Interim Results

Greencore Group PLC 27 May 2003 GREENCORE GROUP PLC Interim statement of results for the half year ended 28 March 2003 Highlights Half Year Ended 28 March 2003 • Like-for-like sales growth across all three divisions • Operating profit from continuing operations* up 7% to €48.9m • Constant currency operating profit from continuing operations* up 12% • Operating margin growth across all three divisions • Profit before tax* up 9% to €31.1m • Headline EPS* up 2% to 14.1c • Net interest down 23% to €21.9m • Net debt down €66.1m to €497.1m * before exceptional items and goodwill amortisation For further information, please contact: David Dilger, Chief Executive Tel: +353 (0)1 6051002 Patrick Kennedy, Chief Financial Officer Tel: +353 (0)1 6051003 Billy Murphy/Trish Morrissey, Drury Communications Tel: +353 (0)1 2605000 Interim Statement Half Year Ended 28 March 2003 Summary The Group performed strongly in the first six months of the financial year, producing excellent results both in terms of profitability and cashflow. • Profitability All three divisions increased like-for-like sales and improved operating margins. As a result, profit before tax grew by 9%, or €2.6m, notwithstanding a reduction of €8.5m in operating profit from discontinued activities versus the comparable period. Headline EPS grew by 2%, with an increase in the effective tax rate from 6% to 13% and the reduction in discontinued profitability more than offset by the strong trading performance. • Cashflow Net interest fell by 23% and net debt reduced by €66.1m, despite the normal seasonal increase in working capital at Irish Sugar. Net debt, at €497.1m, was €376.6m below the level at the end of March 2001 of €873.7m. The benefits of the extensive restructuring which the Group has successfully undertaken over the last two years are clearly evident from these results. We have created a focused Group with leading market positions, well-invested facilities, excellent innovation skills and strong cash generation ability. We are committed to building upon these attributes in the months and years ahead. • Dividend In the last two financial years, the Board has decided to maintain, rather than increase, the level of the interim and final dividend. The aim was to reduce, as swiftly as possible, the indebtedness assumed as a result of the acquisition of Hazlewood Foods in 2001. These results clearly demonstrate the benefits of this prioritisation, and the Board intends to continue this policy for the time being. The Board, however, also wishes to rebalance the weighting between the interim and final dividend payments to reflect more closely the relative profitability of the first half and second half of the financial year. An interim dividend of 5.05c per share will therefore be paid. Shareholders will again be offered the option of receiving dividends in the form of cash or shares. Review of Operations Chilled and Frozen The Chilled and Frozen division performed very strongly in the first six months. Like-for-like sales grew by 3%, whilst operating margins from continuing operations increased from 5.1% to 6.0%, resulting in a 12% increase in continuing operating profit from €16.3m to €18.2m. On a constant currency basis, operating profit from continuing operations grew by 19%. The sandwich business enhanced its position as the world's largest sandwich manufacturer, with its high level of new product development resulting in top line growth again ahead of the market. A number of new ranges were successfully trialled with both existing and new customers, the full benefits of which will be seen in the second half of this year and the next financial year. Ready meals continued to trade strongly, whilst the first phase of the expansion of both the Warrington and Wisbech facilities will be completed on schedule in the second half of the year. The quiche business made further progress as product innovation and range extensions helped to deliver good sales growth in the slower winter months. Chilled sauces and soup had a satisfactory first half, with strong growth in soup sales a particular highlight. The business has won significant additional chilled soup trade since the end of the period and further capacity has been planned to cater for this growth. The Group's chilled pizza business had a challenging first half. Although much was achieved, with the integration of volumes from the Bedford facility closed just before the start of the period and the closure and transfer of volumes from the Group's other remaining topped pizza facility at Nelson in March, the necessary efficiency levels have not yet been achieved. In addition, the focus on operational improvement has resulted in some sales slippage, although this should be, in part, redressed by additional trade won since the end of the half year. Much still remains to be done to generate the returns which are possible for a business with a state-of-the-art facility and strong market position in this fast growing sector. Our expectations are for considerable improvement in performance during the last quarter of this financial year. Roberts, the Group's frozen savoury and dessert business, experienced a fire at one of its savoury facilities during the period. Satisfactory insurance was in place and production is being maintained at other Group facilities whilst the damaged facility is rebuilt and enhanced. Roberts' market position has not been materially impacted, and the frozen savoury market continues to grow in both value and volume terms. Meanwhile, further good growth was experienced in frozen desserts. Since the half year end, the Group disposed of its UK chilled sausage business, J & J Tranfield. Ambient Grocery Operating profit from continuing activities grew by 6% from €10.4m to €11.1m. Whilst like-for-like sales showed only a modest 0.2% advance over last year's levels (due to a sales decline at the baked goods business), operating profit margins improved significantly, increasing from 5.4% to 6.4% on continuing activities. On a constant currency basis, operating profit from continuing operations grew by 13%. The ambient sauces and pickles business performed well, with sales growth driven by new product development and the successful launch of co-packing contracts with two large international branded manufacturers. Campsie, the Scottish mineral water business, benefited from further growth in demand for mineral water in the UK. The cake and dessert business enjoyed a much improved Christmas cake season and, as commented on at the AGM, has won additional trade which will deliver an improved performance for the full year. To build upon this success, the chilled dessert facility at Bedford was closed in April and all chilled dessert production is now consolidated at the Hull facility. Rathbones, the UK baked goods business, improved its performance over the comparable period, with the benefits of the rationalisation and cost reduction initiatives of the last twelve months helping to offset continued difficult market conditions. Ingredients and Agribusiness* The division had a strong first half, generating good profitability, high returns on capital and strong cashflow. Like-for-like sales grew by 3%, operating margins from continuing activities increased from 7.7% to 7.9% and continuing operating profit grew by 4% from €18.8m to €19.6m. On a constant currency basis, operating profit from continuing operations grew by 6%. Irish Sugar had a satisfactory first half. Although sugar beet costs increased and its sugar quota was reduced by 7,052 tonnes, it benefited from the price increase obtained in the second half of the previous year. In addition, as reported at the AGM, an excellent operational performance during the processing campaign helped to offset the lack of sugar beet availability due to poor weather. The profits of the Group's malt business increased, driven by excellent sales and marketing coupled with further efficiency improvements. The Group's agribusinesses traded satisfactorily, with favourable March weather benefiting demand. * Following the disposal of the fertiliser business, Grassland Holdings, in the second half of the last financial year, the Board has decided to combine the results of its remaining agribusinesses within the Ingredients division for reporting purposes going forward. Associates Share of profit of associates, net of share of interest, increased significantly from €1.5m to €2.9m. This principally reflected the inclusion of the flour and oatmeal business, Odlums, as an associate, following its partial disposal last year and its continued strong trading. Other associate companies also performed well, with strong results, in particular, from the Group's yeast associate and its UK sugar distributor associate. Financial Review Like-for-like sales grew by 2.2%, with each division showing growth. Operating margins on continuing activities increased from 6.03% to 6.76%, again with each division showing growth. As a result, operating profit from continuing activities grew by €3.4m, or 7.4%, to €48.9m. This growth, together with the increase in share of profit of associates and the reduction in net interest payable, more than offset the €8.5m reduction in operating profit from discontinued activities, resulting in growth of 9%, or €2.6m, in profit before tax for the year. The tax charge of €4.0m on ordinary activities compares to €1.7m in the first half of last year, with the effective rate increasing from 6% to 13%, reflecting the increased level of profitability in higher tax jurisdictions. The exceptional cost within operating profit of €2.9m relates to start-up inefficiencies at the new pizza facility (as the additional trade from the closed Bedford and Nelson facilities was transferred), whilst a net surplus of €0.6m was recorded on the closure of the Nelson pizza facility and two facilities damaged by fire. Headline earnings per share (adjusted to eliminate exceptional items and amortisation of goodwill and finance facility costs) increased by 2.2% from 13.8c to 14.1c. Basic earnings per share increased from 2.1c to 6.3c. Net debt reduced by €66.1m to €497.1m, benefiting from a particular focus on cash generation across the Group, as well as a translation benefit of €33.2m on the sterling element of the Group's indebtedness. This result is particularly satisfactory in light of the normal seasonal increase in working capital at Irish Sugar. Significant capital investment was made in the period, most particularly in the chilled ready meals category; notwithstanding that, net capital expenditure declined from €25.1m in the same period last year to €19.4m. Net cash of €3.6m was received in respect of taxation, reflecting the modest amount of tax payable across the Group and a tax refund received in Continental Europe. Outlook The Group is well positioned to continue to generate good growth in profitability from continuing operations combined with continued strong cash generation and further reductions in interest payable. The market dynamics in the two convenience food divisions remain attractive and the Group's performance will continue to be underpinned by its strong market positions and excellent innovation skills, as well as specific initiatives in the individual businesses. Whilst much remains to be done in certain sectors to achieve an appropriate return on capital, most particularly in pizza and bread, we are confident of driving continued improvement in these businesses. The Ingredients and Agribusiness division is well positioned to continue to generate substantial cashflow and very satisfactory returns on capital. Irish Sugar will benefit from its second price increase in successive years, which will help to offset continuing inflation in its cost base, whilst the competitiveness of the Group's largest malt operation in the UK should be significantly improved if the recent weakness in sterling is not reversed. The Group has been transformed over the last two years and now has a well-balanced, robust portfolio of businesses, which provides a solid platform for both profit growth and cash generation. E F Sullivan Chairman 27 May 2003 Note Like-for-like sales are calculated on a constant currency basis from continuing operations adjusted for facilities damaged by fire. Consolidated Profit and Loss Account (Unaudited) Half Year Ended 28 March 2003 _______________________________________________________________________________________ Half year ended 28 March 2003 Half year to Notes Exceptional 29 March Ordinary items and Total 2002 activities amortisation €'000 €'000 _______________________________________________________________________________________ Turnover Continuing operations 2 723,727 - 723,727 754,444 Discontinued operations 20,092 - 20,092 182,094 __________ __________ __________ __________ 2 743,819 - 743,819 936,538 __________ __________ __________ __________ Operating profit before goodwill amortisation and exceptional items Continuing operations 2 48,894 - 48,894 45,530 Discontinued operations 1,242 - 1,242 9,784 __________ __________ __________ __________ 2 50,136 - 50,136 55,314 Goodwill - (10,701) (10,701) (9,228) amortisation Exceptional items 3 - (2,927) (2,927) (6,147) __________ __________ __________ __________ Operating profit 50,136 (13,628) 36,508 39,939 Share of operating profit of associated undertakings 3,032 - 3,032 1,514 __________ __________ __________ __________ 53,168 (13,628) 39,540 41,453 __________ __________ __________ __________ Exceptional items Termination/disposal of operations Net surplus over book value 3 - 576 576 974 Goodwill previously written off to reserves 3 - - - (7,838) __________ __________ __________ __________ 576 576 (6,864) __________ __________ __________ __________ Profit before interest and taxation 53,168 (13,052) 40,116 34,589 Net interest payable (21,925) - (21,925) (28,387) Amortisation of issue costs of finance facility - (2,291) (2,291) (1,318) Share of interest (payable)/receivable - associates (138) - (138) 15 __________ __________ __________ __________ Profit before taxation 31,105 (15,343) 15,762 4,899 Taxation (3,966) 631 (3,335) (39) __________ __________ __________ __________ Profit after taxation 27,139 (14,712) 12,427 4,860 Minority interests (650) - (650) (866) __________ __________ __________ __________ Profit attributable to Group shareholders 26,489 (14,712) 11,777 3,994 Dividends 4 (9,537) - (9,537) (8,204) __________ __________ __________ __________ Retained profit/ (loss) 16,952 (14,712) 2,240 (4,210) ========== ========== ========== ========== Adjusted earnings per ordinary share 5 14.1c 13.8c Basic earnings per ordinary share 5 6.3c 2.1c Diluted earnings per share 5 6.2c 2.1c Dividend per ordinary share 4 5.05c 4.38c Consolidated Balance Sheet At 28 March 2003 ______________________________________________________________________________ 28 March 29 March 27 September 2003 2002 2002 (Unaudited) (Unaudited) (Audited) €'000 €'000 €'000 ______________________________________________________________________________ Fixed assets Intangible assets 381,075 363,777 391,773 Tangible assets 540,955 647,105 586,180 Financial assets 16,437 18,167 16,784 __________ __________ __________ 938,467 1,029,049 994,737 __________ __________ __________ Current assets Stocks 187,443 239,185 137,662 Debtors 119,961 182,507 178,974 Cash and bank balances 99,846 190,073 103,256 __________ __________ __________ 407,250 611,765 419,892 Creditors Amounts falling due within one year 388,417 510,723 396,053 __________ __________ __________ Net current assets 18,833 101,042 23,839 __________ __________ __________ Total assets less current liabilities 957,300 1,130,091 1,018,576 __________ __________ __________ Creditors Amounts falling due after more than one year 621,295 811,024 693,395 Provisions for liabilities and charges 44,013 35,941 46,323 Development grants 1,513 2,146 2,332 __________ __________ __________ 666,821 849,111 742,050 __________ __________ __________ Net assets 290,479 280,980 276,526 ========== ========== ========== Capital and reserves Called up share capital 122,058 121,094 121,584 Capital conversion reserve fund 934 934 934 Share premium account 87,280 84,898 85,847 Profit and loss account/other reserves 74,969 68,808 63,535 __________ __________ __________ Shareholders' funds - equity interests 285,241 275,734 271,900 Minority interests - equity interests 5,238 5,246 4,626 __________ __________ __________ 290,479 280,980 276,526 ========== ========== ========== Consolidated Cash Flow Statement Half Year Ended 28 March 2003 ______________________________________________________________________________ Half year to Half year to 28 March 29 March 2003 2002 (Unaudited) (Unaudited) €'000 €'000 ______________________________________________________________________________ Operating activities Operating profit 50,136 55,314 Depreciation (net of grant amortisation) 23,105 29,357 Changes in working capital (4,115) 13,382 Other (including cash effect of exceptional items) 6,662 (5,225) Capital expenditure (net) (19,438) (25,098) __________ __________ Cash flow from operating activities 56,350 67,730 Dividends from associates 2,621 925 Returns on investments and servicing of finance (16,001) (27,979) Taxation 3,575 (4,490) Proceeds on issue of share capital 124 317 Disposal of subsidiary and associated undertakings - 19,513 Net debt disposed of - 22,510 Equity dividends paid (13,739) (15,453) __________ __________ Net cash flow 32,930 63,073 Translation differences 33,184 (8,137) __________ __________ Movement in net debt in period 66,114 54,936 __________ __________ Net debt at start of period (563,173) (722,638) __________ __________ Net debt at end of period (497,059) (667,702) ========== ========== Statement of Total Recognised Gains and Losses Half Year Ended 28 March 2003 ______________________________________________________________________________ Half year to Half year to Full year to 28 March 29 March 27 September 2003 2002 2002 (Unaudited) (Unaudited) (Audited) €'000 €'000 €'000 ______________________________________________________________________________ Profit for period attributable 11,777 3,994 10,131 to Group shareholders Exchange adjustments 9,194 2,219 2,531 Prior year adjustment - 1,600 1,600 __________ __________ __________ Total recognised gains for the period 20,971 7,813 14,262 __________ __________ __________ Notes Half Year Ended 28 March 2003 1. Basis of preparation The interim statement for the six months to 28 March 2003 is unaudited and was approved by the Board on 26 May 2003. The information has been prepared on the basis of the accounting policies set out in the Group's annual report for the year ended 27 September 2002. The balance sheet information for 27 September 2002 represents the audited balance sheet from the Group's full accounts for that year on which the Auditors issued an unqualified audit report and which have been filed with the Registrar of Companies. 2. Analysis of results by activity Turnover Operating profit* Half year Half year 2003 2002 2003 2002 Total Group €'000 €'000 €'000 €'000 Chilled and Frozen 322,378 381,075 19,471 19,625 Ambient Grocery 173,698 246,567 11,063 12,957 Ingredients and Agribusiness 247,743 308,896 19,602 22,732 __________ __________ __________ __________ 743,819 936,538 50,136 55,314 __________ __________ __________ __________ Continuing Activities Chilled and Frozen 302,286 318,574 18,229 16,291 Ambient Grocery 173,698 191,558 11,063 10,405 Ingredients and Agribusiness 247,743 244,312 19,602 18,834 __________ __________ __________ __________ 723,727 754,444 48,894 45,530 __________ __________ __________ __________ * pre goodwill amortisation and exceptional items 3. Exceptional items The current period exceptional charge comprises a cost of €2.9m in respect of commissioning costs at the Group's new chilled pizza facility. In addition, a net surplus of €0.6m was recorded on the closure of certain Group facilities in the United Kingdom. The charge in the prior period reflects restructuring costs, primarily related to commissioning projects undertaken by the Group in the period, of €6.1m, and a net loss of €6.9m after reinstating goodwill of €7.8m on the part disposal of a former subsidiary. 4. Dividends The interim dividend of 5.05c (2002: 4.38c) per share is payable on 30 September 2003 to shareholders on the Register of Members, as at 6 June 2003. The ordinary shares will be quoted ex-dividend from 4 June 2003. The dividend will be subject to dividend withholding tax although certain classes of shareholders may qualify for exemption. 5. Earnings per share The calculation of earnings per share is based on earnings of €11.78m (2002: €3.99m) and on 188.3 million ordinary shares (2002: 187.2 million) being the weighted average number of ordinary shares in issue in the period. The calculation of adjusted earnings per share is after adjusting for exceptional items, goodwill and facility fee amortisation. The diluted earnings per share has been calculated on the basis of 188.7 million ordinary shares (2002: 187.6 million). The calculation of earnings per share excludes 4.9 million treasury shares arising from the share repurchase programme. 6. Information The interim report is being sent by post to all registered shareholders. Copies are also available to the public from the Company's registered office at St. Stephen's Green House, Earlsfort Terrace, Dublin 2 and from its registrar, Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18. * * * Press Release As Follows * * * GREENCORE GROUP PLC Interim statement of results for the half year ended 28 March 2003 Highlights Half Year Ended 28 March 2003 • Like-for-like sales growth across all three divisions • Operating profit from continuing operations* up 7% to €48.9m • Constant currency operating profit from continuing operations* up 12% • Operating margin growth across all three divisions • Profit before tax* up 9% to €31.1m • Headline EPS* up 2% to 14.1c • Net interest down 23% to €21.9m • Net debt down €66.1m to €497.1m * before exceptional items and goodwill amortisation Commenting on the results, Greencore Group Chief Executive, David Dilger, said: 'These are very strong results both in terms of profitability and cashflow, and are a product of the extensive restructuring which the Group has successfully undertaken over the last two years. The Group remains on course to deliver full year earnings per share in line with consensus analyst forecasts.' For further information, please contact: David Dilger, Chief Executive Tel: +353 (0)1 6051002 Patrick Kennedy, Chief Financial Officer Tel: +353 (0)1 6051003 Billy Murphy/Trish Morrissey, Drury Communications Tel: +353 (0)1 2605000 This information is provided by RNS The company news service from the London Stock Exchange

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