Final Results
Kerry Group PLC
27 February 2001
Kerry Group plc
Final Results
Annual Results 2000
Kerry, the global food ingredients and consumer foods group, reports
preliminary results for the year ended 31 December 2000.
Highlights
- EBITDA increased by 14.5% to EUR296.2m
- Sales increased by 6.7% to EUR2.6 billion
- Operating margin up from 8.3% to 8.9%
- Profit before tax of EUR173.2m, a 16.1% increase
on the 1999 comparable
- Adjusted earnings per share increased by 16.3% to EUR85.6c*
- Final dividend per share up 15% to EUR6.13c
- Capital expenditure EUR101m
- Expenditure on research and development increased to EUR52.4m
- Board and senior management changes - positioning the Group
for continued growth
* before goodwill amortisation and exceptionals
Kerry Group Managing Director, Denis Brosnan said; 'In 2000, Kerry's
fifteenth year as a public company, the Group maintained its record of
sustained profitable growth and development. During a year characterised
by major consolidation in global food markets, Kerry again achieved
strong profit growth, assisted by its profit improvement programmes
which advanced operating margins in all regional markets. The Group's
management, financial and operational resources are well positioned
to deliver our targets for future profitable growth.'
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
KERRY GROUP PLC
PRELIMINARY STATEMENT
Results for the year ended 31 December 2000
Kerry Group plc today announced results for the year ended 31 December
2000 and reported another year of profitable growth and development.
Assisted by the Group's profit improvement programmes, operating margins
advanced in all regional markets. Earnings before interest, tax,
depreciation and amortisation (EBITDA) at EUR296.2m reflect an increase
of 14.5% on the previous year. The Group's leadership position in global
food ingredients markets and in snack and convenience sectors of chilled
consumer foods markets in the UK and Ireland was bolstered by a EUR52.4m
expenditure on research and development. Future competitiveness and the
Group's ability to capitalise on sectoral growth opportunities in
European and North American markets and in emerging markets in South
America and Asia, were considerably enhanced through a comprehensive
range of capital development projects at a cost of EUR101m.
Results
_______
The Group achieved profit before tax of EUR173.2m, an increase of 16.1%
on the comparable 1999 result. Adjusted earnings per share increased by
16.3% to EUR85.6c, a continuation of the Group's strong financial growth
record which has produced compound growth in earnings per share of 18.9%
per annum since Kerry Group plc was launched in 1986. Basic FRS3 earnings
per share increased by 75.4% to EUR77.0c in 2000.
The Group's primary focus during the year under review was to again
advance its profit improvement programme. Very satisfactory progress was
achieved across all Group markets resulting in an increase in operating
profit margin from 8.3% in 1999 to 8.9% in 2000. This was achieved
through further development of value added product lines and application
specific food ingredients, and also through progressive elimination of
low margin activities. Total Group turnover increased by 6.7% from
EUR2.46 billion in 1999 to EUR2.62 billion in 2000. Adjusted for
acquisitions, divestitures,discontinued business and the effects of
foreign currency movements, like for like sales grew by 3.2%. Operating
profits increased to EUR233.7m, up 14.8% on the previous year.
Operations Reviews
__________________
Ireland and Rest of Europe
Sales originating from Irish based operations grew by 5.2% to EUR645.9m
giving a very satisfactory 8.1% increase in operating profit from
EUR34.5m in 1999 to EUR37.3m.
Turnover in the Group's European operations (excluding Ireland) grew by
4.4% to EUR1,140.9m while operating profits increased by 7.1% to
EUR91.9m.
In European ingredients markets, growth was driven by the continued
movement towards out-of-home eating with branded restaurants commanding
an ever increasing share of the market. Growth in snacking and home meal
replacement also continued whilst heightened consumer awareness of health
and food safety issues continued to drive development in poultry based
meals, organics and nutraceuticals. In addition Kerry Ingredients position
in the European sweet flavourings sector was considerably strengthened in
2000. The acquisition of the SFI Europe particulates business as part of
the Shade Foods acquisition with a production facility based in Tilburg,
the Netherlands, strengthened the Group's position in the premium ice
cream, confectionery, cereal, bakery, dairy and nutritional sectors.
This was further boosted in August through the acquisition of UK
based, York Dragee.
In consumer foods markets, Kerry Foods continued to build its added
value food sales through leading multiple retailers and to consolidate
its position as the leading supplier of chilled foods to the independent
and convenience sectors in both the UK and Ireland. Kerry again
outperformed the overall market growth rate in the chilled convenience
foods sector through its product development capability, targeted
customer relationships and on-going investment in production capacity.
Following a review of operations in the Irish liquid milk market,
production was rationalised to three dairies in Killarney, Limerick
and Galway, with the sale of the Cork based dairy and the closure of
the Moate facility.
Denny, which is the biggest retail chilled food brand in Ireland,
successfully launched a range of chilled ready meals and consolidated its
leading position in meat and savoury products. Other innovative product
launches during 2000 include H2Sport isotonic mineral water from Kerry
Spring and Walls' Instants microwaveable sausage and bacon products in
the UK.
Americas
In American food ingredients markets Kerry again performed well ahead
of the industry average. Sales increased from EUR615.0m in 1999
to EUR703.9m in 2000 and operating profits increased by 21.1% from
EUR76.3m to EUR92.4m. During the period, the Group acquired the SFI
Group of speciality food ingredients businesses, comprising Shade
Foods Inc in the USA and SFI Europe for a total consideration of
US$80m. Since acquisition, Shade Foods has performed very
satisfactorily in the fast growing nutraceutical and ready to eat
cereal sectors and has positioned Kerry as the leader in
flavoured particulates, inclusions and compound coatings. Solnuts,
also part of this acquisition, provides a unique product line of
value added soy-based nutritional ingredients, ideally suited to
the rapidly expanding nutritional energy bar market. In February
2000, the Group concluded the sale of the DCA bakery mix business
in the US and Canada for US$100m. The contribution of Shade Foods
was broadly offset by the sale of the DCA business in the US and
Canada. Prior to year-end the Group also concluded the acquisition
of US based Armour Food Ingredients (AFI) for a total consideration
of US$35m. With annualised sales of approximately US$40m the AFI
business provides a range of speciality food ingredients including
savoury flavourings, cheese and dairy flavourings and speciality
lipids to the US food industry, strengthening Kerry's leadership
positions in the snack and convenience sectors of the US
market. The AFI acquisition did not materially impact on year 2000
performance. In the US, Kerry continued to advance its position in
foodservice markets and also made excellent progress in the food
processing markets of value added poultry, seafood and appetisers
through coatings technologies.
In Canada, strong growth occurred in Kerry's core market segments
of snack seasonings, dried soups and sauces. From the Group's base
in Mexico, good results were achieved in expanding activities through
multinational accounts in Central American markets, particularly in
the snack sector. In Mexico, sales to quick-service restaurants
continued to expand and Kerry also achieved strong growth in the
supermarket in-store bakery sector.
In Brazil, the Tres Coracoes facility completed its first full
year's production. Good growth was achieved in cheese and dairy
flavourings where Kerry's locally based manufacturing and technical
facilities represent a strong competitive advantage. Coatings and meat
seasonings technologies to the growing value added poultry sector also
delivered good results, as did speciality lipid and functional dairy
technologies in the beverage and bakery sectors. The acquisition of
Harald Industria e Comercio de Alimentos LTDA was not concluded.
Asia Pacific
Rationalisation of Kerry's bakery ingredients services in Australia
and production capacity limitations at the Group's facility in Malaysia
meant that turnover in the region was marginally lower at EUR131.2m
compared to EUR135.0m in 1999. However very satisfactory progress was
made with operating profits increasing by 73.9% to EUR12.1m. In
Australia, excellent results were again achieved in the added value
poultry sector through Kerry's unrivalled range of marinades, glazes,
coatings and stuffings. Home meal replacement continued to grow. The
continued development of the quick-service restaurant sector in
Australia and New Zealand provided further opportunities for Kerry's
core technologies. In the bakery sector, Kerry Pinnacle made significant
operational and financial progress, whilst rationalising its
distribution services to focus on growth sectors through national and
regional bakery chains and supermarket in-store bakeries.
In New Zealand, Kerry achieved double-digit growth in 2000,
consolidating its position as the country's leading ingredients
company. The Group continued to expand and develop its presence in
South East Asian and North East Asian markets in 2000. Further
technical and sales resources were established in Thailand,
the Philippines, Indonesia and China. Strong demand continued for
speciality lipid systems, primarily to the beverage sector
and for cheese powders to the snack and biscuit sectors.
Development
___________
In 2000, a number of strategic development projects were undertaken
to advance the Group's position in global ingredients markets and in
chilled consumer foods growth sectors, bringing capital expenditure to
a record level of EUR101.0m (1999: EUR92.4m).
Principal projects included;
- greenfield development of a food coatings manufacturing facility in
Calhoun, Georgia, USA, to be completed in 2001, for production of
breaders, batters and marinades for poultry, seafood, vegetable and
other processed food applications.
- a AU$20m programme to establish two large ingredient production
facilities in Queensland and Victoria, Australia. The Murrarie
development in Queensland was completed by year-end and the Altona
project in Victoria will be completed by mid-year 2001. Work has also
commenced on a new Corporate Headquarters and Research and Development
facility in Sydney.
- a US$12m expansion of the Johor Bahru facility in Malaysia to increase
production capacity was well advanced by year end. The new plant will
be fully commissioned by end of March 2001 thereby providing production
capacity to meet market requirements in the region.
- in the UK, a global food ingredients technical centre in Bristol was
completed.
- a EUR15m programme to expand production of the Denny range of chilled
snack products at the Shillelagh plant in Ireland was also completed.
Finance
_______
Net cash flow from operating activities increased to EUR309.0m from the
1999 level of EUR262.3m. Despite the expansion in Group operational
activity, working capital fell year on year. Interest charges in 2000
increased to EUR45.7m compared to the previous year's level of EUR42.3m,
with EBITDA to interest growing to 6.5 times (1999: 6.1 times). The cash
cost of businesses acquired amounted to EUR117.5m and disposals
contributed EUR97.7m. The taxation charge on ordinary activities
increased to EUR40.6m (1999: EUR34.7m) reflecting a slight increase in
the Group's effective tax rate from 23.2% to 23.5%.
Notwithstanding the largest ever annual capital expenditure, net debt at
year-end stood at EUR478.3m, compared to the 1999 year-end level of
EUR544.5m. Before currency adjustment, this represents a reduction of
EUR85.8m in Group borrowings in 2000. Debt to EBITDA was reduced to 1.6
times from the prior year-end level of 2.1 times. The level of debt
expressed as a percentage of market capitalisation decreased from 27%
to 20%.
At year-end the Kerry Group share was quoted at EUR13.60 (1999: EUR11.90)
and market capitalisation amounted to EUR2.34 billion compared with the
prior year-end level of EUR2.0 billion. The number of shares in issue
at year-end was 172,425,213 (1999: 172,047,213).
Dividend
________
The Board has declared a final dividend of EUR6.13c, an increase of
15% on 1999. Together with the interim dividend of EUR2.92c per share,
this raises the total dividend payment for the year to EUR9.05c, an
increase of 15% on the 1999 dividend. The final dividend will be paid
on 29 May 2001 to shareholders registered on the record date 4 May 2001.
Post Balance Sheet Events
_________________________
The Group recently concluded the acquisition of Creative Seasonings &
Spices Inc. based in Sturtevant, Wisconsin, USA. Founded in 1993, the
acquired business has a proven growth record in development and
application of flavour systems for the prepared foods, processed meats,
snack and dairy industries in the US.
Euro
____
The Group is well advanced in preparing for the advent of the Euro. A
comprehensive commercial and administrative programme, including
modifications to information technology systems, will be concluded
by summer 2001. Future costs associated with the transition are not
expected to be material.
Board and Management Changes
____________________________
The Board is pleased to announce that it has asked Mr. Michael Hanrahan
to continue as a Director and Chairman until 31 December 2001 and that it
has decided to appoint Mr. Denis Brosnan to the office of Chairman with
effect from 1 January 2002. It has further decided to appoint Mr. Hugh
Friel to succeed Mr. Brosnan as Managing Director of the Group with effect
from 1 January 2002.
Mr. Denis Brosnan (age 56) has been Managing Director of Kerry Group plc
since its formation in 1986. He has been Chief Executive of Kerry
Co-operative Creameries Limited since its establishment in 1974. Mr.
Brosnan is currently Chairman of the Irish Horseracing Authority and is
a Director of a number of other public and private companies in Ireland
and the UK.
Mr. Hugh Friel (age 56) has been joint Deputy Managing Director of the
Company since the formation of Kerry Group. He has been with Kerry
since its foundation in 1972, overseeing its growth as Director of
Finance.
Mr. Roger O'Rahilly and Mr. James V. Brosnan were appointed to the
Board as non-executive Directors on 26 February 2001, replacing Mr.
Diarmuid O'Connell and Mr. Daniel T. O'Sullivan who retired from
the Board in November and December 2000 respectively. Dr. Ivor Kenny
will retire from the Board in May.
Annual Report and Annual General Meeting
________________________________________
The Group's Annual Report will be published at the beginning of May
and the Annual General Meeting will be held in Tralee on 29 May 2001.
Future Prospects
________________
We are optimistic that the ongoing consolidation of the global food
industry will enhance Kerry's opportunities for growth and development.
The Group's management, financial and operational resources are well
positioned to deliver our targets for future profitable growth.
KERRY GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2000
2000 1999
EUR'000 EUR'000
Turnover
Continuing operations - Note 1 2,621,913 2,456,352
========= =========
Operating profit
- continuing operations
Before goodwill amortisation and
exceptional items 233,747 203,614
Goodwill amortisation 15,364 12,103
Exceptional restructuring costs - Note 4 - 35,359
________ ________
Operating profit - Note 1 218,383 156,152
Profit on sale of businesses - Note 4 1,194 -
Loss on sale of fixed assets - Note 4 744 -
Interest payable and similar charges 45,680 42,309
________ ________
Profit before taxation 173,153 113,843
Taxation - ordinary activities 40,649 34,662
- exceptional items - 3,703
_______ _______
40,649 38,365
_______ _______
Profit after taxation and attributable
to ordinary shareholders 132,504 75,478
Dividends - paid 5,033 4,369
- proposed 10,570 9,170
_______ _______
Retained profit for the year 116,901 61,939
======= =======
Earnings per ordinary share (EURcents) - Note 5
- basic before goodwill
amortisation and exceptional items 85.6 73.6
- basic after goodwill
amortisation and exceptional items 77.0 43.9
- fully diluted after goodwill
amortisation and exceptional items 76.4 43.6
KERRY GROUP PLC
CONSOLIDATED BALANCE SHEET
as at 31 December 2000
2000 1999
EUR'000 EUR'000
Fixed assets
Tangible assets 671,821 607,347
Intangible assets 290,139 234,153
_______ _______
961,960 841,500
Current assets
Stocks 285,351 272,354
Debtors 332,035 332,976
Cash at bank and in hand 27,995 13,261
_______ _______
645,381 618,591
Creditors: Amounts falling due
within one year (579,448) (566,512)
_________ _________
Net current assets 65,933 52,079
_________ _________
Total assets less current liabilities 1,027,893 893,579
Creditors: Amounts falling due
after more than one year (495,807) (521,060)
Provisions for liabilities and charges (3,001) (20,394)
_________ ________
529,085 352,125
========= ========
Capital and reserves
Called-up equity share capital 21,553 21,846
Capital conversion reserve fund - Note 6 340 -
Share premium account 193,651 190,694
Profit and loss account 289,470 114,712
________ _______
505,014 327,252
Deferred income 24,071 24,873
________ _______
529,085 352,125
======== =======
KERRY GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2000
2000 1999
EUR'000 EUR'000
Operating profit before goodwill
amortisation and exceptional items 233,747 203,614
Depreciation (net) 62,422 55,078
Change in working capital 14,750 3,779
Exchange translation adjustment (1,945) (149)
________ ________
Net cash flow from operating activities 308,974 262,322
Return on investments and
servicing of finance
Interest received 1,353 536
Interest paid (48,937) (39,993)
Taxation (42,107) (28,137)
Capital expenditure
Purchase of tangible fixed assets (100,837) (91,059)
Proceeds on the sale of fixed assets 3,425 7,986
Development grants received 1,733 3,701
Purchase of intangible fixed assets (45) -
Acquisitions and disposals
Purchase of subsidiary undertakings (115,619) (5,712)
Proceeds on the sale of businesses 97,732 -
Deferred creditors paid (1,867) (4,562)
Exceptional restructuring costs (6,810) (19,692)
Consideration adjustment on
previous acquisitions - 12,101
Issue of share capital 3,004 -
Equity dividends paid (14,203) (12,015)
________ _________
Cash inflow before the use of liquid
resources and financing 85,796 85,476
Financing
Decrease in debt due within one year (30,820) (35,756)
Decrease in debt due after one year (40,242) (49,193)
_________ _________
Increase in cash in the year 14,734 527
========= =========
KERRY GROUP PLC
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 31 December 2000
2000 1999
EUR'000 EUR'000
Increase in cash in the year 14,734 527
Cashflow from debt financing 71,062 84,949
________ _______
Change in net debt resulting from cash flows 85,796 85,476
Exchange translation adjustment (19,611) (64,273)
________ ________
Movement in net debt in the year 66,185 21,203
Net debt at beginning of year (544,532) (565,735)
_________ _________
Net debt at end of year (478,347) (544,532)
========= =========
KERRY GROUP PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2000
2000 1999
EUR'000 EUR'000
Profit attributable to the Group 132,504 75,478
Exchange translation adjustment on
foreign currency net investments (17,274) 10,064
________ _______
Total recognised gains and losses relating
to the year 115,230 85,542
======== =======
KERRY GROUP PLC
RECONCILIATION OF MOVEMENTS IN SHARE CAPITAL AND RESERVES
for the year ended 31 December 2000
Capital
Share Capital Conversion P&L
& Premium Reserve Fund Account Total
EUR'000 EUR'000 EUR'000 EUR'000
At beginning of year 212,540 - 114,712 327,252
Retained profit - - 116,901 116,901
Renominalisation of
share capital (340) 340 - -
Share issue 3,024 - - 3,024
Share issue costs (20) - - (20)
Goodwill written back
on disposal - - 75,131 75,131
Exchange translation
adjustment - - (17,274) (17,274)
_______ ________ ________ ________
At end of year 215,204 340 289,470 505,014
======= ======== ======== ========
The Profit & Loss Account figures comprise the following:
Intangible Assets Retained P&L
Written Off Profits Account
EUR'000 EUR'000 EUR'000
At beginning of year (474,698) 589,410 114,712
Retained profit (15,364) 132,265 116,901
Goodwill written back on
disposal 75,131 - 75,131
Exchange translation adjustment - (17,274) (17,274)
_________ ________ ________
At end of year (414,931) 704,401 289,470
========= ======== ========
KERRY GROUP PLC
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2000
1. Analysis of results by region
_____________________________
2000 1999
Operating Net Operating Net
Turnover Profit Assets Turnover Profit Assets
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
By geographical market of origin:
Ireland 645,874 37,306 126,880 613,671 34,506 105,963
Rest of
Europe 1,140,934 91,900 579,822 1,092,613 85,836 591,176
Americas 703,869 92,422 251,846 615,025 76,305 167,760
Asia Pacific 131,236 12,119 48,884 135,043 6,967 31,758
__________ ________ _________ _________ _______ _______
2,621,913 233,747 1,007,432 2,456,352 203,614 896,657
========== =========
Goodwill amortised (15,364) (12,103)
Exceptional
restructuring costs - (35,359)
Group borrowings (net)
(478,347) (544,532)
_______ _________ _______ _________
218,383 529,085 156,152 352,125
======= ========= ======= =========
Turnover by destination:
2000 1999
EUR'000 EUR'000
Ireland 418,261 394,344
Rest of
Europe 1,274,588 1,224,234
Americas 768,613 675,255
Asia Pacific 160,451 162,519
_________ _________
2,621,913 2,456,352
========= =========
2. Accounting Policies
___________________
The audited accounts have been prepared using the same accounting
policies as detailed in the 1999 annual financial statements except
that the Group has adopted Financial Reporting Standard 16 'Current
Tax'. FRS 16 does not have a material effect on either the measurement
or the classification of the Group's assets and liabilities.
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 2000 or 1999
but is derived from same. The 2000 and 1999 accounts have been audited
and received unqualified audit reports. The 2000 financial statements
were approved by the Board of Directors on 26 February 2001.
The financial statements are prepared under the historical cost
convention. The 2000 financial statements and the 1999 comparative
figures are presented in Euro.
4. Exceptional items
_________________
2000 1999
EUR'000 EUR'000
Profit on sale of businesses 1,194 -
Loss on sale of fixed assets (744) -
Restructuring costs - (35,359)
______ ________
450 (35,359)
Taxation effect of exceptional items - (3,703)
______ ________
Total as per note 5 450 (39,062)
====== ========
The Group disposed of its DCA bakery business in the US and Canada to
Pillsbury Bakeries and Foodservice in February 2000 for US$100.7m and
part of the business and assets of Dawn Dairies Ltd. in Ireland in
December 2000.
The cost of goodwill, previously written off to reserves, disposed of
with the DCA bakery business amounted to EUR75.1m. The taxation effect
of this disposal was provided for in the prior year.
The exceptional items in 1999 relate to the major restructuring
programme undertaken by the Group consequent to the significant
acquisitions in 1998.
5. Earnings per share
__________________
EPS 2000 EPS 1999
Cents EUR'000 Cents EUR'000
Profit after taxation,
before goodwill amortisation
& exceptional items 85.6 147,418 73.6 126,643
Goodwill amortisation 8.9 15,364 7.0 12,103
Exceptional items - Note 4 (0.3) (450) 22.7 39,062
______ _______ _____ ______
Profit after taxation
goodwill amortisation
& exceptional items 77.0 132,504 43.9 75,478
Share option dilution 0.6 - 0.3 -
_______ ________ _______ _______
76.4 132,504 43.6 75,478
======= ======== ======= ========
The basic weighted average number of ordinary shares in issue for the
year was 172,149,130 (1999: 172,047,213). The diluted weighted average
number of ordinary shares in issue for the year was 173,500,688
(1999: 173,076,245). The dilution arises in respect of executive
share options outstanding.
6. Share Capital
_____________
Redenomination and renominalisation of share capital
Due to the introduction of the Euro each of the issued and unissued
ordinary shares of IR£0.10 per share was redenominated into an ordinary
share of EUR0.1269738 following a resolution passed at the Annual
General Meeting held on 30 May 2000. Every such share was then
renominalised to be an ordinary share of EUR0.125. An amount equal to
the reduction in the issued share capital resulting from this
renominalisation was transferred to a capital conversion reserve fund.
Previous Redenominated Renominalised Aggregate
Par Value Par Value Par Value Renominalisation
of Shares of Shares of Shares Effect
EUR'000
172,047,213
A ordinary
shares IR£0.10 EUR0.1269738 EUR0.125 340
======= ============ ========= =========