Interim Results
Greencore Group PLC
31 May 2007
GREENCORE GROUP PLC
INTERIM RESULTS FOR THE HALF YEAR ENDED 30 MARCH 2007
Greencore Group plc, one of Europe's leading convenience food producers, today
announces a strong performance for the half year ended 30 March 2007 and good
prospects for the remainder of the year.
HIGHLIGHTS
- Group operating profit (pre-exceptionals) up 24% to EUR 40.0m
- Profit before tax (pre-exceptionals) up 38% to EUR 35.4m
- Continuing adjusted EPS* up 32% to 12.1 cent (total adjusted EPS* including
discontinued Sugar operations for the first half of FY06 was 13.6 cent)
- Continued progress in Convenience Foods division
- 80% of Group operating profit
- Turnover growth of 8.2% to EUR 478m
- Operating profit growth of 5.0% to EUR 31.8m
- Positive outlook for second half of FY07
- Strong Malt recovery driving Ingredients, Agribusiness and Related Property
division
- 305% increase in continuing operating profit to EUR 8.2m
- All ingredient businesses delivered turnover and operating profit growth
- Net finance costs reduced by 32%
- Full year adjusted EPS* outlook ahead of current market consensus of 25.8
cent by circa 10%
- Continued focus on the strategic development of our category, channel and
geographic positions
* Before exceptional items, inter-company foreign exchange gains/losses and the
movement in the fair value of all derivative financial instruments and related
debt adjustments.
COMMENTING ON THE RESULTS, GROUP CHIEF EXECUTIVE DAVID DILGER SAID:
'We are delighted with these results. They reflect the significant momentum
evident in every part of our business. In a demanding convenience food market,
we continue to deliver strong sales and profit performance. Our Malt business
has bounced back strongly and we believe we are adding real value to our
significant property assets. As our businesses continue to progress, we are
confident that Greencore will deliver a strong performance for the full year.'
FOR FURTHER INFORMATION, PLEASE CONTACT:
David Dilger Chief Executive Officer Tel: +353 1 605 1045
Patrick Coveney Chief Financial Officer Tel: +353 1 605 1018
Eoin Tonge Capital Markets Director Tel: +353 1 605 1036
Billy Murphy/Anne Marie Curran Drury Communications Tel: +353 1 260 5000
Rory Godson/Victoria Brough Powerscourt Tel: +44 207 250 1446
ABOUT GREENCORE
- One of Europe's leading producers of convenience foods, as well as an established ingredients and
agribusiness supplier with operations in Ireland, the UK, the Netherlands and Belgium
- Europe's largest sandwich manufacturer, producing more than 200 million sandwiches per annum
- The UK's largest Christmas cake manufacturer, with a 33% market share
- The UK's largest producer of customer-branded mineral water, selling 190 million units per annum
- The leading malt producer in Ireland, the UK and Belgium
- Significant property assets in Ireland and the UK
------------------------------------------------------------------------------------------------------------------------
SUMMARY
Greencore has performed strongly in the first half of FY07, with significant
progress evident in all parts of the Group. The period under review reflects a
further step in the development of Greencore, with the Group reporting its first
results following the full termination of the Irish sugar processing business.
The Convenience Foods division, which accounted for 80% of Group operating
profit in the first half of FY07, has continued to perform well. Turnover, at
EUR 478m, was up 8.2% on the first half of FY06 - an excellent performance when
compared with the UK underlying total food market growth of 3.9%**. This sales
performance was driven, in particular, by strong market share growth at our
Sandwiches, Prepared Foods, Mineral Water and Continental businesses. Operating
profit, at EUR 31.8m, was up 5.0% on the first half of FY06, with strong trading
performances across most of our categories compensating for ingredient,
packaging and labour inflation, as well as for the negative impact of an
electrical fire at our largest Sandwiches facility in Manton Wood in early
December. These results reflect both clear strategic choices in terms of the
categories and channels where we compete and continued excellent operational
performance as delivered through our Total Lowest Cost ('TLC') and innovation
initiatives.
The Ingredients, Agribusiness and Related Property division has made excellent
progress in the first half of FY07. Operating profits from continuing
operations were EUR 8.2m, a rise of 305%, albeit from an unsustainably low level
in FY06. Turnover from continuing operations has risen 19.5% to EUR 155m, with
good progress evident in all businesses. Central to this uplift has been the
strong recovery of our Malt business. Global malt markets have experienced a
significant recovery, reflecting a better balance between demand and capacity,
continued concerns regarding the availability of quality malting barley and a
more benign energy pricing environment. These industry developments, allied to
the positive impact of the changes we delivered in our Malt business in FY05 and
FY06, as well as excellent operational and commercial performance, have driven a
significant but much needed profit improvement in this business in the first
half of FY07. In addition, the Group's property team has continued to make
progress in adding value to our significant property assets.
The Group's net finance charge for the period has been reduced by 32% to EUR
5.4m, reflecting both an improvement in the net pension financing credit from
the Group's defined benefit pension schemes and income arising on the increase
in the present value of EU aid receivable. The Group's cash position has
improved with comparable net debt at 30 March 2007 totalling EUR 393m, a
reduction of EUR 30m on the comparable period last year.
The board of directors is recommending that the interim dividend be maintained
at the prior year level of 5.05 cent per share.
** Source: TNS 2007
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OUTLOOK
The performance and prospects for Convenience Foods continue to be encouraging.
Despite an inflationary raw material and labour cost environment and the
negative impact of the fire at Manton Wood, we expect to deliver good progress
in Convenience Foods this year and believe the division is well positioned for
further growth.
The anticipated recovery in global malt markets is now established and we are
pleased with how Greencore Malt is performing in this environment. We expect
that the current performance of the business will return Greencore Malt to
acceptable levels of profitability and will deliver a strong profit improvement
in FY07 and beyond.
We are making real progress in the development of our Related Property
portfolio. Whilst this will not significantly impact FY07 results, our actions
are focused on enabling the Group to create and access considerable value from
our property assets in future years.
The reduction in the Group's net financing costs, evident in the first half, is
expected to continue for the full year.
Overall, the momentum across the core parts of the Group's portfolio remains
strong as we enter the seasonally more significant second half of the Group's
financial year. Against this positive backdrop and the expected full year
reduction in the Group's net financing cost, the Board's expectations for the
full financial year have improved such that adjusted earnings per share is
anticipated to exceed the current market consensus level of 25.8 cent earnings
per share for FY07 by circa 10%.
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REVIEW OF OPERATIONS
CONVENIENCE FOODS
The Convenience Foods division, which accounted for 80% of Group operating
profit in the first half of FY07, has continued to perform well. The period has
again seen turnover growth, profit growth and strong margin performance in an
inflationary environment. These results reflect the strong strategic positions
held by our Convenience Foods businesses, as well as the excellent operational
performance that we continue to deliver. Highlights for the period include:
* Turnover growth at more than twice the underlying market rate
The division has delivered strong organic sales growth. Turnover growth
was 8.2% for the period compared to the overall UK food market growth rate
of 3.9%**. Stronger sales growth in our Sandwiches, Prepared Foods,
Mineral Water and Continental businesses drove this performance.
* Strong margin performance in a demanding input cost environment
The business succeeded in broadly maintaining first half operating margin
levels (6.7% versus the comparable period figure of 6.9%), despite the
following factors:
- significant raw material, packaging and labour wage inflation;
- an electrical fire in December at our largest manufacturing facility in
Manton Wood which resulted in five days of lost production and significant
disruption thereafter;
- continued sales price deflation impacting the first half of FY07; and
- increased investment in the capabilities needed to deliver our brand,
channel, category and geographic development strategies.
* Consistent performance across the division
During the first half of FY07, seven of our nine businesses delivered sales
growth at or above the UK food market growth rate. An exception was our
Chilled Meals business which experienced a modest sales decline,
reflecting a slowdown in the product areas where we compete. In response,
we are putting in place a set of exciting customer and product range
initiatives. These include plans to revitalise the Italian meals category,
expand the WeightWatchers chilled meal franchise, launch Disney branded
healthy children's meals and create new premium ethnic prepared meal
ranges.
The Board is pleased with this performance which represents the sixth
consecutive half-year period of operating profit growth. The consistent
underlying trajectory reflects a strong operational capability, driven by:
* A relentless focus on TLC
The culture of TLC in the Group has again driven operational cost
improvements, totalling in excess of 2% of sales in the first half of FY07.
More than 400 separate purchasing initiatives have helped offset some of
the input price inflation and, in addition, the Group continues to deliver
waste reduction and continuous improvement initiatives across all our
categories.
* Aggressive product innovation and mix management
Just under half of our total product range has been introduced or refreshed
in the last 12 months. The ability to execute this level of innovation is
critical to delivering consumer excitement across our categories, while
enhancing margin and driving strategy.
* Well-invested food facilities
The Group continues to make significant investment in our facilities to
ensure their operational effectiveness and to provide a platform for
growth. For example, in the first half of FY07, we invested in
state-of-the-art bottle blow moulding and labelling equipment to enhance
the capacity and efficiency of what is now the leading mineral water
facility in Scotland.
* Excellent customer service levels
Average customer service levels across the division, as measured by
'right first time' delivery to customer order, have continued to exceed 99%
during the period.
Aligning this strong operational performance capability with a clear strategy
has been, and will continue to be, critical to delivering superior performance
and we continue to focus on the following areas:
* Leadership of growing concentrated categories
Greencore insists on attaining either No. 1 or No. 2 positions in all of
the product categories where it competes. In this period, we made further
progress with seven of our nine businesses delivering sales growth at or
ahead of the market rate. We continue to look for opportunities to
strengthen our leadership positions in each of our categories. For
example, in Pickles, a sub-category within our Grocery business, we have
consolidated our strong market position with the acquisition in February
2007 of Ross Pickles, a niche regional pickle business.
* Broad channel exposure
Sales to non-multiple customers accounted for 33% of the Group's turnover
in the UK in the first half of FY07. This represents an increase of nearly
2 percentage points on the first half of FY06 and reflects delivery of some
key new accounts in our Food-to-Go operation.
* An increasing commitment to branded products
The period has seen further development in the relationship with
WeightWatchers, not only with chilled prepared meals now delivering annual
retail sales of circa EUR 25m, but with the extension of the brand to
our Chilled Sauces, Grocery and Quiche categories.
The Group is actively seeking to leverage our strong market positions and
operational competencies to access new convenience food opportunities, both
within and beyond the UK.
** Source: TNS 2007
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INGREDIENTS, AGRIBUSINESS AND RELATED PROPERTY
The Ingredients, Agribusiness and Related Property division has made a very
strong start to the year. Operating profits from continuing operations are up
305% to EUR 8.2m, driven by turnover growth of 19.5% and much needed
improvements in margin performance. All our ingredient businesses have
delivered significant sales and operating profit growth. Malt accounts for
almost 60% of divisional turnover and the strong recovery of that business has
been central to the divisional performance in the first half of the year. We
believe that the Group's property team has made considerable progress during the
first six months of the year in adding value to our significant Related Property
sites.
Malt Recovery
The anticipated and much needed recovery in the malt industry cycle began to
emerge in the late summer of 2006 and has continued into 2007. The drivers of
this recovery are:
* A better balance between industry capacity and demand
Globally, the combination of robust beer consumption and a slowdown in the
growth of malt capacity has led to a better balance between supply and
demand in global malt markets. The restructuring of our Malt business in
FY05 and FY06 played a significant part in delivering this balance within
the UK and Ireland (markets where Greencore is the clear industry leader).
* A more benign energy price environment
Malt is an energy-intensive industry and energy inflation of more than 50%
had a significant impact on industry performance in FY05 and FY06. Whilst
energy prices remain high, the inflationary pressures of recent periods
were not a factor in the period under review.
* Concerns regarding barley quality and availability
A catalyst for industry recovery was the reduction in availability of
quality malting barley across global malt markets, a trend that became
evident in late summer 2006. This barley scarcity was driven by a
combination of reduced barley sowings (with farmers devoting more land to
other uses) and poor harvests across the key barley markets. This drove up
barley and malt prices as customers tried to secure the raw materials
necessary for beer and whiskey production. Current indications are that
concerns regarding the availability of quality barley across the key global
markets may extend into 2008.
Helped by restructuring investments in FY06, Greencore Malt's operational
efficiency and excellent performances across its three core geographies have
enabled the business to capitalise on these industry changes and to deliver
significant but necessary operating profit improvements in the first half of
FY07.
Related Property Momentum
Our Related Property business is managed by a specialist team and continues to
focus on maximising the value available to shareholders from all our property
assets. In the first half of FY07, there was a modest contribution from Related
Property to the division's results. Strategically, the Group's property
business continues to progress well across our principal Irish properties:
* Carlow Gateway (333 acres)
In November 2006, the Group submitted a comprehensive master plan,
'Carlow Gateway', to Carlow County Council and Laois County Council
proposing a transformation of the former Irish Sugar site into an exciting
mixed-use development for the town of Carlow. The timing for consideration
of this submission is a matter for the respective county councils as part
of their wider strategic plans for the area and we anticipate a decision by
the end of the first half of FY08.
* Mallow West (396 acres)
In January 2007, the Group submitted its 'Mallow West' plan to Cork County
Council as part of the Council's Mallow Special Local Area Plan ('SLAP').
If ultimately adopted, Mallow West will represent the largest integrated
development in North Cork, comprising commercial, industrial, residential
and leisure uses, including a hotel and a golf course. Cork County Council
is expected to conclude its Mallow SLAP before September 2007.
* Other Irish Sites (120 acres)
We are working on a planning submission for 21 acres of a 40-acre site
which was rezoned in FY06 and expect to make a formal planning application
for commercial uses on this element of the site before the end of
September 2007. In addition, we continue to make progress in adding value
to a number of smaller Irish sites.
Update on Sugar Exit
The Group's exit from sugar is progressing, as envisaged in our Restructuring
Plan. The judgement from the recent High Court judicial review of the Irish
government's decision on the allocation of EU aid is due to be issued on 14 June
2007 and we remain confident regarding the Group's entitlement to EU
restructuring aid.
------------------------------------------------------------------------------------------------------------------------
FINANCIAL REVIEW
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS).
Group operating profit (pre-exceptionals) of EUR 40.0m grew 24% compared with
the first half of last year. Strong profit before tax (pre-exceptionals) growth
of 38% to EUR 35.4m also reflects a reduced net finance charge, driven by (i) an
increase in the net pension financing credit to EUR 5.1m (versus EUR 3.7m in the
first half of FY06), (ii) a benefit of EUR 1.2m related to income arising on the
increase in the present value of EU aid receivable and (iii) a net gain of EUR
3.6m (versus EUR 3.4m in the first half of FY06), resulting primarily from the
impact of marking-to-market our trading derivatives. Continuing adjusted EPS
for the first half of FY07 (stripping out exceptional items and the EUR 3.6m
gain, primarily resulting from marking-to-market our trading derivatives) was
12.1 cent versus 9.2 cent (stripping out discontinued Sugar and related
activities) in FY06. This is based on a weighted average number of ordinary
shares of 198.6m in the period (first half of FY06: 195.5m).
Comparable net debt (excluding the impact of marking-to-market all derivative
financial instruments and related debt) at 30 March 2007 was EUR 393.0m. This
is a reduction of EUR 30.3m from March 2006, reflecting, in part, an improved
working capital position following the Group's exit from sugar processing. The
underlying focus on cash generation remains in place. Net interest costs on
comparable net debt were EUR 15.4m (first half of FY06: EUR 15.2m).
The Group's tax charge on continuing operations (excluding associates) was EUR
7.0m. The effective tax rate on continuing operations was 22.5%. The amount of
cash taxation continues to be well below the tax charge.
In the period under review, the Group made an exceptional gain (net of tax) of
EUR 3.1m from the disposal of agri-businesses whose activities were closely
related to sugar processing.
Significant capital investment was made in the period. Capital expenditure
amounted to EUR 22.5m of which 85% was invested in Convenience Foods.
The fair value of total plan assets relating to the Group's defined benefit
pension schemes (excluding associates) increased to EUR 561.2m at March 2007
from EUR 539.9m at September 2006. The present value of total pension
liabilities for these schemes increased to EUR 596.4m from EUR 591.5m over the
same period. This is reflected in a reduction in the net pension deficit
(before related deferred tax) to EUR 35.2m at March 2007 (from EUR 51.6m at
September 2006). The primary Irish scheme, the Greencore Group Pension Scheme,
had a surplus (before related deferred tax) of EUR 46.4m.
E F Sullivan
31 May 2007
------------------------------------------------------------------------------------------------------------------------
GROUP INCOME STATEMENT
for the half year ended 30 March 2007
Half year Half year Year
ended ended ended
30 Mar 2007 31 Mar 2006 29 Sep 2006
(Unaudited) (Unaudited) (Audited)
(Note 1)
Pre - Except- Total Pre - Except- Total Pre - Excep- Total
exceptional ional exceptional ional exceptional tional
Notes Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Continuing
operations
Revenue 632,711 - 632,711 571,356 - 571,356 1,176,784 - 1,176,784
Cost of sales (456,653) - (456,653) (406,263) (2,410)(408,673) (826,666) (181) (826,847)
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Gross profit 176,058 - 176,058 165,093 (2,410) 162,683 350,118 (181) 349,937
Operating (136,012) - (136,012) (132,726) (562)(133,288) (275,508) 1,998 (273,510)
costs, net
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Group 2 40,046 - 40,046 32,367 (2,972) 29,395 74,610 1,817 76,427
operating
profit/(loss)
Finance income 6 21,227 - 21,227 18,062 - 18,062 35,929 - 35,929
Finance costs 6 (26,672) - (26,672) (26,094) - (26,094) (54,002) - (54,002)
Share of 823 - 823 1,387 - 1,387 2,848 - 2,848
profit of
associates
(after tax)
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Profit/(loss) 35,424 - 35,424 25,722 (2,972) 22,750 59,385 1,817 61,202
before
taxation
Taxation (6,976) - (6,976) (3,964) 1,190 (2,774) (11,447) 10 (11,437)
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Result for the 3 28,448 - 28,448 21,758 (1,782) 19,976 47,938 1,827 49,765
period from
continuing
operations
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Discontinued
operations
Profit/(loss) 3 - 3,064 3,064 8,626 (43,753) (35,127) 19,398 (68,903) (49,505)
from
discontinued
operations
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Result for the 28,448 3,064 31,512 30,384 (45,535) (15,151) 67,336 (67,076) 260
financial
period
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Attributable
to:
Equity 27,571 3,064 30,635 29,966 (45,535) (15,569) 66,620 (67,076) (456)
shareholders
Minority 877 - 877 418 - 418 716 - 716
interests
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
28,448 3,064 31,512 30,384 (45,535) (15,151) 67,336 (67,076) 260
-------- -------- -------- -------- -------- -------- ---------- -------- ---------
Earnings per
share for the
period (cent)
Notes
Continuing
operations
Basic earnings 5 13.9 10.0 25.0
per share
Diluted 5 13.9 10.0 24.9
earnings per
share
Discontinued
operations
Basic earnings 5 1.5 (18.0) (25.2)
per share
Diluted 5 1.5 (17.9) (25.1)
earnings per
share
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GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the half year ended 30 March 2007
Half year Half year Year
ended ended ended
30 Mar 2007 31 Mar 2006 29 Sep 2006
(Unaudited) (Unaudited) (Audited)
(Note 1)
EUR'000 EUR'000 EUR'000
Items of income and expense taken directly within equity
Currency translation differences (884) 1,007 50
Actuarial gain/(loss) on Group defined benefit pension schemes 7,617 47,018 11,187
Deferred tax on Group defined benefit pension schemes 1,177 (8,581) (1,352)
Share of actuarial gain/(loss) on defined benefit pension 894 1,399 490
schemes of associates (net)
Fair value of available for sale financial assets 82 (291) (406)
Cash flow hedges:
Gains taken to equity 58 (185) 389
Transferred to profit and loss for the period (246) (169) (169)
Deferred tax on cash flow hedge 56 110 (66)
------------- ------------- -------------
Net income/(expense) recognised directly within equity 8,754 40,308 10,123
Group profit/(loss) for the period 31,512 (15,151) 260
------------- ------------- -------------
Total recognised income and expense for the period 40,266 25,157 10,383
------------- ------------- -------------
Attributable to:
Equity shareholders 39,389 24,739 9,667
Minority interests 877 418 716
------------- ------------- -------------
Total recognised income and expense for the period 40,266 25,157 10,383
------------- ------------- -------------
GROUP STATEMENT OF CHANGES IN EQUITY
for the half year ended 30 March 2007
Half year Half year Year
ended ended ended
30 Mar 2007 31 Mar 2007 29 Sep 2006
(Unaudited) (Unaudited) (Audited)
(Note 1)
EUR'000 EUR'000 EUR'000
Total equity at beginning of the period 182,945 197,877 197,877
Impact of adoption of IAS 32 & IAS 39 - (7,414) (7,414)
------------- ------------- -------------
At beginning of the period, as adjusted 182,945 190,463 190,463
Issue of share capital 4,389 2,810 8,352
Employee share option expense 162 259 430
Deferred tax on employee share option expense taken directly 33 - (283)
within equity
Dividends (15,053) (14,853) (24,814)
Movement in minority interests 778 271 (870)
Total recognised income and expense for the period attributable 39,389 24,739 9,667
to equity holders
------------- ------------- -------------
Total equity at end of the period 212,643 203,689 182,945
------------- ------------- -------------
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GROUP BALANCE SHEET
as at 30 March 2007
30 Mar 2007 31 Mar 2006 29 Sep 2006
(Unaudited) (Unaudited) (Audited)
(Note 1)
EUR'000 EUR'000 EUR'000
ASSETS
Non-current assets
Intangible assets 355,543 352,989 353,897
Property, plant and equipment 387,023 372,614 385,771
Investment property 954 1,052 1,003
Investments in associates 9,569 8,766 8,216
Financial assets - 624 -
Trade and other receivables - 123,699 56,508
Retirement benefit assets 46,356 38,951 24,981
Deferred tax assets 24,476 30,420 24,957
------------- ------------- -------------
Total non-current assets 823,921 929,115 855,333
------------- ------------- -------------
Current assets
Inventories 110,920 167,936 126,774
Trade and other receivables 199,132 75,912 154,324
Cash and cash equivalents 70,532 57,110 78,967
Available for sale financial assets 612 - 530
Derivative financial instruments 2,803 - 389
------------- ------------- -------------
Total current assets 383,999 300,958 360,984
------------- ------------- -------------
Total assets 1,207,920 1,230,073 1,216,317
------------- ------------- -------------
EQUITY
Capital and reserves attributable to equity holders of the
Company
Share capital 127,595 125,648 126,820
Share premium 107,751 99,767 104,137
Other reserves 1,800 3,075 2,572
Retained earnings (28,853) (29,514) (54,156)
------------- ------------- -------------
208,239 198,976 179,373
Minority interest in equity 4,350 4,713 3,572
------------- ------------- -------------
Total equity 212,643 203,689 182,945
------------- ------------- -------------
LIABILITIES
Non-current liabilities
Borrowings 426,069 460,998 433,657
Derivative financial instruments 38,973 22,277 32,043
Retirement benefit obligations 81,508 68,948 76,603
Other payables 11,537 11,482 11,818
Provisions for other liabilities and charges 13,937 16,990 14,422
Deferred tax liabilities 42,114 49,243 42,202
Government grants 1,121 1,439 1,182
------------- ------------- -------------
Total non-current liabilities 615,259 631,377 611,927
------------- ------------- -------------
Current liabilities
Borrowings 219 3 265
Derivative financial instruments - 1,471 1,153
Trade and other payables 323,945 326,397 362,285
Provisions for other liabilities and charges 27,313 47,659 33,230
Income taxes payable 28,541 19,477 24,512
------------- ------------- -------------
Total current liabilities 380,018 395,007 421,445
------------- ------------- -------------
Total liabilities 995,277 1,026,384 1,033,372
------------- ------------- -------------
Total equity and liabilities 1,207,920 1,230,073 1,216,317
------------- ------------- -------------
------------------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 March 2007
Half year to Half year to Year end to
30 Mar 2007 31 Mar 2006 29 Sep 2006
(Unaudited) (Unaudited) (Audited)
(Note 1)
EUR'000 EUR'000 EUR'000
Cash flows from operating activities
Operating profit (pre-exceptional) 40,046 32,367 74,610
Profit on discontinued operations (pre-exceptional) - 9,728 21,991
Depreciation (net of grants) 16,732 19,437 35,266
Amortisation of intangibles 406 623 1,014
Employee share option expense 162 259 430
Difference between pension charge and cash contributions (3,143) 95 (3,692)
(pre-exceptional)
Changes in working capital (13,593) (43,173) (103)
Other movements 217 37 (3,611)
------------- ------------- -------------
Net cash inflow from operating activities before exceptional 40,827 19,373 125,905
items
Net cash outflow related to exceptional items (9,438) (3,449) (15,011)
Interest paid (16,345) (16,055) (32,767)
Taxes (paid)/received (251) 628 395
------------- ------------- -------------
Net cash inflow from operating activities 14,793 497 78,522
------------- ------------- -------------
Cash flows from investing activities
Interest received 755 895 2,139
Dividends received from associates 537 59 1,205
Business disposals 5,099 - -
Cost of business acquired (1,036) - -
Purchase of property, plant and equipment & intangibles, net of (22,456) (23,618) (47,951)
grants
------------- ------------- -------------
Net cash outflow from investing activities (17,101) (22,664) (44,607)
------------- ------------- -------------
Cash flows from financing activities
Proceeds from the issue of shares 133 175 1,183
(Decrease) / increase in borrowings (348) 12,879 (9,527)
Decrease in finance lease liabilities (53) (170) (1,944)
Dividends paid to minority interests (99) (87) (1,586)
Dividends paid to equity holders of the Company (5,687) (7,185) (17,470)
------------- ------------- -------------
Net cash (outflow) / inflow from financing activities (6,054) 5,612 (29,344)
------------- ------------- -------------
Net (decrease) / increase in cash and cash equivalents (8,362) (16,555) 4,571
Cash and cash equivalents at beginning of period 78,967 74,102 74,102
Currency translation differences (73) (437) 294
------------- ------------- -------------
Cash and cash equivalents at end of period 70,532 57,110 78,967
------------- ------------- -------------
------------------------------------------------------------------------------------------------------------------------
NOTES
for the half year ended 30 March 2007
1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS UNDER IFRS
The financial information presented in this interim report has been prepared in
accordance with the Group's accounting policies under International Financial
Reporting Standards (IFRS), as set out in the financial statements for the year
ended 29 September 2006.
The interim financial statements for the half year ended 30 March 2007 and the
comparative figures for the half year ended 31 March 2006 are unaudited. The
summary financial statements for the year ended 29 September 2006 represent an
abbreviated version of 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.
In line with the requirements of IFRS, the income statement for the half year
ended 31 March 2006 has been re-presented to show discontinued operations as a
separate line item. The remaining financial information for the half year ended
31 March 2006, disclosed as comparative information in this interim report, has
been restated to facilitate consistent classification of items, consistent with
the classification of items in the interim statement for the half year ended 30
March 2007 and the annual report for the year ended 29 September 2006.
This interim statement for the half year ended 30 March 2007 is unaudited and
was approved by the board of directors on 30 May 2007.
2. SEGMENTAL REPORTING
The Group's primary reporting segment, for which more detailed disclosures are
made, is by class of business. The Group has two primary reporting segments:
(i) Convenience Foods and (ii) Ingredients, Agribusiness and Related Property.
Revenue - half year Operating profit - half year
2007 2006 2007 2006
EUR '000 EUR '000 EUR '000 EUR '000
Continuing
Convenience Foods 477,821 441,694 31,846 30,341
Ingredients, Agri & Related Property 154,890 129,662 8,200 2,026
Discontinued
Ingredients, Agri & Related Property - 86,696 - 9,728
------------- ------------- ------------- -------------
Total Group 632,711 658,052 40,046 42,095
------------- ------------- ------------- -------------
3. EXCEPTIONAL ITEMS
The Group reports the following exceptional items (net of tax):
Half year Half year
2007 2006
EUR '000 EUR '000
Gain on business disposals (a) 3,064 -
Exit from sugar processing (b) - (43,753)
Chilled Sauce business restructuring (c) - (2,069)
Malt business restructuring (d) - (4,643)
Malt legal settlement (e) - 4,930
------------- -------------
3,064 (45,535)
------------- -------------
(a) Gain on business disposals
Exceptional gains of EUR 3.1m arose on the disposal of agribusinesses whose
activities were closely related to sugar processing (a business which Greencore
exited during the year ended 29 September 2006).
(b) Exit from sugar processing
On 15 March 2006, Greencore announced its intention to exit sugar processing in
Ireland, renounce its quota and apply for the EU restructuring aid which is
available under the Council Regulation (EC) No. 320/2006 (the Regulation). The
total EU restructuring aid available for the sugar quota renounced by Greencore
is EUR 145.5m. The Regulation states, inter alia, that at least 10% of the
restructuring aid shall be reserved for sugar beet growers and machinery
contractors. The Regulation gives the Member State the responsibility to
determine if this percentage is to be increased but imposes on the Member State
the requirement, using objective and non-discriminatory criteria, to ensure an
economically sound balance between the elements of a restructuring plan
submitted by Greencore in accordance with the Regulation.
In the half year ended 31 March 2006, the Board of Greencore, having taken
independent legal, economic and financial advice, determined that it was
entitled to 90% of the restructuring aid and recognised a receivable of EUR
123.7m (the present value equivalent of EUR 130.9m - 90% of EUR 145.5m) in the
financial statements. The exceptional loss (net of tax) of EUR 43.8m
represented the estimate of the net cost (after taking account of the
aforementioned restructuring aid) of the decision to exit sugar processing in
Ireland.
On 12 July 2006, the Irish Government announced that it was allocating 67.6%
(representing EUR 98.4m) to Greencore, with the balance of the EU aid to be
allocated to sugar beet growers and machinery contractors. The Board of
Greencore rejected the basis of this allocation. That Government decision is
currently subject to a judicial review in the Irish High Court. As a result of
this contested Government decision, the Group regarded EUR 98.4m of the
restructuring aid as virtually certain with the present value of that amount
(being EUR 95.9m) included in the year ended September 2006 balance sheet as a
receivable and netted against the related gross exceptional costs in the Group
income statement. As at 29 September 2006, the net exceptional charge
associated with the exit from sugar processing had been adjusted to EUR 68.9m.
The balance of the Group's entitlement of EUR 32.5m cannot be regarded as
virtually certain and, therefore, is disclosed but not recognised as a
receivable as at 29 September 2006 and 30 March 2007.
The judgement from the abovementioned High Court judicial review is due to be
released on 14 June 2007.
(c) Chilled Sauces business restructuring
Following a strategic review at Greencore Chilled Sauces, a decision was made to
consolidate all chilled sauce manufacturing at the Bristol facility and to close
the Chesterfield factory. The prior year exceptional loss represents the costs
associated with that decision
(d) Malt business restructuring
Greencore Malt closed three maltings during 2005 and continued restructuring
this business during 2006 with EUR 4.6m of exceptional costs incurred in
relation to that restructuring.
(e) Malt legal settlement
The Group settled an outstanding claim related to Greencore Malt at EUR 4.9m
(net of costs).
4. DIVIDENDS
An interim dividend of 5.05 cent (2006: 5.05 cent) per share is payable on 5
October 2007 to the shareholders on the Register of Members as of 8 June 2007.
The ordinary shares will be quoted ex-dividend from 6 June 2007. The dividend
will be subject to dividend withholding tax, although certain classes of
shareholders may qualify for exemption.
The liability in respect of this interim dividend is not recognised in the
balance sheet of the Group for the half year ended 30 March 2007 because the
interim dividend had not been approved at this balance sheet date (but was
subsequently declared by the directors of the Company).
5. EARNINGS PER ORDINARY SHARE
The calculation of the Group's basic earnings per ordinary share for continuing
operations is based on a profit of EUR 27.6m (H1 2006: profit of EUR 19.6m; full
year 2006: profit of EUR 49.0m) and on 198.6m ordinary shares (H1 2006: 195.5m;
full year 2006: 196.2m) being the weighted average number of ordinary shares in
issue in the period. The calculation of basic earnings per ordinary share from
discontinued operations is based on a profit of EUR 3.1m (H1 2006: loss of EUR
35.1m; full year 2006: loss of EUR 49.5m).
Diluted earnings per ordinary share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
potentially dilutive ordinary shares. The calculation of the diluted earnings
per ordinary share for continuing operations is based on a profit of EUR 27.6m
(H1 2006: profit of EUR 19.6m; full year 2006: profit of EUR 49.0m) and on
199.1m ordinary shares (H1 2006: 196.2m; full year 2006: 196.9m) being the
weighted average number of ordinary shares in issue assuming conversion of all
potentially dilutive ordinary shares. The calculation of diluted earnings per
ordinary share from discontinued operations is based on a profit of EUR 3.1m
(H1 2006: loss of EUR 35.1m; full year 2006: loss of EUR 49.5m).
The Group's adjusted earnings per share is after the elimination of the
exceptional items reported in note 3, inter-company foreign exchange gains/
(losses) and the movement in the fair value of derivative financial instruments
and related debt adjustments. The Group separately presents adjusted earnings
per share for continuing operations and discontinued operations.
The calculation of adjusted earnings per ordinary share from continuing
operations is based on a pre-exceptional profit of EUR 27.6m (H1 2006: EUR
21.3m; full year 2006 EUR 47.2m) adjusted for inter-company foreign exchange and
the fair value of derivative financial instruments and related debt totalling
EUR 3.6m (H1 2006: EUR 3.4m; full year 2006: EUR 5.7m). The calculation of
adjusted earnings per ordinary share from discontinued operations is based on a
pre-exceptional profit of nil (H1 2006: EUR 8.6m; full year 2006 EUR 19.4m).
The weighted average number of ordinary shares in issue during the period was
198.6m (H1 2006: 195.5m; full year 2006: 196.2m).
Half year Half year Full year
2007 2006 2006
cent cent cent
Adjusted EPS - continuing operations 12.1 9.2 21.2
Adjusted EPS - discontinued operations - 4.4 9.9
------------- ------------- -------------
Adjusted EPS - total 12.1 13.6 31.1
------------- ------------- -------------
6. COMPONENTS OF NET DEBT AND FINANCING
Half year Half year
2007 2006
Net debt EUR '000 EUR '000
Current assets
Cash and cash equivalents 70,532 57,110
Current liabilities
Borrowings (219) (3)
Non-current liabilities
Borrowings before fair value adjustment (463,291) (480,420)
------------- -------------
Comparable net debt (392,978) (423,313)
Borrowings - fair value hedge adjustment (non-current liabilities) 37,222 19,422
------------- -------------
Group net debt (355,756) (403,891)
Derivative financial instruments - fair value hedge (hedging instruments
in non-current liabilities)
(38,973) (20,341)
------------- -------------
(394,729) (424,232)
------------- -------------
Net finance costs
Net finance costs on interest bearing cash and cash equivalents and (15,356) (15,202)
borrowings
Net pension financing credit 5,077 3,749
Change in fair value of derivatives, related debt adjustments and foreign 3,596 3,421
exchange movements on inter-company balances
Income arising on the increase in the present value of the EU receivable 1,238 -
------------- -------------
(5,445) (8,032)
------------- -------------
Analysed as:
Finance income 21,227 18,062
Finance costs (26,672) (26,094)
------------- -------------
(5,445) (8,032)
------------- -------------
7. INFORMATION
The interim statement is being sent to registered shareholders by post or
electronically to those who have elected for the Electronic Shareholder
Communications Option.
Copies are also available from the Company's registered office at St Stephen's
Green House, Earlsfort Terrace, Dublin 2, Ireland, and from its registrar,
Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road,
Sandyford Industrial Estate, Dublin 18, Ireland. The statement will also be
available on the Company's website at www.greencore.com.
This information is provided by RNS
The company news service from the London Stock Exchange
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