Interim Results

GLANBIA PLC 2 September 1999 Glanbia plc Interim Report Half-Year Ended 3 July 1999 Summary - Half-year results reflect the disposals, operational and market issues announced by the Group on 1 June 1999. - Disposals of the UK liquid milk and Irish beef operations successfully completed. - Group's Balance Sheet strengthened. Mid-year net borrowings declined by IR£56.47m / Eur71.70m to IR£348.13m / Eur442.03m, compared to IR£404.60m / Eur513.73m in 1998. - Turnover declined 7.9% to IR£1,103.36m / Eur1,400.97m, due to lower sales in UK liquid milk operations, lower international product prices and the impact of disposals completed in the first half of1998. - Operating profit down 34.7% to IR£34.69m / Eur44.05m for the half-year. Disappointing results in Consumer Foods and Food Ingredients more than offset a strong recovery in the Meat Division and good results in the Agribusiness Division. - Profit before exceptional items and tax down 44.6% to IR£19.41m Eur24.65m. Pre-tax loss after exceptional items (primarily disposals related) of IR£53.65m / Eur68.12m. - Adjusted Earnings per Share - IR3.54p / Eur4.50c (1998: IR8.42p / Eur10.69c). - Interim Dividend of IR2.35p / Eur2.983884c per share to be paid. - Satisfactory progress in strategic repositioning of Glanbia. Total of IR£102m / Eur129.51m being reinvested in 1999 in key growth sectors and in merger related capital expenditure. - It is expected that the outcome for the full-year 1999, while disappointing, will be in line with market expectations. Commenting on the interim results, Group Managing Director Ned Sullivan said, 'While the rest of 1999 will be challenging for the Group as we announced on June 1st, I am satisfied that the many initiatives underway are building a solid platform for sustainable growth in the future.' Results Glanbia plc announces a 34.7% decrease in operating profit to IR£34.69m / Eur44.05m (1998: IR£53.14m / Eur67.48m). Operating profit from continuing operations declined by 30.7% to IR£27.37m / Eur34.76m, reflecting delays in completion of the re-organisation of Irish liquid milk operations, margin pressures in the UK cheese market and high Irish manufacturing milk prices relative to market returns. Operating profit from discontinued operations - UK liquid milk - declined by 46.3% to IR£7.32m, / Eur9.30m, reflecting lower sales to the multiple sector. Operating margin was 3.1% (1998: 4.4%). Turnover declined by 7.9% to IR£1,103.36m / Eur1,400.97m (1998: IR£1,198.05m / Eur1,521.21m), reflecting lower sales in UK liquid milk operations, lower international product prices and the impact of the disposals which took place in the first half of 1998. Profit before exceptional items and tax declined by 44.6% to IR£19.41m / Eur24.65m (1998: IR£35.03m / Eur44.48m). On 1 June 1999 the Group announced the disposal of its UK liquid milk operations and the business and fixed assets of its Irish beef operations, raising IR£130m / Eur165.07m in cash, excluding working capital. IR£108m / Eur137.13m was received before 3 July 1999 with the balance paid by the end of that month. These transactions realised cash of IR£48.16m / Eur61.15m above the value of net assets. However, a non- cash write back through the profit and loss account of goodwill (IR£114.75m / Eur145.70m) previously written off to reserves resulted in a net loss on the disposals of IR£66.59m / Eur84.55m which is treated as an exceptional item. A final provision of IR£6.46m / Eur8.20m relating to post merger re-organisation costs has been made to give total exceptional items for the half-year of IR£73.06m / Eur92.76m. This resulted in a loss before tax of IR£53.65m / Eur68.12m (1998 profit: IR£11.01m / Eur13.97m). Adjusted earnings per share declined by 58.0% to IR3.54p / Eur4.50c (1998: IR8.42p / Eur10.69c). A loss per share of IR 21.45p / Eur27.24c arises due to the impact of the exceptional items (1998 earnings: IR0.18p / Eur0.23c). The interest charge declined to IR£15.38m / Eur19.53m (1998: IR£18.16m / Eur23.06m), reflecting lower interest rates and tighter cash management. Non-equity minority interest, which relates to Preferred Securities and Preference Shares, was IR£4.95m / Eur6.29m (1998: IR£4.94m / Eur6.27m). An interim dividend of IR 2.35p / Eur2.983884c per share is to be paid (1998: IR2.25p / Eur2.856911c per share net), reflecting the Board's confidence in the future of the Group. A total of IR£102m / Eur129.51m is being reinvested in 1999 in key growth sectors including USA food ingredients, UK food service and in merger related capital expenditure. Capital employed improved by IR£53.97m / Eur68.53m to IR£224.32m / Eur284.82m since year-end. Net borrowings at 3 July 1999 were IR£348.13m / Eur442.03m, compared to IR£404.60m / Eur513.73m at the half -year in 1998. Commenting on the results, Group Managing Director Ned Sullivan said: 'Glanbia's balance sheet has strengthened considerably since year-end. We are reshaping the Group around businesses that have strong market positions and which offer real development potential. A major investment programme is underway including USA food ingredients and UK food service. Glanbia has already clarified the market and operational issues it is facing and the rest of 1999 will be challenging for the Group as previously stated. However, I am satisfied that the many initiatives now underway are building a solid platform for sustainable growth in the future.' Review of Operations Consumer Foods Glanbia's Consumer Foods Division had a difficult first half in 1999 with turnover declining by 9.5% to IR£462.91m / Eur587.78m (1998: IR£511.44m / Eur649.39m) and operating profit down by 63.9% to IR£10.65m / Eur13.52m (1998: IR£29.53m / Eur37.50m). Operating margins were 2.3% (1998: 5.8%). The decline in turnover was primarily due to reduced sales in the UK liquid milk business. Profits were heavily impacted by this as well as a delay in completion of the re- organisation of the Irish liquid milk operations, which resulted in substantial once-off operating costs. This re- organisation will be completed in late 1999, with benefits flowing in 2000. In the UK retail cheese business, despite an increase in market share, margins were affected by a difficult environment, particularly for mild cheddar. Pizza cheese operations performed strongly, growing volumes and market share in a dynamic European sector. The UK food service business also had a good performance. A new ultra- modern chilled distribution facility is being commissioned in October. In Ireland, progress continues in fresh dairy products with new product introductions and packaging innovations. Food Ingredients Glanbia's Food Ingredients Division had a very disappointing result in the first half of 1999, despite a strong performance in the USA business. Turnover declined by 11.4% to IR£291.42m / Eur370.03m (1998: IR£328.85m / Eur417.56m), reflecting lower international market prices and the 1998 disposal of the Wisconsin businesses. Operating profit declined by 40.7% to IR£9.85m / Eur12.50m (1998: IR£16.60m / Eur21.08m). Operating margins were 3.4% (1998: 5.0%). Margins in the Irish business have been reduced by lower international market prices and the continuing high industry average milk price. An excellent operational performance was achieved, including the successful implementation of a significant rationalisation and investment programme. Good progress was made in growing sales of formulated products and specialised ingredients. Margin pressures are expected to continue at least until the end of 1999. USA operations had an excellent performance, with strong demand, particularly for cheese products, and continued growth in milk supplies in Idaho. The major investment programme to increase output of cheese and ingredients is on schedule. A new milk calcium plant has been successfully commissioned in Richfield, Idaho, which will supply the healthcare and health food sectors. Further market opportunities have been created by enhancing the current range of advanced dairy food ingredients and proteins. Meat Division Glanbia's Meat Division had a much improved performance in the first half of 1999 with operating profit improving strongly to IR£7.10m / Eur9.02m (1998: IR£0.54m / Eur0.68m). Operating margin was 3.0% (1998: 0.2%). Turnover declined to IR£232.80m / Eur295.60m (1998: IR£249.94m / Eur317.35m), due to reduced market prices. The pigmeat businesses in Ireland and the UK recovered significantly, despite intensely competitive market conditions, with enhanced operational efficiencies. However performance remains somewhat below expectations. Good growth has been achieved in retail sales of fresh pork products, particularly in value added sectors including centrally prepared products and meal solutions. In March the Group acquired Nimmo Meats to augment its UK retail position. The UK sliced cooked meats business performed well and, despite strong competition, increased sales to a number of key retail customers. The Irish sheepmeat business had a difficult first half with weak prices arising from oversupply in export markets as well as poor demand for by-products. Nonetheless the business continues to grow its domestic and French retail base. As previously announced, the Irish beef operations have been sold. Agribusiness The Agribusiness Division had a good performance in the first half of 1999, with turnover advancing by 7.8% to IR£116.22m / Eur147.57m (1998: IR£107.82m / Eur136.91m). Operating profit advanced to IR£7.09m / Eur9.0m (1998: IR£6.47m / Eur8.21m). The division benefited from increased demand for feed and fertiliser and other farm inputs. The investment in malt enhances its value added position and market reach in the cereals sector. Further operational efficiencies were achieved in milk assembly and in milling operations, which are now at optimum capacity. Dividend The Board has declared an interim dividend of IR 2.35p / Eur2.983884c per share. It will be paid on 6 October 1999 to shareholders on the register on 17 September 1999. Year 2000 / Euro Glanbia has been engaged for the past two years in a comprehensive programme to address the millennium date change. While it is not possible to give an absolute assurance, satisfactory progress has been made and the Group is confident that all relevant systems will be changed and tested before year-end. The Group has quantified the operational and commercial implications of the Euro and an action programme to prepare for changeover is progressing satisfactorily. Glanbia's plans to convert to the Euro, in conjunction with its major trading partners, are on target. Outlook In the 1 June announcement, Glanbia outlined a number of market and operational issues, which are impacting Group performance. The outcome for 1999, while disappointing, is expected to be in line with market expectations. Glanbia is being strategically refocused for a new phase of profitable growth in selected consumer food markets and in global dairy-based food ingredients. The senior management team has been significantly strengthened. The Board is confident that the many operational and strategic initiatives underway will improve performance and shareholder value in 2000 and beyond. John Duggan Chairman Enquiries to: Michael Patten, Group Corporate Affairs Manager, Glanbia plc Tel: 056 - 72200 or 087 - 2414502 Jim Walsh, Walsh Public Relations Tel: 01 - 6613515 or 087 - 2541700 Glanbia plc Results for Half-Year ended 3 July 1999 in EUROS Half-Year ended 3 July 1999 (Unaudited) Pre- Exceptional Total Exceptional Notes Euro '000 Euro '000 Euro '000 Turnover Continuing 1,224,364 - 1,224,364 operations Discontinued 176,609 - 176,609 operations ---------- ----------- ----------- 1 1,400,973 - 1,400,973 ======== ======== ======== Operating Profit Continuing 34,758 - 34,758 operations Discontinued 9,296 - 9,296 operations ---------- ----------- ----------- 1 44,054 - 44,054 Share of profits of 127 - 127 associates Reorganisation/merger - (8,205) (8,205) costs Loss on sale of 2 - (84,558) (84,558) operations Interest (19,534) - (19,534) ---------- ----------- ----------- Profit before 24,647 (92,763) (68,116) Taxation Taxation (4,788) - (4,788) ---------- ----------- ----------- Profit after Taxation 19,859 (92,763) (72,904) Equity Minority (488) - (488) Interest Non-equity Minority (6,286) - (6,286) Interest ---------- ----------- ----------- Earnings 13,085 (92,763) (79,678) Dividends - (8,728) - (8,728) ordinary ---------- ----------- ----------- Profit Retained/(Loss 4,357 (92,763) (88,406) Absorbed) ======== ======== ======== Earnings per Share 3 (27.24) ======== Adjusted Earnings per 3 4.50 Share ======== Glanbia plc Results for Half-Year ended 3 July 1999 in EUROS Half-Year ended 4 July 1998 (Unaudited) Pre- Exceptional Total Exceptional Notes Euro '000 Euro '000 Euro '000 Turnover Continuing 1,293,867 - 1,293,867 operations Discontinued 227,344 - 227,344 operations ---------- ---------- -------- 1 1,521,211 - 1,521,211 ======== ======== ======== Operating Profit Continuing 50,153 - 50,153 operations Discontinued 17,324 - 17,324 operations ---------- ---------- -------- 1 67,477 - 67,477 Share of profits of 63 - 63 associates Reorganisation/merger - - - costs Loss on sale of 2 - (30,511) (30,511) operations Interest (23,056) - (23,056) ---------- ---------- -------- Profit before 44,484 (30,511) 13,973 Taxation Taxation (6,493) - (6,493) ---------- ---------- -------- Profit after Taxation 37,991 (30,511) 7,480 Equity Minority (532) - (532) Interest Non-equity Minority (6,271) - (6,271) Interest ---------- ---------- -------- Earnings 31,188 (30,511) 677 Dividends - (8,357) - (8,357) ordinary ---------- ---------- -------- Profit Retained/(Loss 22,831 (30,511) (7,680) Absorbed) ======== ======== ======== Earnings per Share 3 0.23 ======== Adjusted Earnings per 3 10.69 Share ======== Glanbia plc Results for Half-Year ended 3 July 1999 in EUROS Year ended 2 January 1999 (Audited) Pre- Exceptional Total Exceptional Notes Euro '000 Euro Euro '000 '000 Turnover Continuing 2,491,327 - 2,491,327 operations Discontinued 430,698 - 430,698 operations ---------- -------- ------------ 1 2,922,025 - 2,922,025 ========== ======== ========== Operating Profit Continuing 112,923 - 112,923 operations Discontinued 27,384 - 27,384 operations ---------- -------- ------------ 1 140,307 - 140,307 Share of profits of 142 - 142 associates Reorganisation/merger - (12,010) (12,010) costs Loss on sale of 2 - (30,074) (30,074) operations Interest (44,760) - (44,760) ---------- -------- ------------ Profit before 95,689 (42,084) 53,605 Taxation Taxation (14,091) 3,174 (10,917) ---------- -------- ------------ Profit after 81,598 (38,910) 42,688 Taxation Equity Minority (783) - (783) Interest Non-equity Minority (12,244) - (12,244) Interest ---------- -------- ------------ Earnings 68,571 (38,910) 29,661 Dividends - (19,871) - (19,871) ordinary ---------- -------- ------------ Profit 48,700 (38,910) 9,790 Retained/(Loss Absorbed) ======== ======== ======== Earnings per Share 3 10.16 ======== Adjusted Earnings 3 23.49 per Share ======== Glanbia plc Consolidated Balance Sheet in EUROs 3 July 4 July 2 January 1999 1998 1999 Notes Euro '000 Euro '000 Euro '000 Net Assets Employed Fixed Assets Tangible assets 514,794 556,536 559,275 Goodwill 3,649 - 3,482 Financial assets 19,389 17,343 19,361 --------- ---------- ------------ 537,832 573,879 582,118 --------- ---------- ------------ Current Assets Stocks 248,056 281,378 242,045 Debtors 421,712 417,817 321,092 Cash and bank 4 57,713 63,045 169,609 balances --------- ---------- ------------ 727,481 762,240 732,746 --------- ---------- ------------ Current Liabilities Creditors 399,702 503,289 476,272 Borrowings 4 - 67,526 12,395 --------- ---------- ------------ 399,702 570,815 488,667 --------- ---------- ------------ Net Current Assets 327,779 191,425 244,079 --------- ---------- ------------ Total Assets less Current Liabilities 865,611 765,304 826,197 --------- ---------- ------------ Less: Non-Current Liabilities Creditors 81,041 57,445 69,346 Borrowings 4 499,745 509,251 540,557 --------- ---------- ------------ 580,786 566,696 609,903 --------- ---------- ------------ 284,825 198,608 216,294 ========= ========= ========= Capital and Reserves Called up equity share 18,571 18,571 18,571 capital Share premium 80,005 80,005 80,005 Merger reserve 113,148 113,148 113,148 Revenue reserves 5 (105,203) (191,556) (167,172) Capital reserve 1,804 1,804 1,804 --------- ---------- ------------ Equity Shareholders' 108,325 21,972 46,356 Funds Equity Minority 6,170 5,547 5,682 Interests Non-Equity Minority Interests 142,000 134,734 129,609 Capital Grants 28,330 36,355 34,647 --------- ---------- ------------ 284,825 198,608 216,294 ========= ========= ========= Glanbia plc EUROs Note 1 : The analysis of turnover and operating profit by business class is as follows : Half-Year ended 3 July 1999 Operating Turnover Profit Euro '000 Euro '000 Consumer Foods 587,780 13,525 Food Ingredients 370,027 12,505 Meat Products 295,598 9,021 Agribusiness 147,568 9,003 ------------ ------------ 1,400,973 44,054 ======== ======== Glanbia plc EUROs Note 1 : The analysis of turnover and operating profit by business class is as follows : Half-Year Ended Year ended 4 July 2 January 1999 1998 Operating Operating Turnover Profit Turnover Profit Euro Euro Euro '000 Euro '000 '000 '000 Consumer Foods 649,390 37,499 1,275,305 74,603 Food Ingredients 417,560 21,080 801,452 43,019 Meat Products 317,355 683 620,931 8,450 Agribusiness 136,906 8,215 224,337 14,235 ------- ------- --------- ------------ 1,521,211 67,477 2,922,025 140,307 ======= ======= ======== ======== Note 2 : Loss on sale of UK Liquid Beef Total operations : Milk Euro '000 Euro Euro '000 '000 Profit / (loss) on 66,900 (5,753) 61,147 disposal of net assets Goodwill on disposal transferred to profit and loss (148,506) 2,801 (145,705) account ----------- -------- ----------- (81,606) (2,952) (84,558) ======== ======== ======== Note 3 : Earnings per share 3 July 1999 4 July 2 Jan 1999 : 1998 (Loss)/Profit after taxation and Minority interest (79,678) 677 29,661 (Euro'000) ----------- -------- ----------- Weighted average number of Ordinary shares in 292.514 291.547 292.031 issue (million) ----------- -------- ----------- Earnings per share (Eur c) (27.24) 0.23 10.16 Adjustments : Goodwill 0.03 - 0.01 amortisation Loss on sale of 28.90 10.46 10.30 operations Reorganisation/ 2.81 - 3.02 merger costs ----------- -------- ----------- Adjusted earnings (Eur c) 4.50 10.69 23.49 per share ======== ======== ======== Note 4 : Group net 3 July 1999 4 July 2 Jan 1999 borrowings 1998 comprise : Euro '000 Euro Euro '000 '000 Borrowings due - 67,526 12,395 within one year Borrowings due 499,745 509,251 540,557 after one year Less : Cash and bank (57,713) (63,045) (169,609) balances ----------- -------- ----------- 442,032 513,732 383,343 ========= ======== ========= Note 5 : Revenue reserves : Profit Goodwill Retained Reserve Total Euro '000 Euro Euro '000 '000 At 2 January 1999 90,851 (258,023) (167,172) (Loss absorbed) (88,406) - (88,406) Goodwill on - 145,705 145,705 disposal Currency translation difference on Foreign currency 4,670 - 4,670 net investments ---------- -------- ----------- At 3 July 1999 7,115 (112,318) (105,203) ======== ======== ======== Note 6 : Non Equity minority interests include US$100m 7.99% cumulative guaranteed preferred securities issued by a subsidiary in 1996 (net of issue costs), together with Eur50.03m (IR£39.4m) cumulative redeemable preference shares issued by a subsidiary in 1993 and 1995. Note 7: The figures for the half-years ended 3 July 1999 and 4 July 1998 are unaudited. The figures for the full year ended 2 January 1999 represent an abbreviated version of the Group's full financial statements for the year, which received an unqualified audit report and have been filed with the Registrar of Companies.

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