Glanbia Plc Ord

Good morning and welcome to the Glanbia PLC 2020 Full Year Results Call with Siobhan Talbot, Group Managing Director, and Mark Garvey, Group Finance Director. Today's conference is being recorded and at this time I'd like to turn the conference over to Liam Hennigan, Group Director of Strategic Planning and Investor Relations. Please go ahead, sir.

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 have been 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 analyst presentation. Due to inherent uncertainties, including both economic and business risk factors underlying such forward-looking information, actual results may differ materially, and those expressed are 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 Siobhan Talbot, Group Managing Director of Glambia TLC.

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 three priorities to navigate the crisis. First and foremost, protecting our people, maintaining the supply of food, and maintaining our strong financial position. This organisation resilience, I think, has been borne out today by our financial results, as Glanby and 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 Glanby 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 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 behaviours, 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 remained 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 measure channels in 2020. The group focus on financial discipline through the crisis is very evident, I think, in our cash performance. We control costs tightly, manage 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 decarbonisation 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 skillset 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've said, we pivoted our focus to the three 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 three things for the second half of 2020. It was all about progressing the GPN transformation, maintaining solid delivery in Glanby 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 three 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 EBITDA 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 continue 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 Foodaram in the third quarter. As I said earlier, the profitability of our joint ventures, particularly in the US, 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 US, but also here in Ireland. The resilience of Glanby 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 well-being of our people front and centre of everything we do in Gambia, 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 and to 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 EBITDA margins in the second half drove a very strong sequential uplift in wholly owned EBITDA to 124.6 million, up 46% on 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 Glandia 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-down 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 a 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've 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 planned 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 EBITDA 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 in 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 EBITDA 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 masks 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 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 and 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 DTC sites in the period, and full-year volume growth was offset by increased promotional investment that indeed helped drive volume. Turning to the GPM 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 three 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've new general managers across a number of our regions, such as China, Southeast Asia, and Europe. Our optimum nutrition and slim-fast 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 market, 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 has happened in GPN. We have scale in the key channels of e-commerce and FDMC for brand awareness Trust and indeed brand loyalty are critical. Looking then in more detail at those two 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 investment to drive awareness and advocacy, continue the evolution of our omni-channel 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. OAN continues to perform in our core North America markets with the negative impacts of the pandemic less significant for powders versus other on-the-go formats. And as I've referenced, consumption for OAN in North America grew by 4%, largely driven by the accelerated channel shifts 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 needs states. Our innovation agenda for SlimFast continued with a further rollout of eight new keto fat bombs across meal bars, snack cups and snacks. So both ON and SlimFast are strong brands that we believe are well positioned as consumers increase engagement in the motivations of active lifestyle and weight management in a post-COVID environment. For a 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 one-third 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 Glanby 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 four 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. EBITDA margins and EBITDA declines in the year largely drew to dairy market dynamics as they reduced buy-sell margins and somewhat altered product mix. The fundamentals of our nutritional solutions business remain 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 a non-dairy and we continue to extend the capability of the business in total with the acquisition of the food around flavours 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 balance being priced. 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 Foodaram 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 across 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 effects 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 U.S. 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 U.S. cheese and indeed U.S. joint ventures are highly complementary. And as you're aware, the GN U.S. 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 U.S. 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 US joint ventures performed particularly well. We had a set of pricing dynamics in the market which favoured 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 non-recourse business financing arrangements. 2020 was an important year for the strategic evolution of two 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, Siobhan, and good morning to everyone on the call. I will walk through some of the key financial highlights of the year. As Siobhan has 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 euros with a good performance from Glambia nutritionals offset by Glambia performance nutrition weakness particularly in Q2. Like for like revenue increased 1.8% constant currency. The average euro dollar rate for the year was 1.11420 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 121 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 EBITDA ratio of 1.7 times. In addition, the majority of the group's debt was refinanced during the year at favourable rates. During the year, the group acquired Futuron for an initial purchase price of 60 million Canadian dollars and invested 48 billion euros in strategic capital expenditure. A 50 million euro share buyback program was launched at 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 receive government support during 2020. Looking at the income statement, you can see that wholly owned revenues were off 6.6% constant currency and wholly owned EBITDA was down 22.6%, primarily due to lower revenues in GPN. The group's EBITDA margin decreased from 7.1% to 5.5%, primarily due to lower operating leverage in GPN in Q2. Second half EBITDA 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 South West Cheese, due to very favourable dairy market dynamics. The group 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 73.78 cents, 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 Zambia 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 of 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 GPM 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 three locations down to one. This has been enabled by the SKU rationalization program and the exit from the majority of the contract business, and 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 EBITDA 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 to 20 million euros 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 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 billion 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 euros, 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 euros from adjoined ventures and also had other outflows including pension of 22 million euros. 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 three years in acquisitions, investment in joint ventures and on capital expenditure. Our most recent acquisitions, Slimfast and GPN and Watson and Foodram and GN Nutritional Solutions are all performing well. We continue to assess acquisition opportunities for nutritional solutions and GPM. Joint venture investments represent the group's investment in the new joint venture in Michigan and the Glambia Cheese EU facility in Port Leach, Ireland. The group has invested $82.5 million to date in the Michigan joint venture and no material additional investment is envisaged. 28 million euros has been invested by the group in the Glambia Cheese EU project and a further 4 million euros 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 their own banking facilities, which are non-recourse 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 GPM. as well as extending solutions capabilities in GN. For 2021, total capital expenditure is expected to be in a range of 80 to 90 million euros, 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 or focuses 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 two banking covenants. Net debt to adjusted EBITDA was 1.7 times in 2020, similar to 2019, and well below the covenant level of 3.5 times. The second covenant relates to interest cover, which is required to be greater than 3.5 times. In 2020, our interest cover was 10 times and 9.3 times 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 euros was in line with the three-year average. Fooderama was acquired by GN for an initial purchase price of 60 million Canadian dollars and closed in August 2020. We have decided to maintain the dividend at the same level as last year, 26.62 cents. This represents a payout of 36.1 cents of adjusted earnings per share, which is marginally outside our target range of 25 to 35 percent. 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 resultant 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 programme 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 authorisation to implement a share buyback programme 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. With that, I'll hand it back to Siobhan.

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, in 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've 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 Glanby 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 well-being. They trust the essence of the Glanby 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 colour, 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 organisation 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 healthcare workers. Through our people's 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 and in 2020 we appointed a first independent chairman and also increased female representation on our board. The announcements today of further progress in board diversity, our Glanbia co-op as our largest shareholder and our board have agreed to changes in 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 Glanby organisation responded to this pandemic and delivered on our reshaped priorities for 2020. Never more than in the year just gone has the culture of Glanby 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 prioritised our people, strengthened our business, and continue 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, would we take confidence from the rollout of the vaccination programmes 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 Blandby Nutritionals. With that, I'll now happily take your questions with Mark.

Thank you. Ladies and gentlemen, if you would like to ask a question, you can do so now by pressing star 1 on your telephones. That's star 1 if you'd like to take a question. We will now take our first question from Cahal Kenny from Davie Research. Please go ahead. Your line is open.

Morning all, and thanks for taking my questions. Two questions for me. Firstly, on GPN, Siobhan, just wondering, could you provide some colour 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 two years.

Thank you. Good morning, Kyle, and thanks for that. And 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 markets. 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 re-emerged, particularly in Europe, and that hurt demand and shipments relative to that 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, you know, be increasing our marketing spend, driving activity on 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, Cahill, and confident as we move and we'll update then depending on how COVID evolves.

Thanks, Carl. 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 then as a result heading into 2021. As we think about capital allocation for the coming one to two years, our capex was a little bit below average at $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 that GPN transformation program reconfiguring our facilities in North America because that will specifically lead to efficiencies that will give us margin improvement into 22. That's key for us. But on the nutritional solution 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 two 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 FoodROM over the last two years. We'd like to continue to look at potential bolt-ons there. And I think as we see the transformation program 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. 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.

Thank you. That's very clear, Mark.

Thank you. We will now take our next question from Alex Sloan from Barclays. Please go ahead. The line is open.

Yeah, morning all. Thanks for taking the questions. I wondered, firstly, on GPN, you referenced the key brands increasing in consumption, I think 4% in measured channels for optimum nutrition and slim fast. I wondered if you could give a reference of how that compared versus the overall market in those channels in terms of how they're 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 you know potentially give any color on the on the sort of the range implied to that by your overall EPS gross guidance of six to twelve percent thanks good morning 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 slim fast as you say

So despite all of the disruption of COVID and obviously shipments being back, those two brands doing very well in the North American measure channels. In fact, Slimfast actually grew share in the year. We obviously have very good visibility on data 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 they're, 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, but so overall very pleased with that brand performance. And we'll continue to drive those, too, in those key North America markets and also driving ON internationally. So, Mark, maybe you pick up the second part, please.

Good morning, Alex. How are you? 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 a 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, 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... You 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 one margin in GPN versus half one last year. And for the overall year, you'll certainly see that in the double digits.