Interim Results
Glanbia PLC
27 August 2003
Glanbia plc
Interim Report
Half-Year Ended 5 July 2003
Highlights
Half-Year Ended Half-Year Ended Change
5 July 2003 29 June 2002
Operating Profit* before €45.73m €45.45m +0.6%
Exceptional Items
Operating Margin before 4.4% 3.6%
Exceptional Items
Profit before Tax / €37.56m €35.63m +5.4%
Exceptional Items
Net Exceptional Charge €26.85m €75.62m -
FRS3 EPS (0.16c) (17.39c)
Adjusted EPS** 9.14c 8.50c +7.5%
Dividend 2.06c 1.96c +5%
Net Borrowings €250.76m €307.84m -18.5%
*Including share of operating profit of joint ventures & associates
**Before exceptional items and amortisation of goodwill
• Increase in operating margin before exceptional items to 4.4%
• Increase in profits before tax and exceptional items - up 5.4%
• Increase in interim dividend - up 5% to 2.06c per share
• Borrowings down by 18.5%, interest cover up to 5.6 times
• Strong performance in consumer foods and agribusiness
• Food ingredients performance hit by weak markets and currency
• Joint Venture cheese and whey facility in New Mexico already announced
• Strategic development continues - initiatives in USA, Europe and Africa
Results
The Board of Glanbia plc is pleased to announce its interim results for the
first half of 2003. The Group has grown operating margins before exceptional
items and increased profit before tax and exceptional items. Operating profit is
marginally ahead of the first half of 2002, despite the sizeable impact on
turnover arising from the exit of UK consumer meats and foodservice in mid 2002.
Overall the Group benefited from growth in profits in consumer foods and
agribusiness operations. Food ingredients had an excellent operating
performance, but results were impacted in the period by difficult market
conditions and the strengthening of the Euro.
Operating profit (before exceptional items, including share of operating profit
of joint ventures and associates) was €45.73m (2002: €45.45m). Turnover for the
period was down by 15.7% to €1,050.77m (2002: €1,246.74m). The operating margin
improved to 4.4% (2002: 3.6%).
Profit before exceptional items and tax increased by 5.4% to €37.56m (2002:
€35.63m), reflecting the benefits of lower borrowings and interest costs.
A net exceptional charge of €26.85m (2002: €75.62m) arises in the period. Of
this redundancy costs totalling €9.50m in the period have been charged against
operating profit, arising from the fire at the Roosky pigmeat plant in 2002.
This has been offset by an exceptional gain of €11.60m from the insurance
settlement, representing the surplus realised over net book value of the asset
destroyed in the Roosky fire. A charge of €21.90m arises primarily from the sale
of Glanbia Fresh Meats (UK) Limited, announced to the market in July 2003, of
which €11.17m is the write back through the P&L account of goodwill previously
written off against reserves. A further charge of €7.04m arises from the closure
of related meat processing facilities in Drongan and Gainsborough in the period.
After net exceptional items, the Group realised a profit before tax of €10.71m
(2002 loss before tax: €39.98m).
Adjusted earnings per share increased by 7.5% to 9.14c (2002: 8.50c). The FRS3
loss per share was 0.16c (2002: FRS3 loss per share: 17.39c).
An interim dividend of 2.06c per share is to be paid, an increase of 5% (2002:
1.96c).
Capital employed was €321.94m (2002: €311.22m). Net borrowings at 5 July 2003
were down relative to 29 June 2002 by €57.08m (18.5%) to €250.76m. The interest
charge declined by 16.8% to €8.17m (2002: €9.81m), reflecting lower borrowings.
Interest cover was 5.6 times. Non-equity minority interest, which relates to
Preferred Securities and Preference Shares, was €5.68m (2002: €6.56m).
Review of Operations
Consumer Foods
Consumer Foods consists of Glanbia's businesses engaged in the production and
marketing of dairy and meat products primarily through retail channels in the UK
and Ireland.
This business group further improved performance in the first half of 2003 aided
by the exit from under-performing UK businesses in mid-2002. Development of new
value added opportunities and enhanced operating efficiencies also assisted
performance. Operating profit advanced by 31.3% to €22.74m (2002: €17.33m).
Turnover was €472.66m (2002: €641.39m). The operating margin improved to 4.8%
(2002: 2.7%).
The Irish liquid milk and chilled foods businesses both made satisfactory
progress in a very competitive market environment. The Group's expansion into
the growing functional foods sector progressed well with a range of new
products, including Avonmore Milk Plus probiotic milk and single serve Avonmore
Supermilk. New functional yoghurts assisted a good overall performance in the
fresh dairy products sector.
Despite strong volumes, the UK retail cheese business had a somewhat difficult
first half due to intensely competitive market conditions. The pizza cheese
joint venture also delivered further volume growth. The Llangeffni facility
benefited strongly from the introduction of the new product range following
completion of the Leprino technology transfer. Conversion of Magheralin to this
new technology is underway but in the interim it is exposed to increasingly
competitive conditions in the market for standard product.
UK fresh pork operations had a satisfactory operating performance in the period.
As previously announced, the Group exited this business in July 2003 as part of
refocusing of activities around core operations and growth strategy. Irish pork
operations performed satisfactorily in difficult market circumstances, with the
impact of the fire in Roosky offset by consequential loss insurance. The Group
has announced that it is to expand processing capacity in its other two Irish
pig-meat facilities in Edenderry and Roscrea to replace the capacity lost in the
fire in 2002. This work will be completed by the end of 2004 and will ensure
that these facilities will become the largest and most efficient of their kind
in the Republic of Ireland.
Dairy Food Ingredients
Dairy Food Ingredients comprises the USA and Irish dairy ingredients operations,
as well as the Group's expanding nutrition business. USA cheese and dairy
ingredient operations had an excellent operational performance with continued
growth in output and efficiencies. The period under review saw weaker cheese
markets in the USA, which have subsequently recovered. The strength of the Euro
in the half-year had a negative effect on profit translation.
Irish operations had a strong operational and volume performance. However as
some recovery in international market prices got underway, the benefit was
offset by a strengthening Euro.
Although in the early stages of establishment as a stand-alone operation, the
nutrition business performed satisfactorily. Continued sales growth of
nutritional ingredients was achieved and progress was made in identifying
strategic development opportunities.
Overall, operating profit declined to €13.63m (2002: €19.28m). Turnover declined
to €428.14m (2002: €465.36m) due to currency translation and lower USA cheese
prices. The operating margin was 3.2% (2002: 4.1%).
Agribusiness
The Agribusiness Division is the key linkage between Glanbia and its farmer
suppliers in Ireland and is engaged primarily in farm input sales, feed milling,
milk assembly and grain trading. The division also has interests in fertiliser
production, veterinary wholesaling, malting and port services. It had a
satisfactory performance in the first half of 2003, with good spring volumes in
feed and fertiliser and a continued focus on cost efficiencies. Turnover grew by
7.1% to €149.97m (2002: €140.00m). Operating profit was €9.35m (2002: €8.84m).
The operating margin was 6.2% (2002: 6.3%).
Dividend
The Board has approved an interim dividend of 2.06c per share, an increase of 5%
on the 2002 interim dividend of 1.96c. It will be paid on 1 October 2003 to
shareholders on the register on 5 September 2003.
Strategy
While much of the focus in preceding years was in addressing operational and
performance issues, Glanbia's main focus in 2003 is the implementation of its
growth strategy, which will drive profits and earnings in future years.
In this regard, as already announced, the Group is finalising negotiations with
Dairy Farmers of America, Inc. ('DFA') and Select Milk Producers Inc. ('Select')
to build a $170m cheese and whey products production facility in New Mexico,
USA. This new plant will be 50% owned by Glanbia with the balance jointly owned
by DFA and Select. Commissioning of the proposed new facility is expected in the
second half of 2005. It will position the Group as the number one producer of
American type cheddar cheese in the USA and simultaneously build its global
position as a supplier of advanced technology whey proteins to the nutritional
sector.
In February 2003, Glanbia announced a strategic joint venture with Conaprole of
Uruguay to initially establish a sales and marketing company in Mexico, serving
Central and South American markets. This is now operational and early sales
performance is encouraging.
Glanbia is actively pursuing a number of other potential opportunities for
business growth in the USA, Europe and Africa, consistent with Group strategy.
Outlook
Glanbia is continuing to make good progress in 2003, benefiting from increasing
focus on value-adding products and market sectors. Nonetheless, difficult
trading conditions, including currency movements, are persisting, particularly
in key commodity markets served by the Group.
As markets currently stand, the Group expects to achieve a satisfactory
full-year trading performance.
The Board is confident that the initiatives currently underway to build
Glanbia's position in its chosen sectors will deliver earnings growth in future
years.
Tom Corcoran
Chairman
ENDS
27 August 2003
For further information, contact:
Michael Patten, Group Director of Communications, Glanbia plc
Tel: +353 (0)56-7772200 (office) or +353 (0)87-2414502 (mobile)
UK Enquiries:
John Olsen / Tom Leatherbarrow, Hogarth Partnership
Tel: 0207 3579477
Glanbia plc
Consolidated Profit and Loss Account
for the Half-Year ended 5 July 2003
Pre Pre Pre
Exceptional Exceptional Total Exceptional Exceptional Total Exceptional Exceptional Total
Half year ended 5 July 2003 Half year ended 29 June 2002 Year ended 4 January 2003
Notes euro'000 euro'000 euro'000 euro'000 euro'000 euro'000 euro'000 euro'000 euro'000
Turnover 1,083,323 1,083,323 1,280,091 1,280,091 2,386,437 2,386,437
Less share of (32,553) (32,553) (33,349) (33,349) (69,699) (69,699)
turnover of
joint venture
Group 1 1,050,770 1,050,770 1,246,742 1,246,742 2,316,738 2,316,738
Turnover
Group 4(a) 45,426 (9,505) 35,921 44,662 44,662 88,588 88,588
Operating
Profit
Share of 301 - 301 785 785 2,947 2,947
operating
profit of
joint venture
& associates
Operating 1 45,727 (9,505) 36,222 45,447 45,447 91,535 91,535
profit
including
joint venture
& associates
Loss on 2 - (7,038) (7,038) - (64,337) (64,337) - (68,064) (68,064)
termination
of operations
Loss on sale 3 - (21,902) (21,902) - (24,677) (24,677) - (25,610) (25,610)
of operation
Profit on 4(b) - 11,595 11,594 - 13,396 13,396 - 13,754 13,754
sale of
investments/
fixed assets
Group (7,949) - (7,949) (9,815) - (9,815) (19,206) - (19,206)
Interest
Share of (217) - (217) - - - (521) - (521)
interest of
joint venture
and
associates
Profit before 37,561 (26,850) 10,711 35,632 (75,618) (39,986) 71,808 (79,920) (8,112)
taxation
Taxation (5,055) - (5,055) (4,017) - (4,017) (7,939) - (7,939)
Profit after 32,506 (26,850) 5,656 31,615 (75,618) (44,003) 63,869 (79,920) (16,051)
taxation
Equity (450) (288) (677)
minority
interest
Non-equity (5,679) (6,565) (12,619)
minority
interest
(Loss)/profit (473) (50,856) (29,347)
for the year
Dividends 5 (5,980) (5,733) (13,833)
(Loss (6,453) (56,589) (43,180)
absorbed)/
profit retained
for the year
Earnings per 6 (0.16) (17.39) (10.06)
share
Adjusted 6 9.14 8.50 17.44
earnings per
share
Glanbia plc
Consolidated Balance Sheet
As at 5 July 2003
5 July 29 June 4 January
Notes 2003 2002 2003
euro'000 euro'000 euro'000
Assets employed
Fixed assets
Tangible assets 372,308 422,993 416,826
Goodwill 2,681 4,600 4,420
Financial assets 36,510 33,546 36,454
411,499 461,139 457,700
Current assets
Stocks 208,217 218,052 180,022
Debtors 326,168 336,753 226,838
Cash and bank balances 7 28,799 15,204 90,953
563,184 570,009 497,813
Creditors 324,549 346,047 316,325
Borrowings 7 64,750 - 1,117
389,299 346,047 317,442
Net current assets 173,885 223,962 180,371
Total assets less current liabilities 585,384 685,101 638,071
Less non-current liabilities
Creditors 31,306 31,571 32,986
Borrowings 7 214,804 323,040 266,144
Capital grants 17,331 19,274 18,505
263,441 373,885 317,635
321,943 311,216 320,436
Capital and reserves
Called up equity share capital 17,551 17,551 17,551
Share premium account 80,005 80,005 80,005
Merger reserve 113,148 113,148 113,148
Revenue reserves 8 (20,838) (45,899) (32,232)
Capital reserves 2,825 2,825 2,825
Equity shareholders' funds 192,691 167,630 181,297
Equity minority interests 5,970 6,716 6,983
Non-equity minority interests 9 123,282 136,870 132,156
321,943 311,216 320,436
Glanbia plc
Summarised Cash Flow Statement
Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Net cash inflow from operating activities:
Operating profit before exceptional items 45,426 44,662 88,588
Reorganisation and merger costs (194) (413) (775)
Profit on disposal of fixed assets (18) (860) (885)
Depreciation and amortisation 22,326 27,197 51,715
Changes in working capital (118,201) (123,216) (12,085)
(50,661) (52,630) 126,558
Returns on investments and servicing of finance (15,258) (16,058) (32,049)
Taxation (3,174) (4,162) (4,990)
Purchase of fixed assets (net of disposals/grants) (17,442) (17,485) (28,630)
Disposal of investments - 13,396 10,705
Fire insurance re-instatement proceeds 7,628 - -
Termination of operations - - (8,648)
Purchase of subsidiary undertakings - - (677)
Disposal of subsidiary undertakings - 3,174 1,184
Minority interest acquired (100) - -
Equity dividends paid (8,100) (7,800) (13,533)
Change in net debt resulting from cash flows (87,107) (81,565) 49,920
Translation difference 12,660 16,388 16,431
Movement in net debt in the period (74,447) (65,177) 66,351
Net debt at beginning of period (176,308) (242,659) (242,659)
Net debt at end of period (250,755) (307,836) (176,308)
Glanbia plc
Notes to the Financial Statements
Note 1: Segmental Analysis
Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Turnover by Business Class
Food Ingredients 428,139 465,360 910,075
Consumer Foods 472,661 641,387 1,175,114
Agribusiness 149,970 139,995 231,549
1,050,770 1,246,742 2,316,738
Operating Profit by Business Class
Food Ingredients 13,634 19,281 30,051
Consumer Foods 22,743 17,328 47,590
Agribusiness 9,350 8,838 13,894
45,727 45,447 91,535
Note 2: Loss on termination of operations
The loss arises from the decision to close the Group's UK fresh meat
operations at Drongan and Gainsborough.
Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Loss arising on termination of operations (5,757) (26,256) (30,370)
Goodwill write back to profit and loss account on termination - (38,081) (37,694)
Goodwill written off on termination (1,281) - -
(7,038) (64,337) (68,064)
The loss on termination in 2002 arose from the closure of the Group's UK
Consumer Meats operation in June 2002.
Note 3: Loss on sale of operation
The loss arises primarily from the sale by the Group of its UK fresh meats
operation at West Bromwich. The Group also sold a pig farm during the period.
Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Loss on disposal of asset (10,731) (13,225) (13,697)
Write back of goodwill on asset disposed after period end (11,171) (11,452) (11,913)
(21,902) (24,677) (25,610)
The loss on sale in 2002 arose mainly from the Group's sale of its UK
Foodservice distribution business in August 2002. The Group also sold two
farms during 2002.
Note 4: Exceptional items
Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
(a) Redundancy cost arising from fire at Roosky plant (9,505) - -
(b) Profit on disposal of Roosky plant 11,595 - -
(c) Profit on disposal of quoted investments - 13,396 13,396
(d) Loss on disposal of tangible assets - - 358
2,090 13,396 13,754
On 8 May 2002 most of the Group's processing plant at Roosky, County
Roscommon, was destroyed by fire. The loss was fully insured and agreement on
the sum insured was reached in the period, resulting in a surplus in the
amount of euro11,595k over the net book value of the asset destroyed.
The directors have taken the decision not to reinstate the processing plant at
Roosky but rather to restore the lost capacity at the two remaining pig
processing plants, with the result that a redundancy cost of euro9,505k has
been incurred.
Note 5: Dividends Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
Dividends paid / proposed per share (cent) 2.06 1.96 4.76
Total dividend (euro'000) 5,980 5,733 13,833
Note 6: Earnings per ordinary share Half year ended Half year ended Year ended
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Profit after taxation and minority interest (473) (50,856) (29,347)
Weighted average number of ordinary
shares in issue (million) 290.292 292.514 291.703
Earnings per share (cent) (0.16) (17.39) (10.06)
Adjustments:
Goodwill amortisation 0.05 0.04 0.11
Loss on sale of operations / investments 9.25 25.85 27.39
Adjusted Earnings per Share 9.14 8.50 17.44
Note 7: Group Borrowings
5 July 29 June 4 January
2003 2002 2003
euro'000 euro'000 euro'000
Borrowings due within one year 64,750 - 1,117
Borrowings due after one year 214,804 323,040 266,144
Less:
Cash and bank balances (28,799) (15,204) (90,953)
Net borrowings 250,755 307,836 176,308
Note 8: Revenue Reserves Currency
Profit Translation Goodwill
Retained Reserve Reserve Total
euro'000 euro'000 euro'000 euro'000
At 4 January 2003 75,626 (32,490) (75,368) (32,232)
Profit retained (6,453) (6,453)
Goodwill on disposal 11,171 11,171
Currency translation difference on
foreign currency net investments 5,376 1,300 6,676
At 5 July 2003 69,173 (27,114) (62,897) (20,838)
Note 9:
Non-equity minority interests include $100 million 7.99% cumulative preferred
securities issued by a subsidiary in 1996 and euro38.2 million cumulative
redeemable preference shares issued by a subsidiary in 1993 and 1995, both net
of unamortised issue costs.
Note 10:
The figures for the half-years ended 5 July 2003 and 29 June 2002 are
unaudited. The figures for the full year ended 4 January 2003 represent an
abbreviated version of the Group's financial statements for the year, which
received an unqualified audit report.
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