1st Mar 2005 07:00
Kerry Group PLC01 March 2005 Press Announcement 1 March 2005 Kerry Group plc Annual Results 2004 Kerry, the global ingredients, flavours and consumer foods group, reportspreliminary results for the year ended 31 December 2004. Financial Highlights • Group turnover exceeds €4 billion • Total sales growth of 11.8% • Like-for-like sales growth of 4.2% • Operating profit* increased by 13.1% to €349m • Operating margin* increased to 8.5% • Profit after tax* increased by 10.7% • Earnings per share* increased by 10.3% to 123.7 cent • Total 2004 dividend per share up 10.7% to 14 cent • Record free cash flow of €267m • Acquisition programme of €712m *before goodwill and exceptionals Kerry Group Chief Executive, Hugh Friel said: "In a busy year for the Group, oneof considerable change at consumer and food industry level, Kerry deliveredanother strong operational and financial performance. Sales exceeded €4 billionfor the first time and Group operating profit reached a new high of €349m in ayear when Kerry successfully completed a €712m acquisition programme whichsignificantly broadened the Group's technology and market base. I am confidentthat Group strategy will continue to deliver consistent growth in profits, cashflow and value for all stakeholders". Kerry Group plc Preliminary Statement Results for the year ended 31 December 2004 In 2004, Kerry Group delivered another strong result in terms of strategic andoperational development and success. The Group achieved strong growthorganically and through its acquisition programme, contributing record free cashgeneration, while making a significant investment in the future growth of itscore businesses. In a year marked by unparalleled attention to dietary,lifestyle, health and well-being issues, Kerry's unrelenting focus on innovationand technical development across all strategic business units contributedstrongly to the robust performance of its food ingredients and flavourtechnologies and to continued brand and category development in its consumerfoods businesses. Group turnover surpassed the €4 billion threshold for thefirst time, while further margin expansion was achieved, reflecting Kerry's corestrengths - consistency of performance, geographic spread and capability of theGroup to successfully grow and develop across a global platform. Extending itsrecord of uninterrupted profit growth over 19 years since the establishment ofthe Group as a public company in 1986, Kerry spent €111m on research anddevelopment and €712m on the Group's 2004 acquisition programme, broadening itsleading edge technology portfolio into bio-ingredients and pharma-ingredientsgrowth sectors and expanding its flavour and fragrance technical and regionalbase. Results Currency turbulence continued to be a feature of international trading in 2004.In particular, the continued depreciation of the US dollar exchange rate versusthe euro, again adversely impacted transaction and profit translation, whilesterling cashflows were impacted by the significant depreciation of sterlingversus the euro since 2002. Total Group turnover reported at €4.13 billionreflects an increase of 11.8% on the reported 2003 turnover level. On alike-for-like basis, adjusting for acquisitions and the impact of foreignexchange translation, total sales grew by 4.2% year-on-year. Operating profit before goodwill and exceptionals increased by 13% to €349m,reflecting like-for-like growth of 7% year-on-year. While all divisions wereactively engaged in support of Kerry's busiest acquisition programme to-date,nevertheless - in a very competitive year in major consumer markets - the Groupoperating margin increased by 10 basis points to 8.5%. Adjusted profit after tax increased by 10.7% to €230m. Earnings per sharebefore goodwill and exceptionals increased by 10.3% to 123.7 cent. Allowingfor goodwill and exceptional items, basic FRS3 earnings per share was reportedat 78.2 cent compared to 86.7 cent in 2003. Business Reviews Segmental analysis of business performance is presented by business (foodingredients and consumer foods) as the Group's primary reporting segment. Salesperformance on a geographical market basis by destination becomes the secondaryreporting segment. Food Ingredients In 2004, sales across Kerry's food ingredients businesses increased by 15.7% to€2.78 billion. When compared to 2003, this performance reflects like-for-likesales growth of 5%. Operating profits increased by 17.5% to €257m, representinga 9% increase on a like-for-like basis year-on-year. The operating marginincreased by 10 basis points to 9.2%. The Group's 2004 food ingredients acquisition programme contributed €274m insales and €23m operating profit. Significant progress was made during the yearunder review in advancing the Group's food ingredients activities in existingand emerging markets. In summary, the 2004 programme successfully extendedKerry's food ingredients and dairy proteins technology platform tobio-ingredients and pharma ingredients applications, broadened the Group'sflavour and fragrance technical and regional base, and also significantlyexpanded the Group's interests in the U.S. branded beverage foodservice andnatural food sectors. Acquisitions concluded during the year comprised: (a) Ingredients Markets Quest Food Ingredients, a leader in innovation and applications of bio-ingredients and pharma-ingredients, serving pharmaceutical, culinary, snack, bakery, dairy, beverage and confectionery markets worldwide. The acquisition completed on 30 April 2004, forms a new Kerry Bio-Science division, operating from nine manufacturing units located in Utrecht, Netherlands; Norwich NY, USA; Rochester MN, USA; Zwijndrecht, Netherlands; Esterol, Malaysia; Brantford, Canada; Cebu, Philippines; Cork, Ireland; and Menstrie, UK. The acquired business has well established leading global positions in bio-ingredients and pharma-ingredients - including protein hydrolysates, emulsifiers, yeast flavourings, enzymes, hydrocolloids, cultures and fermentation products. Cremo Ingredients, based in Glamsbjerg, Denmark, a leading supplier of dairy ingredients and flavourings to an extensive customer base in the savoury, convenience and snack food sectors throughout Europe and Asia. Jana's Classics, located in Tualatin, Oregon, USA, a world class provider of sweet ingredients and inclusions for use in frozen desserts, premium ice cream products and foodservice applications. Ernsts Food Ingredients, located in Penang, Malaysia, bringing additional manufacturing capacity to meet Kerry's growth objectives in the nutritional, beverage and snack sectors in South East Asian markets. b) Flavour and fragrance markets Mastertaste, the Group's flavour and fragrance business added the following businesses: Manheimer, a leading formulator and supplier of natural flavours for the beverage, confectionery, meat and soup industries from its state-of-the-art facilities based in New Jersey, USA. Manheimer Fragrances division develops and markets innovative fragrances for application in home environmental, personal care, household and industrial products. Flavurence, based in Los Angeles, specialising in natural fruit flavours, a major flavour supplier to food and beverage producers on the west coast of the USA. Laboratorios Krauss, based in Mexico, a supplier of sweet flavours to the food industry in Mexico, Latin America and the Caribbean. Fructamine, based in Mozzo, Bergamo in Northern Italy, a leading Italian producer of naturally extracted flavours, serving European savoury, bakery and soft drink markets. c) Foodservice Markets Oregon Chai, a leading U.S. branded supplier of natural Chai Tea Lattes and Chai Tea Latte mixes, concentrates and ready-to-drink products. Serving specialist foodservice beverage chains, grocery, club and natural food store channels throughout the U.S. and Canada, Oregon Chai is the recognised brand leader in both natural and organic segments of the speciality Chai tea market. Extreme Foods, a leader in developing and marketing branded ready-to-use ice blended flavoured beverages for the U.S. foodservice industry. Serving independent coffeehouses, national coffeehouse chains and department store in-house cafes, Extreme Foods produces unique ice-blended fruit smoothies and coffee frappes marketed under the JetTea and JetCafe brand names respectively. Development across ingredients and flavour markets in 2004 was driven by theincreased focus on the nutritional values of food and beverages and the demandfor natural, healthier alternatives coupled with on-going requirements forenhanced taste, texture and convenience. Kerry Ingredients and KerryBio-Science technologies benefited through the development of customised andapplication specific solutions to match customer requirements. In theready-to-eat cereals market Kerry Ingredients achieved strong growth throughpremium granolas, cereal inclusions, all-natural and organic lines. In thesavoury sector, despite increasingly competitive market conditions, the Group'scoatings and seasonings offerings performed well through innovative systems andcontinuing attention to business efficiencies across the Group's globalmanufacturing and technical facilities. While the focus on development of new formulations for managing carbohydratesacross food categories diminished towards year-end, nevertheless, application ofsoy proteins and soy systems continues to achieve growth rates well aboveindustry averages. The range and market expansion in the ready meals and ready-to-cook mealssectors, again provided a strong growth platform for culinary ingredients andMastertaste flavours. While the trend towards health and wellness is pervasive,demand for premium quality indulgence products continues to develop -particularly in chilled and frozen dairy products, desserts, confectionery andbeverage products. This has assisted performance across the Group's flavour,fruit preparations, dairy proteins and bio-ingredients business units. In 2004,a further major area of focus and considerable development for the Group'singredients and flavour businesses was in the fast-growing specialty flavouredbeverages sector. The trends toward 'clean labelling', high protein and convenience also greatlybenefited the newly established Kerry Bio-Science business. This led toincreased demand for fermented ingredients for enhanced shelf-life andanti-microbial applications. While low-carb trends adversely impacted thebakery industry in 2004, Kerry Bio-Science technologies, facilitating improvednatural shelf-life preservation and production of trans-free baked goods,achieved good growth. In the pharma sector, the Kerry Bio-Science Sheffield TM branded proteins andexcipient components continued to advance satisfactorily through new drugapprovals, particularly in the arthritis and diabetes treatment areas. Consumer Foods Against a backdrop of further consolidation at retail level and considerablechange in terms of consumer requirements in the Group's consumer foods markets(primarily Ireland and the UK), the resilience of the Kerry Food's businessmodel was again exemplified through the division's performance and results in2004. Divisional sales increased by 3% to €1.66 billion, reflectinglike-for-like sales growth of 2%. Operating profits increased by 2% to €116mand by 1% on a like-for-like basis. Accordingly, while satisfactory volumegrowth was achieved, the operating margin at 7% was slightly reduced relative tothe previous year due mainly to adverse currency transaction rates. Kerry Foods is a leading player in the chilled convenience food sector. Thesuccess of the division in out-performing industry growth rates stems from itsfocus on added-value categories, pro-active new product development based onconsumer insight and research, in addition to the strength and marketpositioning of its leading brands. The division's leading brands, Denny,Wall's, Richmond, Cheestrings, Charleville, Coleraine, Low Low, Golden Cow,Kerrymaid, Freshways, Dawn and Kerry Spring, all grew market share. Kerry Foods' customer branded retail business is also concentrated inadded-value convenience growth sectors. Solid growth was achieved in chilledand frozen ready meal categories and in chilled ready-to-cook meal solutions.In the poultry sector trading conditions remained extremely competitive.Operational difficulties at the Poole production facility continued to impact onperformance of the pastry business in 2004. Following the acquisition of theHibernia chilled patisserie facility in the UK in December 2003, excellentprogress was achieved in positioning the facility as a premium patisseriedesserts supplier. In the branded cream liqueur market, St. Brendan's achievedstrong value growth in the USA and in Scandinavia, but margins were loweryear-on-year due to the depreciation in the U.S. dollar to sterling exchangerate. Geographic Markets Europe Total sales across European markets increased by 9.3% to €2.7 billion. In European ingredients markets, sales increased by 18% to €1.2 billion,reflecting like-for-like sales growth of 4%. Development of culinary andflavour applications in the prepared meals sector provided good growthparticularly in the UK and Ireland. The growing ready meals market in Germanyalso provided good opportunities. Performance in seasonings and coatings inEurope was in line with industry trends. Kerry Ingredients recorded strongmarket development in Central / Eastern Europe, creating solid platforms forfuture growth. Fruit preparations benefited from the increased focus on healthand nutrition and through innovative syrups and smoothies into the fast growingfoodservice beverage sector. In line with increasing demand for functional,high protein and 'managed carbohydrates', Kerry made good progress throughspeciality ingredients and dairy protein developments from the Listowel andCharleville facilities. Kerry's speciality dairy division also established aSports and Lifestyle Nutrition commercial business unit focussing on theexpanding European sports, dietetic, health and wellness markets. CremoIngredients acquired during the year performed in line with expectations. As reported, the acquisition of Quest Food Ingredients was completed on 30April. The business has now been successfully established across global marketsas a new Kerry Bio-Science division. Bringing a number of new technologyplatforms to the Group, including protein hydrolysates, emulsifiers, yeastflavourings, enzymes, hydrocolloids, cultures and fermentation products, theacquired technologies add considerably to Kerry's capabilities in the areas ofnutrition, flavour, texture and shelf life of food and beverages. Goodprogress has already been achieved through fermented ingredients and enzymes,and a solid base has been established for the future development of the newlyacquired technologies. The acquisition also significantly strengthens Kerry'smarket position in Central European markets and in the Balkan countries, wheregood growth was achieved in the bakery and brewing industries. Following the acquisition of Fructamine, Mastertaste Italy is now the largestflavour supplier to the Italian market, with a complete portfolio across sweetand savoury markets. The acquisition also strengthens Mastertaste's base inFrance, Spain, Poland and Germany. The flavour division also saw continuedgrowth through its micro-gel encapsulation systems in the European confectioneryand dairy sectors. Strong growth in non-alcoholic flavoured beverages alsocontinued to provide solid flavour development opportunities for Mastertaste. Kerry Foods, the Group's consumer foods division recorded a 3% increase in salesto €1.66 billion. In Ireland, Denny performed well, driven by development ofthe brand within premium sectors - in particular Denny select premium flavouredsausages and Denny Deli Selection sliced meats. Freshways, the leadingmanufacturer and distributor of branded pre-packed sandwiches to the Irishmarket, achieved significant growth from the new Dublin based manufacturingfacility commissioned during 2004. Kerryfresh continued to grow its dedicatedofferings and service to the 'food-to-go' deli sector and specialist coffeechains. While the overall spreads market declined slightly, Kerry's Low Low,Golden Cow, Kerrymaid, Move over Butter and Golden Olive brands all grewyear-on-year. Kerry also continued to realise encouraging growth in the naturalcheese and cheese snacking sectors. Charleville Cheese consolidated itsposition as the leading brand in Ireland, while Coleraine Cheese also maintainedits brand leadership position in Northern Ireland. Dawn Omega Milk launched inthe Irish market in March 2004 made good progress. In the UK market, the cheese snacks sector grew by 17% year-on-year andcontinued investment in the Cheestrings brand contributed to its excellentperformance - surpassing industry growth rates. In 2004, Cheestrings was alsosuccessfully launched in France under the Ficello brand and progress to-date isencouraging. Kerry Foods again achieved significant growth in market share in the UK's threelargest food categories; ready meals, cooked meats and savoury pastry lines. Inthe ready meals sector, strongest growth was achieved in the 'meals for one',premium and healthy eating sectors of the market, in line with trends towardshigher quality, health awareness and individual meal occasions. In the UKsausage market, Richmond retained its position as brand leader, while Wall'sachieved good growth in its core range, through unique offerings such as MicroSausages and expansion of its premium family sausage range. Bowyers also grewmarket share through its 95% Fat Free offering. Despite the challengingconditions in the poultry sector in the UK and Ireland, Kerry continued todevelop its customer branded business in the turkey and duck categories withofferings across standard to organic primal meats and an extensive range of chefdeveloped added-value products. Rye Valley Foods continued to achieve positivegrowth in the static frozen ready meals category and again outperformed themarket in its ready-to-cook meal solutions business. Rye Valley alsosuccessfully re-positioned the former Hibernia chilled patisserie facility inBirmingham as a premium patisserie desserts supplier to leading UK retailers.Kerry Foods Direct to Store gained additional customer supply contracts in 2004and continued to grow in the food-to-go and impulse food convenience sectors inthe UK. Americas Kerry's ingredients and flavour businesses in American markets performed well in2004. Sales increased by 14% to €1.12 billion, reflecting like-for-like growthof 6% year-on-year. The heightened awareness of food values and health / wellness issues combined toincrease the pace of new product developments in North American markets -providing strong development opportunities for Kerry's breadth of technologies.In the sweet ingredients sector Kerry achieved good results in the premiumice-cream, ready-to-eat cereal, confectionery and bakery sector. Jana'sClassics acquired during the second half of the year has strengthened Kerry'stechnology base in the premium ice cream and frozen desserts sectors. Development in the nutritional bar segment declined as the impact of thelow-carb phenomenon eased later in the year. However, the nutritional /functional bar sector is expected to maintain a strong category presence in thenutritional snack market. The Nutriant line of organically processed soyproteins and soy specialties continued to broaden application into wider foodsegments. In savoury ingredients sectors, performance of Kerry's coatings andseasonings offerings improved considerably in 2004, with encouraging volumegrowth through meat seasonings and regional snack processors. Conditions in the specialty ingredients sector proved highly competitive asretail price pressures on branded food manufacturers curtailed necessary priceincreases. Kerry continued to achieve strong development into high growthsegments of the foodservice industry and through customised food and beveragecreations for retail / club private label markets. Growth through specialtybeverages and coffee syrups again proved most satisfactory. In 2004, Kerryadded to its offering and technologies in this sector through the acquisitionsof U.S. branded Oregon Chai, the market-leading brand of Chai tea, and ExtremeFoods' JetTea leading smoothie brand. In Mexican and Central American Markets, Kerry achieved good volume growththrough seasonings, bakery mixes and specialty dairy ingredients. A newfoodservice business unit was established in the region to market the division'srange of beverage brands and culinary products. Significant progress was madein South American markets in aligning the cost structure to business developmentneeds and in growing sales of sweet ingredients particularly in the ice creamsector and through seasonings in the meat industry. The newly acquired Kerry Bio-Science division made good progress in Americanmarkets, building on the bio-ingredients and pharma ingredients platformsestablished on acquisition of the former Quest Food Ingredients and Sheffield TMbranded pharma ingredients technologies. Good growth was achieved in thesavoury and bakery market sectors. Trends towards natural preservation, proteinsubstitution of carbohydrates and market gains in the emulsifier segmentassisted development in the bakery category. In the meat processing sector,Kerry Bio-Science gained market share through cultures and fermented shelf lifeprotectants, while carageenans and enzymes showed significant growth in thefoodservice and convenience sectors. In the brewing sector, Kerry Bio-Sciencegrew sales in Canada, Argentina and Brazil. In the USA the use of enzymes toproduce 'low-carb' beers increased but this was offset by reduced consumption intraditional segments and the growth of microbreweries also reached a plateau. In the pharma sector, building on its relationship with global pharmaceuticalcompanies, the Kerry Bio-Science division has a strong pharma project pipelinein protein and excipient components for fermentation, cell culture andproduction of pharmaceutical drugs. Mastertaste, the Group's flavour and fragrance division made good progress inAmerican markets in 2004. The division continued the integration of theacquired flavour and fragrance businesses, restructuring the North Americanbusinesses into technology focused business units; Flavours, Fragrance andNatural Products. In Natural Products, Mastertaste significantly advanced itsmarket and technology positioning through the acquisition of Manheimer andcombining the acquired business with the Sunpure and Crystals businessesacquired in 2003. Mastertaste transferred its Corporate Headquarters to theManheimer site located in Teterboro, New Jersey. In line with the trends in flavoured beverages, Mastertaste achieved stronggrowth in North American still and carbonated beverages. A new beverageemulsion plant was commissioned and production of citrus and apple flavours inFlorida was expanded to meet global demand. Good growth was also achievedthrough sweet flavours, dairy flavours and the recently acquired bakery flavourtechnologies. In 2004, Mastertaste made its first investment in the global fragrance sectorthrough the Manheimer acquisition. Manheimer Fragrances' primary focus is onthe Home Environmental and Personal Care markets. The business also has agrowing presence in the Household (Industrial and Institutional) marketsegments. In 2004, Manheimer maintained its market leading position in the homeenvironmental sector with continued growth through major candle manufacturers.Significant growth was also experienced in the automotive and personal carecategories. Asia Pacific Kerry achieved an excellent business performance in Asia Pacific markets in2004. Sales grew by 31% to €287m which represents 15% like-for-like growthyear-on-year. The strong performance of all business units in the region is most encouraging.Kerry Ingredients achieved good growth in Australia and New Zealand throughseasonings and coatings. In Australia the industrial meat sector provided goodopportunity and progress was achieved through flavoured marinades in the poultrysector. In New Zealand, the division recorded significant increases in snackseasonings and through coating systems into the added value poultry sectors.The quick-serve-restaurant market in Australia and New Zealand again grewsignificantly year-on-year. Kerry also made good progress in the specialityflavoured beverage sector in the region. Kerry Pinnacle which provides a rangeof specialist bakery ingredients to the Australian market benefited from theimproved performance of quality high street bakeries and the continued stronggrowth of franchise shop chains, complementing its strong position in bothsupermarket and route trade segments. The Pinnacle business also gained throughthe addition of Kerry Bio-Science bakery technologies. Kerry Ingredients Asia recorded a strong performance across all its coretechnologies; cheese snacks and biscuits, beverage applications, nutritionalbases and infant formulas, coatings and meat seasonings. Introduction of newflavours, textures and the health positioning of savoury snacks and biscuitsprovided a strong growth platform particularly for Kerry's cheese powdertechnologies. A major capital programme is underway to significantly expandproduction capacity at the Ernsts Food Ingredients facility in Penang, Malaysiawhich was acquired prior to year-end to meet the requirements of this sectoralgrowth market. The continuing strong growth of the infant formula markets, particularly inChina and South East Asia, also provided for double-digit growth in the sectorin 2004. Kerry also benefited from the major shift towards healthy beveragesincluding flavoured water, pure fruit and vegetable juices, and tea beverages. Despite the difficulties in the Asian poultry sector, Kerry grew its sales offlavoured marinades, coatings and meat seasonings in the added value poultry andmeat industries. Strong growth was also achieved in export seafood sectors. In Asia, the newly established Kerry Bio-Science division contributedsignificantly to the Group's strong performance in the region. Progress inline with market trends was achieved through its enzyme, fermentation, proteinsand emulsifier technologies in the growing nutrition, savoury, bakery, beverageand brewing industries. With the increasing focus by the Asian food industry onthe key areas of health, nutrition, and food safety, the strength and marketpositioning of Kerry Bio-Science technologies means that the division is wellpositioned to capitalise on such trends. Mastertaste flavours grew significantly through sweet and savoury flavours inAustralia and successfully launched flavour systems for the fast growing 'prepared rice market'. The flavour division has commenced a businessdevelopment programme in China. Building on its international customer base,Manheimer Fragrances has also made progress in establishing a business platformin this fast growing marketplace. Finance The Group achieved a record free cash flow in 2004. After a working capitalreduction of €40.2m, capital expenditure of €91.3m (net of proceeds from assetdisposals of €18.0m), interest payments of €45.8m, tax of €53.6m and dividendsof €24.5m, free cash flow available to the Group was €266.6m. Net debt at year-end amounted to €1.14 billion compared to the prior year-endlevel of €705m, notwithstanding record expenditure of €696m on the Group's 2004acquisition programme. Accordingly, debt to EBITDA increased from 1.9 times to2.6 times. Interest charges were €49m compared to the 2003 level of €37m, withEBITDA to interest covered 9.0 times (2003: 10.5 times). The restructuring of the Group's manufacturing base, as signalled at year-end2003 to maximise operational efficiencies in the aftermath of over 20acquisitions in the previous two years, was substantially completed during 2004.The integration of the Quest Food Ingredients acquisition was completed byyear-end. The cash cost of the restructuring programme was offset by the saleof non-core assets. Accounts from 1 January 2005 will be prepared in line with InternationalFinancial Reporting Standards. Post Balance Sheet Events Since year-end the Group has announced details of a €20m business developmentprogramme in China. The programme will significantly expand the Group's assetand customer base in China through the acquisition of Hangzhou Lanli FoodIndustry Company Limited ("Lanli") located in Hangzhou in the Zhejiang Provinceand through the establishment of a new world class multi-processingmanufacturing facility and technical centre on a 16 acre greenfield site in theHEDA Economic Zone (Hangzhou Economic and Technological Development Area). The acquisition of Lanli will be completed by the end of March 2005 and thegreenfield development programme will commence mid-year with all facilities tobe fully commissioned by year-end 2006. Development of Kerry's foodingredients and flavour technologies in China will be focused on the significantgrowth opportunities in the food processing and foodservice sectors -particularly in nutritional, dairy, flavoured noodle, brewing, flavouredbeverage, snack and bakery market segments. Dividend The Board has declared a final dividend of 9.5 cent per share, an increase of10.5% on 2003. Together with the interim dividend of 4.5 cent per share, thisraises the total dividend payment for the year to 14 cent per share, an increaseof 10.7% on the 2003 dividend. The final dividend will be paid on 27 May 2005to shareholders registered on the record date 29 April 2005. Annual Report and Annual General Meeting The Group's Annual Report will be published at the end of April and the AnnualGeneral Meeting will be held in Tralee on 24 May 2005. Future Prospects Group businesses are well positioned and fully committed to identifying,developing and application of leading edge ingredients and flavour technologiesto meet consumer nutritional and lifestyle requirements. Opportunities whichwill strengthen Kerry's leadership and global positioning in such technologieswill continue to be explored. Furthermore, with the continuing consolidation ofthe chilled foods processing sector in the UK and Ireland, the Group will alsoexplore complementary business expansion opportunities in its consumer foodscategories. The Group is confident that this strategy will continue to deliver consistentgrowth in profits, cash flow and value for all stakeholders. Trading to-date in2005 is good and again the Group expects to perform in line with market earningsexpectations for the full year. Results for the year ended 31 December 2004 Kerry Group plc Consolidated Profit and Loss Accountfor the year ended 31 December 2004 Pre Exceptional Exceptional Items Items Total 2004 2004 2004 2003 Notes •'000 •'000 •'000 •'000 TurnoverContinuing operations 3,854,502 - 3,854,502 3,693,410Acquisitions 274,234 - 274,234 - ___________ ___________ ___________ __________ 1 4,128,736 - 4,128,736 3,693,410 ___________ ___________ ___________ __________ Operating profit before intangible amortisation and exceptional itemsContinuing operations 325,961 - 325,961 308,519Acquisitions 22,945 - 22,945 - ___________ ___________ ___________ __________ 1 348,906 - 348,906 308,519 Goodwill and other intangible amortisation 69,252 - 69,252 48,103Exceptional restructuring costs 4 - 41,108 41,108 - ___________ ___________ ___________ __________Operating profit 1 279,654 (41,108) 238,546 260,416Profit on sale of fixed assets - 15,592 15,592 942Interest payable and similar charges 48,982 - 48,982 37,356 ___________ ___________ ___________ __________Profit before taxation 230,672 (25,516) 205,156 224,002Taxation 69,433 (10,062) 59,371 63,025 ___________ ___________ ___________ __________Profit after taxation and attributable to ordinary shareholders 161,239 (15,454) 145,785 160,977 Dividends - paid 8,483 - 8,483 7,625 - proposed 17,751 - 17,751 15,985 ___________ ___________ ___________ __________ 26,234 - 26,234 23,610 ___________ ___________ ___________ __________ Retained profit for the year 135,005 (15,454) 119,551 137,367 ___________ ___________ ___________ __________ Earnings per ordinary share (cent) - basic before intangible amortisation and exceptional items 5 123.7 112.1 - basic after intangible amortisation and exceptional items 5 78.2 86.7 - fully diluted after intangible amortisation and exceptional items 5 77.8 86.4 The financial statements were approved by the Board of Directors on 28 February 2005 and signed on its behalf by: Denis Buckley, Chairman Hugh Friel, Chief Executive Kerry Group plc Consolidated Balance Sheetas at 31 December 2004 2004 2003 •'000 •'000Fixed assetsTangible assets 968,480 844,701Intangible assets 1,283,237 837,301 ______________ _____________ 2,251,717 1,682,002Current assetsStocks 457,662 383,899Debtors 566,938 482,955Cash at bank and in hand 65,328 56,862 ______________ _____________ 1,089,928 923,716 Creditors: Amounts falling due within one year (858,305) (709,872) ______________ _____________Net current assets 231,623 213,844 ______________ _____________ Total assets less current liabilities 2,483,340 1,895,846Creditors: Amounts falling due after more than one year (1,350,908) (899,024)Provisions for liabilities and charges (60,681) (48,333) ______________ _____________ 1,071,751 948,489 ______________ _____________ Capital and reservesCalled-up equity share capital 23,356 23,234Capital conversion reserve fund 340 340Share premium account 375,032 365,229Profit and loss account 645,177 531,149 ______________ _____________ 1,043,905 919,952 Deferred income 27,846 28,537 ______________ _____________ 1,071,751 948,489 ______________ _____________ The financial statements were approved by the Board of Directors on 28 February 2005 and signed on its behalfby: Denis Buckley, Chairman Hugh Friel, Chief Executive Kerry Group plc Consolidated Cash Flow Statementfor the year ended 31 December 2004 2004 2003 •'000 •'000 Operating profit before intangible amortisation and exceptional items 348,906 308,519Depreciation (net) 92,655 83,827Change in working capital 41,110 9,138Exchange translation adjustment (914) (1,176) ______________ _____________Net cash inflow from operating activities 481,757 400,308 Return on investments and servicing of financeInterest received 383 943Interest paid (46,158) (41,717) Taxation (53,618) (40,476) Capital expenditure and financial investmentPurchase of fixed assets (110,235) (101,632)Proceeds on the sale of fixed assets 18,010 7,683Development grants received 907 1,194 Acquisitions and disposalsPurchase of subsidiary undertakings (695,701) (207,376)Proceeds on the sale of businesses - 1,264Deferred creditors paid (29,955) (5,532)Exceptional restructuring costs (16,785) (16,575)Consideration adjustment on previous acquisitions (935) (248) Equity dividends paid (24,468) (22,196) ______________ _____________Cash outflow before the use of liquid resources and financing (476,798) (24,360) FinancingIssue of share capital 9,925 2,287Increase / (decrease) in debt due within one year 43,263 (123,860)Increase in debt due after one year 432,076 156,211 ______________ _____________Increase in cash in the year 8,466 10,278 ______________ _____________ Reconciliation of Net Cash Flow to Movement in Net Debt 2004 2003for the year ended 31 December 2004 •'000 •'000 Increase in cash in the year 8,466 10,278Cash inflow from debt financing (475,339) (32,351) ______________ _____________Change in net debt resulting from cash flows (466,873) (22,073) Exchange translation adjustment on net debt 34,635 80,677 ______________ _____________Movement in net debt in the year (432,238) 58,604Net debt at beginning of year (705,200) (763,804) ______________ _____________Net debt at end of year (1,137,438) (705,200) ______________ _____________ Kerry Group plc Consolidated Statement of Total Recognised Gains and Lossesfor the year ended 31 December 2004 2004 2003 •'000 •'000 Profit attributable to the Group 145,785 160,977Exchange translation adjustment on foreign currency net investments (5,523) (24,230) _____________ ____________ Total recognised gains and losses relating to the year 140,262 136,747 _____________ ____________ Kerry Group plc Reconciliation of movements in equity shareholders' fundsfor the year ended 31 December 2004 Capital Share Capital Conversion Profit & Loss and Premium Reserve Fund Account Total •'000 •'000 •'000 •'000 At beginning of year 388,463 340 531,149 919,952Profit after taxation and attributable to ordinary shareholders - - 145,785 145,785Dividends - - (26,234) (26,234)Shares issued during year 10,021 - - 10,021Share issue costs (96) - - (96)Exchange translation adjustment - - (5,523) (5,523) ___________ ____________ ____________ ____________ At end of year 398,388 340 645,177 1,043,905 ___________ ____________ ____________ ____________ The Profit & Loss Account figures comprise the following: Intangible Assets Retained Profit & Loss Written Off Profits Account •'000 •'000 •'000 At beginning of year (527,802) 1,058,951 531,149Profit after taxation and attributable to ordinary shareholders (69,252) 215,037 145,785Dividends - (26,234) (26,234)Exchange translation adjustment - (5,523) (5,523) ___________ ___________ ___________ At end of year (597,054) 1,242,231 645,177 ___________ ___________ ___________ The exchange translation adjustment arises on the retranslation of the Group's opening net investment inits foreign currency subsidiaries. Kerry Group plc Notes to the Financial Statementsfor the year ended 31 December 2004 1. Analysis of results 2004 2003 Unallocated Unallocated and Group and Group Consumer Elimina Consumer Elimina-By business segment: Ingredients Foods -tions Total Ingredients Foods tions Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000Total turnover- Continuing operations 2,506,545 1,660,533 (312,576) 3,854,502 2,403,347 1,607,599 (317,536) 3,693,410- Acquisitions 274,234 - - 274,234 - - - - _________ _________ ________ _________ _________ _________ ________ _________ 2,780,779 1,660,533 (312,576) 4,128,736 2,403,347 1,607,599 (317,536) 3,693,410 _________ _________ ________ _________ _________ _________ ________ _________ Operating profit beforeintangible amortisation and exceptional items- Continuing operations 233,615 116,360 (24,014) 325,961 218,400 113,948 (23,829) 308,519- Acquisitions 22,945 - - 22,945 - - - - _________ _________ ________ _________ _________ _________ ________ _________ 256,560 116,360 (24,014) 348,906 218,400 113,948 (23,829) 308,519Goodwill and other intangible amortisation 42,311 4,387 22,554 69,252 30,010 3,578 14,515 48,103 _________ _________ ________ _________ _________ _________ ________ _________ Operating profit before exceptional items 214,249 111,973 (46,568) 279,654 188,390 110,370 (38,344) 260,416 _________ _________ ________ _________ _________ ________ Exceptional items 25,516 (942) _________ _________Profit before taxation and interest payable 254,138 261,358Interest payable 48,982 37,356 _________ _________Profit before taxation 205,156 224,002Taxation 59,371 63,025 _________ _________Profit after taxation and attributable to odinary shareholders 145,785 160,977 _________ _________ Segment assets and liabilities Segment assets 2,207,325 807,768 326,552 3,341,645 1,644,906 659,399 301,413 2,605,718 Segment liabilities 538,294 261,008 1,470,592 2,269,894 414,144 249,378 993,707 1,657,229 _________ _________ _________ _________ _________ _________ ________ _________ Net assets 1,669,031 546,760 (1,144,040) 1,071,751 1,230,762 410,021 (692,294) 948,489 _________ _________ _________ _________ _________ _________ ________ _________ Other segmental information Fixed asset additions 76,993 36,419 920 114,332 54,850 40,187 2,696 97,733 Depreciation (net) 57,493 34,243 919 92,655 51,783 31,221 823 83,827 2004 2003 Asia AsiaBy geographical area: Europe Americas Pacific Total Europe Americas Pacific Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Turnover by location of customers 2,721,074 1,120,884 286,778 4,128,736 2,490,041 984,809 218,560 3,693,410 Segment assets by location 2,274,952 921,346 145,347 3,341,645 1,844,474 667,933 93,311 2,605,718 Fixed asset additions 88,091 20,246 5,995 114,332 82,745 13,495 1,493 97,733 2. Accounting policies These accounts have been prepared using the same accounting policies detailed in the 2003 annual financial statements. 3. Basis of preparation and reporting currency The financial information set out in this document does not constitute full statutory accounts for the years ended 31December 2004 or 2003 but is derived from same. The 2004 and 2003 accounts have been audited and received unqualifiedaudit reports. The 2004 financial statements were approved by the Board of Directors on 28 February 2005. The financial statements are prepared under the historical cost convention and are presented in Euro. 4. Exceptional items 2004 2003 •'000 •'000 Exceptional restructuring costs (41,108) -Profit on sale of fixed assets 15,592 942 ____________ ____________ (25,516) 942 Tax credit / (charge) on exceptional items 10,062 (45) ____________ ____________ (15,454) 897 ____________ ____________ The exceptional restructuring costs in 2004 relate to the integration of Quest Food Ingredients, otheracquisitions made in 2004 and 2003 and the rationalisation of existing businesses. These costs are analysedas follows: 2004 2003 •'000 •'000 Plant closure and relocation 15,319 -Redundancies and contract compensation 13,858 -Plant and other assets written off 11,662 -Other 269 - ____________ ____________ 41,108 - ____________ ____________ The profit on sale of fixed assets in the year consists of €12,386,000 relating to the sale of financialfixed assets and €3,206,000 relating to the sale of tangible fixed assets. 5. Earnings per share EPS 2004 EPS 2003 cent •'000 cent •'000 Adjusted earnings * 123.7 230,491 112.1 208,183Goodwill and other intangible amortisation 37.2 69,252 25.9 48,103Exceptional items (net) (note 4) 8.3 15,454 (0.5) (897) _______ ________ _______ ________ Profit after taxation, intangible amortisation and exceptional items 78.2 145,785 86.7 160,977Share option dilution 0.4 - 0.3 - _______ ________ _______ ________ 77.8 145,785 86.4 160,977 _______ ________ _______ ________ The basic weighted average number of ordinary shares in issue for the year was 186,401,228 (2003:185,707,545). The diluted weighted average number of ordinary shares in issue for the year was 187,308,737(2003: 186,418,117). The dilution arises in respect of executive share options outstanding. In addition to the basic and diluted earnings per share, an earnings per share before intangible amortisationand net exceptional items calculation is also provided, as it more accurately reflects the Group's underlyingtrading performance. * Adjusted earnings is calculated as profit after taxation, before intangible amortisation and netexceptional items. Adjusted earnings per share is the adjusted earnings divided by the basic weightedaverage number of ordinary shares. For further information please contact: Frank HayesDirector of Corporate Affairs Tel no +353 66 7182304 Fax no +353 66 7182972Kerry Web Site: www.kerrygroup.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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