Business model Delivering better nutrition Source Our core ingredients are pure and clean ingredients, such as milk and grains, from the primary producers. In addition we source inputs from other food manufacturers across the globe. This requires an in-depth understanding of our raw ingredients markets and the development of long-term, mutually beneficial relationships with producers to secure supply. Driven by our purpose to deliver better nutrition for every step of life s journey we serve salient trends in society. We do this through our consumer insights, core capabilities and strong culture. Our vision is to be one of the world s top performing nutrition companies trusted to enrich lives every day. Capital Inputs Natural and sustainable Manufactured Intellectual Human Through worldwide facilities that meet the most stringent standards and our supplier partnerships around the globe, we ensure flexibility, responsiveness and solid supply chains. Financial Social and relationships Our Capabilities Our core capabilities and assets enable us to achieve our growth ambitions. Read more on page 17 06
Develop We apply our deep sector knowledge, collaborative approach and innovative thinking to turn raw ingredients into branded consumer products and high-quality functional products and ingredients for our customers and consumers worldwide. Our innovative mindset and deep relationships foster a culture of co-creation for mutual benefit. Sell We are the global leader in the performance nutrition industry with a portfolio of nine leading consumer brands. As a nutritional solutions provider in the B2B arena, we commercialise specialty nutritional and functional ingredients and precision premixes to meet our customer needs. Outputs Business-to-Consumer (B2C) Innovation sits at the heart of our business and we continuously develop new products and formats. Our consumer brands include a range of formats such as powders, drinks, capsules, tablets and bars. We also manufacture substantially all of our own brands. Business-to-Business (B2B) Our nutritional solutions business is a leading marketer of advanced-technology whey protein, specialist vitamin and mineral blends, plant-based ingredients and functional beverages. We are also the leading marketer of Americanstyle cheddar cheese in the US. B2C Each of our performance nutrition solutions has its own brand essence and consumer appeal. We are in the top three performance nutrition brands in over 20 countries. We also produce some of the leading Irish consumer food and agribusiness brands. B2B Our portfolio of both nutritional ingredients and cheese gives us greater market reach and customer relevance. We work hand-in-hand with our customers and develop products that exceed their expectations. Socio-economic uplift Committed people Loyal customers and consumers Engaged shareholders Environmental awareness Our Consumers Our ruthless focus on our customers and consumers needs places us at the heart of major global market trends in food and nutrition. Our Culture We foster a culture of shared values and behaviours across the organisation which enable, energise and support our employees. Read more on page 18 Read more on page 32 07
Our strategy Creating sustainable value Maintain and grow our global leadership in performance nutrition Strategic objective To maximise total returns to shareholders. Key Indicators (KPIs) We monitor our long-term progress by measuring growth or improvement in seven financial KPIs and two non-financial KPIs. These KPIs have been identified by the Board as the most relevant to delivering the Group s strategy and objectives. See pages 10 to 11 for more about our KPIs. Sustain current and drive further ingredient market leadership in nutritional solutions Grow through organic investment programme and acquisition/partner with complementary businesses Develop talent, culture and values in line with our growing global scale 08
Delivered strong EBITA and margin growth through brand development, innovation and strong focus on operational efficiencies; Achieved consumer insight-led innovation across new formats and channels; and Successfully integrated thinkthin, leveraging the platform for healthy snacks and bars. Nutrition brands on page 22. Commission GPN innovation centre to enhance our product offering and capabilities and drive further growth; Continue to drive branded revenue growth across all markets; and Pursue M&A opportunities and continue to expand GPN s consumer and channel reach. Delivered mid-single digit EBITA earnings growth through further progression in value-added ingredients; Implemented organisational redesign and leveraged commercial and strategic capabilities to deliver our customers requirements; and Expanded our innovation capabilities in functional ingredients across key growth sectors. the Nutritional Solutions business on page 24. Build on 2016 and deliver earnings growth through further progression in value-added ingredients and cheese; Informed by market, customer and consumer insight, continue to innovate in the ingredients space to exceed the needs of our customers; and Expand GN through organic growth, acquisitions and strategic partnership. Successfully completed a capital expenditure programme of 89.5 million focusing on our two strategic businesses GPN and GN; Progressed acquisition of plant protein and greens superfood business Amazing Grass and online sports and wellness brand Body & Fit in early 2017 to expand GPN s product offering; and Finalised a 25% capacity expansion investment plan in our cheese and whey Southwest Cheese facility in Clovis, New Mexico. This will be commissioned in 2018. our Amazing Grass acquisition on page 23. Finalise Joint Venture plans to build a large scale cheese and whey plant in the State of Michigan, US to expand our GN business; Continue to develop an acquisition pipeline to grow our portfolio across the performance nutrition and ingredients sectors; Complete capital expenditure programme of approximately 100 million; and Develop recently acquired platforms of Amazing Grass and Body & Fit. Further embedded values and behaviours across the Group and completed an employee engagement Pulse Survey; Developed leadership talent programme to secure pipeline of our next generation of leaders and renewed focus on career development and succession planning; and Evolved a new HR strategy focusing on leadership, talent, culture and operational effectiveness. the Group s purpose, vision and values on pages 32 to 35. Continue to embed our purpose, vision and values across all levels of the Group, with an employee centric approach; Roll out HR transformation programme, focusing on talent acquisition; and Drive greater linkages between career pathways, values performance and reward across the Group. 09
Key Indicators Delivering growth Revenue 2.8bn 2016 2015 2014 2013 2012 2.2 2.5 2.4 2.8 2.8 We monitor our performance by measuring KPIs that we believe are important to our longer term success. against some of these KPIs is linked to the remuneration arrangements of our Executive Directors and senior executives. While movements in commodity dairy markets can influence revenue movements in a specific year, revenue growth, when viewed over a period of time, is an indicator of how Glanbia is succeeding in developing the Group through its on-going investment and acquisitions programme. In 2016, revenue was 2.8 billion, up 2.7% reported, an increase of 2.8% constant currency on 2015. Volume increases of 3.5% across all segments were more than offset by price declines, with acquisitions accounting for a 3.3% increase in revenues. Definitions of KPIs are contained in the glossary on pages 186 to 193. Adjusted Earnings Per Share 1,2 87.66c 2016 2015 2014 2013 2012 61.16 55.46 51.34 87.66 79.14 Adjusted Earnings Per Share (EPS) is an important measure of the profitability of the Group as it represents the underlying profit of the Group per equity share in issue. Adjusted EPS was 87.66 cent, up 10.8% reported, 11.2% constant currency on 2015. This is the seventh consecutive year of double-digit constant currency EPS growth. The compound annual growth rate in adjusted EPS from 2012 to 2016 was 14.3%. Link to Strategic Priorities NF Grow performance nutrition Sustain and drive nutritional solutions Non-Financial Key Indicators Organic and acquisitional growth Develop talent, culture and values 1. condition of Glanbia s Annual Incentive Scheme. 2. condition of Glanbia s Long Term Incentive Plan. Total Shareholder Return 2 (6.2%) one year +46.1% three years % 500 400 300 200 100 0 Total Shareholder Return (TSR) reflects the value delivered to shareholders arising from the ownership of Glanbia s shares plus dividends reinvested. Relative TSR, compared to a specific peer group or market index, is an important measure of how successful the Group has been in terms of shareholder value creation, compared with its peers over the same time period. Glanbia STOXX Europe 600 Food and Beverage Index Dec 2011 Dec 2012 Dec 2013 Dec 2014 Dec 2015 Dec 2016 Glanbia s TSR in 2016 was a negative 6.2% following positive returns of 33.2% in 2015 and 16.9% in 2014. TSR over the three-year period of 2014 to 2016 was 46.1%. Five-year TSR was 257.1%. Glanbia s share price at the end of the financial year was 15.78 (2015: 16.95) underperforming the STOXX Europe 600 Food and Beverage Index by 5.4% in 2016. 10