Interim Results
Kerry Group PLC
30 August 2000
Interim Report
Half Year Ended 30 June, 2000
Kerry, the global food ingredients and consumer foods group, reports
interim results for the half year ended 30 June 2000
FINANCIAL HIGHLIGHTS
* Sales increased by 10.3% to EUR1,264.8m.
* Operating profit before goodwill amortisation increased by 14.4% to
EUR101.3m.
* Operating margin up from 7.7% to 8%.
* Profit before taxation increased by 20.1% to EUR71.4m.
* Earnings per share before goodwill amortisation increased by 17.4% to
EUR35.1c.
* FRS3 earnings per share increased by 45.5% to EUR30.7c.
* Dividend per share increased by 15% to EUR2.92c.
The unaudited results and Balance Sheet of the Group as at 30 June 2000,
together with comparative figures for the previous year and the audited
results to 31 December 1999, are set out in this release. A copy of the
Interim Report will be circulated to shareholders and is available
for inspection at the registered office of the company.
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
CHAIRMAN'S STATEMENT
for the half year ended 30 June 2000
Results
_________
The Board of Kerry is pleased to report a solid performance with good profit
growth in all markets for the six months to 30 June 2000. Profit before tax
increased by 20.1% to EUR71.4m. Earnings per share before goodwill
amortisation increased by 17.4% to EUR35.1c. Basic FRS3 earnings per share
increased by 45.5% to EUR30.7c. Operating profits increased by 14.4%
to EUR101.3m. Group turnover at EUR1,264.8m grew by 10.3% compared to the
same trading period in 1999.Reflecting the strength of all core businesses,
this represents a further enhancement in operating margins to 8% from the
previous years level of 7.7%.
Operations Review
____________________
Ireland and Rest of Europe
Sales from the Group's Irish based operations grew by 5.7% from EUR277.9m to
EUR293.8m. Operating profit increased by 11.4% to EUR18.2m.
European operations increased turnover by 10.5% to EUR558.1m while operating
profits grew by 7% from EUR35.5m to EUR38.0m.
In European ingredients markets continuing progress was recorded in the
prepared foods sector and good growth was achieved through coatings
applications in the fish and poultry sectors and clear coatings for potato
products. Excellent results were also achieved through the development and
launch of a range of organic ingredients to meet the requirements of major
food processors and retailers in the UK market. The recently commissioned
Olesnica facility in Poland for savoury flavourings and coating systems, and
a technical development centre accommodating Kerry's range of core
ingredients technologies, has advanced the Group's position in Eastern
European markets, particularly in Poland, Hungary and Russia. The
acquisition of SFI Europe ingredients particulates business with a facility
based in Tilburg, the Netherlands, as part of the acquisition of Shade Foods
in the period under review, also advanced the Group's position as a leading
supplier to ice cream, bakery, dairy and nutraceutical markets in Europe.
Kerry's consumer foods business units in Ireland and the UK continued to
outperform the market. The buoyant Irish economy and the growth in the
number of dual income families has accelerated demand for snacking and
convenient food offerings. A range of Italian ready meals were successfully
launched under the Denny brand in Ireland and consumer response to the range
of premium cooked meats introduced under the Denny Finest brand also proved
very satisfactory.
Double digit growth in the UK ready meals sector continued and Kerry
increased its market share. Consumer response to the relaunch of the
Mattessons range of premium cooked meat products proved extremely
favourable.On-going investment in NPD was manifested in the recent
introduction of 'Wall's Instants' - ready cooked microwaveable sausage which
has achieved a highly favourable response at trade level.
Americas
Kerry's American food ingredient business again performed well. Turnover
grew by 14.4% to EUR348.7m and operating profits increased by 18.3% from
EUR34.9m to EUR41.2m.
The sale of the DCA bakery mix business in the US and Canada was broadly
offset by the first time contribution from the acquired Shade Foods
particulates business. The SFI Group of speciality food ingredients
businesses, comprising Shade Foods Inc in the USA and Speciality Food
Ingredients (SFI) in Europe, were acquired since year end for a total
consideration of US$80m. Shade has already exhibited strong growth, in
particular with chocolate coatings and inclusions for the fast growing
nutraceutical sector and with clusters for ready to eat cereals. In February
the Group announced the sale of the DCA bakery mix business in the US and
Canada to Pillsbury Bakeries & Foodservice for US$100m.
In the US strong growth continued through major national accounts driven by
traditional cornerstone technologies, in particular through spray-dried
cheese flavourings, liquid sauces and fillings. Local business in Canada
also grew satisfactorily year on year. In Mexico good progress continued
with the snack food sector growing strongly. Business development in South
American markets has proceeded very satisfactorily since the commissioning
of the Brazilian processing and technical facility in August 1999. Good
results have been achieved through functional dairy ingredients in the ice
cream and bakery sectors and with cheese systems to the prepared foods
industry.
Asia Pacific
Growth and development in Asia Pacific markets continued as planned in the
period under review with sales growing by 8.6% to EUR64.1m and operating
profits increased from EUR1.8m to EUR3.9m.
In Australia and New Zealand the prepared foods segment continued to grow
strongly providing good opportunity for the Group's savoury flavourings and
Mastertaste flavours. Good progress was also recorded through marinades,
glazes and other coatings technologies and developments through 'quick
service restaurant' chains continued apace. Speciality lipids technology
introduced in late 1999 also achieved good results. The Kerry Pinnacle range
of branded bakery ingredients was further rationalised and focused on growth
and development through regional and national bakery chains and in-store
bakeries in major supermarket outlets.
In Asia the Group continued to develop through application of coatings and
functional savoury technologies. Markets for cheese and dairy flavourings
showed promising growth which will be fully exploited when the additional
manufacturing capacity at the Group's Malaysian facility comes on stream in
early 2001.
Development
____________
In line with the Group's growth and development plans in global ingredients
markets and selected consumer foods niches, a number of major development
projects were advanced during the period.
In the UK, a new global food ingredients technical centre developed at a
cost of EUR10m was opened in Bristol. The Bristol Technical Centre will
service Kerry's customer base in European markets through the development of
savoury flavourings, functional savoury ingredients and coating systems,
complementing the Group's regional technical centres throughout Europe.
Construction of a major new state-of-the-art coatings manufacturing facility
in Calhoun, Georgia, USA has commenced. The project costing US$22m will be
completed by mid year 2001 and will produce breaders, batters and marinades
for seafood, poultry, vegetable and other processed food applications. The
Georgia facility will become the fifth US coatings plant operated by Kerry,
complementing existing facilities in Melrose Park, Illinois; Millstadt,
Illinois; Evansville, Indiana and Ponchatoula, Louisiana.
Stage 2 of the major development plan for the Johor Bahru plant in Malaysia
has progressed very satisfactorily. Costing US$12m, the project will be
completed by year end and fully commissioned in early 2001 and will triple
capacity at the facility for the production of speciality lipids and cheese
and dairy flavourings.
Restructuring of manufacturing facilities in Australia, subsequent to the
acquisition of Burns Philp was significantly advanced. The plan comprises
development of two world class production facilities in Murrarie (Brisbane)
and Altona (Victoria) and the closure of three existing facilities. The
AUS$12m Murrarie development project, providing manufacturing and technical
facilities for all Kerry's core ingredients technologies in Australia is
substantially complete and will be fully commissioned by October, making it
one of the most advanced facilities of its kind. The Altona development
project will be completed in 2001.
In consumer foods phase 2 of the development of the Shillelagh (Irl)
pre-packed chilled snack products facility is near completion. The new
EUR15m facility which will be fully commissioned in October 2000, represents
further investment by the Group in high growth segments of the convenience
food sector and provides additional production capacity required to match
the continued growth of the Denny brand in the Irish market.
Post Balance Sheet Events
_________________________
Kerry has entered into an agreement, subject to contract and due diligence
to acquire the ingredients particulates business of Harald-Industria e
Comercio de Alimentos Ltda located in Sao Paola, Brazil. A leading provider
of speciality chocolate coatings, flavoured particulates and low water
activity fillings to the premium ice cream, dairy and bakery sectors in
Brazil, the business complements the Shade Foods and SFI Europe businesses
acquired since year end 1999.
The Group also recently completed the acquisition of York UK based York
Dragee which provides chocolate inclusions and coated particulates to the
cereal, confectionery, bakery and ice cream sector in the UK and mainland
Europe. York Dragee's unique technologies are focused on growth niches of
the latter market segments, including 'healthy eating', novelty and snack
lines.
The acquisitions of Shade, Harald and York in high growth ingredients
sector with strong established partnerships with multinational food
processors, provides strong growth opportunities for Kerry to extend the
unique flavoured textured particulates, high protein inclusions, speciality
chocolate and compound coatings technologies to ready-to-eat-cereals,
confectionery, dairy, ice cream, bakery and nutraceutical markets globally.
Finance
________
Interest charges for the period were similar to last year, with interest
cover increasing to 5.9 times from the prior year level of 5.2 times.
Working capital was EUR68.4m higher than at year end 1999. The disposal of
the DCA bakery mix business in the USA and Canada and the purchase of Shade
Foods Inc. in the USA and SFI Europe resulted in a net cash inflow of
EUR32.6m.
Notwithstanding Group acquisitions and the level of capital expenditure, net
debt at the end of June 2000, incorporating an adverse translation
adjustment of EUR16.4m, stood at EUR569.2m compared to the year end level of
EUR544.5m.
The level of debt expressed as a percentage of market capitalisation amounts
to 24% compared to 30% at 30 June 1999 and the ratio of debt to EBITDA was
2.1 times. The taxation charge on ordinary activities increased to EUR18.6m
compared to the 1999 first half level of EUR14.4m, reflecting an increase in
the Group's effective tax rate from 24.2% to 26.0%. The basic weighted
average number of shares in issue for the period was 172,047,213 (June
1999;172,047,213). The diluted weighted average number of shares in issue
for the period was 173,290,602 (June 1999; 173,132,371).
Dividend
_________
The Board has declared an interim dividend of EUR2.92c per share, an
increase of 15% on the 1999 interim dividend of EUR2.54c per share. The
interim dividend will be paid on 30 November 2000 to shareholders on the
record date 3 November 2000.
Current Trading and Outlook
____________________________
The Group is confident of a good result for the full year and is well
positioned to capitalise on complementary acquisition opportunities which
continue to arise in Kerry's core markets.
Michael Hanrahan
Chairman
29 August 2000
KERRY GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the half year ended 30 June 2000
Half year Half year Year
ended ended ended
30 June, 30 June, 31 Dec.,
2000 1999 1999
Unaudited Unaudited Audited
EUR'000 EUR'000 EUR'000
Turnover
Continuing operations - Note 1 1,264,755 1,146,817 2,456,352
--------- --------- ---------
Operating profit
- continuing operations
Before goodwill amortisation
and exceptional items 101,305 88,562 203,614
Goodwill amortisation 7,520 6,369 12,103
Exceptional restructuring costs - 10,513 35,359
--------- --------- ---------
Operating profit - Note 1 93,785 71,680 156,152
Profit on sale of business 193 - -
Interest payable and
similar charges 22,600 22,770 42,309
--------- --------- ---------
Profit before taxation 71,378 48,910 113,843
Taxation
- Ordinary activities 18,550 14,407 34,662
- Exceptional items - (1,809) 3,703
--------- --------- ---------
18,550 12,598 38,365
--------- --------- ---------
Profit after taxation and
attributable to ordinary
shareholders 52,828 36,312 75,478
Dividends 5,024 4,369 13,539
--------- --------- ---------
Retained profit for the period 47,804 31,943 61,939
========= ========= =========
Earnings per ordinary share (cents) - Note 2
-basic before goodwill amortisation 35.1 29.9 73.6
and exceptional items
-basic after goodwill amortisation 30.7 21.1 43.9
and exceptional items
-fully diluted after goodwill 30.5 21.0 43.6
amortisation and exceptional items
KERRY GROUP PLC
CONSOLIDATED BALANCE SHEET
as at 30 June 2000
30 June, 30 June, 31 Dec,
2000 1999 1999
Unaudited Unaudited Audited
EUR'000 EUR'000 EUR'000
Fixed assets
Tangible assets 641,004 572,473 607,347
Intangible assets 262,445 246,271 234,153
--------- --------- ---------
903,449 818,744 841,500
Current assets
Stocks 296,869 278,944 272,354
Debtors 369,756 366,584 332,976
Cash at bank and in hand 10,381 5,939 13,261
--------- --------- ---------
677,006 651,467 618,591
Creditors: Amounts falling due (612,296) (572,516) (566,512)
within one year --------- --------- ---------
Net current assets 64,710 78,951 52,079
--------- --------- ---------
Total assets less current liabilities 968,159 897,695 893,579
Creditors: Amounts falling due (494,107) (574,075) (521,060)
after more than one year
Provisions for liabilities and charges (8,794) (6,645) (20,394)
--------- --------- ---------
465,258 316,975 352,125
Capital and reserves
Called-up equity share capital 21,506 21,846 21,846
Other reserve 340 - -
Share premium account 190,694 190,694 190,694
Profit and loss account 229,137 81,996 114,712
--------- --------- ---------
441,677 294,536 327,252
Deferred income 23,581 22,439 24,873
--------- --------- ---------
465,258 316,975 352,125
========= ========= =========
KERRY GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
for the half year ended 30 June 2000
Half year Half year Year
ended ended ended
30 June, 30 June, 31 Dec.,
2000 1999 1999
Unaudited Unaudited Audited
EUR'000 EUR'000 EUR'000
Operating profit before goodwill
amortisation and exceptional items 101,305 88,562 203,614
Depreciation (net) 32,665 28,937 55,078
Change in working capital (68,423) (29,466) 3,779
Exchange translation adjustment (770) (1,007) (149)
---------- --------- ---------
Net cash flow from operating activities 64,777 87,026 262,322
Returns on investments and
servicing of finance (23,485) (22,770) (39,457)
Taxation (21,778) (8,924) (28,137)
Capital expenditure
Purchase of tangible fixed assets (46,882) (28,295) (91,059)
Proceeds on the sale of fixed assets 756 596 7,986
Development grants received - 79 3,701
Acquisitions and disposals
Purchase of subsidiary undertakings (72,337) (5,258) (5,712)
Proceeds on the sale of businesses 104,876 - -
Deferred creditors paid (2,407) (4,280) (4,562)
Exceptional restructuring costs (2,674) (6,863) (19,692)
Consideration adjustment on previous
acquisitions - - 12,101
Equity dividends paid (9,170) (7,646) (12,015)
---------- --------- ---------
Cash (outflow) / inflow before use of
liquid resources and financing (8,324) 3,665 85,476
Financing
Increase / (decrease) in debt due
within one year 5,444 24,565 (35,756)
Decrease in debt due after one year - (35,025) (49,193)
--------- --------- ---------
(Decrease) / increase in cash in the
period (2,880) (6,795) 527
========= ========= =========
KERRY GROUP PLC
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
for the half year ended 30 June 2000
(Decrease) / increase in cash in the
period (2,880) (6,795) 527
Cash flow from debt financing (5,444) 10,460 84,949
--------- --------- ---------
Change in net debt resulting from cash
flows (8,324) 3,665 85,476
Exchange translation adjustment (16,383) (45,286) (64,273)
--------- --------- ---------
Movement in net debt in the period (24,707) (41,621) 21,203
Net debt at beginning of period (544,532) (565,735) (565,735)
--------- --------- ---------
Net debt at end of period (569,239) (607,356) (544,532)
========= ========= =========
KERRY GROUP PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the half year ended 30 June 2000
Half year Half year Year
ended ended ended
30 June, 30 June, 31 Dec.,
2000 1999 1999
Unaudited Unaudited Audited
EUR'000 EUR'000 EUR'000
Profit attributable to the Group 52,828 36,312 75,478
Exchange translation adjustment on
foreign currency net investments (8,510) 1,105 10,064
--------- --------- ---------
Total recognised gains and losses
relating to the period 44,318 37,417 85,542
========= ========= =========
KERRY GROUP PLC
RECONCILIATION OF MOVEMENTS IN SHARE CAPITAL AND RESERVES
for the half year ended 30 June 2000
Share
Capital Capital Profit
and Conversion and Loss
Premium Reserve Fund Account Total
EUR'000 EUR'000 EUR'000 EUR'000
At beginning of period 212,540 - 114,712 327,252
Retained profit - - 47,804 47,804
Renominalisation of
share capital - Note 5 (340) 340 - -
Goodwill written back
back on disposal - - 75,131 75,131
Exchange translation
adjustment - - (8,510) (8,510)
--------- --------- --------- ---------
At end of period 212,200 340 229,137 441,677
========= ========= ========= =========
The Profit & Loss Account figures comprise the
following:
Intangible Profit &
Assets Retained Loss
Written Off Profits Account
EUR'000 EUR'000 EUR'000
At beginning of period (474,698) 589,410 114,712
Retained profit (7,520) 55,324 47,804
Goodwill written back
on disposal 75,131 - 75,131
Exchange translation adjustment - (8,510) (8,510)
--------- --------- ---------
At end of period (407,087) 636,224 229,137
========= ========= =========
KERRY GROUP PLC
NOTES TO THE INTERIM REPORT
for the half year ended 30 June 2000
1. Analysis of results by region
--------------------------------
Half year ended Half year ended Year ended
30 June,2000 30 June,1999 31 Dec.,1999
Unaudited Unaudited Audited
------------------- ------------------ -------------------
Turnover Operating Turnover Operating Turnover Operating
Profit Profit Profit
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
By geographical
market of origin:
Ireland 293,846 18,249 277,897 16,386 613,671 34,506
Rest of Europe 558,148 37,971 505,004 35,475 1,092,613 85,836
Americas 348,688 41,230 304,919 34,862 615,025 76,305
Asia Pacific 64,073 3,855 58,997 1,839 135,043 6,967
----------------------------------------------------------
1,264,755 101,305 1,146,817 88,562 2,456,352 203,614
Goodwill amortised - (7,520) - (6,369) - (12,103)
Exceptional
restructuring costs - - - (10,513) - (35,359)
---------------------------------------------------------
1,264,755 93,785 1,146,817 71,680 2,456,352 156,152
==========================================================
By destination:
Ireland 209,610 186,971 394,344
Rest of Europe 617,375 569,770 1,224,234
Americas 357,613 316,976 675,255
Asia Pacific 80,157 73,100 162,519
--------- --------- ---------
1,264,755 1,146,817 2,456,352
========= ========= =========
2. Earnings Per Share
-----------------------------
Unaudited Unaudited Audited
EPS June 2000 EPS June 1999 EPS Dec.1999
Cents EUR'000 Cents EUR'000 Cents EUR'000
Profit after taxation 35.1 60,348 29.9 51,385 73.6 126,643
before goodwill
& exceptional items
Goodwill amortisation 4.4 7,520 3.7 6,369 7.0 12,103
Exceptional items (net) - - 5.1 8,704 22.7 39,062
Profit after taxation
goodwill amortisation ---------------------------------------------------
& exceptional items 30.7 52,828 21.1 36,312 43.9 75,478
===================================================
Share option dilution 0.2 - 0.1 - 0.3 -
---------------------------------------------------
30.5 52,828 21.0 36,312 43.6 75,478
=====================================================
The basic weighted average number of shares in issue for the period
was 172,047,213 (June 1999: 172,047,213). The diluted weighted average
number of ordinary shares in issue for the period was 173,290,602
(June 1999: 173,132,371). The dilution arises in respect of executive
share options outstanding.
3. Accounting Policies
----------------------------
These accounts have been prepared using the same accounting policies
detailed in the 1999 annual financial statements except that the Group
has implemented Financial Reporting Standard 16 'Current Tax' in the
half year ended 30 June 2000. This does not have a material impact on
either the measurement or the classification of the Group's assets and
liabilities.
4. Profit on sale of business
-------------------------------
The profit on sale of business arose on the disposal of the Group's
DCA bakery business in the US and Canada to Pillsbury Bakeries and
Foodservice, completed in February 2000 for US$100.7m (net of
expenses).
5. Share Capital
------------------------------
Due to the introduction of the euro each of the issued and unissued
ordinary shares of IR£0.10 each was redenominated into an ordinary
share of EUR0.1269738 following a resolution passed at the date of
the last AGM. 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 of Par Value Renominalisation
of Shares Shares of Shares Effect
EUR'000
172,047,213 IR£0.10 EUR0.1269738 EUR0.125 340
A ordinary
shares
=====================================================
6. These accounts are not full accounts and except where indicated are
unaudited. Full accounts to 31 December, 1999, which received an
unqualified audit report, have been filed with the Registrar of
Companies.
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