Glanbia plc

Thank you. Good morning, and welcome to the Glanbia Full Year 2018 Results Presentation and Call.

During today's call, the directors may make forward-looking statements. These statements have been made by the directors in good faith based on the information available to them up to the point of their approval of this presentation.

Due to 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 made on today's call, whether as a result of new information, future events or otherwise.

I'm now handing over to Siobhan Talbot, Group Managing Director of Glanbia plc.

Good morning, ladies and gentlemen. I'm delighted to welcome you to the Glanbia full year 2018 results.

I'm joined by our Finance Director, Mark Garvey. I'll take an overview of the strategy and performance of the 2018 year, Mark will then speak to some further detail on the finances and I'll return and speak to the outlook for the year.

Firstly, we're pleased to report a good performance for the group overall for 2018 where we delivered against all of our guided metrics. As you know, we set out in May last year our ambition for the group to 2022.

This ambition pre restatement for IFRS 15 which Mark will speak to later, is to grow our total group revenue to €5 billion from the €3.7 billion of today. This growth will be a blend of organic growth and acquisitions.

As we've previously noted, we believe that our key factors of consumer performance and lifestyle nutrition and nutritional ingredient solutions have global annual revenue growth rates in around mid-single digits. And our ambition is to achieve that level of organic growth on average in our portfolios to 2022.

For 2018, we're on track with that ambition. Our total group revenue growth was 4.6%.

The key driver of growth was our branded and nutritional ingredients platforms, GPN and the Nutritional Solutions component of GN, with GPN delivering 9.5% revenue growth and Nutritional Solutions overall of 3%. We aim to grow our adjusted earnings per share of between 5% and 10% on average over the period to 2022.

2018, again, we're on track with growth in adjusted earnings per share of 9%, driven by growth across our 2 key platforms of Performance Nutrition and the Nutritional Solutions component of GN. On our return on capital and cash conversion metrics, also we performed well against our targets with return on capital at 13.2% and strong cash conversion at 92%.

Finally, having rebased our dividend payout ratio last year, we have increased the dividend by 10%, in line with earnings which results in a payout ratio of 26.6% for 2018. As outlined in detail at the 2018 Capital Markets Day, the consumer trends remain positive for our business with the most relevant trends for us centered on that global consumer desire to purchase nutrition that supports health and well-being, to purchase that in convenient formats in readily accessible retail channels.

From a strong dairy heritage, our consumer-led innovative approach has now broadened our portfolio to now span a range of high-quality offerings as ingredients and consumer brands, those appealing to a wide spectrum of consumers seeking both dairy and nondairy nutrition. Our future growth in primary dairy will be through building on the successful current partnership model.

Our focus for growth and capital allocation will be further up the value chain. Spread through focused investments on innovation and organizational capabilities, we have developed leading positions in higher value offerings as world's leading experts in a wide range of dairy and bioactive ingredients and specialized nutrient premixes.

And as a brand owner, we are a global leader in performance and lifestyle nutrition. When we think of our strategy across the pillars of protecting and growing our core capability of today, stretching ourselves beyond what we do today so that we're never complacent about our consumers and we think of ensuring that the organization is always fit for purpose to execute our growth plans.

In 2018, we made progress across all of those 3 strategic pillars. With a strong quarter 4, GPN delivered like-for-like branded volume growth of 9.2% for 2018 with growth across all regions against the guided metric of mid- to high single-digit volume growth.

Nutritional Solutions grew volumes across both its dairy and nondairy portfolios, driving an overall 8.5% volume growth against the guided metric of mid- to high single digits. While we had growth in our core market of North America, we continue to extend our portfolios geographically with key growth regions for 2018 including Southeast Asia, Mexico, India and Oceania.

Innovation remains a key focus area for us in driving value momentum. We have accelerated our innovation agenda in Glanbia Nutritionals with new capabilities and flavors, proteins and packaging, deepening our relationships with key customers.

In GPN where we have set ourselves a target that 15% of our net sales in any year will come from products developed within the prior 3 years, we overachieved on this target in 2018. This focus on innovation has ensured us that within the GPN-branded portfolio, we have continued to expand our position with both the performance and lifestyle consumer by extending the format and channel reach of our existing brands.

2018 was also a year where we added to our capabilities through acquisition and development activity. In November, we completed the acquisition of SlimFast for $350 million plus working capital, an acquisition that broadens the GPN brand portfolio into the adjacent $8 billion consumer category of weight management.

Today, we have announced that we have agreed to acquire Watson for $89 million, a U.S.-based nondairy ingredient solutions business that is highly complementary to our Nutritional Solutions capability within GN. Mark will speak later to the developments within our joint ventures where we've approved a number of investments with our partners in the U.S.

and Ireland in our very capital-efficient joint venture model. We remain ambitious and have the balance sheet strength to continue to make acquisitions in the future.

We continue to invest to ensure that the organization is well placed to execute growth. We have evolved the operating models of the key group platforms in recent years to be agile, customer- and consumer-focused and strongly supported by centers of excellence in key areas such as supply chain, operations, finance.

We have continued to invest in building our teams across our regions, and this approach of continuous improvement to our operating model has facilitated significant internal talent development. As previously noted, a focus area for GPN in particular is the development of our capabilities in the direct-to-consumer space post the 2017 acquisition of Body & Fit.

We're on track with the investment program for the development of the technology platform and indeed the program of talent development to drive this capability forward. Moving then to the 2018 operational performance.

GPN delivered a good performance in 2018. Revenue increased by 9.5%, this was primarily driven by strong volume performance, which increased by 9.1% year-on-year as a result of demand growth in all regions.

Acquisitions drove revenue growth of 4.5%. Pricing declined 4.1% due to brand investments, innovation support and pricing initiatives to negate at consumer level the impact of foreign exchange headwinds and tariffs in certain markets.

Full year like-for-like branded revenue growth versus the prior year was 5.3% with like-for-like branded volume growth up 9.2%. As in recent years, GPN has a significant seasonal uplift in the fourth quarter across all regions, which drove strong growth in that quarter as retail partners prepare for specific consumer health and wellness initiatives ahead of the new year.

Pricing investment in the fourth quarter was reduced on prior quarters with investment in that quarter largely focused on the lifestyle ready-to-eat category in North America and the continued insulation of our customers and consumers from the impact of tariffs and FX in certain key non-U.S. markets.

From a regional perspective, North America delivered good growth in Q4. Volume was strong with strong orders from our key customers for our Performance Nutrition brands, particularly in the e-commerce and club channels as they prepared for significant consumer activity in the New Year.

In the more lifestyle category, Amazing Grass performed well, expanding its channel reach particularly in the mass channel. Brand investments in North America continued, albeit at a reduced level with the ready-to-eat category than we previously referenced very competitive through 2018, and our Q4 investment was focused in this category.

We expect that investment to continue into 2019 and we have a number of initiatives planned for the ready-to-eat space. In LAPAC, revenue growth momentum continued also through Q4 with strong volume momentum and pricing investment as I've mentioned earlier to insulate our customers and consumers from volatile FX and particularly tariffs.

As of now, we expect the current tariff regime to sustain into 2019, but we are working on a number of supply chain solutions in regions such as India to mitigate this cost. In EMEA, our GPN dedicated consumer, direct-to-consumer platform, Body & Fit, was a key driver of growth with momentum continuing in Q4.

Volumes grew in other channels in the region in the period, but the market is competitive particularly in Europe and brand investments continued into Q4. Overall, therefore, we had good volume momentum in 2018 in GPN.

While we have noted during the year the nature of our business is such that the timing of consumer activity by our customers can significantly impact the timing of our product sell-in and therefore quarterly numbers can move about for GPN at top line. As a team, we are focused on delivering growth for our full year and are pleased that the 9.1% of 2019 builds on the momentum of volume growth of 8% in '17 and 6% in 2016, all for the full years.

On overall pricing, as noted earlier, price declined 4.1% due to brand investments, innovation support and those pricing protections of consumers. For further context on this, we would estimate that approximately 100 basis points of the full year pricing relates to the insulation of customers and consumers from foreign exchange headwinds and tariffs in key markets in 2018.

GPN EBITA for 2018 was €173.1 million, up 6.7% on 2017. Margins at 14.7% was down 40 basis points.

The main factors influencing margin in the full year were the trade investments that I've noted earlier, higher freight costs, ongoing investments in building out the organization capabilities, including the direct-to-consumer, those items being offset somewhat by the lower input costs. Our investment in organizational capabilities includes the investments as planned in our D2C program where we're aligning our capital investments and our investments in talent to meet our future growth ambitions.

There was no one specific item that merits callout in the 40 basis point movement year-on-year, and overall, we are pleased that the, at 14.7%, the 2018 margin was at the higher end of our long-term ambitions set out at the Capital Markets event last May. As noted earlier, innovation remains a key focus of the GPN team and continues to underpin our branded revenue growth.

Against the target of 15% of net revenue from products launched in the last 3 years, GPN delivered an innovation rate of almost 20%. Our innovation was broadly based across regions and brands with locally tailored innovations performing well in the EMEA region and the LAPAC regions.

In North America, our innovations were focused on extensions of our key hero brands, Gold Standard Whey, AMIN. O.

ENERGY, Amazing Grass and Syntha-6, across all formats of powders, ready-to-eat and ready-to-drink. The GPN approach to innovation continues to differentiate our brands, bringing new consumers to our format.

This slide shows how investments we have made in the past have helped to evolve and develop the GPN business such that it remained the market leader, and we continued, and we will continue to develop the business to make sure that it maintains its relevance to performance and lifestyle consumers. While North America remains a significant geography, obviously impacted by recent acquisitions being North America based, we continue to grow strongly in the other geographies which are now 39% of the GPN portfolio.

We now have a significant population of talent based in 24 markets around the world where they are close to the consumer and local preferences. From a channel perspective, the evolution has been more dramatic with growth in FDMC and online such that, together, they now amount for a total of 49% of the GPN portfolio.

This is a very significant evolution versus a number of years ago and has repositioned the business to the fastest-growing channels in the category. The innovation focus I had noted earlier has been a key part of this evolution, which is also highlighted by the change in format mix, a change that will further shift towards the ready-to-drink space on the inclusion of SlimFast for the full year of 2019.

We were really pleased to complete the acquisition of SlimFast in November, which has enabled GPN to enter into that adjacent $8 billion weight management category. As an established and enduring brand in that category, SlimFast provides GPN with an incremental growth opportunity within the U.S.

and in the UK where it already has an existing strong presence. In addition, it will provide GPN with scale in the growing FDMC channel via its ready-to-drink products, in particular.

With full year 2018 pro forma revenue of $247 million, SlimFast grew strongly by 17% in 2018. GPN will use its existing capability to further develop SlimFast across channels and geographies.

Innovation will be a core part and continue to be a core part of the SlimFast portfolio. And the recent launch in the U.S.

of the SlimFast Keto range is performing well. GN delivered a good performance in 2018.

Total Glanbia Nutritionals revenues were €1.2 billion, a decrease on prior year of 0.6% as volume growth of 4.6% overall was offset by price declines of 5.2%. Volume growth was largely driven by Nutritional Solutions, and the price decline primarily relates to lower dairy markets.

GN's EBITA in 2018 was €111.8 million, a 3% improvement on the prior year with a 40 basis point improvement in margin to 9.3%. The margin improvement in GN was largely as a result of improved product mix in the period.

Nutritional Solutions is a leading provider of customized nutrient premixes, advanced technology protein solutions, functional beverages and flavors. Within Nutritional Solutions, we have a diverse product portfolio in both dairy and nondairy.

And we support our customers on both a global and regional basis where we can supply solutions that improve product functionality and nutritional profile, ultimately helping our customers to value add to their brands based on key consumer trends. Nutritional Solutions supports a range of solutions in the ready-to-eat value-add beverages on powder-based format in a number of categories including performance and lifestyle nutrition, infant and clinical nutrition, mainstream food and beverage and supplements.

Again, similarly to GPN, innovation is a key pillar of the continued evolution of GN. We strengthened our innovation portfolio again in 2018 and developed several technologies that allow us to continue to differentiate ourselves from our competitors and be a global provider of nutritional and functional food solutions.

Several new ingredients were launched in 2018 based on these technologies, and further work in '19 will broaden most of the technologies into adjacent applications resulting in an ingredient portfolio that is aligned with market trends. Nutritional Solutions represents the majority of the EBITA of GN and has a margin in the mid-teens range.

Nutritional Solutions delivered a good performance in 2018 with revenue of €526.7 million, an increase of 3% on the prior year. Volume growth at 8.5% was well in line with our guided range of mid- to high single digits.

That volume growth was broadly based across major project groups of premix and bioactive ingredients, dairy and canned nutrition with those regional and global customers. Overall, pricing declined by 5.5%, but this was really a function of the dairy side where we had lower whey markets versus the prior year.

U.S. Cheese is a leading producer and marketer of American-style cheddar cheese in the U.S., supplying brand owners of private label companies who in turn supply major retailers and foodservice operators.

Our U.S. Cheese team operates all of the dairy processing plants within Glanbia Nutritionals and also operates the Southwest and Michigan planned plants that will produce cheese and whey ingredients.

U.S. Cheese delivered an EBITA margin in the low to mid-single-digit range.

It delivered a good operational performance in 2018, increasing volumes by 1.7% with overall revenues now at €680 million. A decrease in revenues of 3.1% was driven by volume growth being offset by price decrease of 4.8% as a result of reduced cheese market prices year-on-year.

Market movements in our U.S. Cheese business tend not to impact earnings.

They will adjust margins slightly because of the milk procurement model that we have in place. Mark will speak later to the new accounting standard, IFRS 15, which will restate the revenue we speak to for Glanbia Nutritionals to include the product that we commercialize for the U.S.

joint ventures. And therefore, while this new standard will not impact earnings, it will alter margin percent.

Our margin guidance for Nutritional Solutions, which at the Capital Markets Day we spoke to as 14% to 16%, will be restated to 13% to 15%. With the bulk of the impact of GN margins per IFRS 15 being on the cheese component where margins will be restated to the low to the mid-single digits.

We're very pleased to announce the acquisition of Watson this morning. Nutritional Solutions has strong growth ambitions and we will achieve that as we go forward with that blend of organic growth and complementary acquisitions.

In line with this strategy, we have agreed to acquire Watson for $89 million. This is a family-owned business based in the U.S.

focused on the nondairy space in providing ingredient solutions. Watson specializes in vitamin and mineral premix solutions, edible films and material conditioning for global and regional customers in the food, nutritional, supplement and personal care categories.

With 2018 revenue of $101 million, Watson will broaden the Nutritional Solutions customer base and category reach and additionally provide a U.S. East Coast production facility.

It has over 300 employees across 3 facilities in Connecticut and Illinois. We expect to close this transaction by Q2, and on that basis, it will be marginally accretive to our 2019 results.

I'd now like to hand to Mark for the financial review.

Thank you, Siobhan, and good morning to everyone on the call. I will now take you through our 2018 financial performance.

In our last strategic planning period beginning in 2014, we delivered on our key financial commitments and we're confident in our ambition to 2022, which we set out at our Capital Markets Day last May. At that meeting, I outlined 4 key financial metrics, including a 5% to 10% average annual growth and constant currency earnings per share; delivering return on capital employed in the range of 10% to 13%; converting over 80% of our EBITDA into operating cash flow; and committing to a dividend payout range between 25% and 35% of adjusted earnings per share.

I am glad to report that in the first year of our 5-year ambition, we have met or exceeded these metrics, reporting adjusted earnings per share growth of 9% on a constant currency basis, operating cash flow conversion of 92%, return on capital employed of 13.2% and a dividend payout of 26.6%. I'll now take you through the income statement on a constant currency and pre-exceptional basis.

We're pleased to report a good set of results in '18. Wholly owned revenues were €2.4 billion, up 4.1%; and wholly owned EBITA was €285 million, up 5.2% with both of our segments delivering good EBITA growth.

Wholly owned EBITA margins were 11.9%, up 10 basis points constant currency on last year. Net finance costs were €5.5 million lower at €17.5 million for the year, reflecting lower average net debt levels in 2018.

This was largely due to the repayment of a portion of our private placement debt in late 2017. Our average finance costs were 4.3% compared to 3.9% last year, somewhat reflecting an increase in U.S.

interest rates as well as the costs associated with refinancing some of our debt last year. The group share of joint ventures profit after tax was €45.3 million, up on a reported basis but marginally down on the prior year on a pro forma basis primarily due to relatively softer dairy markets.

The income tax charge was €32.8 million, a decrease of €5.5 million on prior year, reflecting an effective tax rate of 14.8%. This decrease was largely driven by the reduction in the U.S.

corporate tax rate from 35% to 21% effective the beginning of 2018. The U.S.

authorities have up until June 2019 to finalize regulations relating to the new tax law, and international regulations continue to evolve. At this point, we anticipate our effective tax rate for 2019 will be in the 13% to 14% range.

Adjusted earnings per share for the year was €0.91 up 4.5% on a reported basis and 9% on a pro forma constant currency basis, coming in ahead of our guidance of 5% to 8% constant currency growth. The group had no material exceptional items in 2018.

Looking at the results by segment, you can see that Glanbia Performance Nutritionals had a good year with revenues of €1.2 billion, growing 9.5% on a constant currency basis and 5.2% reported. Glanbia Nutritionals reported revenues of €1.2 billion, down by 0.6% on a constant currency basis and 4.7% reported impacted by relatively lower dairy markets in 2018.

Within Glanbia Nutritionals, the Nutritional Solutions revenues were up 3% constant currency as nondairy related revenues more than offset lower dairy prices. U.S.

Cheese revenues were down 3.1% constant currency. Glanbia Performance Nutritional revenues grew from €1.1 billion to €1.2 billion in 2018, up 9.5%.

Strong volume growth of 9.1% was the primary driver of revenue growth with like-for-like branded volumes up 9.2% with growth across all geographic regions. Pricing was negative 4.1% and negative 3.9% on branded revenues, approximately 1% of which was related to supporting international customers to offset the impacts of tariffs and dollar strength year-on-year.

In the fourth quarter, we again saw strong volume momentum as our key customers ordered for their New Year health and wellness programs. Branded pricing was also less negative at minus 2.8% in the fourth quarter, and we expect an improving pricing trend in 2019 as input costs firm somewhat.

Acquisitions accounted for 4.5% of revenue growth being Body & Fit in the first quarter and SlimFast for the last 6 weeks of the year. We are in the process of integrating SlimFast, and as Siobhan has mentioned, we are pleased with SlimFast's revenue momentum in 2018.

Glanbia Nutritionals revenues of €1.2 billion were down marginally on prior year on a constant currency basis. Nutritional Solutions revenues were up 3% while U.S.

Cheese revenues were down 3.1%. There was strong volume growth of U.S.

Cheese volumes were up 1.7% in the year. Due to relatively weaker dairy markets, pricing was, as expected, negative, down 5.5% in Nutritional Solutions primarily in dairy ingredients and 4.8% in U.S.

Cheese. We are pleased today to announce the agreement to acquire Watson for $89 million.

We expect this transaction will close by Q2 and will be marginally earnings accretive in 2019. Watson had revenues of $101 million in 2018 and as a complementary acquisition to the Nutritional Solutions portfolio.

As we discussed at our Capital Markets Day last May, we are focused on growing our Nutritional Solutions business both organically and through acquisition. Now turning to cash, operating cash flow for the year was at €302 million, representing a conversion of 92% of EBITDA.

There was a small working capital outflow of €10 million for the year. Business sustaining capital expenditure was $16 million.

On a constant currency and like-for-like basis, excluding the impact of SlimFast, total net working capital at the end of 2018 is in line with last year. Free cash flow was €295 million and benefited by €16 million this year from lower interest and tax cash payments due to lower average net debt and lower U.S.

tax rates, respectively. The PLC also received dividends from joint ventures of €32 million in 2018, an increase of €16 million, which included the first dividend from the newly formed Glanbia Ireland joint venture and an enhanced dividend from Glanbia Cheese as a result of strong performance in 2017.

The group continues to focus on operating cash flow conversion as a key metric and expects to achieve a conversion of over 80% of EBITDA through to 2022. In 2018, the group invested €418 million in capital expenditure, acquisitions and joint venture programs to drive future growth and returns.

This was facilitated in large part by the strong free cash flow generated during the year. The acquisition of SlimFast in November 2018 for $350 million was a key investment for the group in the important $8 billion weight management category.

This transaction closed in November 2018 and we are currently in the process of integrating the business. Total capital expenditure cash outflow was €62.6 billion.

Strategic capital expenditure amounted to €46 million and was primarily focused on projects around innovation, supply chain, manufacturing and IT systems in both segments. Business sustaining capital expenditure was €16 million in the year.

In 2019 we expect capital expenditure to be in a range of €70 million to €80 million. The group also invested €42 million in 2 important projects in the year with our joint venture partners: $40 million in the new Michigan cheese and whey joint venture and €8 million in Glanbia Cheese EU related to a new mozzarella cheese facility in Ireland.

As I mentioned earlier, the group signed an agreement to acquire Watson Holdings for $89 million. We have a strong balance sheet and capacity for investment and we continue to look for opportunities to acquire complementary businesses in both Glanbia Performance Nutrition and Nutritional Solutions.

As was discussed at our Capital Markets Day, the group has an ambition for return on capital employed over the 5-year period to 2022 to be in the range of 10% to 13%. In 2018, we are marginally ahead of this range with a reported return of capital employed of 13.2%.

The majority of the group's dairy processing activities are now in a joint venture structure. This model works well for the group as we have combined with strong joint venture partners, funded the significant asset investments in each business with limited equity and nonrecourse financing and ensured each joint venture has relatively stable income generation as well as returning cash to the group through dividends.

In 2018, our joint ventures contributed €45.3 million in profit after tax to the group, an increase of 5.5% on a reported basis. In addition, the group received cash dividends of €32 million from joint ventures including the first dividend from Glanbia Ireland.

Three new large-scale joint venture projects are currently underway, which will lead to future returns for the group. In Michigan, a $470 million cheese and whey operation will be commissioned in 2021.

The group contributed $40 million to this project in 2018 and will contribute a total of $82.5 million for the full project, the remainder being funded by our joint venture partners and nonrecourse bank financing. Glanbia Cheese EU is building a new facility in Ireland to produce mozzarella cheese.

This is a €130 million project and is expected to be commissioned in 2020. The group will contribute €35 million to this project of which €8 million was contributed in 2018.

Recently, our joint venture, Glanbia Ireland, announced a joint venture with Royal A-ware to build a €140 million facility in Ireland to produce continental-style cheeses. This project, which is expected to be commissioned in 2022, will be financed by equity from Glanbia Ireland and Royal A-ware and nonrecourse bank financing.

Turning to the balance sheet. I'm pleased to report that our balance sheet remained strong.

Net debt was €577 million at the end of the year compared to €368 million 1 year ago. The net debt-to-adjusted EBITDA ratio was approximately 1.55x compared to 1.1x in the prior year.

The primary reason for the increase in net debt was the investment in SlimFast somewhat offset by strong cash flow generation during the year. Interest cover was 14.8x.

Total banking facilities available to the group are €1.1 billion, and we have considerable capacity to invest to drive growth. We also extended the average maturity of our committed facilities from 2.2 years to 3.8 years as a result of refinancing activity during the year.

Net pension obligations were €38.5 million at the end of the year compared to €42 million at the end of '17. We continue to look for opportunities to derisk our pension obligations going forward.

In 2019, the new revenue accounting standard, IFRS 15, becomes effective for the group. Following a review of our revenue arrangements, this standard will have the effect of changing how we account for the relationship between the group and Southwest Cheese joint venture to that of a principal arrangement versus an agent arrangement.

As you are aware, the group manages the sale of cheese and whey production from the Southwest Cheese business and the commissions received for managing these sales have been included in the revenues of the Glanbia Nutritionals segment. Due to the revised criteria in IFRS 15 for evaluating principal-agent relationships, effective from 2019 Glanbia Nutritionals revenue and cost of sales will be grossed up for all sales of Southwest Cheese products.

Although a significant change to our wholly owned revenues, importantly, there will be no change to the EBITA of Glanbia Nutritionals or the group, although respective EBITA margins will be impacted by this change. On this slide, you can see the impact this change would have on the 2018 reported results had IFRS 15 been effective for 2018.

These will be the comparative numbers for the '19 results. Finally, I would like to update our 2022 top line ambition for the impact of the IFRS 15 change.

Based on current euro-dollar exchange rates, we have an ambition of €6 billion in total group revenues by 2022, previously noted as €5 billion at the Capital Markets Day. The €6 billion ambition includes €1.8 billion for GPN and €1 billion for Nutritional Solutions with expected EBITA margins in the 13% to 15% range for both businesses.

We expect U.S. Cheese and joint ventures to have revenues of approximately €2 billion and €1.2 billion, respectively, with margins in the low to mid-single-digit range.

And with that, let me hand you back to Siobhan to discuss our 2019 outlook.

Thank you, Mark. Overall, the outlook for Glanbia for 2019 is positive.

We expect adjusted earnings per share growth of between 5% and 8% on a constant currency basis. Previously noted, we generate over 80% of our revenue in U.S.

dollars and we report in euros. If the euro-U.S.

dollar exchange rate remains at today's level for all of '19, we expect the reported results to be approximately 3% higher than the constant currency outlook. For 2019, we expect to meet the metrics set out as part of our 2022 ambition at the Capital Markets Day event last May.

In terms of revenue growth, our ambition continues to be that we grow organically at the level of our category growth rates, which we estimate at mid-single digits for the branded portfolio of GPN and the Nutritional Solutions component of GN. For GPN, we expect 2019 full year revenue to be largely volumetric with full year pricing expected at this point to be broadly neutral year-on-year.

As historically, the volume trajectory through the year for GPN is extremely difficult to forecast on a quarterly basis and we believe that the seasonal feature of recent years will continue. On margins for GPN, we expect at this point that the full year 2019 margin will be reduced by approximately 50 to 70 basis points, largely reflecting the dilutive impact of the SlimFast acquisition, but also our continued extension into the food, drug and mass space and continued investments in our business.

We do expect that a full year effect of investments in relation to tariffs and FX for consumers in certain key markets to continue, which we are well advanced on plans to largely mitigate that impact. We will continue to support our brands and we'll continue to build our direct-to-consumer capability as we've spoken to previously.

For Glanbia Nutritionals, our ambition also continues to be to grow the Nutritional Solutions component at a rate that equates to the underlying category, which, again, we estimate at the mid-single digits. On margins, we will report the component part of GN Nutritional Solutions and U.S.

Cheese in 2019 post the implementation of IFRS 15. Suffice it to say at this point that we expect 2019 margins to be in the restated guidance range of 13% to 15% for Nutritional Solutions and low to mid-single-digit for Cheese.

It's important to note that while we continue to evolve the nondairy component of GN Nutritional Solutions, in particular, dairy market pricing movements can move the percentage margin of GN without necessarily changing the earnings level. Finally, we do anticipate that for 2019, the return on capital metrics and the operating cash conversion metric will be as set out in our 2022 ambition.

Overall, and finally, clearly, there are certain areas of uncertainty currently around trade policy and tariffs. The outcome of UK departure from the EU remains unclear and its impact is therefore difficult to quantify.

Whereas the wholly owned businesses of the group have a relatively limited risk in that regard in a no-deal scenario, the implications for our 2 joint venture businesses of Glanbia Cheese and Glanbia Ireland may be more significant, of course, depending on how the outcome unfolds. We have been actively preparing and as far as possible for that no-deal outcome and remain very alert to the risks that may crystallize in the coming months.

Thank you, ladies and gentlemen, for your time and attention, and we'll now head over to Q&A.

A couple of questions from my side. Firstly, just on the branded business, the international side delivered a very strong performance in 2018.

I know, Siobhan, you called out a couple of markets at the start. Perhaps maybe a little bit more color on 1 or 2 of those markets that you'd like to elevate.

That's my first question. Secondly, on SlimFast, currently, the run rate around top line growth is very impressive.

Just interested to know the drivers of that in terms of is it customer, is it format? That's my second question.

And finally, on Nutritional Solutions, just interested in your outlook around inflation for raw mats and obviously the associated impact on pricing for that segment?

And thanks for that. Yes, what we're finding in the international markets is that the investments that we have done over a number of years is actually really paying dividends in those markets where, and we continue to build out the teams by putting people in country where they get to know how the local market works can help on consumer preferences, that is all helping our growth.

If you take Oceania, for example, we have also evolved our approach to innovation where we had a number of really nice launches in the food, drug and mass space, locally developed, locally co-manufactured and doing well in markets. India, we called out a number of times that our great team there really building out our capabilities across lots of different channels.

And indeed, Mexico and Southeast Asia, again, the communities on the ground really building out predominately in a lot of the regions our sports nutrition brands, but also evolving in many regions, channels and lifestyle products as well. So really nice continued trajectory there.

SlimFast, yes, very pleased, as you say, with the run rate. Clearly, there had been some supply chain disruptions in the prior year.

And it is pretty broadly based. The innovation agenda of the SlimFast team has been really good in recent times and clearly our ambition is that, that will continue on into 2019.

And as I referenced, the Keto range in the U.S. doing well at the moment.

So very pleased with the acquisition in these early days and obviously planning to sustain a good momentum, maybe not at that '18 level, but we will see good momentum going forward. For GN, overall for the full year, we actually at this point would see positive pricing momentum.

Clearly, the dairy component of the portfolio can move around. But as of now, Cathal, we would see positive pricing, particularly towards the back end of the year.

Just one little follow-up. Could we infer from the volumetric numbers that you're taking share both in North America and internationally?

I would say we're taking share internationally within the category that we're operating in North America, I would say that's probably a fair comment. Of course, we always look at it on the run of our full year.

Our volume, branded volumetric of 9.2% was very strong against the categories that we operate. That seasonality, I think, is going to be with us as we look into '19 as well.

But it worked very well for us for '18.

A couple of questions for me. Just -- I guess, firstly, just a clarification.

So just for GPN volumes, for 2019, you are saying you expect branded volume growth in mid-single digits. I just wanted to clarify that's what you mean.

And then for -- just not to dwell on the B word, Brexit, but just is it that your wholly owned revenue businesses were relatively inflated, but I just wanted to check with GPN because I know there is some trading from also manufacturing in the U.K. whether there could be in impact there from a no-deal situation?

And then, finally, just maybe on the specifically pricing in global nutritionals for 2019, how you see that playing out between the Nutritional Solutions and Cheese.

Thanks for that. I'll address some of your topics and I'll ask Mark specifically to speak to your Brexit question.

You're right in terms of your perspective on what we said on volumes for GPN, but we're actually saying as of this morning is that we believe that our revenue ambition actually to be in that mid-single digit because we believe that, that's the category growth rate globally. This was calibrated as we know at various point in time and we do largely believe that to be a volumetric because at this point in time we see pricing probably broadly neutral.

In relation to your pricing piece for GN, this -- again, at this point in time and particularly on the Cheese side, it can ebb and flow through the year. But for the full year overall, we would actually see positive pricing both in the Nutritional Solutions and indeed on the Cheese portfolio.

Cheese portfolio particularly more back end weighted and probably Nutritional Solutions, I think, probably more towards the back end as well. Maybe, Mark, you could speak to Brexit.

It's always challenging to give an answer on Brexit when you don't know what the answer will be and I think you prefaced your question on that basis as well. But okay, from a plc perspective, as I said -- as Siobhan said, about 3% of our revenues are effectively in the U.K.

However, of course, our Performance Nutrition business does manufacture in the U.K. for the European region and they do import certain products to manufacture as they sort of export as well.

So from a transition perspective, we're making sure as we work with our customers that we have some inventories in the right place so that we can work through depending how a transition would occur. And then I think it depends significantly on what actually the new tariff arrangements may be.

And as they evolve, we have options there in terms of how we may want to look at what we want to do either in the U.K. or in Europe.

But at this point, our view is just to work through a transition arrangement in terms of having inventory in the right place.

Two questions. One on Watson, if you can provide some color on the margins and underlying growth of Watson and if they are similar to your Nutritional Solutions business?

And did you also included Watson in your full year guidance for '19? The second on Nutritional Solutions, if you can split the 8.5% volume growth for Nutritional Solutions between dairy and nondairy ingredients.

Good morning. I'd speak to the Watson acquisition and Mark will speak to the Nutritional Solutions.

Yes, very pleased with that acquisition overall. Business has been growing nicely in recent times.

It is a long-established name in the U.S. premix market and it really has a strong reputation in that space.

As we know it's family-owned. We know these people for quite a long period of time and really pleased that actually on their decision to sell the business that is coming into Glanbia organization.

The current margin profile would be a little bit less than the Nutritional Solutions components, but as we were thinking about our Capital Markets Day guidance, Massimo, we always had an expectation that there might be very good business that would still have excellent margins, but maybe not quite at the level of Nutritional Solutions and with that taken into our overall range guidance of 13% to 15%. To your, again, your final part of the question, yes, it is included in our full year guidance as marginally accretive.

Clearly, we're not entirely definitive on our completion date at this point in time, but as Mark referenced, timing of that will be in Q2. So that will be our estimate at this point in time.

Yes, and to your question on volumes, very pleased, Massimo, on the 8.5% like-for-like growth in terms of Nutritional Solutions volumes and it was very broad based across the business and we're seeing that come through on the premix side, dairy side, plant nutrition and Aseptic Solutions. So from our perspective, we're seeing good growth across that business, and Watson obviously is a nice complementary acquisition now that sort of adds, it leads to a lot of sales to that business as well, about 20% uplift in our revenues.

So that's good going forward.

A couple of questions, if you don't mind. Just firstly, within the pricing dynamic for GPN, you mentioned you expect your pricing to be broadly neutral.

Maybe if you can just talk a bit around the input cost side and how you see that materializing for you over the year bearing in mind the margin target you've intimated for that business next year? And then just following on in terms of the competitive dynamics, would be interested to hear any comments on what you're seeing in the market at the moment.

I know you've specifically called that ready-to-eat space. Just wondering any other categories or channels to call out from a competition standpoint?

And did you have any thoughts on whether you expect any change in dynamics following the Pepsi acquisition of CytoSport.

In relation to the trajectory of input costs, I think as we possibly referenced to the back end of 2018, we do see the potential for some firmness probably particularly on the 80% product as we look into '19. Well, at this point in time, we think that, that will be back end weighted.

So as of now, we think that our overall cost of goods and therefore our pricing will be pretty neutral. And the reality is if we see prices firming at the back end, we will be evaluating pricing and price increases in our categories.

So that's where we see it just now. No major movements in either direction, but we'll obviously as we do monitor that closely as we go through the year.

On the competitive dynamics, as you referenced, yes, we particularly called out as we have through '18 the ready-to-eat category. We've responded in that space and that's been part of our brand investment.

We have some exciting initiatives in the ready-to-eat category as we think into '19 and we'll see how that evolves, but we'll be positive about our ability to compete in that space. We have some great brands, not least thinkThin, our Optimum Nutrition brands, all having products in that format.

And innovation will be a continued pillar of how we address that competitive set. And that, indeed, leads me onto that broader final point of your question.

There's no doubt that the space in which we operate is competitive for sure. It's competitive in North America.

I've referenced some of the particular regions in Europe where we see it as being particularly competitive as well. But we are very focused on sustaining our consumer position with our brands across performance and lifestyle.

We're very focused on margin management when we innovate. And so through that combined effect and continuing to build out our organizational capability, I believe that we really have a portfolio now that has navigated that channel shift, but still being very mindful of the importance of certain channels like specialty to innovation in our space.

But I think our innovation agenda plus the strength of our brands, plus the breadth of the brand portfolio, I think, will stand us in good stead. And we will always navigate and invest in our brands as we see appropriate as we go through that.

If you don't mind just one small follow-up. In terms of the back end weighting that you alluded to, is there then anything specific to call out in terms of phasing between H1 and H2 in the overall business?

I know you sort of highlighted last year.

Yes, I think, Jason, what we've seen through 2018, 2017, '18 and into '19 is this seasonal piece. We increasingly now have very large customers in some of our key regions that run very significant events in the new year as we all focus on our health, we focus on our lifestyle.

And indeed, SlimFast and the whole weight management category can be very much customers-focusing on that Q1 space. So we see that seasonality as continuing where you're going to see the bulk of performance coming from GPN in the back end of the year.

Just one question from me and coming back to this GPN volume guidance. So in line with the market performance, is that across both U.S.

and international markets because given the step-up in spend internationally, I imagine you're outperforming that. So does that imply you're actually losing or expecting to lose share in the U.S?

And I just wanted to understand, given your guidance, your flat pricing, how that dynamic impacts your growth relative to the market?

I think it's fair to say to your question that we have been growing in recent times just by virtue of the evolution of the market and the strength of our brands at a faster rate internationally than we have been in North America. I wouldn't necessarily calibrate that to the extension that you led to there in terms of market share.

No, the, we are increasing our channel reach because the category is equally broadening its channel reach and that's giving us opportunity to play with different consumers across the totality of the performance and lifestyle spectrum. We now have 9 brands, many of whom playing specifically into playing specifically into different parts of that spectrum.

And so we continue to be very clear that we want to keep that consumer franchise. Again, we will take both tactical and strategic pricing decisions depending on what we feel is right for the long-term growth and sustainability of the business.

And I suppose I would bring people back to when you look on a full year basis, we've built at 9.1% in total for 2019, that's a build on 8% of the prior year volume growth and 6% prior volume growth beyond that 2016. So we've had very good continued, solid volume momentum.

Of course, I know that they can be somewhat frustrating because the quarterlies can be quite lumpy. But that is the nature of our category.

And as a team, we are very focused on taking that full year long-term view. And we're very focused in that context on delivering on our overall ambitions to 2022 and keeping our consumer franchise strong.

I have 2 questions. The first one, during the call, I think you highlighted the ways that you're looking into ways to cope with tariffs in the international business.

Can you give some more color here? Does that mean working with local co-manufacturers, for example, or broadening the production base potentially for GPN?

And then the second question is on the online, which is now your largest channel to date. Yes, the progress in Europe with Body & Fit, I think, is already clear.

But can you talk on some of the initiatives you've taken in the U.S. market to further progress here and also in the non-European international markets?

Thanks for that. Yes, actually, the initiatives that we're looking at in relation to continuing on an ongoing basis to protect our consumers against increased tariffs are very much the areas that you referenced.

We are well advanced, for example, in India region in looking at some local co-manufacturing. We have been reevaluating our import methodologies into that region.

And as we said and Mark alluded to it even in the Brexit context, we will, from a supply chain perspective, continue to evolve where we believe our production facilities should and could be and that may well be a blend as we look forward to fully-owned new production facilities, but also using an infrastructure of co-man. We have great capability in that global supply chain now within GPN and that team will continue to very much keep that under review.

On the online channel, as you say, yes, very pleased with the evolution of Body & Fit. We are well advanced on planning a new platform for Body & Fit.

Really upscaling our capability in that D2C space from a technology point of view we'll be going in, in 2019. We're delighted to bring on a new team member in the current year whose brief really will be to evaluate how do we best capture a D2C opportunity, particularly outside North America in the first instance.

So that will be something, I think, that we will hone our thinking on more power through the 2019 year and I'm sure we'll revert and talk to you more about that in due course. But pleased with the pace of learning in the organization.

As we said previously not least when we bought Body & Fit that this was a whole new learning for us. I think there's potentially lots of opportunities when we think to some of the international markets and the extent to which our consumers are embracing e-commerce and online for fulfillment of their consumption choices, I believe that will give us a real opportunity in the longer term.

But of course, as we said, we will walk before we run and we're learning lots of interesting things in that space.

Just following, coming back on the Body & Fit. Can you tell us when you expect the new platform to be fully live and when you expect to sort of be able to, I don't know, assess the success of the investments you've been making there?

And then, secondly, just on in terms of acquisition, I suppose, the majority of the acquisitions in GPN have been very sort of U.S. focused.

And I just wondered, and you've mentioned that has been keeping your exposure to the U.S. high.

What is stopping sort of more acquisitions be made outside the U.S. in GPN?

Is it quality of assets, is it prices valuations or is it just you think you get more bang for your buck in the U.S. market?

Thank you for that. I'll speak to Body & Fit and then I'll get Mark to speak to your acquisition question.

We would hope that the new hybrid solution will be in place in the second half of 2019. And you raised a very valid question, how do we, even in these early days, assess our confidence level around the return on the investment that we've made.

And quite frankly, we're seeing that in the top line growth. We have brought a lot of new people into the organization, building on a great capability within the team and organization that we bought with a lot of new people coming in, people that are very experienced in this space.

We're very pleased with the top line momentum even in advance of the new platform coming in place. We launched UK site, building on the existing site that we have.

So again, it will take time to build this out fully, but we're excited about the future potential.

Yes, and to your question on GPN acquisition specifically, James, obviously, the acquisitions we made in the U.S. has served us very well.

We've been able to even take opportunities to bring what we buy in the U.S. and take those brands internationally and has helped our 24-country expansion over the last number of years, I know you've followed us on that.

And we are also looking at potential opportunities outside the U.S. Those markets tend to be a lot more fragmented than the U.S.

You tend to have a lot more consolidation worked through in terms of U.S. opportunities.

That does not mean that we may not buy something internationally at some point, we continue to look at that. But they're probably more selective in terms of what we might want to put into the portfolio due to the fragmentation of a lot of those markets.

A few questions, please. Could you update us on contract manufacturing in GPN, please?

I realize it's small, but it seems to have grown quite nicely in 2018. Do you expect this to continue this year?

And then the second one, you talked a lot about innovation. Could you disclose your R&D spend, please?

Are you finding that you're spending more given the bigger focus you have on this? And then last question, is it possible for you to share with us what EPS accretion you're factoring into your guidance for 2019 from the Watson deal?

Thank you.

Thank you for those. Yes, in terms of the contract activity, we did have some activity increase, as you rightly referenced, for 2018.

As you know, our focus is very much on growing our branded portfolio. And in truth, we would probably see more pressure in that space as we look into '19.

So we're not anticipating any particular growth in contract activity. In fact, we probably see it at this point of maybe going the other direction for 2019.

Innovation, yes, we don't disclose the overall innovation metrics. But you could take it that we are increasing our spend.

There are 2 things I would call out really on the innovation space. Firstly, it's about we have recalibrated the entire organization to be very clear on how we think about it.

We have an entire organization of GPN that is mobilized to focus on innovation, sensible and high-quality innovation, the entirety of the teams are incentivized to deliver that. And that is given, I think, a renewed energy and focus building out more consumer insights and obviously then in GN as well.

So absolutely, it is an area of increased investment for us, part of an overall investment that fundamentally a lot of which we've just managed through our P&L accounts.

And Heidi, to your question on Watson, as Siobhan mentioned earlier, it's included in our 5% to 8% guidance. We expect it to close before the end of March.

At this point, we're saying it will be marginally accretive so you could take it to be less than 1% in terms of our overall guidance.

As always, appreciate the time and input and questions. Thank you very much, and we'll speak again soon.