible for preparing the half yearly financial report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 as amended, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim Financial Reporting', as adopted by the European Union.

The Directors of Glanbia plc confirm that, to the best of their knowledge:

· The condensed Group interim financial statements for the period commencing 31 December 2017 and ended 30 June 2018 (six months/half year) have been prepared in accordance with the International Accounting Standard applicable to interim financial reporting (IAS 34) adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

· The half yearly financial report includes a true review of the development and performance of the business and the position of the Group;

· The half yearly financial report includes a true review of the important events that have occurred during the first six months of the financial year, their impact on the condensed Group financial statements for the half year ended 30 June 2018, and a description of the principal risks and uncertainties for the remaining six months; and

· The half yearly financial report includes a true review of related party transactions that have occurred during the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or the performance of the Group in the first six months of the current financial year.

Board changes

The Directors of Glanbia plc are as listed in the Glanbia plc 2017 Annual Report, with the exception of the following changes in the period relating to Glanbia Co-operative Society Limited ("Glanbia Co-op") nominees on the Glanbia plc Board:

· On 25 April 2018, Michael Keane retired as a Non-Executive Director of the Board at the plc's AGM. On 1 June 2018 Henry Corbally retired as Chairman and retired as a Non-Executive Director of the Board on 21 June 2018. On 1 June 2018 Martin Keane was appointed Chairman and Pat Murphy was appointed Vice Chairman of the Board. On the same date, Patsy Ahern and Tom Grant retired as Non-Executive Directors of the Board and Jer Doheny was re-appointed Non-Executive Director. On 21 June Patsy Ahern was re-appointed Non-Executive Director of the Board.

Glanbia Co-operative Society Limited - Right to nominate Glanbia plc Directors

In compliance with Listing Rule 6.2.2 A of the ISE/Listing Rule 9.2.2 AD of the UKLA, Glanbia plc has entered into a written legally binding agreement (the 'Relationship Agreement') with Glanbia Co-op, which is intended to ensure that Glanbia Co-op complies with the independence provisions/undertakings set out in Listing Rule 3.3.7 A of the ISE and 6.5.4 R of the UKLA. This relationship agreement provides that the governance arrangements set out below will apply with respect to the composition and size of the Board of Glanbia plc. Glanbia Co-op currently owns 31.5% of the issued share capital of Glanbia plc. Between 2012 and 2017, Glanbia Co-op and the Board agreed the following changes, which will impact the composition and size of the Board between 2018 and 2022:

· In 2018 the number of Glanbia Co-op Nominee Directors has reduced from ten to eight;

· In 2020 the number of Glanbia Co-op Nominee Directors will reduce from eight to seven, and

· In 2022 the number of Glanbia Co-op Nominee Directors will reduce from seven to six. It is the intention that Glanbia Co-op would continue to nominate a Glanbia Co-op Nominee as Chairman of the Board until no later than 30 June 2020.

Further, if Glanbia Co-op's shareholding in Glanbia plc falls below 28% of the issued share capital, discussions will take place regarding a further reduction in the size of Glanbia Co-op's representation on the Board.

A list of current directors is maintained on the Glanbia plc website: www.glanbia.com

On behalf of the Board

9 August 2018

Condensed Group Income statement

for the half year ended 30 june 2018

Condensed Group Statement of comprehensive Income

for the half year ended 30 june 2018

Condensed Group Balance sheet

as at 30 june 2018

Condensed Group Statement of changes in equity

For the half year ended 30 june 2018

*On 2 July 2017 non-controlling interests were disposed of as part of the disposal of 60% of the Groups shareholding in Dairy Ireland and related assets (note 9)

Condensed gROUP Statement of cashflows

For the half year ended 30 june 2018

Notes to the financial statements

For the half year ended 30 june 2018

1. General information

Glanbia plc (the Company) and its subsidiaries (together the Group) is a leading global nutrition group with its main operations in Europe, USA, Middle East, Asia Pacific and Latin America.

The Company is a public limited company incorporated and domiciled in Ireland, the number under which it is registered is 129933. The address of its registered office is Glanbia House, Kilkenny, Ireland. Glanbia Co-operative Society Limited (the Society), together with its subsidiaries, holds 31.5% of the issued share capital of the Company. The Board of Directors as at 30 June 2018 is comprised of 16 members, of which up to 8 are nominated by the Society. In accordance with IFRS 10 'Consolidated Financial Statements', the Society controls the Group and is the ultimate parent of the Group.

The Company's shares are quoted on the Euronext Dublin and London Stock Exchanges.

These condensed consolidated interim financial statements ("interim financial statements") as at, and for the period commencing 31 December 2017 and ended 30 June 2018, were approved for issue by the Board of Directors on 8 August 2018.

2. Summary of significant accounting policies

(a) Basis of preparation

The interim financial statements as at, and for the period commencing 31 December 2017 and ended 30 June 2018 (half year/six months) have been prepared in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 as amended, the related Transparency Rules of the Central Bank of Ireland and with IAS 34 'Interim Financial Reporting', as adopted by the European Union. The interim financial statements should be read in conjunction with the financial statements as at, and for the year ended 30 December 2017 (2017 Annual Report), which have been prepared in accordance with International Financial Reporting Standards (IFRS). The interim financial statements do not include all of the information required for a complete set of IFRS financial statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual report.

The interim financial statements as at, and for the period commencing 31 December 2017 and ended 30 June 2018 and, as at, and for the six months ended 1 July 2017, have neither been audited nor reviewed by the Group's auditors.

(b) Statutory information

The interim financial statements are considered non-statutory financial statements for the purposes of the Companies Act 2014 and in compliance with section 340(4) of that Act we state that:

· the interim financial statements as at, and for the period commencing 31 December 2017 and ended 30 June 2018 have been prepared to meet our obligation under the Transparency Directive (2004/109/EC) Regulations 2007 as amended (Statutory Instrument No. 277);

· the interim financial statements as at, and for the period commencing 31 December 2017 and ended 30 June 2018 do not constitute the statutory financial statements of the Group and are unaudited;

· the statutory financial statements as at, and for the financial year ended 30 December 2017 have been annexed to the annual return and filed with the Companies Registration Office;

· the statutory auditors of the Group have made a report under section 391 in the form required by section 336 Companies Act 2014 in respect of the statutory financial statements of the Group; and

· the matters referred to in the statutory auditors' report were unqualified, and did not include a reference to any matters to which the statutory auditors drew attention by way of emphasis without qualifying the report.

(c) Going concern

The Group's business activities, together with the main factors likely to affect its future development and performance, are described in the Strategic Report on pages 1 to 48 of the 2017 Annual Report.

After making enquiries, the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for a period of at least 12 months from the date of approval of the interim financial statements. The Group therefore continue to adopt the going concern basis in preparing its interim financial statements.

In reaching this conclusion the Directors have given due regard to:

· Available cash resources, cash generated from operations, committed bank facilities and their maturities which, taken together, provide confidence that the Group will be able to meet its obligations as they fall due; and

· The Group's financial risk management policies which are described in the 2017 Annual Report, the nature of business activities and the factors likely to impact operating performance and future growth.

(d) Foreign currency translation

The interim financial statements are presented in Euro, which is the Group's presentation currency.

The principal exchange rates used for the translation of results and balance sheets into Euro are as follows:

(e) Changes in accounting policies

The methods of computation, presentation and accounting policies adopted in the preparation of the interim financial statements are consistent with those applied in the 2017 Annual Report. The Group's accounting policies are set out in note 2 to the financial statements in the 2017 Annual Report.

There were no new standards effective for the Group as at, and for the period commencing 31 December 2017 and ended 30 June 2018.

The following standards, amendments and interpretations have been published. The Group will apply the relevant standards in the financial year in which they become effective and is currently assessing their impact on the Group's financial statements. The standards are mandatory for future accounting periods but are not yet effective for the Group and have not been early adopted by the Group.

IFRS 9 'Financial Instruments' (EU effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

The expected impact of IFRS 9 on the Group has been assessed and the findings are as follows:

The Group's review has indicated that, on transition to the new standard, equity securities previously accounted for in accordance with IAS 39 as available for sale financial assets will be elected on initial recognition at fair value through other comprehensive income. On adoption of IFRS 9 any gains or losses arising on de-recognition of such assets will remain in equity and will not be recycled to the income statement.

IFRS 9 introduces a forward-looking expected credit losses model, rather than the current incurred loss model, when assessing impairment of financial assets in the scope of IFRS 9. The standard provides a simplified approach as a practical expedient. The Group will adopt this approach on transition and it is not expected that any significant adjustments will be made to results already reported on transition.

The Group will adopt the hedge accounting section of IFRS 9. No impact to the Group's results has been identified from the Group's assessment of the IFRS 9 hedge accounting requirements.

IFRS 15 'Revenue from Contracts with Customers' (EU effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

The Group expects to adopt the modified retrospective approach to transition permitted by the standard in which the cumulative effect of initially applying the standard is recognised in opening retained earnings at the date of initial application. No material effect is anticipated at this point.

The Group has assessed the impact of implementing IFRS 15 and, with the exception of the matter set out below, has not identified any material impacts resulting from transition to the new standard.

Following a review of all material contracts with customers, the Group has concluded that the revised principal versus agent considerations will lead to the Group's relationship with its Joint Venture, Southwest Cheese Company, LLC (Southwest Cheese) transitioning from an agent relationship to that of a principal. Based on year to date sales by Southwest Cheese, the transition to the new standard would result in a gross up of revenue and costs of sales of approximately €380.4 million for Half Year 2018 (HY 2017: €387.9 million, FY 2017: €747.0 million). Although there is no change to EBITA, as a result of the increase in revenue, there would a dilution to the EBITA margin percentage as follows: Half year 2018 a reduction of 2.8% (HY 2017: 3.1%, FY 2017: 2.8%). For the 2019 financial year revenue and costs relating to this arrangement will be shown gross in the Group income statement.

IFRS 16 'Leases' (IASB effective date: on or after 1 January 2019)

This standard will be effective for and will be adopted by the Group for the 2020 financial year beginning 6 January 2020.

The Group's evaluation of the effect of adoption of IFRS 16 is on-going and the Group's initial findings are detailed as follows:

The Group expects to adopt the modified retrospective approach to transition permitted by the standard in which the cumulative effect of initially applying the standard is recognised in opening retained earnings at the date of initial application.

The Group expects that the adoption of IFRS 16 will have a material impact on the financial statements, significantly increasing the Group's recognised assets and liabilities. The Group has approximately 580 operating leases for a range of assets principally relating to property, equipment and vehicles. The fair values of these leases are currently being evaluated. As a result of the transition to IFRS 16, the fair value of these leases representing the present value of the lease payments over the expected lease contract period will be recognised as a Right of Use Asset with a corresponding value recognised as a lease liability.

Amendments to IFRS 4 - 'Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts' (IASB effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

This standard outlines two options for entities that issue insurance contracts within the scope of IFRS 4.

No material impact is expected upon adoption.

Annual improvements to IFRSs 2014-2016 cycle (IASB effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

A number of small amendments to IAS 28 'Investments in Associates and Joint Ventures'. No material impact is expected upon adoption.

Amendments to IAS 40 'Transfers of Investment Property' (IASB effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

This amendment provides guidance on transfers to, or from, investment properties. No material impact is expected upon adoption.

Amendments to IFRS 2 'Classification and Measurement of Share-based Payment Transactions' (IASB effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

These amendments clarify that only market and non-vesting conditions are taken into account in the measurement of the fair value of the liability in a cash-settled share-based payment transaction. Vesting conditions (other than market conditions) are considered when estimating the number of awards expected to vest. No material impact is expected upon adoption.

IFRIC Interpretation 22 'Foreign Currency Transactions and Advance Consideration' (IASB effective date: on or after 1 January 2018)

This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.

IFRIC 22 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.

No material impact is expected upon adoption.

Amendments to IAS 28 'Long-term Interests in Associates and Joint Ventures' (IASB effective date: on or after 1 January 2019 - not yet endorsed)

The amendments clarify that an entity applies IFRS 9 'Financial Instruments' to long-term interests in an Associate or Joint Venture that form part of the net investment in the Associate or Joint Venture but to which the equity method is not applied.

Amendments to IFRS 9 'Financial Instruments' (IASB effective date: on or after 1 January 2019)

The amendments address concerns about how IFRS 9 'Financial Instruments' classifies particular pre-payable financial assets. In addition, the IASB has clarified an aspect of the accounting for financial liabilities following a modification.

Amendments to IAS 19 'Employee Benefits' (IASB effective date: on or after 1 January 2019 - not yet endorsed)

The amendments clarify the effect of a plan amendment curtailment or settlement on the requirements regarding the asset ceiling. It also clarifies that if a plan amendment, curtailment or settlement occur, that it is mandatory that the current service cost and the net investment for the period after the re-measurement are determined using the assumptions used for the re-measurement.

Annual Improvements to IFRSs 2015-2017 Cycle (IASB effective date: on or after 1 January 2019 - not yet endorsed)

A number of small amendments to IFRS 3 'Business combinations', IFRS 11 'Joint arrangements', IAS 12 'Income taxes' and IAS 23 'Borrowing Costs'.

IFRIC Interpretation 23 'Uncertainty over Income Tax Treatments' (IASB effective date: on or after 1 January 2019 - not yet endorsed)

IFRIC 23 clarifies the accounting for uncertainties in income taxes.

IFRS 17 Insurance Contracts (IASB effective date: on or after 1 January 2021 - not yet endorsed)

This standard replaces the guidance in IFRS 4 'Insurance Contracts'. It requires insurance liabilities to be measured at a current fulfilment value and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve the goal of a consistent, principle based accounting for insurance contracts.

Amendments to References to the Conceptual framework in IFRS Standards (IASB effective date: on or after 1 January 2020 - not yet endorsed)

This document contains amendments to references in relation to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC 32.

3. Changes in critical accounting estimates and judgements

In preparing these interim financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at, and for the year ended 30 December 2017.

4. Segment information

On 2 July 2017 the Group completed the disposal of Dairy Ireland and related assets. Following the disposal the structure of the internal reporting to the Chief Operating Decision Maker was reviewed as required by IFRS 8 'Operating Segments'. As a result, the Group revised its operating segments for the year ended 30 December 2017. Accordingly comparative segment amounts for half year 2017 have been re-presented in line with the revised segments disclosed in the 2017 Annual Report.

The Group now reports across the following segments: Glanbia Performance Nutrition, Glanbia Nutritionals and Glanbia Ireland. 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. Each segment is reviewed in its totality by the Chief Operating Decision Maker. The Glanbia Operating Executive assesses the trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items (EBITA).

Each segment derives its revenue as follows; Glanbia Performance Nutrition earns its revenue from the manufacture and sale of performance nutrition products, Glanbia Nutritionals earns its revenue from the manufacture and sale of cheese, dairy and non-dairy nutritional ingredients, and Glanbia Ireland earns its revenue from the manufacture and sale of cheese and dairy ingredients, and the manufacture and sale of a range of consumer products and farm inputs. Glanbia Ireland is an Equity accounted investee and the amounts stated represent the Group's share. All other segments and unallocated include the results of other Equity accounted investees, who manufacture and sell cheese and dairy ingredients. Corporate costs included within the total Group EBITA have been allocated across the wholly owned segments on a basis consistent with prior years.

Amounts stated for Equity accounted investees represents the Group's share.

The segment results for the period ended 30 June 2018 for continuing operations are as follows:

*Re-presented to reflect the revision of operating segments.

Included in external revenue are related party sales between Glanbia Nutritionals and Joint Ventures of €5.7 million (HY 2017: €7.0 million). Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to un-related third parties.

Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax for continuing operations as follows:

Balance sheet and other disclosures

The segments assets and liabilities are as follows:

Unallocated assets and liabilities comprise taxation, cash and cash equivalents, borrowings, available for sale financial assets, derivatives, retirement benefit obligations and the carrying value of remaining Equity accounted investees.

5. Seasonality

Due to the seasonal nature of the retail segment into which the Glanbia Performance Nutrition segment sells, higher revenues and operating profits are usually expected in the second half of the year than in the first six months. Glanbia Nutritionals revenues and operating profits, although impacted by dairy markets, are typically more evenly spread throughout the year.

6. Operating profit - Continuing operations

7. Exceptional items

There were no exceptional items incurred in half year 2018. This will be kept under review in the second half of 2018.

The nature of the total exceptional operating loss is as follows:

During the 2018 half year there was a cash outflow of €2.7 million in respect of exceptional charges recognised in FY2017. During the 2017 half year there was a cash outflow of €5.8 million on exceptional charges of which €5.4 million was in respect of exceptional charges incurred prior to FY2017.

Transaction costs on the disposal of 60% of Dairy Ireland and related assets were incurred in half year 2017. The nature of these transaction costs is outlined in the table above.

8. Retirement benefit obligations

The Group operates a number of defined benefit pension plans.

Principal assumptions used in the defined benefit pension plans

The principal assumptions used for the purposes of the actuarial valuations were as follows:

\* The ROI defined benefit pension plans are on a career average structure therefore this assumption does not have a material impact. The UK defined benefit pension plans comprise solely pensioners and deferred pensioners.

Mortality rates

The mortality assumptions used at half year 2018 are consistent with those applied in the 2017 Annual Report.

Recognition in the condensed Group income statement and in the condensed Group statement of comprehensive income

The following amounts have been recognised in the condensed Group income statement and condensed Group statement of comprehensive income in relation to defined benefit pension plans:

Recognition in the condensed Group income statement:

Recognition in the condensed Group statement of comprehensive income:

Recognition in the condensed Group balance sheet:

Reconciliation of net defined benefit pension plan liability to the amounts recognised in the condensed Group balance sheet:

The net liability disclosed above all relates to funded plans.

The movement in the net defined benefit pension plan liability recognised in the condensed Group balance sheet is as follows:

Sensitivity analysis

The following table sets out for the Group's pension schemes, the estimated impact in the plan liabilities resulting from a 0.25% change in the discount rate:

9. Discontinued operations

On 2 July 2017, the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia Co-operative Society Limited ("the Society"), its ultimate parent, creating a new joint venture, together with Glanbia Ingredients Ireland DAC, called Glanbia Ireland. Dairy Ireland is comprised of two business units, Glanbia Consumer Foods Ireland and Glanbia Agribusiness.

The disposal was approved by Society members at a Special General Meeting (SGM) on 18 May 2017 and by Group shareholders at an Extraordinary General Meeting (EGM) on 22 May 2017.

In consideration for the Society acquiring the 60% interest, Glanbia plc received €112.0 million and an amount of €96.8 million which equalled 100% of the net working capital in Dairy Ireland at completion.

The transaction is accounted for as a 100% disposal of Dairy Ireland in consideration for the cash payments outlined above and a 40% investment in Glanbia Ireland. The 40% investment in Glanbia Ireland is treated as a Joint Venture of the Group.

The Dairy Ireland activities were disclosed as discontinued operations in the condensed Group income statement and condensed Group statement of comprehensive income in 2017. See note 7 for details of exceptional items relating to the Dairy Ireland transaction.

The net cash flows of the Group's discontinued operations are as follows:

The full discontinued operations note is included in the 2017 Annual Report.

10. Finance income and costs - Continuing operations

Net finance costs do not include borrowing costs of €0.5 million (HY 2017: €0.5 million) attributable to the acquisition, construction or production of a qualifying asset within continuing operations, which have been capitalised.

Interest is capitalised at the Group's average interest rate for the period of 4.0% (HY 2017: 3.5%). Interest income includes the interest on loans to related parties of €0.5 million (HY 2017: €0.3 million).

11. Income taxes - continuing operations