Annual Report and Accounts
Kerry Group PLC
01 March 2005
Press Announcement
1 March 2005
Kerry Group plc Annual Results 2004
Kerry, the global ingredients, flavours and consumer foods group, reports
preliminary results for the year ended 31 December 2004.
Financial Highlights
• Group turnover exceeds €4 billion
• Total sales growth of 11.8%
• Like-for-like sales growth of 4.2%
• Operating profit* increased by 13.1% to €349m
• Operating margin* increased to 8.5%
• Profit after tax* increased by 10.7%
• Earnings per share* increased by 10.3% to 123.7 cent
• Total 2004 dividend per share up 10.7% to 14 cent
• Record free cash flow of €267m
• Acquisition programme of €712m
*before goodwill and exceptionals
Kerry Group Chief Executive, Hugh Friel said: 'In a busy year for the Group, one
of considerable change at consumer and food industry level, Kerry delivered
another strong operational and financial performance. Sales exceeded €4 billion
for the first time and Group operating profit reached a new high of €349m in a
year when Kerry successfully completed a €712m acquisition programme which
significantly broadened the Group's technology and market base. I am confident
that Group strategy will continue to deliver consistent growth in profits, cash
flow and value for all stakeholders'.
Kerry Group plc
Preliminary Statement
Results for the year ended 31 December 2004
In 2004, Kerry Group delivered another strong result in terms of strategic and
operational development and success. The Group achieved strong growth
organically and through its acquisition programme, contributing record free cash
generation, while making a significant investment in the future growth of its
core businesses. In a year marked by unparalleled attention to dietary,
lifestyle, health and well-being issues, Kerry's unrelenting focus on innovation
and technical development across all strategic business units contributed
strongly to the robust performance of its food ingredients and flavour
technologies and to continued brand and category development in its consumer
foods businesses. Group turnover surpassed the €4 billion threshold for the
first time, while further margin expansion was achieved, reflecting Kerry's core
strengths - consistency of performance, geographic spread and capability of the
Group to successfully grow and develop across a global platform. Extending its
record of uninterrupted profit growth over 19 years since the establishment of
the Group as a public company in 1986, Kerry spent €111m on research and
development and €712m on the Group's 2004 acquisition programme, broadening its
leading edge technology portfolio into bio-ingredients and pharma-ingredients
growth sectors and expanding its flavour and fragrance technical and regional
base.
Results
Currency turbulence continued to be a feature of international trading in 2004.
In particular, the continued depreciation of the US dollar exchange rate versus
the euro, again adversely impacted transaction and profit translation, while
sterling cashflows were impacted by the significant depreciation of sterling
versus the euro since 2002. Total Group turnover reported at €4.13 billion
reflects an increase of 11.8% on the reported 2003 turnover level. On a
like-for-like basis, adjusting for acquisitions and the impact of foreign
exchange translation, total sales grew by 4.2% year-on-year.
Operating profit before goodwill and exceptionals increased by 13% to €349m,
reflecting like-for-like growth of 7% year-on-year. While all divisions were
actively engaged in support of Kerry's busiest acquisition programme to-date,
nevertheless - in a very competitive year in major consumer markets - the Group
operating margin increased by 10 basis points to 8.5%.
Adjusted profit after tax increased by 10.7% to €230m. Earnings per share
before goodwill and exceptionals increased by 10.3% to 123.7 cent. Allowing
for goodwill and exceptional items, basic FRS3 earnings per share was reported
at 78.2 cent compared to 86.7 cent in 2003.
Business Reviews
Segmental analysis of business performance is presented by business (food
ingredients and consumer foods) as the Group's primary reporting segment. Sales
performance on a geographical market basis by destination becomes the secondary
reporting segment.
Food Ingredients
In 2004, sales across Kerry's food ingredients businesses increased by 15.7% to
€2.78 billion. When compared to 2003, this performance reflects like-for-like
sales growth of 5%. Operating profits increased by 17.5% to €257m, representing
a 9% increase on a like-for-like basis year-on-year. The operating margin
increased by 10 basis points to 9.2%.
The Group's 2004 food ingredients acquisition programme contributed €274m in
sales and €23m operating profit. Significant progress was made during the year
under review in advancing the Group's food ingredients activities in existing
and emerging markets. In summary, the 2004 programme successfully extended
Kerry's food ingredients and dairy proteins technology platform to
bio-ingredients and pharma ingredients applications, broadened the Group's
flavour and fragrance technical and regional base, and also significantly
expanded the Group's interests in the U.S. branded beverage foodservice and
natural food sectors.
Acquisitions concluded during the year comprised:
(a) Ingredients Markets
Quest Food Ingredients, a leader in innovation and applications of
bio-ingredients and pharma-ingredients, serving pharmaceutical, culinary,
snack, bakery, dairy, beverage and confectionery markets worldwide. The
acquisition completed on 30 April 2004, forms a new Kerry Bio-Science
division, operating from nine manufacturing units located in Utrecht,
Netherlands; Norwich NY, USA; Rochester MN, USA; Zwijndrecht,
Netherlands; Esterol, Malaysia; Brantford, Canada; Cebu, Philippines;
Cork, Ireland; and Menstrie, UK. The acquired business has well
established leading global positions in bio-ingredients and
pharma-ingredients - including protein hydrolysates, emulsifiers, yeast
flavourings, enzymes, hydrocolloids, cultures and fermentation products.
Cremo Ingredients, based in Glamsbjerg, Denmark, a leading supplier of
dairy ingredients and flavourings to an extensive customer base in the
savoury, convenience and snack food sectors throughout Europe and Asia.
Jana's Classics, located in Tualatin, Oregon, USA, a world class provider
of sweet ingredients and inclusions for use in frozen desserts, premium
ice cream products and foodservice applications.
Ernsts Food Ingredients, located in Penang, Malaysia, bringing additional
manufacturing capacity to meet Kerry's growth objectives in the
nutritional, beverage and snack sectors in South East Asian markets.
b) Flavour and fragrance markets
Mastertaste, the Group's flavour and fragrance business added the
following businesses:
Manheimer, a leading formulator and supplier of natural flavours for the
beverage, confectionery, meat and soup industries from its
state-of-the-art facilities based in New Jersey, USA. Manheimer
Fragrances division develops and markets innovative fragrances for
application in home environmental, personal care, household and
industrial products.
Flavurence, based in Los Angeles, specialising in natural fruit flavours,
a major flavour supplier to food and beverage producers on the west
coast of the USA.
Laboratorios Krauss, based in Mexico, a supplier of sweet flavours to the
food industry in Mexico, Latin America and the Caribbean.
Fructamine, based in Mozzo, Bergamo in Northern Italy, a leading Italian
producer of naturally extracted flavours, serving European savoury,
bakery and soft drink markets.
c) Foodservice Markets
Oregon Chai, a leading U.S. branded supplier of natural Chai Tea Lattes
and Chai Tea Latte mixes, concentrates and ready-to-drink products.
Serving specialist foodservice beverage chains, grocery, club and natural
food store channels throughout the U.S. and Canada, Oregon Chai is the
recognised brand leader in both natural and organic segments of the
speciality Chai tea market.
Extreme Foods, a leader in developing and marketing branded ready-to-use
ice blended flavoured beverages for the U.S. foodservice industry.
Serving independent coffeehouses, national coffeehouse chains and
department store in-house cafes, Extreme Foods produces unique
ice-blended fruit smoothies and coffee frappes marketed under the
JetTea and JetCafe brand names respectively.
Development across ingredients and flavour markets in 2004 was driven by the
increased focus on the nutritional values of food and beverages and the demand
for natural, healthier alternatives coupled with on-going requirements for
enhanced taste, texture and convenience. Kerry Ingredients and Kerry
Bio-Science technologies benefited through the development of customised and
application specific solutions to match customer requirements. In the
ready-to-eat cereals market Kerry Ingredients achieved strong growth through
premium granolas, cereal inclusions, all-natural and organic lines. In the
savoury sector, despite increasingly competitive market conditions, the Group's
coatings and seasonings offerings performed well through innovative systems and
continuing attention to business efficiencies across the Group's global
manufacturing and technical facilities.
While the focus on development of new formulations for managing carbohydrates
across food categories diminished towards year-end, nevertheless, application of
soy proteins and soy systems continues to achieve growth rates well above
industry averages.
The range and market expansion in the ready meals and ready-to-cook meals
sectors, again provided a strong growth platform for culinary ingredients and
Mastertaste flavours. While the trend towards health and wellness is pervasive,
demand for premium quality indulgence products continues to develop -
particularly in chilled and frozen dairy products, desserts, confectionery and
beverage products. This has assisted performance across the Group's flavour,
fruit preparations, dairy proteins and bio-ingredients business units. In 2004,
a further major area of focus and considerable development for the Group's
ingredients and flavour businesses was in the fast-growing specialty flavoured
beverages sector.
The trends toward 'clean labelling', high protein and convenience also greatly
benefited the newly established Kerry Bio-Science business. This led to
increased demand for fermented ingredients for enhanced shelf-life and
anti-microbial applications. While low-carb trends adversely impacted the
bakery industry in 2004, Kerry Bio-Science technologies, facilitating improved
natural shelf-life preservation and production of trans-free baked goods,
achieved good growth.
In the pharma sector, the Kerry Bio-Science Sheffield TM branded proteins and
excipient components continued to advance satisfactorily through new drug
approvals, particularly in the arthritis and diabetes treatment areas.
Consumer Foods
Against a backdrop of further consolidation at retail level and considerable
change in terms of consumer requirements in the Group's consumer foods markets
(primarily Ireland and the UK), the resilience of the Kerry Food's business
model was again exemplified through the division's performance and results in
2004. Divisional sales increased by 3% to €1.66 billion, reflecting
like-for-like sales growth of 2%. Operating profits increased by 2% to €116m
and by 1% on a like-for-like basis. Accordingly, while satisfactory volume
growth was achieved, the operating margin at 7% was slightly reduced relative to
the previous year due mainly to adverse currency transaction rates.
Kerry Foods is a leading player in the chilled convenience food sector. The
success of the division in out-performing industry growth rates stems from its
focus on added-value categories, pro-active new product development based on
consumer insight and research, in addition to the strength and market
positioning of its leading brands. The division's leading brands, Denny,
Wall's, Richmond, Cheestrings, Charleville, Coleraine, Low Low, Golden Cow,
Kerrymaid, Freshways, Dawn and Kerry Spring, all grew market share.
Kerry Foods' customer branded retail business is also concentrated in
added-value convenience growth sectors. Solid growth was achieved in chilled
and frozen ready meal categories and in chilled ready-to-cook meal solutions.
In the poultry sector trading conditions remained extremely competitive.
Operational difficulties at the Poole production facility continued to impact on
performance of the pastry business in 2004. Following the acquisition of the
Hibernia chilled patisserie facility in the UK in December 2003, excellent
progress was achieved in positioning the facility as a premium patisserie
desserts supplier. In the branded cream liqueur market, St. Brendan's achieved
strong value growth in the USA and in Scandinavia, but margins were lower
year-on-year due to the depreciation in the U.S. dollar to sterling exchange
rate.
Geographic Markets
Europe
Total sales across European markets increased by 9.3% to €2.7 billion.
In European ingredients markets, sales increased by 18% to €1.2 billion,
reflecting like-for-like sales growth of 4%. Development of culinary and
flavour applications in the prepared meals sector provided good growth
particularly in the UK and Ireland. The growing ready meals market in Germany
also provided good opportunities. Performance in seasonings and coatings in
Europe was in line with industry trends. Kerry Ingredients recorded strong
market development in Central / Eastern Europe, creating solid platforms for
future growth. Fruit preparations benefited from the increased focus on health
and nutrition and through innovative syrups and smoothies into the fast growing
foodservice beverage sector. In line with increasing demand for functional,
high protein and 'managed carbohydrates', Kerry made good progress through
speciality ingredients and dairy protein developments from the Listowel and
Charleville facilities. Kerry's speciality dairy division also established a
Sports and Lifestyle Nutrition commercial business unit focussing on the
expanding European sports, dietetic, health and wellness markets. Cremo
Ingredients acquired during the year performed in line with expectations.
As reported, the acquisition of Quest Food Ingredients was completed on 30
April. The business has now been successfully established across global markets
as a new Kerry Bio-Science division. Bringing a number of new technology
platforms to the Group, including protein hydrolysates, emulsifiers, yeast
flavourings, enzymes, hydrocolloids, cultures and fermentation products, the
acquired technologies add considerably to Kerry's capabilities in the areas of
nutrition, flavour, texture and shelf life of food and beverages. Good
progress has already been achieved through fermented ingredients and enzymes,
and a solid base has been established for the future development of the newly
acquired technologies. The acquisition also significantly strengthens Kerry's
market position in Central European markets and in the Balkan countries, where
good growth was achieved in the bakery and brewing industries.
Following the acquisition of Fructamine, Mastertaste Italy is now the largest
flavour supplier to the Italian market, with a complete portfolio across sweet
and savoury markets. The acquisition also strengthens Mastertaste's base in
France, Spain, Poland and Germany. The flavour division also saw continued
growth through its micro-gel encapsulation systems in the European confectionery
and dairy sectors. Strong growth in non-alcoholic flavoured beverages also
continued to provide solid flavour development opportunities for Mastertaste.
Kerry Foods, the Group's consumer foods division recorded a 3% increase in sales
to €1.66 billion. In Ireland, Denny performed well, driven by development of
the brand within premium sectors - in particular Denny select premium flavoured
sausages and Denny Deli Selection sliced meats. Freshways, the leading
manufacturer and distributor of branded pre-packed sandwiches to the Irish
market, achieved significant growth from the new Dublin based manufacturing
facility commissioned during 2004. Kerryfresh continued to grow its dedicated
offerings and service to the 'food-to-go' deli sector and specialist coffee
chains. While the overall spreads market declined slightly, Kerry's Low Low,
Golden Cow, Kerrymaid, Move over Butter and Golden Olive brands all grew
year-on-year. Kerry also continued to realise encouraging growth in the natural
cheese and cheese snacking sectors. Charleville Cheese consolidated its
position as the leading brand in Ireland, while Coleraine Cheese also maintained
its brand leadership position in Northern Ireland. Dawn Omega Milk launched in
the Irish market in March 2004 made good progress.
In the UK market, the cheese snacks sector grew by 17% year-on-year and
continued investment in the Cheestrings brand contributed to its excellent
performance - surpassing industry growth rates. In 2004, Cheestrings was also
successfully launched in France under the Ficello brand and progress to-date is
encouraging.
Kerry Foods again achieved significant growth in market share in the UK's three
largest food categories; ready meals, cooked meats and savoury pastry lines. In
the ready meals sector, strongest growth was achieved in the 'meals for one',
premium and healthy eating sectors of the market, in line with trends towards
higher quality, health awareness and individual meal occasions. In the UK
sausage market, Richmond retained its position as brand leader, while Wall's
achieved good growth in its core range, through unique offerings such as Micro
Sausages and expansion of its premium family sausage range. Bowyers also grew
market share through its 95% Fat Free offering. Despite the challenging
conditions in the poultry sector in the UK and Ireland, Kerry continued to
develop its customer branded business in the turkey and duck categories with
offerings across standard to organic primal meats and an extensive range of chef
developed added-value products. Rye Valley Foods continued to achieve positive
growth in the static frozen ready meals category and again outperformed the
market in its ready-to-cook meal solutions business. Rye Valley also
successfully re-positioned the former Hibernia chilled patisserie facility in
Birmingham as a premium patisserie desserts supplier to leading UK retailers.
Kerry Foods Direct to Store gained additional customer supply contracts in 2004
and continued to grow in the food-to-go and impulse food convenience sectors in
the UK.
Americas
Kerry's ingredients and flavour businesses in American markets performed well in
2004. Sales increased by 14% to €1.12 billion, reflecting like-for-like growth
of 6% year-on-year.
The heightened awareness of food values and health / wellness issues combined to
increase the pace of new product developments in North American markets -
providing strong development opportunities for Kerry's breadth of technologies.
In the sweet ingredients sector Kerry achieved good results in the premium
ice-cream, ready-to-eat cereal, confectionery and bakery sector. Jana's
Classics acquired during the second half of the year has strengthened Kerry's
technology base in the premium ice cream and frozen desserts sectors.
Development in the nutritional bar segment declined as the impact of the
low-carb phenomenon eased later in the year. However, the nutritional /
functional bar sector is expected to maintain a strong category presence in the
nutritional snack market. The Nutriant line of organically processed soy
proteins and soy specialties continued to broaden application into wider food
segments. In savoury ingredients sectors, performance of Kerry's coatings and
seasonings offerings improved considerably in 2004, with encouraging volume
growth through meat seasonings and regional snack processors.
Conditions in the specialty ingredients sector proved highly competitive as
retail price pressures on branded food manufacturers curtailed necessary price
increases. Kerry continued to achieve strong development into high growth
segments of the foodservice industry and through customised food and beverage
creations for retail / club private label markets. Growth through specialty
beverages and coffee syrups again proved most satisfactory. In 2004, Kerry
added to its offering and technologies in this sector through the acquisitions
of U.S. branded Oregon Chai, the market-leading brand of Chai tea, and Extreme
Foods' JetTea leading smoothie brand.
In Mexican and Central American Markets, Kerry achieved good volume growth
through seasonings, bakery mixes and specialty dairy ingredients. A new
foodservice business unit was established in the region to market the division's
range of beverage brands and culinary products. Significant progress was made
in South American markets in aligning the cost structure to business development
needs and in growing sales of sweet ingredients particularly in the ice cream
sector and through seasonings in the meat industry.
The newly acquired Kerry Bio-Science division made good progress in American
markets, building on the bio-ingredients and pharma ingredients platforms
established on acquisition of the former Quest Food Ingredients and Sheffield TM
branded pharma ingredients technologies. Good growth was achieved in the
savoury and bakery market sectors. Trends towards natural preservation, protein
substitution of carbohydrates and market gains in the emulsifier segment
assisted development in the bakery category. In the meat processing sector,
Kerry Bio-Science gained market share through cultures and fermented shelf life
protectants, while carageenans and enzymes showed significant growth in the
foodservice and convenience sectors. In the brewing sector, Kerry Bio-Science
grew sales in Canada, Argentina and Brazil. In the USA the use of enzymes to
produce 'low-carb' beers increased but this was offset by reduced consumption in
traditional segments and the growth of microbreweries also reached a plateau.
In the pharma sector, building on its relationship with global pharmaceutical
companies, the Kerry Bio-Science division has a strong pharma project pipeline
in protein and excipient components for fermentation, cell culture and
production of pharmaceutical drugs.
Mastertaste, the Group's flavour and fragrance division made good progress in
American markets in 2004. The division continued the integration of the
acquired flavour and fragrance businesses, restructuring the North American
businesses into technology focused business units; Flavours, Fragrance and
Natural Products. In Natural Products, Mastertaste significantly advanced its
market and technology positioning through the acquisition of Manheimer and
combining the acquired business with the Sunpure and Crystals businesses
acquired in 2003. Mastertaste transferred its Corporate Headquarters to the
Manheimer site located in Teterboro, New Jersey.
In line with the trends in flavoured beverages, Mastertaste achieved strong
growth in North American still and carbonated beverages. A new beverage
emulsion plant was commissioned and production of citrus and apple flavours in
Florida was expanded to meet global demand. Good growth was also achieved
through sweet flavours, dairy flavours and the recently acquired bakery flavour
technologies.
In 2004, Mastertaste made its first investment in the global fragrance sector
through the Manheimer acquisition. Manheimer Fragrances' primary focus is on
the Home Environmental and Personal Care markets. The business also has a
growing presence in the Household (Industrial and Institutional) market
segments. In 2004, Manheimer maintained its market leading position in the home
environmental sector with continued growth through major candle manufacturers.
Significant growth was also experienced in the automotive and personal care
categories.
Asia Pacific
Kerry achieved an excellent business performance in Asia Pacific markets in
2004. Sales grew by 31% to €287m which represents 15% like-for-like growth
year-on-year.
The strong performance of all business units in the region is most encouraging.
Kerry Ingredients achieved good growth in Australia and New Zealand through
seasonings and coatings. In Australia the industrial meat sector provided good
opportunity and progress was achieved through flavoured marinades in the poultry
sector. In New Zealand, the division recorded significant increases in snack
seasonings and through coating systems into the added value poultry sectors.
The quick-serve-restaurant market in Australia and New Zealand again grew
significantly year-on-year. Kerry also made good progress in the speciality
flavoured beverage sector in the region. Kerry Pinnacle which provides a range
of specialist bakery ingredients to the Australian market benefited from the
improved performance of quality high street bakeries and the continued strong
growth of franchise shop chains, complementing its strong position in both
supermarket and route trade segments. The Pinnacle business also gained through
the addition of Kerry Bio-Science bakery technologies.
Kerry Ingredients Asia recorded a strong performance across all its core
technologies; cheese snacks and biscuits, beverage applications, nutritional
bases and infant formulas, coatings and meat seasonings. Introduction of new
flavours, textures and the health positioning of savoury snacks and biscuits
provided a strong growth platform particularly for Kerry's cheese powder
technologies. A major capital programme is underway to significantly expand
production capacity at the Ernsts Food Ingredients facility in Penang, Malaysia
which was acquired prior to year-end to meet the requirements of this sectoral
growth market.
The continuing strong growth of the infant formula markets, particularly in
China and South East Asia, also provided for double-digit growth in the sector
in 2004. Kerry also benefited from the major shift towards healthy beverages
including flavoured water, pure fruit and vegetable juices, and tea beverages.
Despite the difficulties in the Asian poultry sector, Kerry grew its sales of
flavoured marinades, coatings and meat seasonings in the added value poultry and
meat industries. Strong growth was also achieved in export seafood sectors.
In Asia, the newly established Kerry Bio-Science division contributed
significantly to the Group's strong performance in the region. Progress in
line with market trends was achieved through its enzyme, fermentation, proteins
and emulsifier technologies in the growing nutrition, savoury, bakery, beverage
and brewing industries. With the increasing focus by the Asian food industry on
the key areas of health, nutrition, and food safety, the strength and market
positioning of Kerry Bio-Science technologies means that the division is well
positioned to capitalise on such trends.
Mastertaste flavours grew significantly through sweet and savoury flavours in
Australia and successfully launched flavour systems for the fast growing '
prepared rice market'. The flavour division has commenced a business
development programme in China. Building on its international customer base,
Manheimer Fragrances has also made progress in establishing a business platform
in this fast growing marketplace.
Finance
The Group achieved a record free cash flow in 2004. After a working capital
reduction of €40.2m, capital expenditure of €91.3m (net of proceeds from asset
disposals of €18.0m), interest payments of €45.8m, tax of €53.6m and dividends
of €24.5m, free cash flow available to the Group was €266.6m.
Net debt at year-end amounted to €1.14 billion compared to the prior year-end
level of €705m, notwithstanding record expenditure of €696m on the Group's 2004
acquisition programme. Accordingly, debt to EBITDA increased from 1.9 times to
2.6 times. Interest charges were €49m compared to the 2003 level of €37m, with
EBITDA to interest covered 9.0 times (2003: 10.5 times).
The restructuring of the Group's manufacturing base, as signalled at year-end
2003 to maximise operational efficiencies in the aftermath of over 20
acquisitions in the previous two years, was substantially completed during 2004.
The integration of the Quest Food Ingredients acquisition was completed by
year-end. The cash cost of the restructuring programme was offset by the sale
of non-core assets.
Accounts from 1 January 2005 will be prepared in line with International
Financial Reporting Standards.
Post Balance Sheet Events
Since year-end the Group has announced details of a €20m business development
programme in China. The programme will significantly expand the Group's asset
and customer base in China through the acquisition of Hangzhou Lanli Food
Industry Company Limited ('Lanli') located in Hangzhou in the Zhejiang Province
and through the establishment of a new world class multi-processing
manufacturing facility and technical centre on a 16 acre greenfield site in the
HEDA Economic Zone (Hangzhou Economic and Technological Development Area).
The acquisition of Lanli will be completed by the end of March 2005 and the
greenfield development programme will commence mid-year with all facilities to
be fully commissioned by year-end 2006. Development of Kerry's food
ingredients and flavour technologies in China will be focused on the significant
growth opportunities in the food processing and foodservice sectors -
particularly in nutritional, dairy, flavoured noodle, brewing, flavoured
beverage, snack and bakery market segments.
Dividend
The Board has declared a final dividend of 9.5 cent per share, an increase of
10.5% on 2003. Together with the interim dividend of 4.5 cent per share, this
raises the total dividend payment for the year to 14 cent per share, an increase
of 10.7% on the 2003 dividend. The final dividend will be paid on 27 May 2005
to shareholders registered on the record date 29 April 2005.
Annual Report and Annual General Meeting
The Group's Annual Report will be published at the end of April and the Annual
General Meeting will be held in Tralee on 24 May 2005.
Future Prospects
Group businesses are well positioned and fully committed to identifying,
developing and application of leading edge ingredients and flavour technologies
to meet consumer nutritional and lifestyle requirements. Opportunities which
will strengthen Kerry's leadership and global positioning in such technologies
will continue to be explored. Furthermore, with the continuing consolidation of
the chilled foods processing sector in the UK and Ireland, the Group will also
explore complementary business expansion opportunities in its consumer foods
categories.
The Group is confident that this strategy will continue to deliver consistent
growth in profits, cash flow and value for all stakeholders. Trading to-date in
2005 is good and again the Group expects to perform in line with market earnings
expectations for the full year.
Results for the year ended 31 December 2004
Kerry Group plc
Consolidated Profit and Loss Account
for the year ended 31 December 2004
Pre
Exceptional Exceptional
Items Items Total
2004 2004 2004 2003
Notes €'000 €'000 €'000 €'000
Turnover
Continuing operations 3,854,502 - 3,854,502 3,693,410
Acquisitions 274,234 - 274,234 -
___________ ___________ ___________ __________
1 4,128,736 - 4,128,736 3,693,410
___________ ___________ ___________ __________
Operating profit before intangible amortisation and
exceptional items
Continuing operations 325,961 - 325,961 308,519
Acquisitions 22,945 - 22,945 -
___________ ___________ ___________ __________
1 348,906 - 348,906 308,519
Goodwill and other intangible amortisation 69,252 - 69,252 48,103
Exceptional restructuring costs 4 - 41,108 41,108 -
___________ ___________ ___________ __________
Operating profit 1 279,654 (41,108) 238,546 260,416
Profit on sale of fixed assets - 15,592 15,592 942
Interest payable and similar charges 48,982 - 48,982 37,356
___________ ___________ ___________ __________
Profit before taxation 230,672 (25,516) 205,156 224,002
Taxation 69,433 (10,062) 59,371 63,025
___________ ___________ ___________ __________
Profit after taxation and attributable to
ordinary shareholders 161,239 (15,454) 145,785 160,977
Dividends - paid 8,483 - 8,483 7,625
- proposed 17,751 - 17,751 15,985
___________ ___________ ___________ __________
26,234 - 26,234 23,610
___________ ___________ ___________ __________
Retained profit for the year 135,005 (15,454) 119,551 137,367
___________ ___________ ___________ __________
Earnings per ordinary share (cent)
- basic before intangible amortisation and
exceptional items 5 123.7 112.1
- basic after intangible amortisation and
exceptional items 5 78.2 86.7
- fully diluted after intangible amortisation
and exceptional items 5 77.8 86.4
The financial statements were approved by the Board of Directors on 28 February 2005 and signed on its behalf by:
Denis Buckley, Chairman
Hugh Friel, Chief Executive
Kerry Group plc
Consolidated Balance Sheet
as at 31 December 2004
2004 2003
€'000 €'000
Fixed assets
Tangible assets 968,480 844,701
Intangible assets 1,283,237 837,301
______________ _____________
2,251,717 1,682,002
Current assets
Stocks 457,662 383,899
Debtors 566,938 482,955
Cash at bank and in hand 65,328 56,862
______________ _____________
1,089,928 923,716
Creditors: Amounts falling due within one year (858,305) (709,872)
______________ _____________
Net current assets 231,623 213,844
______________ _____________
Total assets less current liabilities 2,483,340 1,895,846
Creditors: Amounts falling due after more than one year (1,350,908) (899,024)
Provisions for liabilities and charges (60,681) (48,333)
______________ _____________
1,071,751 948,489
______________ _____________
Capital and reserves
Called-up equity share capital 23,356 23,234
Capital conversion reserve fund 340 340
Share premium account 375,032 365,229
Profit and loss account 645,177 531,149
______________ _____________
1,043,905 919,952
Deferred income 27,846 28,537
______________ _____________
1,071,751 948,489
______________ _____________
The financial statements were approved by the Board of Directors on 28 February 2005 and signed on its behalf
by:
Denis Buckley, Chairman
Hugh Friel, Chief Executive
Kerry Group plc
Consolidated Cash Flow Statement
for the year ended 31 December 2004
2004 2003
€'000 €'000
Operating profit before intangible amortisation and exceptional items 348,906 308,519
Depreciation (net) 92,655 83,827
Change in working capital 41,110 9,138
Exchange translation adjustment (914) (1,176)
______________ _____________
Net cash inflow from operating activities 481,757 400,308
Return on investments and servicing of finance
Interest received 383 943
Interest paid (46,158) (41,717)
Taxation (53,618) (40,476)
Capital expenditure and financial investment
Purchase of fixed assets (110,235) (101,632)
Proceeds on the sale of fixed assets 18,010 7,683
Development grants received 907 1,194
Acquisitions and disposals
Purchase of subsidiary undertakings (695,701) (207,376)
Proceeds on the sale of businesses - 1,264
Deferred creditors paid (29,955) (5,532)
Exceptional restructuring costs (16,785) (16,575)
Consideration adjustment on previous acquisitions (935) (248)
Equity dividends paid (24,468) (22,196)
______________ _____________
Cash outflow before the use of liquid resources and financing (476,798) (24,360)
Financing
Issue of share capital 9,925 2,287
Increase / (decrease) in debt due within one year 43,263 (123,860)
Increase in debt due after one year 432,076 156,211
______________ _____________
Increase in cash in the year 8,466 10,278
______________ _____________
Reconciliation of Net Cash Flow to Movement in Net Debt 2004 2003
for the year ended 31 December 2004 €'000 €'000
Increase in cash in the year 8,466 10,278
Cash inflow from debt financing (475,339) (32,351)
______________ _____________
Change in net debt resulting from cash flows (466,873) (22,073)
Exchange translation adjustment on net debt 34,635 80,677
______________ _____________
Movement in net debt in the year (432,238) 58,604
Net debt at beginning of year (705,200) (763,804)
______________ _____________
Net debt at end of year (1,137,438) (705,200)
______________ _____________
Kerry Group plc
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 December 2004
2004 2003
€'000 €'000
Profit attributable to the Group 145,785 160,977
Exchange translation adjustment on foreign currency net investments (5,523) (24,230)
_____________ ____________
Total recognised gains and losses relating to the year 140,262 136,747
_____________ ____________
Kerry Group plc
Reconciliation of movements in equity shareholders' funds
for the year ended 31 December 2004
Capital
Share Capital Conversion Profit & Loss
and Premium Reserve Fund Account Total
€'000 €'000 €'000 €'000
At beginning of year 388,463 340 531,149 919,952
Profit after taxation and attributable to
ordinary shareholders - - 145,785 145,785
Dividends - - (26,234) (26,234)
Shares issued during year 10,021 - - 10,021
Share issue costs (96) - - (96)
Exchange translation adjustment - - (5,523) (5,523)
___________ ____________ ____________ ____________
At end of year 398,388 340 645,177 1,043,905
___________ ____________ ____________ ____________
The Profit & Loss Account figures comprise the following:
Intangible Assets Retained Profit & Loss
Written Off Profits Account
€'000 €'000 €'000
At beginning of year (527,802) 1,058,951 531,149
Profit after taxation and attributable to
ordinary shareholders (69,252) 215,037 145,785
Dividends - (26,234) (26,234)
Exchange translation adjustment - (5,523) (5,523)
___________ ___________ ___________
At end of year (597,054) 1,242,231 645,177
___________ ___________ ___________
The exchange translation adjustment arises on the retranslation of the Group's opening net investment in
its foreign currency subsidiaries.
Kerry Group plc
Notes to the Financial Statements
for the year ended 31 December 2004
1. Analysis of results 2004 2003
Unallocated Unallocated
and Group and Group
Consumer Elimina Consumer Elimina-
By business segment: Ingredients Foods -tions Total Ingredients Foods tions Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Total turnover
- Continuing operations 2,506,545 1,660,533 (312,576) 3,854,502 2,403,347 1,607,599 (317,536) 3,693,410
- Acquisitions 274,234 - - 274,234 - - - -
_________ _________ ________ _________ _________ _________ ________ _________
2,780,779 1,660,533 (312,576) 4,128,736 2,403,347 1,607,599 (317,536) 3,693,410
_________ _________ ________ _________ _________ _________ ________ _________
Operating profit before
intangible amortisation
and exceptional items
- Continuing operations 233,615 116,360 (24,014) 325,961 218,400 113,948 (23,829) 308,519
- Acquisitions 22,945 - - 22,945 - - - -
_________ _________ ________ _________ _________ _________ ________ _________
256,560 116,360 (24,014) 348,906 218,400 113,948 (23,829) 308,519
Goodwill and other
intangible amortisation 42,311 4,387 22,554 69,252 30,010 3,578 14,515 48,103
_________ _________ ________ _________ _________ _________ ________ _________
Operating profit
before exceptional items 214,249 111,973 (46,568) 279,654 188,390 110,370 (38,344) 260,416
_________ _________ ________ _________ _________ ________
Exceptional items 25,516 (942)
_________ _________
Profit before taxation
and interest payable 254,138 261,358
Interest payable 48,982 37,356
_________ _________
Profit before taxation 205,156 224,002
Taxation 59,371 63,025
_________ _________
Profit after taxation and
attributable to
odinary shareholders 145,785 160,977
_________ _________
Segment assets and liabilities
Segment assets 2,207,325 807,768 326,552 3,341,645 1,644,906 659,399 301,413 2,605,718
Segment liabilities 538,294 261,008 1,470,592 2,269,894 414,144 249,378 993,707 1,657,229
_________ _________ _________ _________ _________ _________ ________ _________
Net assets 1,669,031 546,760 (1,144,040) 1,071,751 1,230,762 410,021 (692,294) 948,489
_________ _________ _________ _________ _________ _________ ________ _________
Other segmental information
Fixed asset additions 76,993 36,419 920 114,332 54,850 40,187 2,696 97,733
Depreciation (net) 57,493 34,243 919 92,655 51,783 31,221 823 83,827
2004 2003
Asia Asia
By geographical area: Europe Americas Pacific Total Europe Americas Pacific Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Turnover by location of
customers 2,721,074 1,120,884 286,778 4,128,736 2,490,041 984,809 218,560 3,693,410
Segment assets by location 2,274,952 921,346 145,347 3,341,645 1,844,474 667,933 93,311 2,605,718
Fixed asset additions 88,091 20,246 5,995 114,332 82,745 13,495 1,493 97,733
2. Accounting policies
These accounts have been prepared using the same accounting policies detailed in the 2003 annual financial statements.
3. Basis of preparation and reporting currency
The financial information set out in this document does not constitute full statutory accounts for the years ended 31
December 2004 or 2003 but is derived from same. The 2004 and 2003 accounts have been audited and received unqualified
audit reports. The 2004 financial statements were approved by the Board of Directors on 28 February 2005.
The financial statements are prepared under the historical cost convention and are presented in Euro.
4. Exceptional items 2004 2003
€'000 €'000
Exceptional restructuring costs (41,108) -
Profit on sale of fixed assets 15,592 942
____________ ____________
(25,516) 942
Tax credit / (charge) on exceptional items 10,062 (45)
____________ ____________
(15,454) 897
____________ ____________
The exceptional restructuring costs in 2004 relate to the integration of Quest Food Ingredients, other
acquisitions made in 2004 and 2003 and the rationalisation of existing businesses. These costs are analysed
as follows:
2004 2003
€'000 €'000
Plant closure and relocation 15,319 -
Redundancies and contract compensation 13,858 -
Plant and other assets written off 11,662 -
Other 269 -
____________ ____________
41,108 -
____________ ____________
The profit on sale of fixed assets in the year consists of €12,386,000 relating to the sale of financial
fixed assets and €3,206,000 relating to the sale of tangible fixed assets.
5. Earnings per share EPS 2004 EPS 2003
cent €'000 cent €'000
Adjusted earnings * 123.7 230,491 112.1 208,183
Goodwill and other intangible amortisation 37.2 69,252 25.9 48,103
Exceptional items (net) (note 4) 8.3 15,454 (0.5) (897)
_______ ________ _______ ________
Profit after taxation, intangible amortisation and
exceptional items 78.2 145,785 86.7 160,977
Share option dilution 0.4 - 0.3 -
_______ ________ _______ ________
77.8 145,785 86.4 160,977
_______ ________ _______ ________
The basic weighted average number of ordinary shares in issue for the year was 186,401,228 (2003:
185,707,545). The diluted weighted average number of ordinary shares in issue for the year was 187,308,737
(2003: 186,418,117). The dilution arises in respect of executive share options outstanding.
In addition to the basic and diluted earnings per share, an earnings per share before intangible amortisation
and net exceptional items calculation is also provided, as it more accurately reflects the Group's underlying
trading performance.
* Adjusted earnings is calculated as profit after taxation, before intangible amortisation and net
exceptional items. Adjusted earnings per share is the adjusted earnings divided by the basic weighted
average number of ordinary shares.
For further information please contact:
Frank Hayes
Director of Corporate Affairs Tel no +353 66 7182304
Fax no +353 66 7182972
Kerry Web Site: www.kerrygroup.com
This information is provided by RNS
The company news service from the London Stock Exchange
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