Glanbia plc

Thank you, Operator. Good morning, and welcome to the Glanbia Full Year 2020 Results Presentation and Call.

During today's call, the directors may make forward-looking statements, and these statements are being made by the Directors in good faith based on the information available to them up to the time of their approval of the full year 2020 results release and the analyst 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 these statements made on today's call, whether as a result of new information, future events or otherwise. I'm now handing over to Siobhán Talbot, Group Managing Director of Glanbia plc.

Good morning, everyone, and a warm welcome to our full year 2020 results call. I hope you are all safe and well.

I'm joined today by our Group Finance Director, Mark Garvey. On the call today, I'm going to run through the operating highlights for 2020 and how we've performed against our priorities.

I'll outline how the pandemic has changed our markets and how we've evolved our strategy to drive growth in 2021 from our growth platforms of GPN and GN. Mark then will cover some of the finances, and we'll conclude with an overview of our ESG agenda, our outlook and, indeed, be happy to take your questions.

So turning then to the full year 2020. Following a strong first quarter that was ahead of our plans, COVID-19 was undoubtedly significantly disruptive for the group during the second quarter, given the speed and severity with which the pandemic changed our day-to-day lives in the many markets in which we operate.

Our people demonstrated tremendous agility and resilience in their response. And as a team, as we've spoken to you before, we immediately set 3 priorities to navigate the crisis.

First and foremost, protecting our people, maintaining the supply of food and maintaining our strong financial position. This organizational resilience, I think, has been borne out today by our financial results, as Glanbia Nutritionals and our strategic joint ventures saw less business disruption than our branded GPN business.

On a like-for-like basis, excluding the impact of a 53rd week in the prior year, we delivered 1.8% revenue growth in 2020. This was driven by a robust performance from Glanbia Nutritionals, which grew like-for-like revenue by 10%.

Our joint ventures demonstrated the strength we've built into their economic models, with our share of JV profits up significantly in 2020. As we've noted before, the second quarter was by far the most disrupted by COVID, with the main impact being on the GPN business as lockdowns heavily impacted consumer behaviors as well as routes to market.

And of course, that suppressed demand. Market conditions improved thereafter, albeit lockdowns were reinstated in many markets in Q4.

And while the second half of the year for GPN remains below the prior year, the business gained momentum with a sequential improvement in both revenue and earnings in H2 versus H1. In fact, from a consumption perspective, our pillar brands of both ON and SlimFast grew consumption by 4% in the key North American measured channels in 2020.

The group focus financial discipline through the crisis is very evident, I think, in our cash performance. We controlled costs tightly, managed working capital well, generating 122% operating cash conversion for the year.

This has facilitated further investment to fuel growth in the business, the maintenance of our dividend level of the 2019 levels, the execution of the €50 million buyback program and the continuation of our financial capability to execute M&A transactions. Today, we're also highlighting the evolution of our ESG strategy.

From an environmental perspective, our strategy builds on our heritage. Glanbia in Irish means pure food.

And our ambition is to combine pure food with a pure planet. As a team, we have set new targets for decarbonization and the management of waste.

From a social perspective, in 2020, we engaged in a significant listening exercise with our people to inform and stretch ourselves on the areas of diversity and inclusion. And of course, today, we have announced some significant changes in Board governance that will enhance the skill set and diversity of our Board.

I'll speak more to those later on. Early in 2020, we set out our strategy to regain growth momentum in the group.

In Q2, as the full extent of the COVID-related disruption became evident, as I said, we pivoted our focus to the 3 priorities we noted earlier. Despite this pivot, we sustained our focus clearly also on the strategic agenda.

And when I spoke to you last October at our Q3 results call, I said we were focused on delivering 3 things for the second half of 2020. It was all about progressing the GPN transformation, maintaining solid delivery in Glanbia Nutritionals and our joint ventures and continuing to navigate the COVID crisis as safely as possible.

As a team, we delivered our 2020 ambitions across all 3 of these dimensions. In GPN, we broadened and deepened the transformation program and have made great progress across initiatives to both drive efficiency and brand growth.

This progress helped deliver the 11.8% margins achieved in GPN in the second half of the year. This project is delivering against its plans and is on target to deliver an overall GPN EBITA margin ambition by 2022 of between 12% and 13%, an increase of 400 to 500 basis points on the 2020 margin and 200 basis points ahead of the full year '19 margin.

This project will continue through 2021, and we have increasing visibility on their returns. The depth of the portfolio in GN and the robust business models of our joint ventures continued to deliver this year.

GN delivered strong like-for-like revenue growth with volumes up over 4%. Nutritional Solutions extended its strategic capabilities through the acquisition of Foodarom in the third quarter.

As I said earlier, the profitability of our joint ventures, particularly in the U.S., increased significantly in the second half of the year. And importantly, we completed the construction and have entered commissioning of two very large-scale dairy facilities, particularly in the U.S., but also here in Ireland.

The resilience of Glanbia in 2020 would not have been achieved without the tremendous efforts of our people. I'd like to acknowledge the challenges that our people faced as we navigated the pandemic and express sympathy to our colleagues who, of course, have lost friends and loved ones.

We will and continue to put the health and wellbeing of our people front and center of everything we do in Glanbia, and this principle has guided us and served us very well. Through enhanced engagement and health and safety measures, we have kept all of our operations running safely into plan.

And we'll sustain the required infrastructure to support our people as long as it is required. The next slide highlights a reflection on our H2 priorities and how they come through in our financial results, specifically the scale of the pickup in financial performance in the second half of the year.

We do, of course, have natural seasonality in our revenues, but the scale of the improvement in GPN EBITA margins in the second half drove a very strong sequential uplift in wholly owned EBITA to €124.6 million, up 46% in the first half. And of course, this flowed through to our adjusted earnings per share.

The operational actions we took and the focused approach to liquidity management following the onset of COVID clearly benefited cash generation, with €285.7 million of operating cash flow in the second half. Our net debt levels have come down by over €120 million in the year.

And as Mark will outline later, we have refinanced the group, and our balance sheet is strong. Of course, we continue to navigate COVID that continues to disrupt all our lives, but the business trends that improved for Glanbia in the second half of 2020 have continued to improve as we moved into 2021.

I'd now like to speak to those market trends and how we've seen them evolve as we move through the year. No doubt COVID-19 has altered many aspects of our lives.

And for Glanbia, I believe the opportunities for growth have, in fact, accelerated. COVID-19 is a health crisis.

Glanbia is an organization focused on healthy nutrition. Consumers increasingly acknowledge the link between nutrition, the prevention of illness and health and wellness.

Our portfolio, which focuses on ingredients and brands that support active and healthy lifestyles, is perfectly positioned against these trends. Consumers have demonstrated increasing loyalty to trusted brands and category leaders, and we've certainly seen this to be the case for our pillar brands of ON and SlimFast.

Demand for dairy protein as a nutrition source has also been resilient through the crisis. We've seen good demand for our dairy and plant-based protein ingredient solutions.

And indeed, our plant-based brand, Amazing Grass, had good growth in 2020. Of course, we all changed our ways of working through the year, and we sustained strong engagement with our customers across both the ingredient and branded businesses.

We responded to strong demand for functional ingredients across areas such as supplements and immunity, increasing collaboration with our customers also on things like sustainability initiatives and evolving ways of working that has no doubt helped to cement many of our relationships. On channels, as we've spoken, as we move through 2020, e-commerce penetration has definitely accelerated.

We entered 2020 in a strong position in that channel in GPN and have continued to grow in 2020. In GPN, our brand portfolio is increasingly focused on the growth channels of e-commerce and FDMC, channels which now represent 70% of GPN revenue and in which, again, both our key brands of Optimum Nutrition and SlimFast performed well through 2020.

We are highly conscious that COVID-19 and the related lockdowns continue to disrupt many of our markets. After a very challenged Q2 in 2020, we recovered well in Q3, but saw lockdowns again disrupt Q4, albeit not at all to the same levels of consumer disruption as we saw earlier in the year.

We have and will continue to sustain our focused actions on the delivery of the GPN transformation, the driving of top line growth in both GPN and Glanbia Nutritionals and the management of the safety of our people and business as we move through COVID. We believe that we will return to growth in adjusted earnings per share in 2021.

We expect COVID-19 to continue to disrupt the year. But we do, at this point, expect the level of disruption to alleviate as we move through particularly the second half.

In this context, we expect that our on-trend positions in nutrition in GPN and in Nutritional Solutions will underpin the delivery of like-for-like branded revenue growth in 2021 and growth in our ingredients business. It's extremely difficult to be absolutely prescriptive at this point of the year on the level of top line growth.

However, we do see trends that would, at this point, indicate the potential to deliver mid-single-digit revenue growth for the full year in those key areas of branded GPN and GN Nutritional Solutions revenue. On the margin side, we're somewhat more confident as the successful continuation of the GPN transformation program underpins our expectation of the delivery of double-digit margins in GPN in 2021.

In GN and Nutritional Solutions, we're targeting a delivery of 2021 margins broadly in line with 2020, always mindful of the buy/sell risk on dairy. We started well to date in the first quarter of '21 with good year-on-year revenue growth in both GPN and GN and good margins.

Our current view, therefore, is that, while acknowledging the continued risk that COVID-19 can be disruptive and the trends may not evolve as we plan today, current trends across our business give us confidence to guide a 2021 growth in adjusted earnings per share of between 6% and 12% constant currency as earnings growth in both GPN and GN will offset the expected reduction in 2021 performance by the joint ventures. Turning then to GPN.

The GPN full year decline in revenue and EBITA was a consequence of the COVID-19 pandemic. Like-for-like revenue declined 13.3%, including the impact of the exit of the U.S.

contract business, with like-for-like branded revenue down 10.8% in 2020. GPN had been trading ahead of plan for the first quarter, delivering 6% growth, but the market disruption and COVID reduced year-on-year revenue through the rest of the year, with the decline most severe in the second quarter.

In full year '20, like-for-like branded volume was down 10.9%, with the volume decline more pronounced in the first half, as a result, again, of those challenges in the second quarter. The rate of year-on-year decline improved in Q3 as lockdowns eased.

However, a return to lockdowns in Q4 did result in year-on-year decline, albeit not to the extent of Q2. As I said earlier, from that low of Q2, quarter-on-quarter revenue improved through Q3 and Q4.

Over the full year, the key areas negatively impacted by COVID-19 were international markets, which were curtailed, as well as the specialty and distributor channels in North America. Overall, price was positive for the year.

We implemented targeted price increases in North America performance and international portfolios in the second half of the year, and this helped to offset the pricing declines in the first half. Overall EBITA declined by 36.2% as a result of those lower margins and lower revenue.

Margins were particularly impacted in the first half and made a strong recovery in the second half as a result of improved operating leverage, improving sales trends, price increases and the delivery of the margin improvement initiatives from the GPN transformation. Looking then at full year 2020 for GPN by business area.

North America was 69% of revenue; international, 24%; and our D2C business, 7%. Year-on-year, the North America performance portfolio like-for-like branded revenue declined by 9%.

This was driven by volume declines in the specialty and distributor channels, heavily impacted by COVID-19, and it masked good growth in the growing channels of the domestic online and FDMC. While Q4 built sequentially on Q3, it was not as strong as the prior year due to the ongoing COVID restrictions and also a resultant shift in some promotional activity generally planned for January to later in Q1 '21.

The North American contract business declined significantly in the year as we exit that business as part of the transformation program. Pricing trends in Q4 continued the positive trajectory of Q3 as those price increases implemented in the second half drove overall pricing positive for the full year.

From a brand perspective, Optimum Nutrition performed well, with positive consumption in measured channels, while the more specialty brands of BSN and Isopure were negatively impacted by COVID restrictions. North America Lifestyle delivered a robust performance, albeit that like-for-like revenue declined 5.3%.

This was largely driven by headwinds for the think! brand as reduced consumer mobility as a result of COVID-19 resulted in a decline in the overall ready-to-eat category in North America.

In addition, as we said previously, through 2020, SlimFast had very strong prior year comparisons in the second half as, in fact, 2019 SlimFast consumption in North America grew by 49%. SlimFast continued to outperform the category in 2020.

And indeed, think! also outperformed its category performance in the year.

Our smaller brand Amazing Grass delivered good consumption growth as consumers sought out products providing natural immunity. The international portfolio was the most impacted by COVID-19 as restrictions effectively closed many channels in the second quarter.

Like-for-like revenue, therefore, declined by 21.3%, with the most severe disruption in that second quarter. There was a good recovery in volume trends in Q3 as restrictions eased in Europe.

And while the rate of year-on-year decline again was there in Q4, with the reintroduction of restrictions, Q4 had that year-on-year decline, but it was significantly less than Q2, and we believe that the performance of our international business within GPN over the full year demonstrates how quickly that business can recover in a more normal trading environment. Our direct-to-consumer business, Body & Fit, delivered like-for-like growth of 1.9%, with good volume growth in the second half, and this offset declines in the first half.

This growth was driven by increased traffic on our D2C sites in the period, and full year volume growth was offset by increased promotional investment that indeed helped drive volume. Turning to the GPN growth strategy.

I've already noted the benefits that the GPN transformation program are bringing to the business, so I'd like to here summarize why GPN is positioned for growth. And it centers on 3 core items.

Firstly, we have brought a sharper geographic focus to the business. In North America, we have a scale business with leadership positions in Performance Nutrition and weight management.

In our Rest of World markets, we've reduced complexity, significantly realigned our routes to market and our talent to growth opportunities. And we have new general managers across a number of our regions, such as China, Southeast Asia and Europe.

Our Optimum Nutrition and SlimFast brands are market leaders in their respective categories. We have refocused and increased our marketing investment in these brands, which we are confident of delivering returns.

Given that both brands, in fact, had positive consumption numbers in 2020 in the key North American markets, despite all the disruption of COVID, we believe these brands will continue to respond very well to increased investment and targeted innovation. Quite simply, our channel exposure has been one of the biggest transformations that have happened in GPN.

We have scale in the key channels of e-commerce with FDMC, where brand awareness, trust and, indeed, brand loyalty are critical. Looking then in more detail at those 2 key brands of Optimum Nutrition and SlimFast.

The brands now make up 71% of GPN revenues. Brand health is strong, and our strategy for the brand is to increase investments to drive awareness and advocacy, continue the evolution of our omnichannel strategy and selectively innovate to drive portfolio expansion.

Optimum Nutrition Net Promoter Score grew last year by 5 points to 59 in North America. We plan to increase our marketing investment in the brand significantly in 2021, targeting above-the-line spend and increasing brand awareness.

Optimum Nutrition continued to activate the proven 360 global platform in 2020, focusing on supporting personal trainers and consumers looking to stay fit during lockdown. ON continues to perform in our core North American markets, with the negative impacts of the pandemic less significant for powders versus other on-the-go formats.

And as I referenced, consumption for ON in North America grew by 4%, largely driven by the accelerated channel shift by consumers to e-commerce. While COVID-19 impacted the diet category in 2020, SlimFast consumption also grew.

Again, in those North America measured channels, it increased by 4%, with the brand gaining share in retail and growing well in e-commerce. Brand awareness for SlimFast remains very strong at 95%, and household penetration increased to 5%.

Our strategy for the SlimFast brand continues to involve the leveraging of our master brand communication strategy across both traditional and digital media and a continuation of innovation across consumer need states. Our innovation agenda for SlimFast continued with a further rollout of 8 new Keto fat bombs across meal bars, stackups and snacks.

So both ON and SlimFast are strong brands that we believe are well positioned as consumers increase engagements and the motivations of active lifestyle and weight management in a post-COVID environment. For number of years, GPN has been on a transformational journey with respect to channel orientation, in particular, growing brand presence in the e-commerce and FDMC channels.

Relative to 2015, when we had less than 1/3 of our revenue in these channels, we now have 71% of our GPN business across those channels. They are growth channels, where brand awareness, trust and loyalty, as I've referenced, is important.

We have leadership positions and have developed strong capability to further leverage our growth opportunities. Turning then to Glanbia Nutritionals.

It had a good performance in 2020, again, despite the challenges of COVID. Overall, revenue grew 9%, with like-for-like revenue up 10% and volumes up over 4% and pricing up 5.8%.

GN delivered volume growth in each quarter of 2020, albeit there was a marginal dip in NS volumes in Q2. Pricing, too, was largely positive across the year, driven by the cheese business.

Acquisitions added 0.9% to revenue in the year. EBITA margins and EBITA declined in the year, largely due to dairy market dynamics as they reduced buy/sell margins and somewhat altered product mix.

The fundamentals of our Nutritional Solutions business remained very strong through 2020. And the broad portfolio reach, the depth of our customer relationships, both those factors were such that the business navigated the year extremely well, despite the challenges of COVID in some areas.

60% of our Nutritional Solutions portfolio is now nondairy, and we continue to extend the capability of the business in total with the acquisition of the Foodarom flavors business in 2020. Nutritional Solutions revenue increased in the full year by 2%.

Like-for-like revenue increased by 0.8%, driven by a 2.4% increase in volume and the balancing price. Volume growth was broad-based across the portfolio as a result of good end-market demand.

The price increase primarily related to ingredient pricing year-on-year. The Watson and Foodarom acquisitions delivered a further 3% revenue growth, with both businesses actually performing very well.

We had a good revenue and margin performance in premix in 2020, with good volume for the year in all key regions, particularly North America and the Asia markets. From a category perspective, we saw good demand across clinical, supplements and, indeed, mainstream food and beverage.

Volumes in our key dairy ingredients were relatively stable, but we had some product mix effect from COVID, particularly COVID-related challenges in the convenience sector. And as I've referenced, negative pricing impacted margins for the year.

We continue to be very ambitious for the strategic evolution of Nutritional Solutions. Here too, we have leading positions and strong customer relationships in a broad range of categories.

These categories across supplements, clinical nutrition, mainstream food and beverage, infant formula, will sustain and grow further in a post-COVID world. We continue to develop the business by broadening the reach through organic development in these growth categories and by acquisitions, increasing our relevance, offering various technologies, taking a tailored partnership and solutions-based approach to individual customer needs.

We've increased our investment in innovation and have continued to develop nutrition technologies and offerings that address the ever-increasing functional and nutritional requirements of our customers and consumers. In US Cheese then, revenues increased in the full year by 11.9%, with like-for-like revenue increased 13.8%.

This was driven by a 5% increase in volume and an 8.8% increase in price. Volume growth reflected good demand from customers with retail and market exposure, a category which was strong as a result of COVID-19.

Pricing in US Cheese was extremely volatile through the year, but averaged at higher levels than the prior year as a result of that higher category demand. Our US Cheese business operates a business model that helps to negate the majority of the impact of price volatility.

Our US Cheese margin did decline, largely as a result of higher operating costs and that pricing volatility. From a business perspective, our US Cheese and indeed U.S.

joint ventures are highly complementary. And as you're aware, the GN US Cheese team are the operational and commercial team for our U.S.

joint ventures. In 2020, while pricing dynamics and some cost headwinds impacted the margins of the wholly owned US Cheese business, this was more than countered by strong margins in our U.S.

joint ventures. Overall, our joint ventures delivered strongly in the year.

And as noted earlier, the U.S. joint ventures performed particularly well.

We had a set of pricing dynamics in the market, which favored the business, and we had very strong operational and commercial performance. All of our joint ventures continue to execute to their strategic agenda.

That's facilitated by very robust business models, which have at their core nonrecourse business financing arrangements. 2020 was an important year for the strategic evolution of 2 of our joint ventures.

The US American cheddar cheese joint venture in Michigan and the mozzarella joint venture in Europe. All of our teams really did a superb job building and commencing commissioning of these facilities, which, with our partners, continues to support our leading positions in US Cheese and EU mozzarella.

Commissioning of both of these facilities is expected to be completed by the second quarter of 2021. With that, I now turn to Mark, who will provide an update on Glanbia's financial position.

Thanks, Siobhán, and good morning to everyone on the call. I will walk through some of the key financial highlights of the year.

As Siobhán said, 2020 was a challenging year, particularly in the second quarter, as most of our key markets were severely impacted by lockdowns as a result of the pandemic. Notwithstanding a difficult Q2, the group's portfolio was resilient in 2020.

Wholly owned revenue grew by 0.6% constant currency to €3.8 billion, with a good performance from Glanbia Nutritionals, offset by Glanbia Performance Nutrition weakness, particularly in Q2. Like-for-like revenue increased 1.8% constant currency.

The average euro-dollar rate for the year was $1.1420 compared to $1.12 for the prior year, resulting in an approximate 1.5% headwind in reported results compared to constant currency. Looking to 2021, if the U.S.

dollar-euro rate remains at the current level of $1.21 for the year, that would represent an approximate 6% headwind for the group's reported results comparative versus constant currency. Adjusted earnings per share was down 14.9% on a constant currency basis due to COVID-19-related disruption in most of GPN's end markets, particularly so in non-U.S.

markets and in the specialty and distributor channels in the U.S. The group had strong cash flow during the year as a result of focused working capital management.

122% of EBITDA was converted into operating cash flow. The group ended the year with a stronger balance sheet and net debt of €494 million and a net debt-to-EBITDA ratio of 1.7x.

In addition, the majority of the group's debt was refinanced during the year at favorable rates. During the year, the group acquired Foodarom for an initial purchase price of CAD 60 million and invested €48 million in strategic capital expenditure.

A €50 million share buyback program was launched in the fourth quarter, and we proposed to maintain the dividend at the same level of last year. Importantly, the group did not furlough employees or received government support during 2020.

Looking at the income statement. You can see that wholly owned revenues were up 6.6% constant currency and wholly owned EBITA was down 22.6%, primarily due to lower revenues in GPN.

The group's EBITA margin decreased from 7.1% to 5.5%, primarily due to lower operating leverage in GPN in Q2. Second half EBITA margins were 6.3%, reflecting improved performance as the group exited the second quarter.

Net finance costs for the year were €20.5 million compared to €26.3 million in the prior year, reflecting the benefit of lower average net debt in 2020 compared to the prior year. The group's average net debt was €150 million lower in 2020 compared to 2019.

In addition, the average interest rate was 2.9% compared to 3.4% in the prior year. Joint ventures performed well in 2020, in particular, Southwest Cheese, due to very favorable dairy market dynamics.

The group's share of profit after tax of the joint ventures was €61.6 million, a significant increase from €48.6 million in 2019. In 2021, we would expect the results for joint ventures to be more in line with the 2019 result as we do not expect the favorability we saw in 2020 to repeat.

The effective tax rate for the year was 11.3%, a decrease from 12.3%, representing the geographic footprint of the group's profitability during the year. In 2021, we expect the effective tax rate to be between 12% and 13%.

Profit for the year after tax was €175.3 million, translating into adjusted earnings per share of €0.7378, which is down 14.9% on a constant currency basis and 16.3% on a reported basis. Given the scale of the share buyback program completed at the end of the year, this did not have a material impact on earnings per share.

In 2020, the group had exceptional items of €31.5 million, net of tax, which are primarily related to the transformation program ongoing in Glanbia Performance Nutrition. In the second half of 2019, the group performed a comprehensive review of GPN across brand strategy, geographic footprint and operating model.

In February 2020, we announced plans for the reorganization of the segment, a prioritization of investment in the Optimum Nutrition and SlimFast brands and the streamlining of our product portfolio, enabling a simplification of business operations. At the time, we rationalized 35% of SKUs to the business, and this has served the business well in the first half following the onset of COVID.

As the program continued, €31.2 million was incurred on people and property-related costs, professional consulting fees and costs associated with the termination and exit of certain contractual arrangements. By the end of 2020, overall FTEs in the GPN business have been reduced by over 10% since the end of 2019 and a number of office locations have been closed or consolidated across our markets.

On the supply chain front, we are moving forward with the consolidation of our U.S. manufacturing footprint from 3 locations down to 1.

This has been enabled by the SKU rationalization program and the exit from the majority of the contract business is expected to be completed by the end of 2021. The capital cost of this consolidation will be approximately $45 million, of which $15 million has been incurred in 2020.

These initiatives are important components in improving GPN EBITA margin, with the ambition of achieving a margin of between 12% and 13% by 2022. We anticipate exceptional costs will be in the range of €15 million to €20 million related to the conclusion of the GPN transformation program in 2021.

There were also specific COVID-19-related exceptional charges of €4.9 million, including the group's share of those incurred by the joint ventures related to setting up production facilities to be COVID-19-safe, PPE as well as incremental payments to certain frontline employees at the height of the pandemic during the second quarter. There was a one-off benefit of €3.4 million from a legal settlement which also occurred during the second quarter, and there were acquisition transaction and integration-related costs of €3.4 million incurred during the year.

Now turning to cash flow. The group delivered operating cash flow of €335 million in 2020, representing a strong EBITDA cash conversion of 122%.

This was achieved through active working capital management, in particular, of inventory and receivables, which led to a €78 million inflow from working capital. In a volatile trading year, particularly in the second quarter, inventory was managed carefully to reflect trading conditions.

In addition, we managed receivables closely and worked with our customers, particularly in the specialty and distributor channels, to ensure the group was paid timely for product, and credit extensions were carefully considered. Interest and tax payments were €43 million, both lower than prior year due to lower average debt levels during the year and lower net tax payments.

The group received dividends of €37 million from the joint ventures and also had other outflows, including pension of €22 million. Free cash flow was €307 million for the year compared to €232 million in 2019.

We continue to target a conversion of over 80% of EBITDA into operating cash flow into 2021, albeit we expect that working capital will be an outflow as trading continues to improve during the year. The group has invested over €700 million over the last 3 years in acquisitions, investment in joint ventures and on capital expenditure.

Our most recent acquisitions, SlimFast in GPN and Watson and Foodarom in GN Nutritional Solutions are all performing well. We continue to assess acquisition opportunities for Nutritional Solutions and GPN.

Joint venture investments represent the group's investment in the new joint venture in Michigan and the Glanbia Cheese EU facility in Portlaoise, Ireland. The group has invested $82.5 million to date on the Michigan joint venture, and no material additional investment is envisaged.

€28 million has been invested by the group in the Glanbia Cheese EU project and a further €4 million has been committed. Both projects are expected to be fully commissioned by the end of the first half of 2021.

Like all of our joint ventures, these JVs are independently financed with our own banking facilities, which are nonrecourse to the group. Capital investment in 2020 was €64.2 million, of which €47.7 million was strategic capital expenditure, which included projects such as the initial phase of the production plant reconfiguration and the investment in the direct-to-consumer e-commerce platform in GPN as well as extending solutions capabilities in GN.

For 2021, total capital expenditure is expected to be in the range of €80 million to €90 million, which includes the completion of the production plant reconfiguration in GPN as part of the transformation project. Return on capital employed for the year was 9% compared to 10.9% in 2019.

The decline is due to the decrease in earnings as a result of the pandemic. As the group returns to growth, our focus is to get return on capital employed back above 10%.

During the year, the group replaced a significant element of its committed borrowing facilities, extending maturity dates and lowering future interest costs. At the end of 2020, total committed borrowing facilities were €1.2 billion.

The average maturity of the group's facilities was 4.4 years compared to 2.8 years in the prior year. Also, the group is trading well within our 2 banking covenants.

Net debt to adjusted EBITDA was 1.7x in 2020, similar to 2019 and well below the covenant level of 3.5x. Second covenant relates to interest cover, which is required to be greater than 3.5x.

In 2020, our interest cover was 10x and 9.3x the year prior. The group's strong cash generation in 2020 was an important factor in reducing our debt levels and providing flexibility in investment decisions and return of capital to shareholders in what was a challenging year to navigate.

Capital investment of €64 million was in line with the 3-year average. Foodarom was acquired by GN for an initial purchase price of CAD 60 million and closed in August 2020.

We have decided to maintain the dividend at the same level as last year, €0.2662. This represents a payout of €0.361 of adjusted earnings per share, which is marginally outside our target range of 25% to 35%.

The Board has decided to maintain the dividend in line with prior year as a result of the strong cash performance during 2020, the reduction in net debt during the year and the resulting strong financial position of the group. Following a positive vote at last year's Annual General Meeting, a share buyback program up to €50 million commenced in November 2020, which is a further opportunity to use the group's strong cash flows to allocate capital to benefit shareholders.

By the end of 2020, just under €17 million had been spent on this program, resulting in 1.6 million shares repurchased at an average price of €10.10. Buyback programs has continued into 2021 and is expected to conclude in the coming weeks.

As of yesterday, we had purchased 4.1 million shares for a total of €41.4 million at an average price of €10.16. At the upcoming AGM, the Board will seek approval to renew the group's authorization to implement a share buyback program to have this option available for the coming year.

In summary, the group ended 2020 in a strong financial position and has the capacity to invest for growth during 2021. And with that, I'll hand it back to Siobhán.

Thank you, Mark. For Glanbia, sustainability has always been a core part of our ethos.

Indeed, our very name, Glanbia, means pure food, and the very genesis of our nutritional portfolio was a desire to create value from what had been a waste product from dairy processing. In Glanbia, we have a very long and rich heritage that goes back to the early 1900s when groups of Irish farming families came together to create the cooperative movement.

And their aim then was simple. It was to deliver a brighter future for their communities by adding value to their farm produce.

The purpose of Glanbia today, to deliver better nutrition for every step of life's journey, and truth is not too far removed from this. In 2020, we again underpinned the importance of sustainability as a pivotal element of our corporate strategy and an integral part of our operational performance.

We've evolved our sustainability strategy, initially focusing environmental, specifically carbon, water and waste. While we've achieved a lot to date, we've set ourselves ambitious targets which will guide our contribution to a sustainable future in global nutrition.

To achieve this, we've signed up to science-based targets and have committed to reducing carbon emissions in our operational sites by 30% by 2030 and reducing emissions intensity in our supply chain by 25% by 2030. On waste, we commit to zero waste to landfill in our operational sites by 2025 and a 50% reduction in food waste by 2030.

We have more work to do on the area of water and packaging use, and we will be baselining further through 2021. Our consumers and our customers view Glanbia as an organization that can help them achieve a brighter future for themselves, be it through the consumption of our weight management products, our whey protein shakes or our functional ingredients to boost health and wellbeing.

They trust the essence of the Glanbia portfolio of brands and ingredients. They trust that our products can help them lead healthier lives, and we will work to assure them that the same products are good for the planet also.

Of course, we all know that the pandemic is not the only reason that most of us will remember 2020. The political and social movement dedicated to fighting racism was also a timely reminder that society should and must do more to embrace difference.

Glanbia has always welcomed people regardless of color, gender or sexual orientation, and we're now committing to take further steps to ensure that we continue to respect and include all of our people. In 2020, we engaged in an extensive listening exercise across the organization.

And led by the Board, this year, we will roll out a comprehensive diversity and inclusion strategy and truly foster a culture that will celebrate individuality. I think this is the right thing to do, and I strongly believe it will have a positive impact on all of our stakeholders.

While we were navigating the pandemic in 2020, our people in Glanbia stepped up to support the communities in which we operate in numerous ways, and I'm particularly proud of the support we provided to frontline health care workers. Through our people focus on maintaining our financial position, Glanbia was in a strong position, as outlined by Mark, and we did not furlough any employees or avail of any government support related to COVID-19.

Finally, on the area of governance, we have announced significant steps today in our journey in -- and in 2020, we appointed a first independent chairman and also increased female representation on our Board. The announcements today are further progress in Board diversity.

Our Glanbia Co-op, as our largest shareholder, and our Board have agreed to changes and representation by the Co-op, which will impact the composition and size of the Glanbia Board between now and 2023. Essentially, the number of nominees of the Co-op Board on the plc Board will reduce from the current level of 7 to 3 by 2023.

With a number of diverse independent directors being appointed, such that the overall Board size will reduce from the current 15 to 13 by 2023. Finally then, after a challenging 2019 for the group, 2020 brought on the global challenge of COVID-19.

I'm hugely proud of how the Glanbia organization responded to this pandemic and delivered on our reshaped priorities for 2020. Never more than in the year just gone has the culture of Glanbia and the dedication and commitment of our teams come to the fore.

We took decisive action through the year and delivered in the second half the commitments we set as the disruptive force of COVID-19 had become evident in the second quarter. We prioritized our people, strengthened our business and continued to execute on our strategic agenda.

We will regain growth momentum in 2021, and we have started well in the first quarter. Globally, COVID-19 continues to disrupt markets, which we take confidence from the rollout of the vaccination programs, and we expect the disruption to ease through the second half of the year.

On that basis, we are guiding return to growth in adjusted earnings per share of between 6% and 12% on a constant currency basis for 2021 as we regain momentum in our GPN business and continue to grow and evolve Glanbia Nutritionals. With that, I'll now happily take your questions with Mark.

Two questions from me. Firstly, on GPN.

Siobhán, just wondering, could you provide some color and commentary on the cadence of growth as you see it into 2021, in particular, the first quarter? And my second question is for Mark.

Obviously, very strong cash conversion in '20. Another strong guide around conversion for '21.

I just want to understand maybe your priorities around capital allocation over the next 2 years.

Maybe what I'll do is just walk a little bit the journey again through the year of '20 and give you some perspective on what I believe will be the position as we move into '21. As I said on the call just now, there's no doubt that Q2 was the quarter that was most severely impacted by COVID as the market lockdowns, curtailed demand, curtailed routes to market.

We saw then in Q3, as the lockdowns eased, the GPN business responded well, and we saw an uptick. Then in Q4, of course, a number of factors came into play.

The lockdowns reemerged, particularly in Europe, and that hurt demand and shipments relative to the third quarter. And then given those lockdowns, some promotional activity that had been planned, particularly probably in North America, that would have generally been planned for January of '21, moved further into the first quarter.

We're also seeing in the first quarter now some of the rest of world markets opening up and some of our partners rebuilding inventory. And of course, then importantly, we also have the price increases that we've implemented in the second half.

That will be positive to the top line for the first quarter and for the first half of '21. So when you bring all that together, while the fourth quarter was still behind the prior year, we're actually very pleased with the trajectory and have started well in the first quarter of '21 to date.

I mean, we're obviously very mindful that COVID hasn't gone away, and we're somewhat cautious until we get better visibility as the year progresses, but we will be increasing our marketing spend, driving activity in Optimum and SlimFast, and we do believe that will position us really well when consumers fully engage with our performance and weight management goals as we move through the year. So a good start, Cathal.

I'm confident as we move and we'll update then depending on how COVID evolves.

Thanks, Cathal. In terms of cash flow, we're very, very pleased to see the result.

It came in a bit stronger than I had expected, frankly, but very well positioned. And as a result, heading into 2021, as we think about capital allocation for the coming 1 to 2 years, our CapEx was a little bit below average of €64 million in 2020.

You might recall at the end of the second quarter, we said we're just going to manage that carefully as we go through just from a liquidity perspective. So you're going to see that uptick a little bit now this year as we sort of get some programs up and running.

Clearly, a very important one is the GPN transformation program, reconfiguring our facilities in North America because that will specifically lead to efficiencies that would give us margin improvement into '22. That's key for us.

But on the Nutritional Solutions side as well, building our manufacturing capabilities in that business is really important for us. There are a number of IT programs that we have in place as well that will be coming through.

So CapEx over the next 2 years will be important to build for growth. On the M&A side, we are looking at a number of targets on the Nutritional Solutions side right now.

That has been a very successful acquisition program with Watson and Foodarom over the last 2 years. We'd like to continue to look at potential bolt-ons there.

And I think as we see the transformation programs settle in, in GPN, we'll also be more active in terms of looking at opportunities, particularly as we get to the second half of the year in GPN. And we'll keep our dividend payout ratio between the 25% and 35% range.

We did go over that this year. I think it was warranted given where we came in on cash flow.

And then we'd like to have the option of share buyback available to the Board should we decide to use that at any point during the year following the AGM. Hopefully, approval on that as well.

I wondered, firstly, on GPN, you referenced the key brands increasing in consumption, I think, 4% in measured channels for Optimum Nutrition and SlimFast. I wonder if you could sort of give a reference of how that compared versus the overall market in those channels in terms of how their market share performed through the year.

And then just secondly, on GPN. So if I heard correctly, sort of a mid-single-digit like-for-like guidance as a base case for 2021 at this point.

I wondered if you would potentially give any color on sort of the range implied to that by your overall EPS growth guidance of 6% to 12%.

Alex, I'll take the first part of that question, and I'll hand the second part over to Mark. Overall, very pleased in truth with the performance of Optimum Nutrition and SlimFast, as you say.

So despite all of the disruption of COVID and obviously, shipments being back, those 2 brands doing very well in the North American measured channels. In fact, SlimFast actually grew share in the year.

We obviously have very good visibility on that for SlimFast, it both grew share and outperformed category. So very pleased with SlimFast overall.

Optimum Nutrition, less available category data, but again, very much holding our own. We have a very significant presence, as you know, in e-commerce in North America.

We're, by far and away, the leading player there and continuing to grow well in that channel. So there, too, very pleased that, again, despite the vagaries of COVID and, again, while shipments -- in fact, shipments for Optimum were quite positive as well as consumption.

So overall, very pleased with that brand performance, and we'll continue to drive those two in those key North American markets and also driving ON internationally. So Mark, maybe you'd pick up the second part, please?

A good question in terms of how we look at the guidance for the year. We have a wide range of 6% to 12%.

We feel that's prudent at this point in time as we're still coming through the pandemic. However, depending on how the top line will pan out, that obviously will have a significant impact on where we fall in the range.

So from mid-single-digit perspective, we feel reasonably comfortable on that. I mean, the first quarter is an important quarter for us in terms of comping to last year, and it started off well in the business.

That gives us some comfort around that. I think, as we get through the first quarter and you see vaccines and overall communities being more socially mobile, we would have a lot more confidence actually that we'd see that continue throughout the year and potentially maybe an uplift beyond mid-single digits.

But again, I'd hold that until I get through the first quarter. What gives us a tremendous amount of confidence, of course, is that we can see on the bottom line that we have improvements coming through on momentum.

We've clearly got pricing laps that are going to come through in the first half, so you'll see a significantly improved half 1 margin in GPN versus half 2 last -- half 1 last year. And for the overall year, you'll certainly see that in the double digits, and it will be an important bridge for us as we get to that 12% to 13% in 2022.

And clearly, the more the revenues come through, the operating leverage gives us improvement as well on the margin side.

A few questions around GPN just to start with. In terms of the pricing decisions that you took, obviously held in reasonably well, what sort of reaction did you see from customers or indeed competitors in response to that?

And then you mentioned the promotional activity that maybe been delayed in Q1 from the start. Has that actually taken place?

Or is that likely to be in the next few weeks? And then just on other parts of your business, within the US Cheese, in particular, the margin performance, maybe just a bit more color on that decline that you saw in the second half of the year.

You mentioned additional production...

Thank you, Jason. I'll...

Sorry, I was just going to ask the additional production cost...

Apologies.

Yes, no problem. Just the additional production costs around the US Cheese business, what was that really about?

And how should we think about that in terms of margin profile for this year?

Thanks, Jason. I'll respond to the first two, and again, I'll pass to Mark, and he'll speak about the US Cheese business.

Yes, we're very pleased overall, Jason, with the pricing decisions that we made last year. It drove good pricing momentum in the second half, which again takes us into positive for the full year.

That will carry through, we believe, into 2021, again, where we'll have positive pricing, obviously, for the first half and until we start -- would start lapping the prior year decisions. And overall, it stopped very well actually.

We had the natural conversations that one has with customers. I think it was timely in terms of our decisions, in terms of what we could see on our cost of goods line.

So overall, no particular reaction that would cause us any concern from a brand perspective. In fact, we believe that it was the right decision.

It was -- they were very strategic decision...

Good morning. We just lost the audio to the main conference room where Siobhán and Mark are, and we're just getting that back up.

So apologies for that. And we will get them back on the line in the next minute or so.

So please bear with us as we reconnect with Siobhán and Mark to continue the call.

Siobhán, can you hear me there?

Yes, Jason. And sincere apologies for that.

No problem. No problem.

Did you get my questions? Or do you need me to repeat them?

Maybe if you could just recap, just for everybody's benefit, and then I'll respond to those, if that's okay. Thanks, Jason.

Yes. No problem.

Yes, look, it was just firstly around GPN and pricing dynamics and the impact that might have had on customer reaction or indeed on the competitive landscape and then just where promotional activity sits at the moment. And then the final question was with regard to the US Cheese.

I guess understanding a bit more about the additional production costs that you experienced and then how we should think about that margin profile looking forward. And then maybe just to tie in one final question around cash flow that I was going to ask is really the working capital benefit that you had, maybe one for Mark, in terms of how we should think about any potential unwind of that.

Thanks, Jason. And again, to all participants, significant apologies for that.

Our line just went dead here, so -- but we're back on track. So in response to your question, Jason, yes, overall, very pleased with the pricing decisions that we took in the second half of last year.

They have held very well. They were very strategic price decisions across elements of our portfolio of Optimum Nutrition in North America and internationally.

So that has positioned us very well. That will drive positive pricing for the first half of this year.

Haven't seen any adverse elasticity. We put a lot of thought into the pricing in the first instance.

So pleased with the execution and they have held, which I think is positive. On the promotional activity, some of the activity has happened.

Some is actually going to happen now in February. So it varies really in the piece.

Again, it was particular retailers as they, too, were making assessments of how consumers might respond to COVID and the alleviation, hopefully, indeed, of COVID through the year, shifted into later January and into February. So some done, some to do, but very much on track for the normal programs.

But as I say, that slight delay. And with that, Jason, I'll hand to Mark who will pick up on cheese and working capital.

Yes. So on the cheese side, and some of those, we can get this from a timing perspective, some additional operating cost.

Freight was also additional cost that we had come in towards the end of the quarter, Jason. That will rightsize itself.

We've got a very good pricing model here. So this is not a significant impact in terms of ongoing margins.

So we expect that to rightsize itself as we get into 2021, but we are seeing some of those additional costs come through in North America. Then on the working capital side, yes, I'd expect some unwind.

I think receivables will continue to keep really tight, and we've gotten a very good program going on that now, I would say, over the last year. Inventory, though, as business picks up, and we need to make sure we have the right inventory in the right places.

Our systems are very well capable of making sure we manage that. But I expect that potentially could be more of a headwind for us, not overly significant.

I think we'll still be well on target to be over 80% of conversion for the year, but it will be more of an outflow rather than what we had this year, which was an inflow.

A couple of questions from me. Just firstly, sorry to go back on the GPN outlook for '21.

But within your mid-single-digit sort of ambition or expect -- sort of realistic expectation at this stage, could you give some color on how you expect the various business areas to perform? So North America performance, lifestyle, international, D2C, et cetera, because, obviously, there was big differences in performance in those areas during 2020.

So I want to understand the magnitude of contribution from those areas. And I assume that, that mid-single-digit is branded like-for-like growth.

So I wonder if you could just talk about where we are with contract now in terms of the size and expectations, whether it's completely out by the end of '21. And my second question is just on margins, I guess, particularly GPN margins.

A couple of things. I noticed a lot of your COVID costs were in your exceptional items.

So is that right that all the kind of the margin pressure you saw in '20 was from kind of operational deleverage from the lower volumes, et cetera, and no direct COVID costs there? I'm just trying to understand in terms of thinking what's going to fall out in '21.

And then also, you mentioned incremental marketing investments. Could you give an idea of the level of increase in marketing investments that you're talking about?

That would be helpful. And then my final question is just actually also on the -- on sort of GN profitability in '20.

You mentioned that the sort of EBITDA -- EBITA, sorry, and margins are a bit under pressure because of dairy market dynamics. But equally, you had very strong profit growth in JVs, so I'm just trying to understand to reconcile if the margin pressure or the profit pressure in GN versus the very strong growth in the profits of the JVs.

James, many thanks for those questions. I'll speak to the 1 around how we might see the top line revenue moving through '21, and then I'll pass the margin ones over to Mark.

For '21, James, we would actually plan that, in fact, all areas will grow. Obviously, there's certain things for COVID to be seen as we move through the year.

You're absolutely right that we saw different parts of the portfolio respond differently to COVID, so I'm sure we'll see the inverse of that. So I would expect if international markets open, as we would hope through '21, we could get very good growth internationally.

We have already started to see some of that in the first quarter that I've referenced. We're always going to be cautious at this point of the year, as you can imagine.

But I would also expect our core North America portfolios to grow as well actually. So there are some variables, like -- but they're probably relatively minor in the scheme of things when will the ready-to-eat category fully come back in North America.

But if you think again of our core brands of Optimum Nutrition and SlimFast, I really do think we're positioned very well. Probably the judgment call for us, in many instances, James, is that we believe, for example, the trigger events for SlimFast will happen at some point through '21.

Now exactly calibrating when that confidence and those occasions that consumers can engage with our brands and really reengage with our weight management goals, it's very hard to be prescriptive on that at this point in time. But fundamentally, when you stand over the total portfolio, I would really -- I think we have opportunity to grow across actually all segments, and I would expect that, again, if COVID moves through the year as we might hope, actually, international could do very well in 2021.

So we'll update that all through the year as we speak with you. And yes, your core observation is absolutely right.

We're speaking to branded like-for-like. The contract business, we're progressing the exit of that as we planned under the transformation program.

It got -- it will probably be down to 2% for 2021 in terms of North America contract. So lots of reasons to believe in top line.

Plenty to be done. Of course, COVID is the big variable, but I'd be optimistic at this point for growth across all of the segments of GPN.

Mark, maybe the margin question?

Just in terms of the question you have on margins, James, I mean, the real impact for us in the second quarter was operating leverage issues in terms of that revenue being down so dramatically and unexpected for us, not able to move our fixed costs around, frankly, to be able to manage that scale of a decrease. So you mentioned COVID cost in the second quarter.

The majority of those that were unusual or acceptable were put through that €3.5 million charge. There were certainly some costs in the second half of the businesses are now basically assuming our business as usual in a -- I suppose, living with COVID environment and protecting our employees, but I don't know -- I wouldn't over-dial that in terms of impact on margin.

The real benefits coming through in the second half for us to sort of improve that 3.7% to 11.8% was operating leverage coming through in the third quarter. And even though the fourth was back a bit, it was still much better than the second.

And of course, momentum savings are starting to come in as well. And we're seeing that, and we saw some pricing benefits in the fourth quarter as well.

So these are more fundamental, I would say, points in terms of bringing that margin back. I think you're going to see that come into the coming year as well.

And what's important for us, even as we look at the coming year, and we talk about double-digit margins for the entire year, and I think a much better balanced profile between the first and second half margins from that as well, the momentum savings coming through help us with that, operating leverage and pricing help us with that. But we plan to spend some of that momentum savings back in marketing.

And we are looking at having a marketing investment of about 8% for ON and about 11% for SlimFast as a percentage of sales, which again is just moving up the scale a bit in terms of where we've been. So that will be important for us as well and just driving the brand growth for those businesses.

Then you asked the question on Nutritional Solutions versus joint ventures. Of course, quite different models, and there's a lot of different things going on in the Nutritional Solutions business.

You know on the dairy whey side, Nutritional Solutions, there can be a dynamic around the movement of low-end whey pricing versus high-end whey pricing, and that can sort of move the margin around a little bit, and that was part of, I would say, the mix impact there as well. Our premix margin is doing really well, but we have some products that we sell more in the convenience channel, which are probably more impacted by COVID over the last year, which had an impact on margin, too.

So there's a number of moving points around mix that impacted our Nutritional Solutions business last year. In the joint venture, Southwest Cheese had a very, very strong performance.

We have a very good model in that business. That gives us a reasonably predictable profitable number there.

This year, there were again some unusual dynamics in terms of the spread between block-and-barrel pricing for cheese as well as for buffer pricing loss, all of which came to be very favorable for Southwest Cheese. Now we work with our partners in terms of how we manage all of that, as you can manage -- as you can imagine, but it came in very strongly for us.

That is probably more a factor of the fact that markets were quite disruptive with a lot of the pandemic activity. We would not expect that to fully repeat in the coming year.

I hope that's helpful.

Just two for me, please. Firstly, on GPN, I wondered, Siobhán, if you could just talk about your thinking around how the sort of typical consumer preferences for sports nutrition maybe differs now if there's a bigger focus on home exercise and outside-of-gym activities versus the more traditional type, which I think the portfolio has been a bit more adjusted to historically.

And then maybe one for Mark. You mentioned potential acquisitions in GPN.

I just wondered if you could lay out some of the criteria that you're thinking about for those and where we might expect those in terms of maybe categories or geographies.

Thanks, Graham. Yes, it's been interesting actually to see how consumers have evolved through the pandemic.

And one of the factors that, again, gives us confidence as we look forward, is that definitely, there was a shock to the system in the second quarter and when gyms closed down and general activity reduced so significantly, consumers just had that jolt. But we saw consumers are resilient, and we saw Q3, that alter, we saw then an improving trajectory Q4 and as we move into '21.

And interestingly, in terms of our portfolio, protein stayed very resilient, and protein powder is actually very resilient. So naturally, when gyms closed, you might see less of the products that are in the pre-workout space that are very associated with gym activity not do as well.

But our overall powder performance did actually very well and continues to be very resilient. We have our brands, again, that point around loyalty and trust.

We lean into that a lot with Optimum Nutrition. We then had brands like Amazing Grass that could play into the immunity.

We actually have a brand like Isopure that can play very nicely into that general health and clean ingredient trends. So across our powder portfolio, we absolutely are focused on Optimum Nutrition.

The powder is very resilient, and we'll build out then our consumer messaging. I think the fact, too, as Mark has referenced and as I referenced earlier, and we are very much investing behind increasing brand awareness, very much engaging on social media, driving a lot of above-the-line spend.

We've done a lot of work on return on investment for our marketing, targeting consumers at different levels and increasing awareness with key consumers that are new to the category and consumer that are right in that sweet spot of usage. So I think we had a number of factors come together.

And again, we build further on those as we come through COVID because I have little doubt that consumers will only continue to engage further with these products from a sports and, indeed, as I said, from a weight management point as we come through this. So -- and we'll continue to evolve and innovate around both that core, very strong position we have in powders, as we've spoken about before, the ready-to-eat, the ready-to-drink space, as appropriate.

Mark, maybe if...

I suppose as we look at GPN and the potential opportunities that are important for us there, we think around, I suppose, channels, type of protein and format. Channels being very important in accessing our consumers.

We've seen the significant pivot to e-commerce. So that's certainly an area that we continue to look at as we look at potential opportunities.

The type of protein is important. We're very dairy-dominated.

As you know, plant protein, it's an interesting protein in the market, and consumers are clearly gravitating to that. We do see that as part of, I would say, immunity enhancement as well that folks are more -- taking more plant protein.

And then formats. We've talked about this before.

We have a lot of ready-to-mix, ready-to-eat products. We have, like, more ready-to-drink in our portfolio as well.

So again, looking at potential opportunities that help us to expand that format portfolio as well.

I have two questions. The first one is on the Nutritional Solutions margins that are a bit under pressure.

And you are -- also highlight you see some headwinds in certain parts of that business on the growth side, but at the same time, you sound optimistic for the like-for-like in solutions for 2021. So the question is, can we expect Nutritional Solutions to see margins back within the 13% to 15% target range already this year?

Or is that more something for 2022? And the second question is more on the competitive landscape in the North American market, particularly the mass market for GPN.

Because core competitor to you showed quite different trends than yourselves, with a significant pressure on the gross margin, high promotional activity and, therefore, high growth. And you've seen strong margins in H2 and less growth in the second half.

So yes, can you say a few words how you see the promotional environment and the competitive environment in the U.S. at this point?

Karel, I'll take the Nutritional Solutions question and then pass back to Siobhán in terms of the North American market for GPN. Our NS margins are 12% for this year.

I think it's pretty much in line with what we had expected. We expect good growth next year in Nutritional Solutions.

We expect mid-single-digit growth in that business. Again, we'll see premix, I think, do quite well.

I think some of the mix issues that we're having some challenges with base as well as you go through the year. I think, at this point, we'd still forecast our margins will be similar in '21 to what they are in '20.

I think that's probably the right way forecast that. And we have a number of things, as you know, coming through in the business next year as well.

The -- on -- we're taking on Midwest Cheese. That's coming on in the second half, particularly a very important event for that Nutritional Solutions business as well.

But we continue to expect good growth in our nondairy premix business next year. And again, good margins in that business.

But overall, 12% is what I'd expect for next year.

Thanks, Karel, for your question on the competitive trends and, indeed, the margin performance. I suppose the first comment I would make is that the actions that we've taken since the back end of 2019 under the transformation program is really a massive underpin to our margin delivery and our future margin ambition of GPN.

Because through all of the activities that we're doing and, indeed, some of the investment, for example, we're still doing in D2C, we have a very strong margin profile in our core brand propositions in GPN. And through the very essence of the transformation project, which is about driving efficiency and demand levers, we're going to bring that back to the fore.

So that whole thrust of decomplexing the business, simplifying our portfolio, focusing on Optimum Nutrition and SlimFast, all of those elements and drivers across the business is giving us that margin confidence. And as we've said repeatedly, from the point in time when we started the transformation program, we are ambitious for that, cognizant that we were going to have an ambition that would over-deliver against the 200 basis points that we first spoke of relative to '19 because we want to reinvest behind the brands.

So that's the routine or the rhythm, for the want of a better word, we are in now as we speak. We're getting very good delivery by the team on the programs to deliver the margin improvement, and we're reinvesting.

And we believe that is the rhythm that will really stand us in good stead as we come through '21 and into 2022. Yes, of course, competitively, there will be different activities happening in terms of promotional agendas.

But again, I come back to the strategic pricing decisions that we made in the second half of '22 -- or '20 rather, excuse me, they have stock that will give us positive pricing. Both on top line and, obviously, the margin impact of positive pricing as we come through the first half of 2021.

So in the round, through many different levers, we have been on a journey of improving the margin. And that's right across the portfolio, both internationally and in North America.

So that then gives us the fuel to invest as we see fit in things like promotional agendas, if that's necessary. So very, very focused on evolving that gross margin and evolving the net margin of GPN.

And we're confident that we will do that through '21.

Appreciate we've covered quite a lot today, so just a brief one on GPN progression. I appreciate we've talked a little bit about expectations, but just interested to get your insights into what the main growth moderators are on the top line that you were talking about being a little bit uncertain.

I'm thinking things like gym openings are obviously going to be a big contributor to that, but any others that we should be thinking about in terms of the general reopening of the economies?

Yes, thank you for that. I think the thing about gym openings is that it kind of -- it gives that lead indicator of activity.

What we have found is that we're probably, in some ways, maybe less calibrated to that than we were in the early stages of the pandemic because consumers have been really innovative in finding ways to do home exercise or engage in those goals. So I think, really, it's about just that general opening of markets and people being able to engage, go out, socialize, train with their friends, go to the gyms, et cetera.

It's that overarching piece. And as a reference, we got great confidence for when we saw just a general easing of restrictions in the third quarter, we could see that actually having dipped severely in Q2, we came back quite quickly.

We went a little bit the other way in Europe. We're already seeing, in fact, as I referenced in the first quarter, a number of our international markets, as lockdowns eased, inventory coming back into the system, our partners building and getting ready for consumption trends.

So I think it is really around countries opening up, general easing, people just feeling they can get out and about, socialize and engage. And again, I see that as a real positive for us as we move through '21 and into 2022.

Those trigger events that I mentioned, whether it be in sports, whether it be in weight management, absolutely, we believe that, that will come through when people literally start moving around again and engaging in the gym or engaging in social and community exercise.

Yes. So I was wondering if you could talk a bit more -- you mentioned that plant and ready-to-eat, ready-to-drink are focus for potential GPN acquisitions.

I was wondering whether you could talk about in the margin profile, whether it would be margin-accretive for GPN? And then just kind of following on, on acquisitions.

You talked about Nutritional Solutions being the main focus for M&A. I'm just wondering where you see the opportunities there to add to your portfolio via any bolt-ons or if you could potentially do maybe a larger more transformative deal?

And then just my second question is around ESG and whether you're seeing -- obviously, we've seen a step change in ESG in 2020. So I was just wondering whether you're seeing any pressure on your cost base from kind of more ESG, more environmentally-friendly packaging or any that sort of thing?

I'll take the M&A question. Siobhán will speak to ESG.

Obviously, it depends on what targets you look at as to whether they'll be margin-accretive or not. I mean, there's certainly some opportunities and plan to be a bit more accretive, not having the same raw material base, some of what we have otherwise.

For us, really, it's more what can drive top line in the first instance in terms of potential acquisition opportunities here. Because as we see consumers continue to look at different options, plant potentially is an interesting one, we've looked at this before.

We may come back and look at this again. And ready-to-drink and ready-to-eat is just more balancing out the portfolio in terms of offerings to our consumers.

Obviously, all within the view that we'd like to make sure we're maintaining a 12% to 13% margin overall as we look at that. And on the e-commerce side, and we obviously have Body & Fit that we purchased a number of years ago.

It's a very small D2C business, but important for us as we learn how to operate in that business. We clearly have a journey to go.

Here, we've invested significantly behind the software behind that business. We are expanding to a number of different countries.

And it hasn't been so easy for us the last year, given a lot of whole sales are in Holland, and that's been a very locked-down country, but we and the Board are very eager to ensure that we are very important in the e-commerce space in terms of our overall portfolio. So we'll keep an eye on that.

Thank you. In terms of the ESG, I suppose one comment I would make at the outset is that we have been engaging with our customers in this space, particularly on the Glanbia Nutritionals side for a number of years now.

And yes, we're always mindful, and we deal obviously with the suppliers as well that this has the potential to put incremental cost into the supply chain. But that's probably a journey we've been navigating already and are very mindful of that in our overall evolution of costs and how we might drive efficiencies to mitigate that.

From a brand perspective, as I said, there is further baselining we will be doing in areas like packaging in 2021. And ultimately, we will lock in the round of the decision in terms of it being right for the brand, right for the consumer, right for our ESG agenda.

So there's nothing particularly new I would be dialing up on that cost pressure that the ESG agenda can bring at this point in time. It's one of those variables that I would say we've been handling here tofore, and we'll continue to keep a keen eye to it as we go forward.

I mean, for us, it is really about signing up to those good targets on the environmental side, and we will be doing more work in the areas like packaging, as I mentioned, through '21.

So if we look at the food industry overall, it's generally understood that the larger brands benefited from the pandemic last year, especially in North America. And there's a debate as to whether this continues or if the challenger brands might gain back share as things normalize.

Do you think this is relevant also in sports nutrition and weight management? And have you noted any changes in your competitive landscape?

That's the first question. And then a second quick one, could you update us on input costs for 2021, please?

Thank you. In terms of the first question, yes, I think it is fair to say that we would have seen the same trend in terms of larger brands that consumers felt they could trust, et cetera, coming to the fore through the pandemic.

I don't believe that will fundamentally alter at least for our brands post pandemic brand, for example, like SlimFast that has 95% brand awareness, that has been on a journey of recovering its growth momentum over a number of years. I think that brand will still stand very well and, in fact, in some way be more relevant post COVID.

So I believe we'll have many mitigants against that if it was even to be relevant because the areas in which we're playing, which are fundamentally around supporting a healthy lifestyle, active living, a brand like SlimFast promoting weight management, that avoids immune -- obesity issues, et cetera. So I think the general package and ethos that sits behind, particularly our pillar brands of Optimum Nutrition and SlimFast, won't actually fall foul of any potential recalibration if there was one.

I think we will continue to -- the net will be absolutely positive for those 2 brand positionings going forward.

In terms of input costs, as we look at whey cost 80% or WPI 90%, the trend is for those costs to go up this year, probably more on the 80% side than the 90% side. As we look at that from a GPN perspective, it's more of a second half view for us.

And we're pretty much locked in for the first half. But at this point, it looks like those costs will be higher in the second half based on the trends we're seeing.

Again, thank you for -- thank you to everybody for your time today. Really appreciate -- and for you staying with us just through that little glitch, and we'll talk again soon.

Thank you.