Final Results
Glanbia PLC
07 March 2007
NEWS RELEASE 2006 RESULTS
For a full copy of this document - please visit www.glanbia.com
For further information contact
Glanbia plc +353 56 777 2200
Geoff Meagher, Deputy Group Managing Director/Group Finance Director
Siobhan Talbot, Deputy Group Finance Director
Geraldine Kearney, Corporate Communications Director + 353 87 231 9430
Hogarth Partnership UK +44 207 357 9477
John Olsen
KEY MILESTONES ACHIEVED IN 2006
ON TARGET FOR DOUBLE DIGIT GROWTH IN 2007
7 March 2007 - Glanbia plc, the international dairy foods and nutritional
ingredients Group, announces its full year results for the year ended 30
December 2006.
2006 Results Summary
2006 2005 Change
(as restated)
Revenue(1) €1,853.4 m €1,830.0 m Up 1%
Operating profit pre exceptional €85.6 m €80.9 m Up 6%
Operating margin pre exceptional 4.6 % 4.4 % Up 20 bps
Net financing costs pre exceptional (€14.0 m) (€13.1 m) Up €0.9 m
Share of results of joint ventures
and associates(1) €2.8 m €0.9 m Up 205%
Profit before tax pre exceptional €74.4 m €68.7 m Up 8%
Profit after tax pre exceptional €66.4 m €61.1 m Up 9%
Exceptional items(2) (€0.1 m) (€3.4 m) See note
Earnings per share 22.5 c 19.7 c Up 14%
Adjusted earnings per share 22.6 c 20.9 c Up 8%
Dividend per share in respect of the year 5.79 c 5.51 c Up 5%
Net debt €224.5 m €224.2 m Similar
(1) Revenue including Glanbia's share of the revenue of joint ventures and
associates was €2.1 billion in 2006, up 8% on 2005. Share of results of joint
ventures and associates is an after interest and tax amount.
(2) Exceptional items are €3.3 million restructuring costs relating to the
closure of the Pigmeat cannery operation, €9.1 million being the cost of the
disposal of the Group's remaining 25% interest and related loan note in The
Cheese Company Holdings Limited to Milk Link Limited for €70 million and €12.3
million being the recognition of a deferred tax asset relating to the Group's
former UK operations.
John Moloney, Group Managing Director, said:
'2006 was a good year for Glanbia. Our results are in line with market
expectations, despite a particularly tough first half and ongoing challenges in
Ireland. Key financial performance indicators are trending positive and
international operations and joint ventures are progressing well.
We achieved key strategic milestones during the year including a US$105 million
US Nutritionals acquisition, Seltzer, and the opening of one of the largest
natural cheese and whey processing plants in the world, Southwest Cheese, which
is a US$190 million 50:50 joint venture. The Seltzer acquisition is performing
ahead of expectations. The Southwest Cheese plant is fully commissioned and is
producing product to a world class standard.
A further €50 million of development capital expenditure has been committed in
2006, including €5 million to build the Group's first nutritionals operation in
the Asia Pacific region and €22.5 million for a planned capacity expansion and
new plant in the Nigerian joint venture.
We are successfully developing a strategic international presence, which today
represents nearly 40% of the Group's revenue and profits. This gives Glanbia a
strong platform from which to continue to grow and develop overseas. At the same
time, the Group continues to consistently and solidly improve the cost base,
productivity and long-term sustainability of the Irish operations.
As to the future, Glanbia is on target to deliver double digit earnings growth
in 2007 and we believe the outlook is positive for sustained high growth.'
---------------------------------------------------------
2006 Results
Results for the year ended 30 December 2006
Finance review
Income statement
Revenue increased by 1% to €1,853.4 million (2005: €1,830.0 million). A solid
operating performance, the changing mix of business and the benefits of prior
year rationalisation initiatives improved profitability and margins. Operating
profit pre exceptional was up 6% to €85.6 million (2005: €80.9 million) and the
operating margin pre exceptional increased 20 basis points to 4.6% (2005: 4.4%).
Net financing costs pre exceptional increased by €0.9 million to €14.0 million
(2005: €13.1 million). This reflects an increase in average debt in the year
primarily driven by the acquisition of Seltzer in the second half.
The Group's share of results of joint ventures and associates, post interest and
tax, increased to a profit of €2.8 million in 2006, compared with a profit of
€0.9 million in 2005. This result primarily reflects the improved performance in
Glanbia Cheese, the Group's UK joint venture with Leprino Foods and a small
first time contribution from Southwest Cheese in the USA.
Profit before tax pre exceptional, including share of joint ventures and
associates, increased by 8% to €74.4 million (2005: €68.7 million). Profit after
tax pre exceptional increased by 9% to €66.4 million (2005: €61.1 million).
Taxation for the year amounted to a net credit of €4.3 million, compared with a
charge of €0.7 million in 2005. 2006 Group tax of €8.0 million (2005: €7.6
million) was offset by an exceptional tax credit of €12.3 million, which was the
recognition of a deferred tax asset relating to tax losses in former UK
operations which are now being utilised. In 2005, the Group had an exceptional
credit of €6.9 million, primarily due to a tax credit relating to a prior
disposal of assets in the USA.
Net exceptionals for the year amounted to €0.1 million compared with €3.4
million in 2005. The 2005 exceptional amount has been restated as a consequence
of recent changes under IFRS, which no longer require that particular inter
company translation movements are reflected in the income statement. In 2006,
exceptionals include €3.3 million for restructuring costs relating to the
closure of the Pigmeat cannery operations in Ireland, €9.1 million cost relating
to the disposal of the Group's remaining 25% interest and related £35 million
loan note from The Cheese Company Holdings Limited offset by €12.3 million tax
credit outlined above.
Earnings per share grew 14% to 22.5 cent (2005: 19.7 cent), while adjusted
earnings per share increased 8% to 22.6 cent (2005: 20.9 cent).
Balance sheet and cash flow
Net debt at the year end amounted to €224.5 million, which was similar to the
2005 restated level of €224.2 million. The 2005 net debt was restated as
required under IFRS to reflect an increase in lease liabilities of €8.5 million.
This change in accounting policy also increased 2005 property, plant and
equipment by €8.5 million. 2006 net debt reflects the €70 million received from
the disposal of the Group's interest in The Cheese Company Holdings Limited and
related loan note (which was discounted to current value at an exceptional cost
of €9.1 million) and €62.3 million (US$80 million) paid for the acquisition of
Seltzer Companies Inc. A further €19.5 million (US$25 million) is payable to
Seltzer in 2007 and 2008, depending on the achievement of profitability targets.
The total consideration for the Seltzer acquisition is €81.8 million (US$105
million).
The Group's retirement benefit obligations decreased €40.1 million to €124.9
million (2005: €165 million). This is mainly as a result of a change in the
discount rate assumptions for actuarial valuations and improved investment
returns. The discount rate applied to pension schemes in Ireland is 4.7%
(2005:4.3%), whilst the rate applied to UK schemes is 5.3% (2005: 4.9%).
Dividends and Annual General Meeting (AGM)
The Board is recommending a final dividend of 3.41 cent per share, compared with
a 3.24 cent per share final dividend in 2005. This brings the total dividend for
the year to 5.79 cent per share (2005: 5.51 cent per share), representing a 5%
increase. Subject to shareholders approval, dividends will be paid on 22 May
2007 to shareholders on the register as at 27 April 2007. Irish dividend
withholding tax will be deducted at the standard rate where appropriate. The
AGM will be held on Wednesday 16 May 2007 and the Annual Report post out date
is 13 April 2007.
Operations Review
Glanbia plc is organised into three divisions and has operations in Ireland,
Europe and the USA, with international joint ventures in the UK, USA and
Nigeria. In line with accounting standards, the Group's share of profits of
joint ventures and associates is included on an after interest and tax basis and
is separately outlined in the segmental analysis below.
CONSUMER FOODS
This division includes: Consumer Foods incorporating nutritional beverages,
fresh dairy products and cheese, soups and spreads; and, Pigmeat, which produces
a range of pork and bacon products.
€'000 2006 2005 Change
Revenue 511,022 493,582 Up 3.5%
Operating profit pre exceptional 24,525 27,139 Down 10%
Operating margin pre exceptional 4.8% 5.5% Down 70 bps
Revenue for the Consumer Foods division was up 3.5% to €511 million (2005:
€493.6 million). Operating profit was down 10% to €24.5 million (2005: €27.1
million), leading to a 70 basis points reduction in the operating margin to 4.8%
(2005: 5.5%). A steady performance from the consumer foods business was more
than offset by difficulties in Pigmeat including margin erosion due to lower
prices in certain segments and losses at the cannery operation.
Consumer Foods
Overall the consumer foods business unit had a demanding but satisfactory year
and revenue, operating profits and margins were broadly similar to last year.
Significantly increased marketing investment resulted in maintaining leading
market share positions in key categories such as beverages, fresh dairy and
cheese. Recent extensions of TV advertising position Glanbia in the top three
TV grocery advertisers in Ireland and research indicates that Avonmore will
be the top advertised food brand in the country in 2007 based on current
trends. Glanbia is the only company with seven listings in the top 100 Irish
grocery brands, with several of our portfolio improving their positions year on
year. However, the retail environment continues to be very competitive and
inflationary cost pressures in the economy remain a constant challenge for the
business.
Nutritional beverages: In 2006, this business retained its leading market share
position in milk mainly as a result of strong marketing investment, the volume
benefits of the CMP brand and the ongoing launch of new products, such as coffee
milk and flavoured milks. Progress was also made in extending the product range
targeting the growing consumer trend towards more nutritious and healthier
beverages.
Fresh dairy products: In 2006, this business successfully stabilised its overall
market share and improved its position in the growing functional foods area with
the launch of products targeting health benefits. The manufacturing cost base
continues to improve, despite increased energy and labour costs, as a result of
competitiveness initiatives including the rationalisation of the Yoplait
production facilities undertaken in 2005 together with ongoing improvements in
supply chain management and capacity consolidation.
Cheese, soups and spreads: In 2006, a concerted marketing focus helped these
segments defend their overall market share positions in increasingly competitive
food categories. The key opportunity for this business will be to continue to
deliver fresh and convenient product solutions and to extend the product range,
focusing on the growing consumer trend for more innovative foods in convenient
formats, such as the Fresh Fare range of meal soups launched successfully this
year.
Outlook: Nutritious, fresh and natural continue to be the key drivers for food
and beverages among Irish consumers. However, the marketplace is becoming more
competitive which is driving the need for a lower cost base. Against this
background consumer foods will continue with its product innovation and cost
management programmes, underpinned by strong marketing investment to maintain
the relevance of its product portfolio to customers and consumers.
Pigmeat
This business had a difficult 2006 and its overall performance declined. The two
key factors affecting performance were margin erosion due to lower prices in
certain segments of the business and the accelerated decline of the cannery
operation leading eventually to the decision to close this business in November
2006.
The closure of the cannery operation gave rise in 2006 to an exceptional item of
€3.3 million primarily relating to redundancy costs. The overall cost associated
with this rationalisation is expected to be largely neutral when the property
element of this business is disposed of in due course.
Outlook: The outlook for the pigmeat business unit is for an improved
performance in 2007. Pig production is expected to stabilise and improvements in
operational efficiency continue as a consequence of ongoing consolidation and
modernisation of the sector overall.
AGRIBUSINESS & PROPERTY
This division includes: Agribusiness, which is the key linkage with the Group's
Irish farmer supply base; and Property, which has responsibility for the
maximisation of value from the Group's property portfolio.
€'000 2006 2005 Change
Revenue 264,492 229,142 Up 15%
Operating profit pre exceptional 16,876 10,684 Up 58%
Operating margin pre exceptional 6.4% 4.7% Up 170 bps
Revenue was up 15% to €264.5 million (2005: €229.1 million). Operating profit
was up 58% to €16.9 million (2005: €10.7 million), substantially driven by
Property. The operating margin was up 170 basis points to 6.4% (2005: 4.7%). The
Agribusiness margin was 3.7% (2005: 3.6%).
Agribusiness
Agribusiness had a good year, despite the ongoing challenges in farming due to
the implementation of EU policy changes under MTR. This performance was due to
strong demand in key segments, such as feed and fertilizer, and growth in market
share as a result of competitive pricing and strong promotional activity. The
business continued to rollout the Countrylife format with ten branches
redeveloped to date. Overall in 2006, there was some improvement in revenue,
profits and margins.
Outlook
Agribusiness continues to evolve. Technology and system upgrades have been
recently completed, further Countrylife branches are planned and the product
offering continues to expand. In particular, Agribusiness continues to work to
meet the challenges of MTR and to remain relevant and competitive for its
growing customer base.
Property
This business, known as Glanbia Estates, had a good year and successfully
completed the disposal of non-core assets arising mainly as a result of
Agribusiness branch network rationalisation.
Outlook
The remit of this business is to maximise the value of Glanbia's overall
property portfolio and to look at all options for key sites. A pipeline of
potential transactions has been identified and these are expected to be
completed at a steady pace over the medium term.
FOOD INGREDIENTS & NUTRITIONALS
This division has Food Ingredients operations in Ireland and the USA that
produce cheese, butter, casein and protein ingredients. It also includes the
Group's global Nutritionals business.
€'000 2006 2005 Change
Revenue 1,077,913 1,107,288 Down 3%
Operating profit pre exceptional 44,166 43,109 Up 3%
Operating margin pre exceptional 4.1% 3.9% Up 20 bps
Revenue decreased by 3% to €1.08 billion (2005: €1.11 billion), due to lower
market prices for the ingredients businesses in Ireland and the USA. Despite
lower revenue, operating profit was up 3% to €44.2 million (2005: €43.1 million)
and the operating margin grew 20 basis points to 4.1% (2005: 3.9%), mainly
because of the increased contribution from the higher margin Nutritionals
business. Overall, this division delivered a good performance, particularly in
light of the difficult market environment in the first half.
Food Ingredients Ireland
2006 was a particularly challenging time for both producers and processors in
the Irish dairy industry. The EU is now in its fourth year of implementation of
MTR with further reductions in dairy supports. This had and is having a
significant and unpredictable effect on the sector and continues to squeeze
operating margins and impact performance.
Outlook
Global dairy markets are currently reasonably firm and 2007 is expected to be
less volatile. In Ireland, the final year of MTR continues to affect producers
and processors and there is no expectation of a material uplift in performance
from Food Ingredients Ireland. However, this business continues to pursue
productivity, quality and efficiency gains and is reorganising its product
offering to reflect changes in market demand.
Food Ingredients USA
Production volumes reached record levels in 2006 and demand was excellent for
all cheese types. Milk supply in Idaho was up significantly year-on-year. There
was also strong demand for dairy proteins, especially in the second half of the
year and this lifted whey prices. While cheese pricing was volatile, Food
Ingredients USA delivered a good performance with excellent management of
manufacturing costs.
Outlook
In the USA, markets, demand and milk availability are expected to remain strong
and Food Ingredients USA operations are expected to run at full capacity. This
business is expected to perform well in 2007 and will continue its focus on
operational excellence and increasing its market presence.
Nutritionals
In 2006, the global nutritional market exhibited strong growth and the Group's
Nutritionals business delivered good organic growth, benefiting from increased
capacity in whey in Idaho, vitamins and minerals in Germany and bars, beverages
and powders in the UK. The business performed well and continued to invest
heavily in people and research and development to drive the business forward.
The Seltzer acquisition in October delivered an important step forward in
developing the Nutritionals business. Seltzer is a leading US nutritional
solutions company with strong expertise in the development of customised
formulations and the provision of speciality ingredients for the nutritional
supplement, food and beverage markets.
Outlook
The Nutritionals business is expected to deliver a strong performance in 2007.
Existing operations are expected to continue to grow organically and although
neutral in terms of the 2006 performance, Seltzer will contribute for a full
year in 2007 and will be earnings enhancing. Work has commenced on Glanbia's
first nutritional operation in the Asia Pacific region. Based outside Shanghai,
at a cost of €5 million, this facility is expected to be complete in 2008.
JOINT VENTURES & ASSOCIATES (GLANBIA SHARE)
Glanbia has a number of international joint ventures, which are an important
part of the Group's growth strategy.
€'000 2006 2005 Change
Revenue (1) 262,871 131,444 Up 100%
Profit after interest and tax (2) 2,842 932 Up 205%
(1) Not included in Group revenue
(2) Included in the Income Statement as share of results of joint ventures and
associates
UK
Glanbia Cheese, a joint venture with Leprino, produces mozzarella cheese for the
European market. This business had a good performance in 2006 and this is
expected to continue in 2007.
Nigeria
Nutricima, a joint venture with PZ Cussons plc, delivered strong top line growth
and good market share development in powdered and evaporated milk during the
year. The business performed satisfactorily although overall results were
impacted by significant market development expenditure. A pipeline of new
products and capacity expansion is underway and this business is forecast to
perform as planned in 2007.
USA
Southwest Cheese, a joint venture with main partners Dairy Farmers of America
and Select Milk Producers Inc., was commissioned in 2006. This plant, which
produces cheese and whey proteins, is based in New Mexico and continues its ramp
up to full capacity, forecast for the second quarter of 2007. Southwest Cheese
is already producing product to world class standards and is forecast to perform
as planned in 2007.
2007 outlook
Ireland will remain challenging in light of the competitive retail environment
and the ongoing effects of the implementation of MTR. Irish operations continue
to focus on key aspects of business execution which drive performance,
productivity and cost competitiveness. International operations are expected to
perform well in 2007 and Food Ingredients USA, Nutritionals and Joint Ventures
are all well positioned for good growth.
Glanbia is successfully developing a strategic international presence, which
today represents nearly 40% of revenue and profits. This gives the Group a
strong platform from which to continue to grow and develop overseas. At the same
time, the Group continues to consistently and solidly improve the long-term
sustainability of the Irish operations.
As to the future, Glanbia is on target to deliver double digit earnings growth
in 2007 and we believe the outlook is positive for sustained high growth.
Consolidated income statement
for the year ended 30 December 2006
Pre- Pre-
exceptional Exceptional Total exceptional Exceptional Total
(as restated) (as restated) (as restated)
2006 2006 2006 2005 2005 2005
Notes €'000 €'000 €'000 €'000 €'000 €'000
Revenue 2 1,853,427 - 1,853,427 1,830,012 - 1,830,012
Cost of sales (1,596,547) - (1,596,547) (1,589,686) - (1,589,686)
-------- ------- -------- -------- ------- -------
Gross profit 256,880 - 256,880 240,326 - 240,326
Distribution expenses (105,724) - (105,724) (94,743) - (94,743)
Administration
expenses 3 (65,589) (12,455) (78,044) (64,651) (5,041) (69,692)
-------- ------- -------- -------- ------- -------
Operating profit 85,567 (12,455) 73,112 80,932 (5,041) 75,891
Finance income 4 4,883 - 4,883 4,209 - 4,209
Finance costs 4 (18,918) - (18,918) (17,358) (5,304) (22,662)
Share of results of
joint ventures and
associates 2,842 - 2,842 932 - 932
-------- ------- -------- -------- ------- -------
Profit before taxation 74,374 (12,455) 61,919 68,715 (10,345) 58,370
Income taxes 5 (7,970) 12,321 4,351 (7,592) 6,935 (657)
-------- ------- -------- -------- ------- -------
Profit for the year 66,404 (134) 66,270 61,123 (3,410) 57,713
-------- ------- -------- -------- ------- -------
Attributable to:
Equity holders of the Parent 65,934 57,396
Minority interests 336 317
-------- -------
66,270 57,713
-------- -------
Basic earnings per
share (cent) 6 22.51 19.69
Diluted earnings per
share (cent) 6 22.47 19.62
Consolidated statement of recognised income and expense
for the year ended 30 December 2006
2006 2005
(as restated)
€'000 €'000
Actuarial gain/(loss) - defined benefit schemes 36,852 (42,303)
Deferred tax on actuarial gain/loss (3,923) 4,054
Share of actuarial gain - joint venture 230 -
Currency translation differences (9,401) 889
Fair value adjustments
- Group 2,367 (873)
- Joint ventures 367 -
------- -------
Net income/(expense) recognised directly in equity 26,492 (38,233)
Profit for the year 66,270 57,713
------- -------
Total recognised income for the year 92,762 19,480
------- -------
Attributable to:
Equity holders of the Parent 92,426 19,163
Equity minority interest 336 317
------- -------
92,762 19,480
------- -------
Consolidated balance sheet
as at 30 December 2006
2006 2005
(as restated)
ASSETS Notes €'000 €'000
Non-current assets
Property, plant and equipment 335,152 340,503
Intangible assets 138,724 57,963
Investments in associates 10,933 11,090
Investments in joint ventures 58,668 59,832
Available for sale investments 12,527 29,511
Trade and other receivables - 56,874
Derivative financial instruments 2,095 1,825
Deferred tax assets 23,923 15,869
------- -------
582,022 573,467
------- -------
Current assets
Inventories 145,158 144,250
Trade and other receivables 169,540 143,610
Derivative financial instruments 6,776 1,125
Cash and cash equivalents 8 259,311 104,405
------- -------
580,785 393,390
------- -------
Total assets 1,162,807 966,857
------- -------
EQUITY
Issued capital and reserves attributable to equity
holders of the Parent
Share capital 98,304 97,964
Other reserves 9 113,696 120,192
Retained earnings 10 (18,116) (100,737)
------- -------
193,884 117,419
Minority interests 6,635 6,299
------- -------
200,519 123,718
------- -------
LIABILITIES
Non-current liabilities
Borrowings 8 444,570 327,424
Deferred tax liabilities 38,611 34,471
Trade and other payables 11,373 -
Retirement benefit obligations 124,888 165,016
Provisions for other liabilities and charges 6,032 6,072
Derivative financial instruments 3,406 -
Capital grants 10,660 14,855
------- -------
639,540 547,838
------- -------
Current liabilities
Borrowings 8 39,235 1,133
Provisions for other liabilities and charges 7,110 8,433
Trade and other payables 270,773 278,583
Current tax liabilities 1,942 4,605
Derivative financial instruments 3,688 2,547
------- -------
322,748 295,301
------- -------
Total liabilities 962,288 843,139
------- -------
Total equity and liabilities 1,162,807 966,857
------- -------
Consolidated cash flow statement
for the year ended 30 December 2006
2006 2005
Notes €'000 €'000
Cash flows from operating activities
Cash generated from operations 11 58,486 163,835
Interest received 1,000 670
Interest paid (19,967) (23,177)
Tax paid (6,274) (3,777)
------- -------
Net cash from operating activities 33,245 137,551
------- -------
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired (69,892) (19,366)
Purchase of property, plant and equipment (38,085) (46,979)
Purchase of available for sale investments (3,406) (5,214)
Disposal of subsidiary, net of cash disposed (323) (147)
Disposal of available for sale investments 22,185 14,394
Repayment of loan note by The Cheese Company
Holdings Limited 52,822 -
Proceeds from sale of property, plant and equipment 8,665 4,418
------- -------
Net cash used in investing activities (28,034) (52,894)
------- -------
Cash flows from financing activities
Proceeds from issue of ordinary shares 190 731
Sharesave Scheme - receipt from Trustees 122 2,191
Increase/(decrease) in borrowings 169,851 (20,242)
Finance lease principal payments (1,077) (1,449)
Dividends paid to Company's shareholders (16,472) (15,612)
Repayment of minority interest - (7)
Capital grants received 123 772
------- -------
Net cash from/(used) in financing activities 152,737 (33,616)
------- -------
Net increase in cash and cash equivalents 157,948 51,041
Cash and cash equivalents at the beginning of the year 104,405 51,625
Effects of exchange rate changes on cash and cash
equivalents (3,042) 1,739
------- -------
Cash and cash equivalents at the end of the year 259,311 104,405
------- -------
Reconciliation of net cash flow to movement in net debt
2006 2005
€'000 €'000
Net increase in cash and cash equivalents 157,948 51,041
Cash (outflow)/inflow from debt financing (168,774) 21,691
------- -------
(10,826) 72,732
Debt acquired with subsidiaries - (1,786)
Fair value of interest rate
swaps qualifying as fair value hedges 3,978 -
Exchange translation adjustment on net debt 6,506 (24,717)
------- -------
Movement in net debt in the year (342) 46,229
Net debt at beginning of year (224,152) (270,381)
------- -------
Net debt at the end of the year (224,494) (224,152)
------- -------
1 Basis of preparation
The financial information presented in this preliminary announcement has been
prepared in accordance with International Financial Reporting Standards (IFRS)
and IFRIC interpretations endorsed by the European Union
(EU) and with those parts of the Companies Acts 1963 to 2006 applicable to
companies reporting under IFRS. The financial information has been prepared
under the historical cost convention as modified by use of fair values for
available for sale assets and derivative financial instruments.
The financial information set out in this document does not constitute full
statutory financial statements but has been derived from the Group financial
statements for the year ended 30 December 2006 (referred to as the 2006
financial statements). The 2006 financial statements have been audited and have
received an unqualified audit report.
The financial statements were approved by the Board of Directors on 6 March 2007
and signed on its behalf by MJ Walsh, JJ Moloney and GJ Meagher.
Prior year adjustments
Foreign currency
The Group has adopted the amendment to IAS 21, 'Net Investment in a Foreign
Operation', in the Group's financial statements from 1 January 2006. The
adoption of this amendment, which has resulted in a change in accounting policy,
requires that all foreign exchange gains and losses on inter-company loans that
form part of the net investment in a foreign operation, including loans between
fellow subsidiaries, are recognised directly in equity on consolidation. Prior
period comparative figures have been restated to reflect the impact of this
change. In the prior year, such loans between fellow subsidiaries did not
qualify as part of the net investment and therefore the exchange gains and
losses on these loans were recognised directly in the income statement.
This change results in the recognition of a gain of €3.9 million, previously
included within administration expenses in the income statement in the prior
year, directly in equity in the currency reserve. There is no net impact on
equity as a result of this change. The overall impact represents an increase in
currency reserve amounting to €3.9 million and a decrease in retained earnings
amounting to €3.9 million. The change in accounting policy has resulted in a
decrease in basic earnings per share for the year-ended 31 December 2005 of 1.35
cent
Leases
The Group has adopted IFRIC 4, Determining whether an Arrangement contains a
Lease, in the Group's financial statements from 1 January 2006. The Group
reviews arrangements that do not take the legal form of a lease and a
determination is made as to whether the substance of an arrangement could equate
to a finance lease, considering whether fulfilment of the arrangement is
dependant upon the use of a specific asset and the arrangement contains the
right to use an asset. If the specified criteria are met, the arrangement is
classified as a finance lease. In prior years the annual cost of this
arrangement was recognised as an expense as incurred. The effect of this change
in accounting policy has resulted in both an increase in property, plant and
equipment and lease liabilities amounting to €8.5 million at 31 December 2005.
This resulted in no net impact to profit or basic earnings per share for the
year ended 31 December 2005.
2 Segment information
Primary reporting format - business segments
At 30 December 2006 the Group is organised into three main business segments:
- Consumer Foods
- Food Ingredients and Nutritionals
- Agribusiness and Property
The segment results for the year ended 30 December 2006 are as follows:
Food
Ingredients Agribusiness
Consumer and and
Foods Nutritionals Property Unallocated Group
2006 €'000 €'000 €'000 €'000 €'000
Total gross
segment revenue 511,077 1,186,890 264,492 - 1,962,459
Inter-segment (55) (108,977) - - (109,032)
revenue -------- -------- -------- -------- --------
Revenue 511,022 1,077,913 264,492 - 1,853,427
-------- -------- -------- -------- --------
Operating profit
pre exceptional 24,525 44,166 16,876 - 85,567
items
Exceptional items (3,277) - - (9,178) (12,455)
-------- -------- -------- -------- --------
21,248 44,166 16,876 (9,178) 73,112
-------- -------- -------- --------
Finance income and costs (14,035)
Share of results of
joint ventures 2,842
and associates --------
Profit before tax 61,919
Tax 4,351
--------
Profit for the year 66,270
--------
The segment results for the year ended 31 December 2005 are as follows:
Food
Ingredients Agribusiness
Consumer and and
Foods Nutritionals Property Unallocated Group
(as restated) (as restated) (as restated)
2005 €'000 €'000 €'000 €'000 €'000
Total gross
segment revenue 493,667 1,215,559 239,826 - 1,949,052
Inter-segment (85) (108,271) (10,684) - (119,040)
revenue -------- -------- -------- -------- --------
Revenue 493,582 1,107,288 229,142 - 1,830,012
-------- -------- -------- -------- --------
Operating
profit pre 27,139 43,109 10,684 - 80,932
exceptional items
Exceptional items (11,860) (2,649) (1,160) 10,628 (5,041)
-------- -------- -------- -------- --------
15,279 40,460 9,524 10,628 75,891
-------- -------- -------- --------
Finance income and costs (18,453)
Share of results of
joint ventures and 932
associates --------
Profit before tax 58,370
Tax (657)
--------
Profit for the year 57,713
--------
3 Exceptional items
2006 2005
(as restated)
Notes €'000 €'000
Restructuring cost (a) (3,277) (15,669)
The Cheese Company Holdings Limited (b) (9,178) -
Loss on sale or termination of operations - (331)
Profit on sale of quoted investments - 10,959
------- -------
(12,455) (5,041)
Exceptional tax credit (note 5) 12,321 6,935
Exceptional finance cost (note 4) - (5,304)
------- -------
Net exceptional items (134) (3,410)
------- -------
a) Restructuring costs relate to the closure of the Pigmeat cannery operation.
Costs include redundancy and the release of unamortised capital grants.
b) On 29 December 2006, the Group disposed of its remaining 25% interest and
related 2008-2018 loan note in The Cheese Company Holdings Limited to the
majority shareholder, Milk Link Limited.
4 Finance income and costs
(a) Finance income
2006 2005
€'000 €'000
Interest income (i) 4,883 4,209
------- -------
(b) Finance costs - pre-exceptional
2006 2005
(as restated)
€'000 €'000
Interest expense
- Bank borrowings repayable within five years (15,096) (10,291)
- Finance lease (380) (472)
------- -------
(15,476) (10,763)
Finance cost of preferred securities and
preference shares (3,442) (6,595)
------- -------
Total finance costs - pre exceptional (18,918) (17,358)
------- -------
Finance costs - exceptional
Cancellation of preferred securities (ii) - (5,304)
------- -------
Total finance costs (18,918) (22,662)
------- -------
i) Interest income consists mainly of interest on a Stg£35 million
subordinated secured loan note granted by The Cheese Company Holdings
Limited in 2004, representing part proceeds on the sale by the Group of
a 75% interest in its UK hard cheese business. On 29 December 2006, the
Group disposed of its remaining 25% interest in The Cheese Company Holdings
Limited and related 2008-2018 loan note to the majority shareholder, Milk
Link Limited.
ii) On 15 June 2005 the Group prepaid the US$100 million 7.99% cumulative
guaranteed preferred securities, giving rise to a cost of €5.3 million,
which was disclosed as an exceptional item.
5 Income taxes
2006 2005
€'000 €'000
Irish corporation tax 3,080 2,460
Adjustments in respect of prior years 238 (1,285)
------- -------
Current tax on income for the year 3,318 1,175
------- -------
Foreign tax 1,035 594
Adjustments in respect of prior years (46) (1,056)
------- -------
Current tax on income for the year 989 (462)
------- -------
Total current tax 4,307 713
Deferred tax 3,663 6,879
------- -------
Pre-exceptional tax charge 7,970 7,592
Exceptional tax credit (12,321) (6,935)
------- -------
(4,351) 657
------- -------
A deferred tax asset of €12.1 million arising from the expected use in future
years of UK tax losses, which previously had not been recognised due to
uncertainty as to recoverability, has been recognised in the 2006 financial
statements. The restructuring provision in the Pigmeat Division also resulted in
a net tax credit of €0.2 million.
The tax credits in 2006 and 2005, by virtue of their size and nature, have been
separately disclosed as exceptional credits in the financial statements.
6 Earnings per share
Basic
2006 2005
(as restated)
€'000 €'000
Profit attributable to equity
holders 65,934 57,396
of the Company --------- ---------
Weighted average number of ordinary
shares in issue 292,958,667 291,469,902
--------- ---------
Basic earnings per share (cent per
share) 22.5 19.7
--------- ---------
Diluted
2006 2005
€'000 €'000
Weighted average number of ordinary
shares in issue 292,958,667 291,469,902
Adjustments for share options 480,072 1,134,139
--------- ---------
Adjusted weighted average number of
ordinary shares 293,438,739 292,604,041
--------- ---------
Diluted earnings per share (cent per share) 22.5 19.6
--------- ---------
Adjusted
2006 2005
€'000 €'000
Profit attributable to equity holders of the Company 65,934 57,396
Exceptional items 134 3,410
--------- ---------
66,068 60,806
--------- ---------
Adjusted earnings per share (cent per share) 22.6 20.9
--------- ---------
Diluted adjusted earnings per share (cent per share) 22.5 20.8
--------- ---------
7 Dividends
The dividends paid in 2006 and 2005 were €16.5 million (5.62 cent per share) and
€15.6 million (5.36 cent per share) respectively. On 4 October an interim
dividend of 2.38 cent per share on the ordinary shares amounting to €6.98
million was paid to shareholders on the register of members as at 15 September
2006. The Directors have recommended the payment of a final dividend of 3.41
cent per share on the ordinary shares which amounts to €10 million. Subject to
shareholders approval this dividend will be paid on Tuesday 22 May 2007 to
shareholders on the register of members as at Friday, 27 April 2007, the record
date. The financial statements do not reflect this final dividend payable.
8 Borrowings
2006 2005
(as restated)
€'000 €'000
Borrowings due within one year 39,235 1,133
Borrowings due after one year 444,570 327,424
Less:
Cash and cash equivalents (259,311) (104,405)
------- -------
224,494 224,152
------- -------
9 Other reserves
Capital
and
mergers Currency Fair value
reserves reserve reserves Total
€'000 €'000 €'000 €'000
Balance at 1 January 2006 116,250 2,596 2,144 120,990
Amendment to IAS 21 - (798) - (798)
------- ------- ------- -------
Restated Balance at 1 January 2006 116,250 1,798 2,144 120,192
Translation differences on
foreign currency net investments - (9,401) - (9,401)
Revaluation of interest rate
swaps gain in year - - 2,378 2,378
Foreign exchange contracts
gain in year - - 1,840 1,840
Transfers to income statement
- Foreign exchange contracts
gain in year - - (540) (540)
- Forward commodity
contracts loss in year - - 227 227
- Interest rate swaps gain
in year - - (1,169) (1,169)
Revaluation of forward
commodity contracts gain in year - - 591 591
Revaluation of investments
gain in year - - 102 102
Deferred tax on fair value
adjustments - - (695) (695)
Cost of share options 199 - - 199
Discount on own shares vested (28) - - (28)
------- ------- ------- -------
Balance at 30 December 2006 116,421 (7,603) 4,878 113,696
------- ------- ------- -------
10 Retained earnings
Retained Goodwill
earnings write-off Total
€'000 €'000 €'000
Balance at 1 January 2006 (8,574) (92,961) (101,535)
Amendment to IAS 21 798 - 798
------- ------- --------
Restated Balance at 1 January 2006 (7,776) (92,961) (100,737)
------- ------- --------
Actuarial gain - defined benefit schemes 36,852 - 36,852
Deferred tax on pension gain (3,923) - (3,923)
Share of actuarial gain - joint venture 230 - 230
------- ------- --------
Net income recognised directly in equity 33,159 - 33,159
Profit for the year 65,934 - 65,934
------- ------- --------
Total recognised income for 2006 99,093 - 99,093
Dividends paid in 2006 (16,472) - (16,472)
------- ------- --------
Balance at 30 December 2006 74,845 (92,961) (18,116)
------- ------- --------
11 Cash generated from operations
2006 2005
€'000 €'000
(as restated)
Profit for the year 66,270 57,713
Non-cash exceptional restructuring costs - 2,172
Exceptional loss on The Cheese Company Holdings
Limited 9,178 -
Share of results of associates and joint ventures (2,842) (932)
Income taxes (4,351) 657
Depreciation 25,415 24,085
Amortisation 4,452 3,313
Cost of share options 199 161
Gain on disposal of investments (1,541) (10,959)
Gain on disposal of property, plant and equipment (7,531) (2,509)
Interest income (4,883) (4,209)
Interest expense 18,918 22,662
Amortisation of government grants received (4,322) (1,424)
------- ------
Net profit before changes in working capital 98,962 90,730
Change in net working capital
- Increase in inventory (2,684) (5,501)
- (Increase)/decrease in short term receivables (25,137) 35,419
- (Decrease)/increase in short term liabilities (11,332) 36,045
- (Decrease)/increase in provisions (1,323) 7,142
------- ------
Cash generated from operations 58,486 163,835
------- ------
12 Statutory financial statements
The financial information in this preliminary announcement is not the statutory
financial statements of the Company, a copy of which is required to be annexed
to the Company's annual return to the Companies Registration Office. A copy of
the financial statements in respect of the financial year ended 30 December 2006
will be annexed to the Company's annual return for 2006. The auditors of the
Company have made a report, without any qualification on their audit, of the
financial statements of the Company in respect of the financial year ended 31
December 2005 and the Directors approved the financial statements of the Company
in respect of the financial year ended 30 December 2006 on 6 March 2007. A copy
of the financial statements of the Company in respect of the year ended 31
December 2005 has been annexed to the Company's annual return for 2005 to the
Companies Registration Office.
This information is provided by RNS
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