Half-year Report

RNS Number : 5895N

Kerry Group PLC

10 August 2017

 

News release

Thursday, 10 August 2017

Interim Management Report

for the half year ended 30 June 2017

Kerry, the global taste & nutrition and consumer foods group reports a solid underlying business performance for the half year ended 30 June 2017.

HIGHLIGHTS

·      Group revenue increased by 4.8% to €3.2 billion reflecting 3.8% business volume growth -      Taste & Nutrition +4.2% volume growth -      Consumer Foods +2.3% volume growth ·      Trading profit increased by 5.2% to €338m ·      Group trading margin maintained at 10.6% -      Taste & Nutrition +20bps to 13% -      Consumer Foods -70bps to 7.6% ·      Adjusted EPS* up 7.5% to 143.8 cent ·      Basic EPS of 127.6 cent (H1 2016: 126.4 cent) ·      Interim dividend per share increased by 11.9% to 18.8 cent ·      Free cash flow of €357m (H1 2016: €379m)        *Before brand related intangible asset amortisation and non-trading items (net of related tax)

Commenting on the results Kerry Group Chief Executive Stan McCarthy said; "Against a background of significant adverse currency movements, we achieved a strong overall business performance in the first half of 2017, outperforming market growth rates and delivering a 7.5% increase in adjusted earnings per share. In February 2017 we guided growth in adjusted earnings per share of 5% to 9% at prevailing exchange rates. Taking into account increased currency translation headwinds of 4% and a 2% improvement in underlying performance at constant currency rates, we now expect to achieve growth in adjusted earnings per share of 3% to 7% on a reported basis to a range of 333.1 to 346 cent per share (2016: 323.4 cent)."

Contact Information

Media Frank Hayes Investor Relations Brian Mehigan Ronan Deasy        William Lynch        Website        www.kerrygroup.com

Director of Corporate Affairs Chief Financial Officer Group Financial Controller Head of Investor Relations

[phone] [phone] [phone] [phone]

[e-mail] [e-mail] [e-mail] [e-mail]

INTERIM MANAGEMENT REPORT

for the half year ended 30 June 2017

Kerry Group maintained a strong overall business performance in the first half of 2017 despite significant adverse currency movements and increased raw material pricing. Business volume growth rates outpaced industry levels, capitalising on Kerry's unique taste & nutrition technologies and systems which are well positioned to deliver innovative solutions for the Group's global, regional and local customers in response to ever-changing consumer requirements. Consumer trends favouring clean label, nutritious, tasteful, natural and convenient food and beverage offerings continue to drive a strong innovation pipeline across all end-use-markets in all regions. Growth in the foodservice channel continues to outpace growth in traditional retail outlets. E-tail and convenience channels also continue to grow strongly in selected consumer preferred categories.

The Group's developing markets strategic growth model continues to achieve excellent results, particularly in Asia. Business performance in all regions continues to benefit from Group investments in its Technology & Innovation network, Development & Application Centres, and in its in-market commercial / technical support facilities through delivery of speedy innovative solutions to meet local taste preferences and consumer requirements.

Kerry Foods continues to perform well delivering sustained volume growth, despite the uncertainty following the UK electorate's decision to leave the European Union and the significant devaluation of sterling. Retail fragmentation continues to drive marketplace competitiveness as growth through convenience formats, discounter chains and online grocery shopping outperforms traditional retail channel growth. 

Business Performance

Group revenue on a reported basis increased by 4.8% to €3.2 billion driven by strong organic growth offset by adverse currency movements. Business volumes grew by 3.8% in the period reflecting a good performance in American markets, an improved performance in the EMEA region and double digit growth in the Asia-Pacific region. Net pricing increased by 1.8%. Currency headwinds increased during Q2 contributing an adverse 1% translation impact and an adverse 0.4% transaction currency impact to revenue relative to H1 2016.

Taste & Nutrition delivered 4.2% growth in business volumes and pricing increased by 1.7%. Kerry Foods' business volumes increased by 2.3% and divisional pricing increased by 1.9% across the half year.

The Group trading margin was maintained at 10.6% reflecting 20 basis points improvement in Taste & Nutrition, positive underlying margin improvement in Kerry Foods offset by adverse sterling exchange rates resulting in a 70 basis points margin reduction, and an increased spend on the Kerryconnect Programme.

Adjusted earnings per share increased by 7.5% to 143.8 cent (H1 2016: 133.8 cent). Basic earnings per share increased by 0.9% to 127.6 cent (H1 2016: 126.4 cent).

The interim dividend of 18.8 cent per share represents an increase of 11.9% over the 2016 interim dividend.

Net capital expenditure amounted to €102m (H1 2016: €63m). The Group achieved a strong free cash flow of €357m in the period (H1 2016: €379m).

Business Reviews

Taste & Nutrition

	H1 2017	Growth
Revenue	€2,543m	4.2%*
Trading profit	€331m	+8.8%
Trading margin	13%	+20bps

*Volume growth

Kerry provides the largest, most innovative portfolio of Taste & Nutrition Technologies and Systems, and Functional Ingredients & Actives for the global food, beverage and pharmaceutical industries.

The changing marketplace and consumer consumption trends continued to drive demand for Kerry's globally connected Taste & Nutrition technologies and innovation capabilities, facilitated by the Group's 'in-market' development & applications expertise and local customer service infrastructure. Retail and foodservice channel disruption and expansion, coupled with growth of ecommerce and demand for convenience plus localised taste preferences benefited Kerry's unique Taste & Nutrition business model and differentiated consumer-led innovation network. Increased consumer demand for 'better-for-you', balanced nutrition and health offerings provided a strong platform for growth through Kerry's market leading clean label solutions across all end-use-markets and foodservice channels. Growth in out-of-home consumption drove strong business development in the foodservice sector. The Group's developing market strategies and investment again recorded excellent progress in all regions and double digit volume growth in Asia. 

Taste & Nutrition reported revenue increased by 6.9% to €2.5 billion reflecting 4.2% volume growth. Net pricing increased by 1.7%. Trading profit grew by 8.8% to €331m, reflecting a 20 basis points improvement in divisional trading margin to 13%.

Americas Region

While consumer trends and increased market fragmentation impacted 'centre of store' branded offerings and industry growth rates, Kerry Taste & Nutrition 'go-to-market' strategies continued to deliver a strong innovation pipeline across core food & beverage end-use-markets, direct-to-retail and foodservice channels. Kerry's taste and nutrition technologies are well positioned to meet increased consumer requirements for convenient, clean label, natural, organic, gluten-free, non-GMO and meat-free solutions, together with enhanced natural food preservation. Acquisitions completed in 2015 maintained a strong market development momentum across North and South American markets. Market conditions in Brazil improved relative to H1 2016 but Mexico and Central American markets were impacted by lower regional economic growth. 

Sales revenue in the Americas region on a reported basis increased by 7.6% to €1,339m, reflecting 3.6% volume growth, a 1.5% increase in net pricing and a favourable translation currency impact of 2.5%.

Taste technologies achieved a solid performance throughout American markets in particular in the meat, bakery and beverage categories. Smoke & Grill technologies maintained excellent progress throughout retail and foodservice applications - benefiting from the Red Arrow acquisition completed in late 2015. Seasonings and coatings applications grew throughout the Latin American meat industry. Dairy & Culinary systems were impacted by challenging market conditions in North American prepared meals and side dish categories. However, dairy & culinary technologies achieved good growth in Latin America - particularly in foodservice solutions. Brazil based Ben Alimentos was acquired in June, expanding the Group's dairy technology capability in the region.

The decline in the traditional R.T.E. cereals sector led to continued challenges in Cereal Systems. However, snacking trends provided solid growth opportunities in the nutritional bar sector in North America. The savoury snacks sector remains challenged due to consumer trends and industry issues in Mexico, Central America and the Caribbean region. Beverage systems grew well through R.T.D. coffee and all natural smoothie applications. Kerry's branded beverage offerings, including Island Oasis, Da Vinci, Café D'Amore, Big Train and Oregon Chai continued to progress market development.

The Group's core Functional Ingredients & Actives business continued to perform well. Solid growth was achieved through Food Preservation Systems and through cell nutrition applications in the pharmaceutical sector. Wellmune® branded food, beverage and supplement immune enhancing ingredients maintained strong growth, with successful market development in wider global nutritional and food product markets.        

EMEA Region

Whilst the retail environment remained challenging across European markets, the continued growth of out-of-home consumption and channel diversification provided good opportunities for growth and market development. Kerry's increased focus on commercial effectiveness and 'in market' customer engagement achieved good progress - contributing to a strong performance relative to H1 2016.

Demand for enhanced nutrition, clean label, authentic, sustainably produced offerings provided a strong platform for growth through Kerry Taste & Nutrition Technologies & Systems supported by the Group's Technology & Innovation Centre network.

Sales revenue in the EMEA region on a reported basis increased by 2.3% to €750m, reflecting 2.3% business volume growth, 2.2% increase in net pricing, a 3.1% adverse translation currency impact and an adverse 0.3% transaction currency impact. Underlying business momentum improved across regional end-use-markets and channels in particular in Q2. Kerry performed well in the UK market despite food and beverage inflationary trends and the uncertainty following the UK electorate decision to leave the European Union.

Kerry's taste technologies and systems grew solidly, in particular in the meat sector through foodservice applications. Good progress was achieved in Italy, Spain, Russia and the MENAT region. Establishment of a new manufacturing facility commenced near Moscow to meet customer requirements in the meat and savoury snack sectors. Dairy & Culinary systems benefited from snacking trends with a strong performance reported through Kerry's unique 'infused oil' applications. Innovation in the sweet sector improved with good growth in nutritional applications, yoghurt and the premium ice cream sector. Clean label trends in the bakery sector also provided a solid platform for growth. Market conditions in Sub-Saharan Africa stabilised.

Sugar reduction continued to drive innovation in the beverage sector. Beverage systems performed well in the foodservice and c-store channels, supported by market development through the recently acquired Island Oasis and Vendin beverage solutions businesses. Kerry's branded beverage offerings continued to perform well through the major chains and convenience channels.

Dairy based nutritional technologies continued to grow through infant and adult life-stage applications, in particular in Asian markets. Returns from primary dairy markets progressively improved due to lower production year-to-date in some exporting countries and to improved butterfat market demand.

Asia-Pacific Region

Kerry's strong market development and business performance momentum was maintained throughout Asia-Pacific markets in the half year. Business volumes grew by 10.3% and net pricing increased by 1.7%. Reported revenue in the region grew by 14.2% to €419m.

Solid growth was achieved through all Kerry's core technologies, end-use-markets and geographic markets in the region. In particular foodservice growth remains highly favourable - providing excellent innovation opportunities for Kerry technologies and a strong impetus for product diversification in competing channels. Strategic expansion of Kerry's Asian footprint to meet customer requirements was maintained throughout the region through organic investment in Group facilities and completion of a number of acquisitions. The acquisition of Tianning Flavours was completed in April strengthening Kerry's savoury and sweet flavour development capabilities in China. In March, Taste Master was acquired in Australia providing a significant boost to the Group's taste capabilities in the beverage, snack, meat and culinary industries in Australia and New Zealand. New production facilities were established in Batangas, the Philippines and in Cikarang, Indonesia. In India, establishment of a new production facility to support taste and clean-label technology delivery commenced. The Group has also reached agreement to acquire Hangzhou, China based Hangman Flavours - a leading producer of sweet and savoury flavours.

Kerry's Taste, Nutrition & General Wellness technologies all performed well throughout the Asia-Pacific region. Dry beverage applications grew strongly in Thailand and China. Liquid beverage systems achieved solid growth in particular in the foodservice and convenience channels in Japan, China and Thailand. Branded beverage systems including DaVinci continued to successfully progress market development throughout the region. The snack and bakery categories provided strong development opportunities for Kerry dairy technologies & systems in Indonesia, Japan, China and Malaysia. Culinary systems also benefited from foodservice trends in Australia, New Zealand, China and Malaysia. Similarly, the meat sector provided good development opportunities in the latter geographies and in Thailand.

Nutritional applications including specialised proteins and enzyme technologies maintained solid growth. Wellmune® achieved strong growth in the regional nutritional beverage sector.

Consumer Foods

	H1 2017	Growth
Revenue	€677m	2.3%*
Trading profit	€51m	(11.1%)
Trading margin	7.6%	(70bps)

*Volume growth

Kerry Foods is an industry-leading manufacturer of added-value branded and customer branded chilled food products to the Irish, UK and selected international markets.

The consumer foods marketplace in the UK and Ireland remained highly competitive due to increasing inflationary pressures in the UK and overall competitiveness in a more fragmented market landscape. The decline in retailer promotional activity continued as the major chains responded through EDLP strategies to the growth in convenience outlets, channel proliferation and expansion of discounter chains. 'Food-to-go', foodservice and e-tail channels continue to grow at the expense of traditional outlets.

Kerry Foods' business volumes grew by 2.3% and net pricing increased by 1.9%. Reported revenue at €677m declined by 2.8% due to significant adverse currency movements. The divisional trading profit margin decreased by 70 basis points to 7.6% as the underlying margin improvement was more than offset by adverse sterling exchange rate movements. This resulted in a trading profit decrease of 11.1% to €51m.

Demand for nutritional tasteful convenience products continued to drive good growth through meat and dairy snacking lines. 'Mattessons' performed well in meat snacking. 'Cheestrings' grew market share in the UK children's cheese snack sector. 'Cheestrings Scoffies' extended the division's cheese snack offering into the after-school segment and 'Go-Go's' achieved encouraging results in the adults' snack sector. 'Cheestrings' continued to develop its market positioning in mainland Europe. 'Attack-A-Snack' achieved double digit growth in the light snacks category. 'Yollies' maintained solid growth in the children's yoghurt snack sector.

Conditions in the UK sausage sector stabilised. The relaunched 'Richmond' brand performed satisfactorily and the 'Walls' fresh sausage portfolio achieved good market penetration. 'Fire & Smoke' maintained good development momentum in the UK and Irish sliced cooked meats categories. 'Denny' branded lines performed satisfactorily in Ireland. In May 'Henry Denny's Meat Masters' was launched successfully in the premium meats sub-category.

Premiumisation and health trends contributed to a good performance in Kerry Foods' chilled and frozen prepared meals. Foodservice and 'direct-to-consumer' channels also provided good growth opportunities.

Excellent progress was achieved in the UK private label spreads category through Kerry's spreadable butter based offerings. 'Dairygold' maintained market share in the Irish spreads category assisted by successful new product introductions.

Financial Review

 

Reconciliation of adjusted* earnings to profit after taxation	% change	H1 2017 €'m	H1 2016 €'m
Revenue	4.8%	3,181.3	3,036.6
Trading profit	5.2%	338.4	321.6
Trading margin		10.6%	10.6%
Computer software amortisation		(11.9)	(11.4)
Finance costs (net)		(34.4)	(39.1)
Adjusted earnings before taxation		292.1	271.1
Income taxes (excluding non-trading items)		(38.5)	(35.7)
Adjusted earnings after taxation	7.7%	253.6	235.4
Brand related intangible asset amortisation		(10.7)	(10.2)
Non-trading items (net of related tax)		(17.8)	(2.8)
Profit after taxation		225.1	222.4
		EPS	EPS
		cent	cent
Adjusted EPS	7.5%	143.8	133.8
Brand related intangible asset amortisation		(6.1)	(5.8)
Non-trading items (net of related tax)		(10.1)	(1.6)
Basic EPS	0.9%	127.6	126.4

* Before brand related intangible asset amortisation and non-trading items (net of related tax)

Analysis of Results

Revenue

On a reported basis Group revenue increased by 4.8% to €3.2 billion (H1 2016: €3.0 billion). Volumes grew by 3.8%, net product pricing increased by 1.8% and there was a negative transaction related currency impact of 0.4%. Business acquisitions contributed 0.6% and there was a negative translation currency impact of 1.0%.

In Taste & Nutrition, reported revenue increased by 6.9% to €2.5 billion (H1 2016: €2.4 billion). Volumes grew by 4.2%, product pricing increased by 1.7% and there was a negative transaction related currency impact of 0.1%. Business acquisitions contributed 0.7% and there was a positive translation currency impact of 0.4%.

In Consumer Foods, reported revenue decreased by 2.8% to €677m (H1 2016: €697m). Volumes increased by 2.3% and product pricing increased by 1.9%. There was a negative impact of 1.4% from transaction related currency and a negative translation currency impact of 5.6% due to weaker sterling.

Trading Profit & Margin

Group trading profit increased by 5.2% to €338.4m (H1 2016: €321.6m). Group trading profit margin in the period was maintained at 10.6%. Underlying margin expansion attributable to improved product mix, operating leverage and efficiencies was offset by transaction currency headwinds, increased Kerryconnect investment and the denominator pricing effect.

Trading profit margin in Taste & Nutrition increased by 20 bps to 13.0%, due to the benefits of improved product mix, leverage and efficiencies, offset by the denominator pricing effect and currency headwinds.

Trading profit margin in Consumer Foods decreased by 70 bps to 7.6% due to significant transaction currency headwinds in the period, partly offset by underlying margin expansion.

Finance Costs (net)

Finance costs (net) for the period decreased by €4.7m to €34.4m (H1 2016: €39.1m) due to strong cash generation in the period.

Taxation

The tax charge for the period, before non-trading items was €38.5m (H1 2016: €35.7m) which represents an effective tax rate of 13.7% (H1 2016: 13.7%).

Acquisitions

During the period, the Group completed three bolt-on acquisitions, Tianning Flavours was acquired in China, Taste Master was acquired in Australia, and Ben Alimentos was acquired in Brazil. The Group also reached agreement to acquire Hangman Flavours in China.

Non-Trading Items

The Group recorded €17.8m of costs net of tax (H1 2016: €2.8m) primarily relating to costs associated with integrating the acquisitions completed since 2015.

Free Cash Flow

The Group achieved free cash flow of €357.2m (H1 2016: €379.1m). This reflects improved profit, offset by higher capital expenditure relative to the prior period.

Free Cash Flow	H1 2017 €'m	H1 2016 €'m
Trading profit	338.4	321.6
Depreciation (net)	68.6	66.9
Movement in average working capital	118.1	120.0
Pension contributions paid less pension expense	(22.7)	(20.0)
Cash flow from operations	502.4	488.5
Finance costs paid (net)	(21.0)	(23.9)
Income taxes paid	(21.8)	(22.6)
Purchase of non-current assets	(102.4)	(62.9)
Free cash flow	357.2	379.1

Balance Sheet

A summary balance sheet as at 30 June 2017 is presented below:

	H1 2017 €'m	H1 2016 €'m	FY 2016  €'m
Property, plant & equipment Intangible assets Other non-current assets Current assets	1,430.1 3,414.2 211.1 2,159.8	1,385.1 3,414.4 261.6 1,989.0	1,451.9 3,444.3 285.7 2,240.0
Total assets	7,215.2	7,050.1	7,421.9
Current liabilities Non-current liabilities	1,546.8 2,418.0	1,581.8 2,591.3	1,693.4 2,634.5
Total liabilities	3,964.8	4,173.1	4,327.9
Net assets	3,250.4	2,877.0	3,094.0
Shareholders' equity	3,250.4	2,877.0	3,094.0

Property, Plant & Equipment

Property, plant & equipment decreased by €21.8m to €1,430.1m (Dec 2016: €1,451.9m, H1 2016: €1,385.1m), as additions made in the period were more than offset by foreign exchange translation movements and the depreciation charge.

Intangible Assets

Intangible assets decreased by €30.1m to €3,414.2m (Dec 2016: €3,444.3m, H1 2016: €3,414.4m) as additions during the period were offset by foreign exchange movements and the amortisation charge.

Current Assets

Current assets decreased by €80.2m to €2,159.8m (Dec 2016: €2,240.0m, H1 2016: €1,989.0m), primarily due to a decrease in cash in hand at 30 June 2017 arising from the repayment of US Senior Notes of $192m which matured on 20 January 2017.

Retirement Benefits

At the balance sheet date, the net deficit for all defined benefit schemes (after deferred tax) was €186.4m (Dec 2016: €291.9m, H1 2016: €313.9m). The decrease in the net deficit from year end arises from good investment returns, a favourable movement in discount and inflation rates, and a liability management programme implemented in 2017.

Net Debt

At 30 June 2017, net debt stood at €1,222m, a decrease of €102m relative to the December 2016 debt of €1,324m.

Key Financial Covenants

At 30 June the key financial ratios were as follows:

Covenant	H1 2017  Times	H1 2016     Times	FY 2016 Times
Net debt: EBITDA*                    Maximum 3.5 EBITDA: Net interest*               Minimum 4.75	1.3       14.9	1.7      15.7		1.5      14.0

 *Calculated in accordance with lenders facility agreements which take account of adjustments as outlined in the financial definitions accompanying the Interim Financial Statements.

The average maturity profile of net debt was 6.5 years at the end of the period (Dec 2016: 6.4 years). At the period end 60% of gross debt was carried at fixed rates and the weighted average period for which rates were fixed was 7.2 years. The Group's balance sheet is in a healthy position. With a net debt to EBITDA* ratio of 1.3 times, the organisation has sufficient headroom to support its future growth plans.

Related Party Transactions

There were no changes in related party transactions from the 2016 Annual Report that could have a material effect on the financial position or performance of the Group in the first half of the year.

Exchange Rates

Group results are impacted by fluctuations in exchange rates year on year versus the euro. The table below (see link) details the movement in spot rates since February guidance for the principal exchange rates used to translate results of non-euro denominated subsidiaries.

http://www.rns-pdf.londonstockexchange.com/rns/5895N_1-2017-8-9.pdf  

Principal Risks & Uncertainties

Details of the principal risks and uncertainties facing the Group can be found in the 2016 Annual Report on pages 62 to 67. These risks include but are not limited to; the identification and integration of acquisition targets, a slowdown in the rate of innovation, quality & food safety risks, failure to attract/retain key talent, systems implementation risks, unauthorised use of Group intellectual property, geopolitical risk and ongoing operational and compliance risks. However, risks with increased potential impact in the second half of the year include fluctuating raw materials together with volatile currencies. The Group actively manages these and all other risks through its control and risk management process.

Going Concern

The Group Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis. The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group's budget for a period not less than 12 months, the medium term plans as set out in the rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group's committed borrowing facilities and projected gearing ratios.

Dividend

The Board has declared an interim dividend of 18.8 cent per share (an increase of 11.9% on the 2016 interim dividend of 16.8 cent) payable on 10 November 2017 to shareholders registered on the record date 13 October 2017.

Board & Management Changes

As announced in February, Mr Stan McCarthy, who became Chief Executive of the Group in January 2008, will retire as Chief Executive on 30 September 2017 and as Director of the Group at year end.

Mr Edmond Scanlon has been appointed Chief Executive Designate to succeed Mr McCarthy on his retirement. Having joined Kerry's Graduate Development Programme in 1996, Mr Scanlon worked in Finance until his appointment as Vice President Finance, Supply Chain and Operations of Kerry's Global Flavours Division in 2004. In 2007, he was appointed Vice President Mergers & Acquisitions, Kerry Americas region, before being appointed Global President Kerry Functional Ingredients & Actives in late 2008. In 2012, he was appointed President of Kerry China, prior to his appointment as President & CEO Kerry Asia Pacific region in November 2013.

Mr Flor Healy has retired as an Executive Director of the Board and signalled his intention to step down from his position as CEO of Kerry Foods, the Group's consumer foods division, at year end. Over the coming months Mr Healy will assist the transition to a new CEO of Kerry Foods to be appointed by Mr Edmond Scanlon, Chief Executive Designate. Mr Healy joined Kerry's Graduate Development Programme in 1984 and served in a number of key positions across the Group's foods' businesses prior to his appointment as CEO of Kerry Foods in 2004.

Future Prospects

Notwithstanding significant currency headwinds, Group businesses are well positioned to meet customer and consumer needs in the changing marketplace and deliver sustained underlying growth. Kerry's globally connected, localised Taste & Nutrition business model, supported by the Group's Technology & Innovation Centre network, holds a strategic advantage in meeting customer requirements across all market channels in developed and developing markets. We continue to capitalise on out-of-home consumption trends and channel expansion. Prospects for sustained strong growth throughout Asian markets will be supported by deployment of increased resources. Organic and acquisition growth opportunities will continue to be pursued in all geographic regions.

Kerry Foods will continue to embrace meat and dairy snacking, meal solution and out-of-home channel growth opportunities.

In February 2017 we guided growth in adjusted earnings per share of 5% to 9% at prevailing exchange rates. Taking into account increased currency translation headwinds of 4% and a 2% improvement in underlying performance at constant currency rates, we now expect to achieve growth in adjusted earnings per share of 3% to 7% on a reported basis to a range of 333.1 to 346 cent per share (2016: 323.4 cent).

Responsibility Statement

The Directors are responsible for preparing the Half Yearly Financial Report in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 of Ireland (S.I. No. 277 of 2007) ("the Regulations"), the Transparency Rules of the Central Bank of Ireland and with IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The Directors confirm that to the best of their knowledge:

·     the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 have been prepared in accordance with the international accounting standard applicable to interim financial reporting adopted pursuant to the procedure provided for under Article 6 of the Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002;

·     the Interim Management Report includes a fair review of the important events that have occurred during the first six months of the financial year, and their impact on the Group Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017, and a description of the principal risks and uncertainties for the remaining six months;

·     the Interim Management Report includes a fair review of the related party transactions that have occurred during the first six months of the current financial year and that have materially affected the financial position or the performance of the Group during that period, and any changes in the related parties' transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

On behalf of the board

Stan McCarthy Chief Executive

Brian Mehigan Chief Financial Officer

9 August 2017

Disclaimer Forward Looking Statements

This Announcement contains forward looking statements which reflect management expectations based on currently available data. However actual results may differ materially from those expressed or implied by these forward looking statements. These forward looking statements speak only as of the date they were made and the Company undertakes no obligation to publicly update any forward looking statement, whether as a result of new information, future events or otherwise.

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2017

Kerry Group plc
Condensed Consolidated Income Statement
for the half year ended 30 June 2017
	Notes	Before Non-Trading Items 30 June 2017 Unaudited €'m	Non-Trading Items 30 June 2017 Unaudited €'m	Half year ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016  Unaudited €'m	Year ended 31 Dec. 2016  Audited €'m
Continuing operations
Revenue	2	3,181.3	-	3,181.3	3,036.6	6,130.6
		_________	_________	_________	_________	_________
Trading profit	2	338.4	-	338.4	321.6	749.6
Intangible asset amortisation		(22.6)	-	(22.6)	(21.6)	(46.4)
Non-trading items	3	-	(24.8)	(24.8)	(4.8)	(21.0)
		_________	_________	_________	_________	_________
Operating profit		315.8	(24.8)	291.0	295.2	682.2
Finance income	4	0.1	-	0.1	0.8	1.1
Finance costs	4	(34.5)	-	(34.5)	(39.9)	(71.5)
		_________	_________	_________	_________	_________
Profit before taxation		281.4	(24.8)	256.6	256.1	611.8
Income taxes		(38.5)	7.0	(31.5)	(33.7)	(78.7)
		_________	_________	_________	_________	_________
Profit after taxation and attributable to owners of the parent		242.9	(17.8)	225.1	222.4	533.1
		_________	_________	_________	_________	_________
Earnings per A ordinary share				Cent	Cent	Cent
- basic	5			127.6	126.4	302.9
- diluted	5			127.5	126.2	302.0
				_________	_________	_________

Kerry Group plc
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 30 June 2017
	Note	Half year ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016  Unaudited €'m	Year ended 31 Dec. 2016  Audited €'m
Profit after taxation and attributable to owners of the parent		225.1	222.4	533.1
Other comprehensive income:
Items that are or may be reclassified subsequently to profit or loss:
Fair value movements on cash flow hedges		7.4	17.0	29.3
Cash flow hedges - reclassified to profit or loss from equity		(17.0)	(0.3)	(13.3)
Deferred tax effect of fair value movements on cash flow hedges		1.3	(2.4)	0.9
Exchange difference on translation and disposal of foreign operations	10	(60.8)	(14.9)	(17.9)
Deferred tax effect of exchange difference on translation of foreign operations		-	0.6	-
Items that will not be reclassified subsequently to profit or loss:
Re-measurement on retirement benefits obligation		74.7	(93.5)	(170.3)
Deferred tax effect of re-measurement on retirement benefits obligation		(9.8)	15.3	25.5
		_________	_________	_________
Net expense recognised directly in other comprehensive income		(4.2)	(78.2)	(145.8)
		_________	_________	_________
Total comprehensive income		220.9	144.2	387.3
		_________	_________	_________

Kerry Group plc
Condensed Consolidated Balance Sheet
as at 30 June 2017
	Notes	30 June 2017 Unaudited €'m	30 June 2016 Unaudited €'m	31 Dec. 2016 Audited €'m
Non-current assets
Property, plant and equipment		1,430.1	1,385.1	1,451.9
Intangible assets		3,414.2	3,414.4	3,444.3
Financial asset investments		40.2	35.6	39.3
Investment in associates		5.9	40.4	40.7
Non-current financial instruments		111.7	142.3	153.0
Deferred tax assets		53.3	43.3	52.7
		__________	___________	___________
		5,055.4	5,061.1	5,181.9
		__________	___________	___________
Current assets
Inventories		744.1	736.0	743.0
Trade and other receivables		897.5	864.0	847.3
Cash at bank and in hand	8	457.4	329.8	564.7
Other current financial instruments		56.0	42.3	80.1
Assets classified as held for sale		4.8	16.9	4.9
		__________	__________	___________
		2,159.8	1,989.0	2,240.0
		__________	__________	___________
Total assets		7,215.2	7,050.1	7,421.9
		__________	__________	___________
Current liabilities
Trade and other payables		1,383.1	1,234.2	1,351.6
Borrowings and overdrafts	8	7.5	199.7	192.5
Other current financial instruments		15.7	13.2	20.9
Tax liabilities		99.2	102.3	95.2
Provisions		36.9	28.1	30.4
Deferred income		4.4	4.3	2.8
		__________	__________	___________
		1,546.8	1,581.8	1,693.4
		__________	__________	___________
Non-current liabilities
Borrowings	8	1,782.7	1,810.9	1,867.0
Other non-current financial instruments		0.6	-	7.3
Retirement benefits obligation	7	233.8	377.7	352.8
Other non-current liabilities		89.1	93.6	95.1
Deferred tax liabilities		250.4	230.4	247.2
Provisions		40.1	57.0	40.8
Deferred income		21.3	21.7	24.3
		__________	__________	___________
		2,418.0	2,591.3	2,634.5
		__________	__________	___________
Total liabilities		3,964.8	4,173.1	4,327.9
		__________	__________	___________
Net assets		3,250.4	2,877.0	3,094.0
		__________	__________	___________
Issued capital and reserves attributable to owners of the parent
Share capital	9	22.0	22.0	22.0
Share premium		398.7	398.7	398.7
Other reserves		(163.9)	(97.8)	(98.0)
Retained earnings		2,993.6	2,554.1	2,771.3
		__________	__________	___________
Shareholders' equity		3,250.4	2,877.0	3,094.0
		__________	__________	___________

Kerry Group plc
Condensed Consolidated Statement of Changes in Equity
for the half year ended 30 June 2017
	Note	Share Capital €'m	Share Premium €'m	Other Reserves €'m	Retained Earnings €'m	Total €'m
At 1 January 2016		22.0	398.7	(103.9)	2,473.3	2,790.1
Profit after tax attributable to owners of the parent		-	-	-	222.4	222.4
Other comprehensive income/(expense)		-	-	1.8	(80.0)	(78.2)
Dividends paid	6	-	-	-	(61.6)	(61.6)
Share-based payment expense		-	-	4.3	-	4.3
		_______	_______	________	________	________
At 30 June 2016 - unaudited		22.0	398.7	(97.8)	2,554.1	2,877.0
Profit after tax attributable to owners of the parent		-	-	-	310.7	310.7
Other comprehensive expense		-	-	(3.7)	(63.9)	(67.6)
Dividends paid	6	-	-	-	(29.6)	(29.6)
Share-based payment expense		-	-	3.5	-	3.5
		________	________	________	________	________
At 31 December 2016 - audited		22.0	398.7	(98.0)	2,771.3	3,094.0
Profit after tax attributable to owners of the parent		-	-	-	225.1	225.1
Other comprehensive (expense)/income		-	-	(70.4)	66.2	(4.2)
Dividends paid	6	-	-	-	(69.0)	(69.0)
Share-based payment expense		-	-	4.5	-	4.5
		_______	_______	________	________	________
At 30 June 2017 - unaudited		22.0	398.7	(163.9)	2,993.6	3,250.4
		_______	_______	________	________	________

Other Reserves comprise the following:

	Capital Redemption Reserve €'m	Other Undenominated Capital €'m	Share-Based Payment Reserve €'m	Translation Reserve €'m	Hedging Reserve €'m	Total €'m
At 1 January 2016	1.7	0.3	30.5	(129.1)	(7.3)	(103.9)
Total comprehensive (expense)/income	-	-	-	(14.9)	16.7	1.8
Share-based payment expense	-	-	4.3	-	-	4.3
	________	________	________	________	________	________
At 30 June 2016 - unaudited	1.7	0.3	34.8	(144.0)	9.4	(97.8)
Total comprehensive expense	-	-	-	(3.0)	(0.7)	(3.7)
Share-based payment expense	-	-	3.5	-	-	3.5
	________	________	________	________	________	________
At 31 December 2016 - audited	1.7	0.3	38.3	(147.0)	8.7	(98.0)
Total comprehensive expense	-	-	-	(60.8)	(9.6)	(70.4)
Share-based payment expense	-	-	4.5	-	-	4.5
	_______	________	_______	________	_______	_______
At 30 June 2017 - unaudited	1.7	0.3	42.8	(207.8)	(0.9)	(163.9)
	_______	________	_______	________	_______	_______

Kerry Group plc
Condensed Consolidated Statement of Cash Flows
for the half year ended 30 June 2017
	Notes	Half year  ended 30 June 2017 Unaudited €'m	Half year  ended 30 June 2016 Unaudited €'m	Year  ended 31 Dec. 2016 Audited €'m
Operating activities
Trading profit		338.4	321.6	749.6
Adjustments for:
Depreciation (net)		68.6	66.9	129.8
Change in working capital		(42.9)	(58.8)	61.7
Pension contributions paid less pension expense		(22.7)	(20.0)	(118.2)
Payments on acquisition integration and restructuring costs		(12.5)	(7.0)	(21.2)
Exchange translation adjustment	10	(1.8)	(0.8)	0.1
		__________	__________	___________
Cash generated from operations		327.1	301.9	801.8
Income taxes paid		(21.8)	(22.6)	(57.3)
Finance income received		0.1	0.8	1.1
Finance costs paid		(21.1)	(24.7)	(62.6)
		__________	__________	___________
Net cash from operating activities		284.3	255.4	683.0
		__________	__________	___________
Investing activities
Purchase of assets		(103.4)	(73.5)	(223.8)
Proceeds from the sale of assets		0.9	10.6	12.1
Capital grants received		0.1	-	1.5
Purchase of businesses (net of cash acquired)	11	(89.1)	(22.4)	(22.2)
Disposal/(purchase) of share in associates		30.1	-	(6.7)
Income received from associates		-	-	5.0
Disposal of businesses		-	-	(2.0)
Payments relating to previous acquisitions		(0.1)	(7.2)	(0.1)
		__________	__________	___________
Net cash used in investing activities		(161.5)	(92.5)	(236.2)
		__________	__________	___________
Financing activities
Dividends paid	6	(69.0)	(61.6)	(91.2)
Issue of share capital	9	-	-	-
Repayment of borrowings		(155.6)	-	(25.6)
		__________	__________	___________
Net cash movement due to financing activities		(224.6)	(61.6)	(116.8)
		__________	__________	___________
Net (decrease)/increase in cash and cash equivalents		(101.8)	101.3	330.0
Cash and cash equivalents at beginning of period		561.1	231.2	231.2
Exchange translation adjustment on cash and cash equivalents	10	(9.4)	(2.7)	(0.1)
		__________	__________	___________
Cash and cash equivalents at end of period	8	449.9	329.8	561.1
		__________	__________	___________
Reconciliation of Net Cash Flow to Movement in Net Debt
Net (decrease)/increase in cash and cash equivalents		(101.8)	101.3	330.0
Cash inflow from debt financing		155.6	-	25.6
		__________	__________	___________
Changes in net debt resulting from cash flows		53.8	101.3	355.6
Fair value movement on interest rate swaps (net of adjustment to borrowings)		0.9	(1.6)	(5.4)
Exchange translation adjustment on net debt	10	47.3	30.7	(23.8)
		__________	__________	___________
Movement in net debt in the period		102.0	130.4	326.4
Net debt at beginning of period		(1,323.7)	(1,650.1)	(1,650.1)
		__________	__________	___________
Net debt at end of period	8	(1,221.7)	(1,519.7)	(1,323.7)
		__________	__________	___________

Kerry Group plc

Notes to the Condensed Consolidated Interim Financial Statements

for the half year ended 30 June 2017

1. Accounting policies

These Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 have been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' and using accounting policies consistent with International Financial Reporting Standards as adopted by the European Union. The accounting policies applied by the Group in these Condensed Consolidated Interim Financial Statements are the same as those detailed in the 2016 Annual Report. Some comparative information has been re-presented to align with the current half year presentation.

The following standards and interpretations are effective for the Group from 1 January 2017 but do not have a material effect on the results or financial position of the Group:

-	IAS 7 (amendments)	Statement of Cash Flows
-	IAS 12 (amendments)	Income Taxes

The following revised standards are not yet effective and the impact on Kerry Group is currently under review:             Effective Date

-	IFRS 9	Financial Instruments	1 January 2018
		IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 'Financial Instruments: Recognition and Measurement'. IFRS 9 includes revised guidance on the classification and measurement of financial instruments, including a new expected credit loss model for calculating impairment on financial assets, and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. The Group is continuing to assess the potential impact on its consolidated financial statements resulting from the application of IFRS 9. The vast majority of financial assets held are trade receivables and cash, which are expected to continue to be accounted for at amortised cost. The majority of financial asset investments are expected to continue to be accounted for at fair value through profit or loss. On this basis, the classification and measurement changes are not expected to have a material impact on the Group's consolidated financial statements. Given historic loss rates, normal receivable ageing and the significant portion of trade receivables that are within agreed terms, the move from an incurred loss model to an expected loss model is not expected to have a material impact. The new hedging requirements of IFRS 9 will align hedge accounting more closely to the Group's risk management policies, as well as making more hedging relationships eligible for hedge accounting. Current hedging arrangements continue to be appropriate under IFRS with the only difference being a change to the cost of hedging. This change to cost is not expected to be material. The Group's implementation plan for IFRS 9 is ongoing and is expected to be complete by the end of quarter 3 2017.
-	IFRS 15	Revenue from Contracts with Customers	1 January 2018
		IFRS 15, published in May 2014, was issued to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied i.e. when 'control' of the goods or services underlying the particular performance obligation is transferred to the customer. The Group is continuing to assess the potential impact on its consolidated financial statements resulting from the application of IFRS 15. Findings from our initial review of IFRS 15 are that the impact of this new standard on the Groups' results is unlikely to be material. Kerry do not supply services and generally legal title of goods sold is transferred on shipment. As a result, our impact analysis identifies that it is unlikely that the impact of moving from a risk and reward model to the IFRS 15 control model will be material. The Group's implementation plan for IFRS 15 is ongoing and is expected to be complete by the end of quarter 3 2017.
-	IFRS 16	Leases	1 January 2019
		IFRS 16, published in January 2016, replaces the existing guidance in IAS 17 'Leases'. IFRS 16 eliminates the classification of leases as either operating leases or finance leases. It introduces a single lessee accounting model, which requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months and depreciation of lease assets separately from interest on lease liabilities in the income statement. The Group is assessing the potential impact on its consolidated financial statements resulting from the application of IFRS 16. Indications from our continued review of IFRS 16 are that this will result in an increase in finance leased assets of approximately €58.0m, and a corresponding increase in financial liabilities of the same amount, on the consolidated balance sheet of the Group's financial statements.

2. Analysis by business segment

The Group has determined it has two reportable segments: Taste & Nutrition and Consumer Foods. The Taste & Nutrition segment manufactures and distributes an innovative portfolio of taste & nutrition solutions and functional ingredients & actives for the global food, beverage and pharmaceutical industries. The Consumer Foods segment manufactures and supplies added value branded and consumer branded chilled food products to the Irish, UK and selected international markets. Corporate activities, such as the cost of corporate stewardship and the cost of the kerryconnect programme, are reported along with the elimination of inter-group activities under the heading 'Group Eliminations and Unallocated'.

		Half year  ended 30 June 2017 Unaudited €'m	Half year  ended 30 June 2016  Unaudited €'m	Year  ended 31 Dec. 2016  Audited €'m
External revenue
- Taste & Nutrition		2,507.9	2,344.2	4,800.1
- Consumer Foods		673.4	692.4	1,330.5
		__________	__________	___________
		3,181.3	3,036.6	6,130.6
Inter-segment revenue
- Taste & Nutrition		35.2	35.0	79.4
- Consumer Foods		3.6	4.3	2.0
- Group Eliminations and Unallocated		(38.8)	(39.3)	(81.4)
		__________	__________	___________
		-	-	-
Total revenue
- Taste & Nutrition		2,543.1	2,379.2	4,879.5
- Consumer Foods		677.0	696.7	1,332.5
- Group Eliminations and Unallocated		(38.8)	(39.3)	(81.4)
		__________	__________	___________
		3,181.3	3,036.6	6,130.6
		__________	__________	___________
Trading profit
- Taste & Nutrition		330.6	303.8	716.4
- Consumer Foods		51.3	57.7	117.3
- Group Eliminations and Unallocated		(43.5)	(39.9)	(84.1)
		__________	__________	___________
		338.4	321.6	749.6
Intangible asset amortisation		(22.6)	(21.6)	(46.4)
Non-trading items		(24.8)	(4.8)	(21.0)
		__________	__________	___________
Operating profit		291.0	295.2	682.2
Finance income		0.1	0.8	1.1
Finance costs		(34.5)	(39.9)	(71.5)
		__________	__________	___________
Profit before taxation		256.6	256.1	611.8
Income taxes		(31.5)	(33.7)	(78.7)
		__________	__________	___________
Profit after taxation and attributable to owners of the parent		225.1	222.4	533.1
		__________	__________	___________

Information about geographical areas

	Half year  ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016 Unaudited €'m	Year ended 31 Dec. 2016 Audited €'m
Revenue by location of external customers
EMEA	1,423.7	1,426.0	2,777.0
Americas	1,338.8	1,243.8	2,588.5
Asia Pacific	418.8	366.8	765.1
	__________	__________	___________
	3,181.3	3,036.6	6,130.6
	__________	___________	___________

The accounting policies of the reportable segments are the same as those detailed in the Statement of Accounting Policies in the 2016 Annual Report.

3. Non-trading items

	Notes	Half year ended 30 June 2017 Unaudited €'m	Half year   ended 30 June 2016 Unaudited €'m	Year ended 31 Dec. 2016 Audited €'m
(Loss)/profit on disposal of assets* and businesses	(i)	(4.9)	2.1	(1.3)
Acquisition integration and restructuring costs	(ii)	(19.9)	(6.9)	(19.6)
Impairment of assets held for sale	(iii)	-	-	(0.1)
		__________	__________	___________
		(24.8)	(4.8)	(21.0)
Tax		7.0	2.0	8.0
		__________	__________	___________
		(17.8)	(2.8)	(13.0)
		__________	__________	___________

*Assets represent non-current assets and assets classified as held for sale.

(i) (Loss)/profit on disposal of assets and businesses

During the period the Group disposed of property, plant and equipment primarily in Ireland and the UK and disposed of its 22.5% shareholding in Addo Food Group Limited for a total consideration of €31.0m. The investment in Addo Food Group Limited was disposed from the investment in associate line on the Condensed Consolidated Balance Sheet. In 2016, the Group disposed of property, plant and equipment and assets classified as held for sale primarily in Ireland and the UK and a small business in the Taste & Nutrition segment.

A net tax credit of €0.2m (30 June 2016: a tax charge of €0.4m; 31 December 2016: a tax credit of €1.0m) arose on the disposal of assets and businesses.

(ii) Acquisition integration and restructuring costs

During the period, acquisition integration and restructuring costs of €19.9m (30 June 2016: €6.9m; 31 December 2016: €19.6m) primarily related to costs of integrating acquisitions completed since 2015, including Red Arrow and Island Oasis, into the Group's operations and transaction expenses incurred in completing current year acquisitions. In the period ended 30 June 2017, a tax credit of €6.8m (30 June 2016: a tax credit of €2.4m; 31 December 2016: a tax credit of €7.0m) arose due to tax deductions available on acquisition integration and restructuring costs.

(iii) Impairment of assets held for sale

There were no impairments of assets held for sale recorded in the period. In 2016, assets classified as held for sale were impaired to their value less costs to sell by €3.7m. In addition in 2016 it was determined that the value of the Group's remaining businesses held for sale, would no longer be recovered principally through a sale. As a result, the assets were reclassified from 'Assets classified as held for sale' and a remeasurement gain of €3.6m was recorded in 'Non-trading items' to recognise the assets at their recoverable amount, which was determined using a value in use calculation.

4. Finance income and costs

	Half year  ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016  Unaudited €'m	Year ended 31 Dec. 2016 Audited €'m
Finance income:
Interest income on deposits	0.1	0.8	1.1
	__________	___________	___________
Finance costs:
Interest payable	(27.7)	(30.7)	(64.1)
Interest rate derivative	(2.7)	(4.8)	0.5
	__________	___________	___________
	(30.4)	(35.5)	(63.6)
Net interest cost on retirement benefits obligation	(4.1)	(4.4)	(7.9)
	__________	___________	___________
Finance costs	(34.5)	(39.9)	(71.5)
	__________	___________	___________

The interest rate derivative cost represents credit value adjustments to the fair values of derivative financial instruments designated in a hedge relationship of €2.7m (30 June 2016: €4.8m; 31 December 2016: a credit of €0.5m).

5. Earnings per A ordinary share

		Half year ended  30 June 2017  Unaudited		Half year ended 30 June 2016 Unaudited		Year ended 31 Dec. 2016 Audited
		EPS cent	€'m	EPS cent	€'m	EPS cent	€'m
Basic earnings per share
Profit after taxation and attributable to owners of the parent		127.6	225.1	126.4	222.4	302.9	533.1
Brand related intangible asset amortisation		6.1	10.7	5.8	10.2	13.1	23.0
Non-trading items (net of related tax)		10.1	17.8	1.6	2.8	7.4	13.0
		______	______	______	______	______	______
Adjusted earnings		143.8	253.6	133.8	235.4	323.4	569.1
		______	______	______	______	______	______
Diluted earnings per share
Profit after taxation and attributable to owners of the parent		127.5	225.1	126.2	222.4	302.0	533.1
Adjusted earnings		143.7	253.6	133.6	235.4	322.4	569.1
		______	______	______	______	______	______

In addition to the basic and diluted earnings per share, an adjusted earnings per share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation and attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings.

	Number of Shares 30 June 2017 Unaudited		Number of Shares 30 June 2016 Unaudited		Number of  Shares 31 Dec. 2016 Audited
	m's		m's		m's
Number of Shares
Basic weighted average number of shares	176.4		175.9		176.0
Effect of dilutive potential shares	0.1		0.3		0.5
	_______		_______		_______
Diluted weighted average number of shares	176.5		176.2		176.5
	_______		_______		_______

6. Dividends

	Half year ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016 Unaudited €'m	Year ended 31 Dec. 2016 Audited €'m
Amounts recognised as distributions to equity shareholders in the period
Final 2016 dividend of 39.20 cent per A ordinary share paid 19 May 2017 (Final 2015 dividend of 35.00 cent per A ordinary share paid 13 May 2016)	69.0	61.6	61.6
Interim 2016 dividend of 16.80 cent per A ordinary share paid 18 November 2016	-	-	29.6
	________	________	_________
	69.0	61.6	91.2
	________	________	_________

Since the end of the period, the Board has proposed an interim dividend of 18.80 cent per A ordinary share. The payment date for the interim dividend will be 10 November 2017 to shareholders registered on the record date as at 13 October 2017. These Condensed Consolidated Interim Financial Statements do not reflect this dividend.

7. Retirement benefits obligation

The net deficit recognised in the Condensed Consolidated Balance Sheet for the Group's defined benefit post retirement schemes was as follows:

	Half year ended 30 June 2017 Unaudited	Half year ended 30 June 2016 Unaudited	Year ended 31 Dec. 2016  Audited
	€'m	€'m	€'m
Net recognised deficit in plans before deferred tax	(233.8)	(377.7)	(352.8)
Net related deferred tax asset	47.4	63.8	60.9
	________	________	_________
Net recognised deficit in plans after deferred tax	(186.4)	(313.9)	(291.9)
	________	________	_________

At 30 June 2017, the net deficit before deferred tax for defined benefit post-retirement schemes was €233.8m (30 June 2016: €377.7m; 31 December 2016: €352.8m). This was calculated by rolling forward the defined benefit post-retirement schemes' liabilities at 31 December 2016 to reflect material movements in underlying assumptions over the period while the defined benefit post-retirement schemes' assets at 30 June 2017 are measured at market value. The decrease in the net deficit before deferred tax of €119.0m arises from good investment returns, favourable movements in discount and inflation rates and to a liability management programme implemented in 2017.

8. Financial instruments

i)   The following table outlines the components of net debt by category at the balance sheet date:

	Loans & Other Financial Assets/(Liabilities) at Amortised Cost €'m	Liabilities at Fair Value through Profit or Loss €'m	Derivatives Designated as Hedging Instruments €'m	Total Net Debt by Category €'m
Assets:
Interest rate swaps	-	-	111.7	111.7
Cash at bank and in hand	457.4	-	-	457.4
	__________	________	________	__________
	457.4	-	111.7	569.1
	__________	________	________	__________
Liabilities:
Interest rate swaps	-	-	(0.6)	(0.6)
Bank overdrafts	(7.5)	-	-	(7.5)
Bank loans	-	-	-	-
Senior notes	(1,756.9)	(25.8)	-	(1,782.7)
	__________	________	________	__________
Borrowings and overdrafts	(1,764.4)	(25.8)	-	(1,790.2)
	__________	________	________	__________
	(1,764.4)	(25.8)	(0.6)	(1,790.8)
	__________	________	________	__________
At 30 June 2017 - unaudited	(1,307.0)	(25.8)	111.1	(1,221.7)
	__________	________	________	__________
Assets:
Interest rate swaps	-	-	161.1	161.1
Cash at bank and in hand	329.8	-	-	329.8
	__________	________	________	__________
	329.8	-	161.1	490.9
	__________	________	________	__________
Liabilities:
Interest rate swaps	-	-	-	-
Bank loans	(31.1)	-	-	(31.1)
Senior notes	(1,926.2)	(53.3)	-	(1,979.5)
	__________	________	________	__________
Borrowings and overdrafts	(1,957.3)	(53.3)	-	(2,010.6)
	__________	________	________	__________
	(1,957.3)	(53.3)	-	(2,010.6)
	__________	________	________	__________
At 30 June 2016 - unaudited	(1,627.5)	(53.3)	161.1	(1,519.7)
	__________	________	________	__________
Assets:
Interest rate swaps	-	-	178.3	178.3
Cash at bank and in hand	564.7	-	-	564.7
	__________	________	________	__________
	564.7	-	178.3	743.0
	__________	________	________	__________
Liabilities:
Interest rate swaps	-	-	(7.2)	(7.2)
Bank overdrafts	(3.6)	-	-	(3.6)
Bank loans	(6.9)	-	-	(6.9)
Senior notes	(2,020.6)	(28.4)	-	(2,049.0)
	__________	________	________	__________
Borrowings and overdrafts	(2,031.1)	(28.4)	-	(2,059.5)
	__________	________	________	__________
	(2,031.1)	(28.4)	(7.2)	(2,066.7)
	__________	________	________	__________
At 31 December 2016 - audited	(1,466.4)	(28.4)	171.1	(1,323.7)
	__________	________	________	__________

As part of the Group's debt portfolio it holds US$750m of senior notes issued in 2013 and US$408m (30 June 2016: US$600m; 31 December 2016: US$600m) of senior notes issued in 2010. At the time of issuance, US$250m of the 2013 senior notes and US$500m of the 2010 senior notes were swapped, using cross currency swaps, to euro. $92m of the 2010 senior notes swapped were repaid in January 2017. In addition, the Group holds €750m of senior notes issued in 2015, of which €175m were swapped, using cross currency swaps, to US dollar.

The adjustment to senior notes classified under liabilities at fair value through profit or loss of €25.8m (30 June 2016: €53.3m; 31 December 2016: €28.4m) represents the part adjustment to the carrying value of debt from applying fair value hedge accounting for interest rate risk. This amount is primarily offset by the fair value adjustment on the underlying cross currency interest rate swap.

ii)  The following table sets out the currency profile of the Group's net debt, highlighting the impact of cross currency swaps (CCS) on net debt:

	Pre CCS Half year ended 30 June 2017 €'m	Notional CCS Half year ended 30 June 2017 €'m	Post CCS Half year ended 30 June 2017 €'m	Half year ended 30 June 2016 €'m	Year ended 31 Dec. 2016 €'m
Euro	(447.7)	(401.9)	(849.6)	(960.4)	(789.5)
Sterling	165.8	-	165.8	62.1	116.8
US Dollar	(964.0)	401.9	(562.1)	(681.6)	(698.2)
Other	24.2	-	24.2	60.2	47.2
	_________	________	_________	_________	_________
	(1,221.7)	-	(1,221.7)	(1,519.7)	(1,323.7)
	_________	________	_________	_________	_________

iii)  The following table details the maturity profile of the Group's net debt:

	On demand & up to 1 year €'m	Up to 2 years €'m	2 - 5 years €'m	> 5 years €'m	Total €'m
Cash at bank and in hand	457.4	-	-	-	457.4
Interest rate swaps	-	-	76.6	34.5	111.1
Bank overdrafts	(7.5)	-	-	-	(7.5)
Bank loans	-	-	-	-	-
Senior notes	-	-	(307.5)	(1,475.2)	(1,782.7)
	________	________	_________	_________	_________
At 30 June 2017 - unaudited	449.9	-	(230.9)	(1,440.7)	(1,221.7)
	________	________	_________	_________	_________
Cash at bank and in hand	329.8	-	-	-	329.8
Interest rate swaps	19.8	-	56.8	84.5	161.1
Bank loans	(31.1)	-	-	-	(31.1)
Senior notes	(168.6)	-	(199.3)	(1,611.6)	(1,979.5)
	________	________	_________	_________	_________
At 30 June 2016 - unaudited	149.9	-	(142.5)	(1,527.1)	(1,519.7)
	________	________	_________	_________	_________
Cash at bank and in hand	564.7	-	-	-	564.7
Interest rate swaps	25.6	-	64.1	81.4	171.1
Bank overdrafts	(3.6)	-	-	-	(3.6)
Bank loans	(6.9)	-	-	-	(6.9)
Senior notes	(182.0)	-	(207.9)	(1,659.1)	(2,049.0)
	_________	________	_________	_________	_________
At 31 December 2016 - audited	397.8	-	(143.8)	(1,577.7)	(1,323.7)
	_________	________	_________	_________	_________

In April 2017, the Group exercised the second 1 year extension option on the 5 year €1,100m revolving credit facility as agreed in 2015.

At 30 June 2017, the Group had undrawn committed bank facilities of €1,100m, comprising primarily of a revolving credit facility maturing in 2022.

iv) Fair value of financial instruments

a) Fair value of financial instruments carried at fair value

Financial instruments recognised at fair value are analysed between those based on:

-     quoted prices in active markets for identical assets or liabilities (Level 1);

-     those involving inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly (as prices) or indirectly (derived from prices) (Level 2); and

-     those involving inputs for the assets or liabilities that are not based on observable market data (unobservable inputs) (Level 3).

	Fair Value Hierarchy	30 June 2017 Unaudited €'m	30 June 2016 Unaudited €'m	31 Dec. 2016 Audited €'m
Financial assets
Interest rate swaps	Level 2	111.7	161.1	178.3
Forward foreign exchange contracts	Level 2	56.0	23.5	54.8
Financial asset investments:        Fair value through profit or loss	Level 1	36.1	31.5	35.2
Available-for-sale	Level 3	4.1	4.1	4.1
Financial liabilities
Interest rate swaps	Level 2	(0.6)	-	(7.2)
Forward foreign exchange contracts	Level 2	(15.7)	(13.2)	(21.0)
		_________	_________	_________

There have been no transfers between levels and there was no movement for the financial asset investments categorised at Level 3 for the current period.

b) Fair value of financial instruments carried at amortised cost

Except as detailed in the following table, it is considered that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the Condensed Consolidated Interim Financial Statements approximate their fair values.

	Fair Value Hierarchy	Carrying Amount 30 June 2017 Unaudited €'m	Fair Value 30 June 2017 Unaudited €'m	Carrying Amount 30 June 2016 Unaudited €'m	Fair Value 30 June 2016 Unaudited €'m	Carrying Amount 31 Dec. 2016 Audited €'m	Fair Value 31 Dec. 2016 Audited €'m
Financial liabilities
Senior notes - Public	Level 2	(1,399.2)	(1,425.0)	(1,399.2)	(1,481.5)	(1,451.8)	(1,471.0)
Senior notes - Private	Level 2	(357.7)	(373.3)	(527.0)	(559.0)	(568.8)	(585.4)
		_________	_________	_________	_________	_________	_________
		(1,756.9)	(1,798.3)	(1,926.2)	(2,040.5)	(2,020.6)	(2,056.4)
		_________	_________	_________	_________	_________	_________

c) Valuation principles

The fair value of financial assets and liabilities are determined as follows:

-     assets and liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices;

-     other financial assets and liabilities (excluding derivatives) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments; and

-     derivative financial instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments. Forward foreign exchange contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates adjusted for counterparty credit risk, which is calculated based on credit default swaps of the respective counterparties. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates adjusted for counterparty credit risk which is calculated based on credit default swaps of the respective counterparties.

9. Share capital

Half year ended 30 June 2017 Unaudited €'m Half year ended 30 June 2016 Unaudited €'m Year ended 31 Dec. 2016 Audited €'m Authorised 280,000,000 A ordinary shares of 12.50 cent each 35.0 35.0 35.0 _________ _________ _________ Allotted, called-up and fully paid (A ordinary shares of 12.50 cent each) At beginning of the financial period 22.0 22.0 22.0 Shares issued during the financial period - - - _________ _________ _________ At end of financial period 22.0 22.0 22.0 _________ _________ _________

Kerry Group plc has one class of ordinary share which carries no right to fixed income.

Shares issued during the period

During the period, a total of 103,175 A ordinary shares were issued at the nominal value of 12.50 cent per share under the Group's Long Term Incentive Plan and Short Term Incentive Plans.

The total number of shares in issue at 30 June 2017 was 176,114,006 (30 June 2016: 175,981,485; 31 December 2016: 176,010,831).

10. Effect of exchange translation adjustments on the Condensed Consolidated Balance Sheet

	Half year ended 30 June 2017 Unaudited €'m	Half year ended 30 June 2016 Unaudited €'m	Year ended 31 Dec. 2016 Audited €'m
(Decrease)/increase in assets
Property, plant and equipment	(55.3)	(33.2)	(18.1)
Intangible assets	(94.5)	(50.6)	(28.9)
Financial asset investments	(2.7)	(1.4)	0.8
Inventories	(31.4)	(16.7)	(3.4)
Trade and other receivables	(26.5)	(13.0)	(9.1)
Cash at bank and in hand	(9.4)	(2.7)	(0.1)
Assets classified as held for sale	(0.1)	(0.3)	(1.0)
Deferred tax assets	(0.7)	-	0.1
Decrease/(increase) in liabilities
Trade and other payables	75.0	53.2	49.1
Tax liabilities	2.8	1.8	6.1
Financial liabilities	56.7	33.4	(23.7)
Retirement benefits obligation	7.7	5.9	12.9
Other non-current liabilities	10.0	5.0	(3.1)
Deferred tax liabilities	9.4	1.7	(6.4)
Provisions	(0.3)	2.6	6.8
Deferred income	0.3	0.2	-
Retained earnings	(1.8)	(0.8)	0.1
	_________	_________	_________
	(60.8)	(14.9)	(17.9)
	_________	_________	_________

The above exchange translation adjustments arise primarily on the retranslation of the Group's opening net investment in its foreign currency subsidiaries.

11. Business combinations

In March 2017 the Group acquired assets of Australia based Taste Master Limited, a leading flavours provider to the beverage, sweet & savoury snack and meat & culinary industries in Australia and New Zealand. In April 2017 the Group acquired China based Tianning Flavour & Fragrance Co. Ltd., which strengthens the Group's sweet and savoury flavour development capability in the Chinese food and beverage industry. In June 2017 the Group acquired Brazil based Ben Alimentos Ltda., which will allow the Group to serve increasing customer demand in the LATAM region, primarily through dry dairy technologies. 

The total consideration for these acquisitions was €97.4m, including a deferred element of €8.3m. Transaction expenses related to these acquisitions were charged against non-trading items in the Group's Condensed Consolidated Statement of Comprehensive Income during the period and represented less than one percent of the total consideration.

The provisional net assets acquired before combination were €37.0m and the Group recognised goodwill on these acquisitions of €60.4m. Given that the valuation of the fair value of assets and liabilities recently acquired is still in progress, these values are determined provisionally. The goodwill is attributable to the expected profitability, revenue growth, future market development and assembled workforce of the acquired businesses and the synergies expected to arise within the Group after the acquisitions. None of the goodwill is expected to be deductible for income tax purposes.

The acquisition method of accounting has been used to consolidate the businesses acquired in the Group's financial statements. Due to the fact that these acquisitions were recently completed, the revenue and results included in the Group's reported figures are not material. For the acquisitions completed in 2016 there have been no material revisions of the provisional fair value adjustments since the initial values were established.

12. Events after the balance sheet date

Since the period end, the Group has:

- proposed an interim dividend of 18.80 cent per A ordinary share (see note 6).

- progressed with the acquisition of the business of Hangman Flavours, based in Hangzhou, China - a leading producer of sweet and savoury flavours serving the beverage, ice cream, confectionery and snacks sectors in China.

There have been no other significant events, outside the ordinary course of business, affecting the Group since 30 June 2017.

13. General information

These unaudited Condensed Consolidated Interim Financial Statements for the half year ended 30 June 2017 are not full financial statements and were not reviewed by the auditors. The Board of Directors approved these Condensed Consolidated Interim Financial Statements on 9 August 2017. The figures disclosed relating to 31 December 2016 have been derived from the consolidated financial statements which were audited, received an unqualified audit report and have been filed with the Registrar of Companies.

These unaudited Condensed Consolidated Interim Financial Statements have been prepared on the going concern basis. The Directors report that they have satisfied themselves that the Group is a going concern, having adequate resources to continue in operational existence for the foreseeable future. In forming this view, the Directors have reviewed the Group's budget for a period not less than 12 months, the medium term plans as set out in the rolling five year plan, and have taken into account the cash flow implications of the plans, including proposed capital expenditure, and compared these with the Group's committed borrowing facilities and projected gearing ratios.

In relation to seasonality, trading profit is lower in the first half of the year due to the nature of the food business and stronger in December trading. While revenue is relatively evenly spread, margin has traditionally been higher in the second half of the year due to product mix and the timing of promotional activity. There is also a material change to the levels of working capital between December and June mainly due to the seasonal nature of the dairy and crop-based businesses.

As permitted by the Transparency (Directive 2004/109/EC) Regulations 2007 this Interim Report is available on www.kerrygroup.com. However, if a physical copy is required, please contact the Corporate Affairs department.

FINANCIAL DEFINITIONS

1.   Revenue

Volume growth

This represents the sales volume growth year-on-year from ongoing business, excluding volumes from acquisitions net of disposals.

Volume growth is an important metric as it is seen as the key driver of top-line business improvement. This is used as the key revenue metric, as Kerry operates a pass-through pricing model with its customers to cater for raw material price fluctuations. A full reconciliation to reported revenue growth is detailed in the revenue reconciliation below.

Revenue Reconciliation

		Volume growth	Price	Transaction currency	Translation currency	Acquisitions/ Disposals	Reported revenue growth
Taste & Nutrition		4.2%	1.7%	(0.1%)	0.4%	0.7%	6.9%
Consumer Foods		2.3%	1.9%	(1.4%)	(5.6%)	0.0%	(2.8%)
Group		3.8%	1.8%	(0.4%)	(1.0%)	0.6%	4.8%

2.   EBITDA

EBITDA represents profit after taxation and attributable to owners of the parent before finance income and costs, income taxes, depreciation (net), intangible asset amortisation and non-trading items.

	H1 2017		H1 2016
	€'m		€'m
Profit after taxation and attributable to owners of the parent	225.1		222.4
Finance income	(0.1)		(0.8)
Finance costs	34.5		39.9
Income taxes	31.5		33.7
Non-trading items	24.8		4.8
Intangible asset amortisation	22.6		21.6
Depreciation (net)	68.6		66.9
	_______		_______
	407.0		388.5
	_______		_______

3.   Trading Profit

Trading Profit refers to the operating profit generated by the businesses before intangible asset amortisation and gains or losses generated from non-trading items. Trading Profit represents operating profit before specific items that are not reflective of underlying trading performance and therefore hinder comparison of the trading performance of the Group's businesses, either year-on-year or with other businesses.

4.   Trading Margin

Trading Margin represents trading profit, expressed as a percentage of revenue.

5.   Non-trading Items

Non-trading items refers to gains or losses on the disposal of businesses, disposal of assets (non-current assets and assets classified as held for sale), costs in preparation of disposal of assets, material acquisition transaction costs and material acquisition integration and restructuring costs.

6.   Operating Profit

Operating profit is profit before income taxes, finance income and finance costs.

7.   Adjusted Earnings Per Share

In addition to the basic and diluted earnings per share, an adjusted earnings per share is also provided as it is considered more reflective of the Group's underlying trading performance. Adjusted earnings is profit after taxation and attributable to owners of the parent before brand related intangible asset amortisation and non-trading items (net of related tax). These items are excluded in order to assist in the understanding of underlying earnings. A full reconciliation of adjusted earnings per share is provided in note 5 of these Condensed Consolidated Interim Financial Statements.

	H1 2017	H1 2016
	EPS	EPS
	cent	cent
Basic earnings per share	127.6	126.4
Brand related intangible asset amortisation	6.1	5.8
Non-trading items (net of related tax)	10.1	1.6
	_________	_________
Adjusted earnings per share	143.8	133.8
	_________	_________

8.   Free Cash Flow

Free Cash Flow is trading profit plus depreciation, movement in average working capital, capital expenditure, pension costs less pension expense, finance costs paid (net) and income taxes paid.

Free Cash Flow is seen as an important indicator of the strength and quality of the business and of the availability to the Group of funds for reinvestment or for return to shareholders. Movement in average working capital is used when calculating free cash flow as management believes this provides a more accurate measure of the increase or decrease in working capital needed to support the business over the course of the period rather than at two distinct points in time. Movement in average working capital measures more accurately fluctuations caused by seasonality and other timing factors. Below is a reconciliation of free cash flow to the nearest IFRS measure, which is 'Net cash from operating activities'.

	H1 2017	H1 2016
	€'m	€'m
Net cash from operating activities	284.3	255.4
Difference between movement in average working capital and movement in the period end working capital	161.0	178.8
Expenditure on acquisition integration and restructuring costs	12.5	7.0
Purchase of assets	(103.4)	(73.5)
Proceeds from the sale of assets*	0.9	10.6
Capital grants received	0.1	-
Exchange translation adjustment	1.8	0.8
	_________	_________
Free Cash Flow	357.2	379.1
	_________	_________
*Assets represent property, plant and equipment.

9.   Financial Ratios

The Net debt: EBITDA and EBITDA: Net interest ratios disclosed are calculated in accordance with lender's facility agreements using an adjusted EBITDA, adjusted finance costs (net of finance income) and an adjusted net debt value to adjust for the impact of non-trading items, acquisitions net of disposals and deferred payments in relation to acquisitions. As outlined above these ratios are calculated in accordance with lender's facility agreements and these agreements specifically require these adjustments in the calculation.

 

END

 

 

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