25th May 2005 07:00
Greencore Group PLC25 May 2005 GREENCORE GROUP PLCCONTACT: MS C M BERGIN TELEPHONE: +353 1 6051029 FAX: +353 1 6051104 INTERIM STATEMENT FOR THE HALF YEAR ENDED 25 MARCH 2005 FINANCIAL HIGHLIGHTS - 2% like-for-like sales growth, with 8% in the Convenience Food division- 2% like-for-like operating profit growth, with 23% in the Convenience Food division- Interest charge down 15% to EUR14.8 million- Profit before tax* up 8% to EUR32.6 million- Headline EPS* up 6% to 14.2 cent- Net debt down EUR44.3 million from March 2004* before exceptional item and goodwill amortisation BUSINESS HIGHLIGHTS - Strong performance from Convenience Food division- Continued execution of low cost leadership and customer strategies- Consolidation of sugar processing at one facility commenced- Two smaller maltings closed, with a third closure announced- Excellent sugar processing campaign, with record daily throughput achieved COMMENTING ON THE RESULTS, GREENCORE GROUP CHIEF EXECUTIVE, DAVID DILGER, SAID: "These results are evidence of the strong strategic, commercial and financial progress which the Group has made in the first six months of the financial year." WEDNESDAY, 25 May 2005 FOR FURTHER INFORMATION, PLEASE CONTACT: David Dilger, Chief Executive Tel: +353 1 605 1002Billy Murphy/Trish Morrissey, Drury Communications Tel: +353 1 260 5000Mark Garraway/Kate Pope, College Hill Tel: +44 7771 860 938 =======================================================================INTRODUCTION Greencore has made good strategic, commercial and financial progress in the first six months of this financial year. The inherent challenges in our industry continue to be more than offset by thequality of our market positions, the strong cash generative nature of ourportfolio and successful execution of our key strategic initiatives, mostparticularly: - our low cost leadership strategy- our customer strategy, with a balanced exposure to food retailers and increasing penetration into alternative channels As a result, our financial performance in the first half was strong across a range of fronts: - Like-for-like sales growth of 8% was achieved in our Convenience Food division.- Operating profit grew by 2% on a like-for-like basis, with a strong performance from the Convenience Food division which grew like-for-like profits by 23%.- Our interest charge declined by a further EUR2.5 million, or 15%, reflecting continued reductions in the amount and cost of the Group's indebtedness.- Profit before tax* grew by 8%.- Headline earnings per share* grew by 6%.- Net debt at the end of March 2005 was EUR417 million, EUR44 million below the level of March 2004. * before exceptional item and goodwill amortisation REVIEW OF OPERATIONS CONVENIENCE FOOD The Convenience Food division had a successful first half of the year. Like-for-like sales grew by 8% and operating margins increased from 5.7% to 6.6%,resulting in like-for-like operating profit growth of 23%. Profitability in the comparative period in 2004 was impacted by a lag inrecovering raw material inflation which amounted to EUR4.7 million, which wasoffset by price increases and therefore did not recur in the first half of thisyear. Input costs were broadly unchanged in the period, although energy costswere close to EUR2 million higher than in the comparative period. This division operates in a competitive marketplace. Customer consolidation isongoing, price competitiveness is a key measure by which many of our customersseek to differentiate themselves and their quality requirements are continuouslyincreasing. Furthermore, increasing branded promotional activity is noticeablein those categories which have branded alternatives. Evidence of the impact of these issues on our categories include: - The customer bases in sandwiches and more particularly pizza, although varied, are under-performing the market overall.- Retail price points on a standard quiche have again been reduced in the last two months, and are now some 20% below their level of four years ago.- Product presentation standards in sandwiches have increased markedly in the last twelve months, adversely impacting productivity.- Leading mineral water brands were on promotion for much of last winter in the UK. Against this backdrop, our initiatives ensured that the division increased itsoperating profit by some EUR5.4 million in the first half of the year. Top-line growth was assisted by the Group's ongoing strategy of balancing itsleading category positions with multiple food retailers by increasing itsconvenience food sales to other customers. Many of the division's categories -sandwiches, pizza, ambient sauces, frozen desserts and frozen savoury products -launched new ranges in alternative channels, including to airlines, conveniencestores, food service operators and fast food outlets. The two most substantial increases in activity in alternative channels in theperiod arose in the ambient sauce and sandwich categories. The ambient saucecategory substantially increased its sales to international branded foodmanufacturers, underpinned by a short-term contract to supply one customer whichwas temporarily unable to produce its own requirements. Sandwiches commenceddeliveries in the period to a national convenience store chain and is nowsupplying in excess of 1,400 of its outlets. The Group's continued focus on operational excellence and low cost leadershipdelivered further benefit in the period. Particular initiatives and examples ofsuccess in the period included: - Focusing on products where we have a particular competitive advantage by eliminating low volume, low margin lines: our frozen desserts category discontinued production of 20% of its product lines in the period. - Simplifying our processes through a reduction in the number of ingredients and suppliers: our sandwich category reduced its number of separate ingredients by 10% and its supplier base by close to 20%. - Focusing on process improvement, particularly in reducing waste and increasing automation and capacity: Several categories have achieved significant material waste reductions via increased training, additional measurement systems, more collaborative planning with customers and de-listing low selling lines. The performance of the automated line in our sandwich category continues to improve, whilst a third state-of-the-art line has been added at our quiche business. - Improving purchasing efficiency through increased cross-category purchasing: benefits have been generated both on ingredient spends and on non-resale items. - Focusing on cost reduction, most particularly a reduction in indirect labour and overheads, with each spend in every category being challenged. INGREDIENTS AND AGRIBUSINESS The Ingredients and Agribusiness division had a challenging first half. Like-for-like sales declined by 8%, operating margins reduced from 8.3% to 6.9% andoperating profit fell from EUR20.0 million to EUR15.3 million. The decline in sales is not an indicator of underperformance in the period: itoccurred, principally, because of lower 'C' sugar sales in Greencore Sugar andthe closure of uncompetitive capacity in the Group's Malt division. Nonetheless, the market conditions for both these businesses remain challenging. As indicated in the Preliminary Announcement last November, both businesses havesubstantial fuel requirements; higher costs of oil and other fuels impacted thedivision by in excess of EUR2 million in the period. In Greencore Sugar, the slowdown in demand from certain industrial customers astheir own sales come under pressure has continued. Furthermore, there is an EU-wide oversupply of sugar this year as a result of the European Commission'sdecision last September not to declassify temporarily any sugar quota, due toits inaccurate forecasting of sugar consumption and stock levels in the EU. This oversupply has contributed to increased price competition in the domesticsugar market, and also to a reduction in export prices. Competition has alsoincreased in advance, and in anticipation, of the impending reform of theEuropean sugar regime as processors attempt to build market share in Europeanmarkets in which they do not have a presence. This impending regime reform is the most significant market issue facingGreencore Sugar. The European Commission made indicative proposals for quotaand price reductions in July last year and a revised proposal is expected nextmonth. The Council of Ministers is expected to have reached agreement on reformby the end of this year, and it is likely to take effect from July 2006. In the Group's Malt division, international malt prices have softenedconsiderably, driven in part by new capacity being introduced, most particularlyin Russia. In addition, the level of decline in international barley prices hasnot been reflected in the UK and Ireland. The long-proven operational and low cost capability of both businesses hashelped counter these market conditions. Greencore Sugar closed its Carlowmanufacturing facility in the period and is consolidating all sugarmanufacturing at its Mallow site. The consolidation is essential to secure thesurvival of the Irish sugar processing industry in a more deregulated andcompetitive environment, and, to date, has proceeded to expectation, withagreements having been achieved with both grower and employee representativeswhich will underpin future competitiveness. An exceptional cost of EUR65.4million has been charged in the period to cater for this consolidation. The Malt division is also consolidating production into its larger, better-invested maltings. It closed two of its smaller maltings in the UK at the startof the period and announced the closure of its smaller Irish maltings atBanagher, which will be implemented by the end of the financial year. Theseinitiatives will enhance the overall competitiveness of the business. Once again, Greencore Sugar benefited from an excellent processing campaign. Although sugar content was below the exceptional levels of the previous year,both facilities achieved record daily throughput and all processing wascompleted just before Christmas. Following the closure of uncompetitive malt capacity, the Group's Malt divisionhas focused on domestic and higher grade export markets and withdrawn from lowercontribution export markets. In the first half of 2005, domestic deliveriesaccounted for 60% of all deliveries compared to 54% in 2004. FINANCIAL REVIEW Like-for-like sales grew by 2%, with an 8% increase in the Convenience Fooddivision. Overall operating margins remained at last year's level of 6.7% andcontinuing operating profit increased by 2% to EUR45.2 million. Share ofcontinuing profits from associates, net of share of interest, declined by EUR0.3million, with a decline in profitability at the Group's yeast associate thelargest contributor. Discontinued activities (comprising the Group's former UKbakery subsidiary and sugar distribution associate), which had been exited fromthe Group before the period under review, contributed EUR0.5 million in thefirst half of last year. Net interest declined by EUR2.5 million from EUR17.3 million to EUR14.8 million,reflecting a reduction in the amount and cost of the Group's indebtedness. Profit before tax, the exceptional item and goodwill amortisation increased by8%, or EUR2.5 million, from EUR30.1 million to EUR32.6 million. The tax charge of EUR4.4 million on ordinary activities compared to EUR3.9million in the first half of last year, with the effective rate increasing from12.9% to 13.5%. Headline earnings per share (adjusted to eliminate the exceptional item andgoodwill amortisation) increased by 6% from 13.4 cent to 14.2 cent. An interimdividend of 5.05 cent per share will be paid, which is in line with last year'slevel. Qualifying shareholders will again be offered the option of receivingdividends in the form of cash or shares. An exceptional cost of EUR65.4 million, net of tax, was charged in the period,arising from the consolidation of all of the Group's sugar production at itsMallow site. This arose, principally, from asset write-offs, redundancies andother costs of closing the Carlow processing facility. Significant capital investment was made in the period. Capital expenditureamounted to EUR21.0 million, compared to depreciation of EUR20.9 million. Nonetheless, net debt at the end of the period under review of EUR417.1 millionwas more than EUR44 million below the level at the end of March 2004. Net debtincreased by EUR30 million from the level at the end of September 2004,reflecting the seasonal working capital uplift at Greencore Sugar of EUR36million, a consequence of the timing of its annual processing campaign, and thecommencement of the spend on redundancies and capital expenditure arising fromthe consolidation of the Group's sugar processing activities, which amounted toEUR13 million in the period. OUTLOOK Challenging market conditions persist. However, the Board is confident that theGroup will continue to make good returns as a result of its leading marketpositions, the strong cash generative nature of its portfolio and the successfulexecution of its chosen strategies. E F Sullivan 25 May 2005 NOTE Like-for-like sales and profits are calculated on a constant currency basis from continuing operations. ======================================================================= CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED) Half year ended 25 March 2005 Half Year to 25 March 2005 Half Year to 25 March 2004 Before Exceptional Total exceptional item and item and goodwill goodwill amortisation amortisation Notes EUR'000 EUR'000 EUR'000 EUR'000TurnoverContinuing operations 2 677,336 - 677,336 669,149Discontinued operations - - - 44,242 -------------- -------------- -------------- -------------- 2 677,336 - 677,336 713,391 -------------- -------------- -------------- --------------Operating profit before goodwillamortisation and exceptional itemContinuing operations 2 45,200 - 45,200 44,504Discontinued operations - - - -456 -------------- -------------- -------------- -------------- 2 45,200 - 45,200 44,048Goodwill amortisation - -10,304 -10,304 -10,701 -------------- -------------- -------------- --------------Operating profit 45,200 -10,304 34,896 33,347 Share of operating profit of associatedundertakingsContinuing operations 2,301 - 2,301 2,539Discontinued operations - - - 1,001 -------------- -------------- -------------- -------------- 47,501 -10,304 37,197 36,887Exceptional itemFundamental reorganisationof Greencore Sugar 3 - -71,600 -71,600 - -------------- -------------- -------------- --------------Profit/(loss) before interest andtaxation 47,501 -81,904 -34,403 36,887 Net interest payable -14,762 - -14,762 -17,295Amortisation of issue costs of financefacility - - - -1,266Share of interest payable - associates -182 - -182 -162 -------------- -------------- -------------- --------------Profit/(loss) before taxation 32,557 -81,904 -49,347 18,164Taxation -4,395 6,240 1,845 -3,887 -------------- -------------- -------------- --------------Profit/(loss) after taxation 28,162 -75,664 -47,502 14,277Minority interests -943 - -943 -982 -------------- -------------- -------------- --------------Profit/(loss) attributable to Groupshareholders 27,219 -75,664 -48,445 13,295Dividends 4 -9,804 - -9,804 -9,630 -------------- -------------- -------------- --------------Retained profit/(loss) 17,415 -75,664 -58,249 3,665 ======= ========= ========= ========= Adjusted earnings per ordinary share 5 14.2c 13.4cBasic earnings/(loss) per ordinary 5 -25.2c 7.0cshareDiluted earnings/(loss) per ordinary 5 -25.0c 7.0cshareDividend per ordinary share 4 5.05c 5.05c ======================================================================= CONSOLIDATED BALANCE SHEET At 25 March 2005 25 March 26 March 24 September 2005 2004 2004 (Unaudited) (Unaudited) (Audited) EUR'000 EUR'000 EUR'000 Fixed assetsIntangible assets 326,561 359,647 336,865Tangible assets 494,860 568,527 541,786Financial assets 11,590 14,517 12,409 ------------- ------------- ------------- 833,011 942,691 891,060 ------------- ------------- -------------Current assetsStocks 188,615 200,486 141,279Debtors 92,909 99,782 130,771Cash and bank balances 97,492 93,122 86,278 ------------- ------------- ------------- 379,016 393,390 358,328 CreditorsAmounts falling due within one year 410,649 485,862 410,942 ------------- ------------- ------------- Net current liabilities -31,633 -92,472 -52,614 ------------- ------------- ------------- Total assets less current liabilities 801,378 850,219 838,446 ------------- ------------- ------------- CreditorsAmounts falling due after more than one year 521,651 510,880 493,166Provisions for liabilities and charges 36,637 39,676 46,142Development grants 1,741 772 1,634 ------------- ------------- ------------- 560,029 551,328 540,942 ------------- ------------- -------------Net assets 241,349 298,891 297,504 ======= ======= ======= Capital and reservesCalled up share capital 123,841 122,202 123,647Capital conversion reserve fund 934 934 934Share premium account 93,149 87,700 92,459Profit and loss account/other reserves 18,081 82,129 75,945 ------------- ------------- -------------Shareholders' funds - equity interests 236,005 292,965 292,985Minority interests - equity interests 5,344 5,926 4,519 ------------- ------------- ------------- 241,349 298,891 297,504 ======== ======== ======== ======================================================================= CONSOLIDATED CASH FLOW STATEMENT Half year ended 25 March 2005 Half Year to Half Year to 25 March 26 March 2005 2004 (Unaudited) (Unaudited) EUR'000 EUR'000 Operating activitiesOperating profit 45,200 44,048Depreciation (net of grant amortisation) 20,602 21,964Changes in working capital -45,607 -35,753Other movements 958 -1,589Capital expenditure (net) -20,990 -24,194 ------------- ------------- Cash flow from operating activities 163 4,476Dividends from associates 1,835 4,900Returns on investments and servicing of finance -15,696 -21,105Rationalisation costs at Greencore Sugar -11,567 -Taxation -123 2,122Proceeds on issue of share capital 212 111Equity dividends paid -8,925 -9,219 ------------- ------------- Net cash flow -34,101 -18,715Translation differences 4,403 -12,644 ------------- -------------Movement in net debt in period -29,698 -31,359Net debt at start of period -387,390 -430,049 ------------- -------------Net debt at end of period -417,088 -461,408 ========== ========== ======================================================================= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Half year ended 25 March 2005 Half Year to Half Year to Full Year to 25 March 26 March 24 September 2005 2004 2004 (Unaudited) (Unaudited) (Audited) EUR'000 EUR'000 EUR'000 Profit/(loss) for period attributable to Group -48,445 13,295 -16,858shareholdersExchange adjustments 385 -4,620 -6,229 ------------- ------------- -------------Total recognised gain/(loss) for the period -48,060 8,675 -23,087 ======== ======== ======== ======================================================================= NOTES Half year ended 25 March 2005 1. BASIS OF PREPARATION The interim statement for the six months to 25 March 2005 is unaudited and wasapproved by the Board on 24 May 2005. The information has been prepared on thebasis of the accounting policies set out in the Group's annual report for theyear ended 24 September 2004. The balance sheet information for 24 September2004 represents the audited balance sheet from the Group's full accounts forthat year on which the Auditors issued an unqualified audit report and whichhave been filed with the Registrar of Companies. 2. ANALYSIS OF RESULTS BY ACTIVITY Turnover Operating Profit* Half Year Half Year 2005 2004 2005 2004 EUR'000 EUR'000 EUR'000 EUR'000Total GroupConvenience Food 455,339 470,021 29,868 24,009Ingredients and Agribusiness 221,997 243,370 15,332 20,039 ------------- ------------- ------------- ------------- 677,336 713,391 45,200 44,048 ------------- ------------- ------------- -------------Continuing ActivitiesConvenience Food 455,339 426,933 29,868 24,465Ingredients and Agribusiness 221,997 242,216 15,332 20,039 ------------- ------------- ------------- ------------- 677,336 669,149 45,200 44,504 ------------- ------------- ------------- ------------- *Pre goodwill amortisation and exceptional item 3. EXCEPTIONAL ITEM Following a strategic review of Greencore Sugar in anticipation of pendingreform of the EU sugar regime and the increasingly competitive nature of itsmarkets, a decision was made in January 2005 to consolidate all sugarmanufacturing at Mallow and to close the Carlow facility. The current year exceptional loss represents the costs associated with thisdecision. A net tax credit of EUR6.24 million was recorded on the exceptionalitem. There were no exceptional items in the prior period. 4. DIVIDENDS The interim dividend of 5.05 cent (2004: 5.05 cent) per share is payable on 4October 2005 to shareholders on the Register of Members as at 3 June 2005. Theordinary shares will be quoted ex-dividend from 1 June 2005. The dividend willbe subject to dividend withholding tax, although certain classes of shareholdersmay qualify for exemption. 5. EARNINGS PER ORDINARY SHARE The calculation of earnings per ordinary share is based on a loss of EUR48.4million (2004: a profit of EUR13.3 million) and on 192.3 million ordinary shares(2004: 189.0 million), being the weighted average number of ordinary shares inissue in the period. The calculation of adjusted earnings per ordinary share isafter adjusting for the exceptional item and goodwill amortisation. The dilutedearnings per ordinary share has been calculated on the basis of 193.4 millionordinary shares (2004: 191.1 million). The calculation of earnings per ordinaryshare excludes 4.2 million treasury shares (2004: 4.9 million) arising from theshare repurchase programme. 6. INFORMATION The interim statement is being sent to registered shareholders by post orelectronically to those who have elected for the Electronic ShareholderCommunications option. Copies are also available from the Company's registered office at St. Stephen'sGreen House, Earlsfort Terrace, Dublin 2, Ireland, and from its registrar,Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road,Sandyford Industrial Estate, Dublin 18, Ireland. The statement will also beavailable on the Company's website at www.greencore.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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