31st May 2007 07:01
Greencore Group PLC31 May 2007 GREENCORE GROUP PLC INTERIM RESULTS FOR THE HALF YEAR ENDED 30 MARCH 2007 Greencore Group plc, one of Europe's leading convenience food producers, todayannounces a strong performance for the half year ended 30 March 2007 and goodprospects for the remainder of the year. HIGHLIGHTS- Group operating profit (pre-exceptionals) up 24% to EUR 40.0m- Profit before tax (pre-exceptionals) up 38% to EUR 35.4m- Continuing adjusted EPS* up 32% to 12.1 cent (total adjusted EPS* including discontinued Sugar operations for the first half of FY06 was 13.6 cent)- Continued progress in Convenience Foods division - 80% of Group operating profit - Turnover growth of 8.2% to EUR 478m - Operating profit growth of 5.0% to EUR 31.8m - Positive outlook for second half of FY07- Strong Malt recovery driving Ingredients, Agribusiness and Related Property division - 305% increase in continuing operating profit to EUR 8.2m - All ingredient businesses delivered turnover and operating profit growth- Net finance costs reduced by 32%- Full year adjusted EPS* outlook ahead of current market consensus of 25.8 cent by circa 10%- Continued focus on the strategic development of our category, channel and geographic positions * Before exceptional items, inter-company foreign exchange gains/losses and themovement in the fair value of all derivative financial instruments and relateddebt adjustments. COMMENTING ON THE RESULTS, GROUP CHIEF EXECUTIVE DAVID DILGER SAID: "We are delighted with these results. They reflect the significant momentumevident in every part of our business. In a demanding convenience food market,we continue to deliver strong sales and profit performance. Our Malt businesshas bounced back strongly and we believe we are adding real value to oursignificant property assets. As our businesses continue to progress, we areconfident that Greencore will deliver a strong performance for the full year." FOR FURTHER INFORMATION, PLEASE CONTACT: David Dilger Chief Executive Officer Tel: +353 1 605 1045Patrick Coveney Chief Financial Officer Tel: +353 1 605 1018Eoin Tonge Capital Markets Director Tel: +353 1 605 1036Billy Murphy/Anne Marie Curran Drury Communications Tel: +353 1 260 5000Rory Godson/Victoria Brough Powerscourt Tel: +44 207 250 1446 ABOUT GREENCORE - One of Europe's leading producers of convenience foods, as well as an established ingredients and agribusiness supplier with operations in Ireland, the UK, the Netherlands and Belgium- Europe's largest sandwich manufacturer, producing more than 200 million sandwiches per annum- The UK's largest Christmas cake manufacturer, with a 33% market share- The UK's largest producer of customer-branded mineral water, selling 190 million units per annum- The leading malt producer in Ireland, the UK and Belgium- Significant property assets in Ireland and the UK ------------------------------------------------------------------------------------------------------------------------SUMMARY Greencore has performed strongly in the first half of FY07, with significantprogress evident in all parts of the Group. The period under review reflects afurther step in the development of Greencore, with the Group reporting its firstresults following the full termination of the Irish sugar processing business. The Convenience Foods division, which accounted for 80% of Group operatingprofit in the first half of FY07, has continued to perform well. Turnover, atEUR 478m, was up 8.2% on the first half of FY06 - an excellent performance whencompared with the UK underlying total food market growth of 3.9%**. This salesperformance was driven, in particular, by strong market share growth at ourSandwiches, Prepared Foods, Mineral Water and Continental businesses. Operatingprofit, at EUR 31.8m, was up 5.0% on the first half of FY06, with strong tradingperformances across most of our categories compensating for ingredient,packaging and labour inflation, as well as for the negative impact of anelectrical fire at our largest Sandwiches facility in Manton Wood in earlyDecember. These results reflect both clear strategic choices in terms of thecategories and channels where we compete and continued excellent operationalperformance as delivered through our Total Lowest Cost ("TLC") and innovationinitiatives. The Ingredients, Agribusiness and Related Property division has made excellentprogress in the first half of FY07. Operating profits from continuingoperations were EUR 8.2m, a rise of 305%, albeit from an unsustainably low levelin FY06. Turnover from continuing operations has risen 19.5% to EUR 155m, withgood progress evident in all businesses. Central to this uplift has been thestrong recovery of our Malt business. Global malt markets have experienced asignificant recovery, reflecting a better balance between demand and capacity,continued concerns regarding the availability of quality malting barley and amore benign energy pricing environment. These industry developments, allied tothe positive impact of the changes we delivered in our Malt business in FY05 andFY06, as well as excellent operational and commercial performance, have driven asignificant but much needed profit improvement in this business in the firsthalf of FY07. In addition, the Group's property team has continued to makeprogress in adding value to our significant property assets. The Group's net finance charge for the period has been reduced by 32% to EUR5.4m, reflecting both an improvement in the net pension financing credit fromthe Group's defined benefit pension schemes and income arising on the increasein the present value of EU aid receivable. The Group's cash position hasimproved with comparable net debt at 30 March 2007 totalling EUR 393m, areduction of EUR 30m on the comparable period last year. The board of directors is recommending that the interim dividend be maintainedat the prior year level of 5.05 cent per share. ** Source: TNS 2007 ------------------------------------------------------------------------------------------------------------------------OUTLOOK The performance and prospects for Convenience Foods continue to be encouraging.Despite an inflationary raw material and labour cost environment and thenegative impact of the fire at Manton Wood, we expect to deliver good progressin Convenience Foods this year and believe the division is well positioned forfurther growth. The anticipated recovery in global malt markets is now established and we arepleased with how Greencore Malt is performing in this environment. We expectthat the current performance of the business will return Greencore Malt toacceptable levels of profitability and will deliver a strong profit improvementin FY07 and beyond. We are making real progress in the development of our Related Propertyportfolio. Whilst this will not significantly impact FY07 results, our actionsare focused on enabling the Group to create and access considerable value fromour property assets in future years. The reduction in the Group's net financing costs, evident in the first half, isexpected to continue for the full year. Overall, the momentum across the core parts of the Group's portfolio remainsstrong as we enter the seasonally more significant second half of the Group'sfinancial year. Against this positive backdrop and the expected full yearreduction in the Group's net financing cost, the Board's expectations for thefull financial year have improved such that adjusted earnings per share isanticipated to exceed the current market consensus level of 25.8 cent earningsper share for FY07 by circa 10%. ------------------------------------------------------------------------------------------------------------------------REVIEW OF OPERATIONS CONVENIENCE FOODS The Convenience Foods division, which accounted for 80% of Group operatingprofit in the first half of FY07, has continued to perform well. The period hasagain seen turnover growth, profit growth and strong margin performance in aninflationary environment. These results reflect the strong strategic positionsheld by our Convenience Foods businesses, as well as the excellent operationalperformance that we continue to deliver. Highlights for the period include: * Turnover growth at more than twice the underlying market rate The division has delivered strong organic sales growth. Turnover growth was 8.2% for the period compared to the overall UK food market growth rate of 3.9%**. Stronger sales growth in our Sandwiches, Prepared Foods, Mineral Water and Continental businesses drove this performance. * Strong margin performance in a demanding input cost environment The business succeeded in broadly maintaining first half operating margin levels (6.7% versus the comparable period figure of 6.9%), despite the following factors: - significant raw material, packaging and labour wage inflation; - an electrical fire in December at our largest manufacturing facility in Manton Wood which resulted in five days of lost production and significant disruption thereafter; - continued sales price deflation impacting the first half of FY07; and - increased investment in the capabilities needed to deliver our brand, channel, category and geographic development strategies. * Consistent performance across the division During the first half of FY07, seven of our nine businesses delivered sales growth at or above the UK food market growth rate. An exception was our Chilled Meals business which experienced a modest sales decline, reflecting a slowdown in the product areas where we compete. In response, we are putting in place a set of exciting customer and product range initiatives. These include plans to revitalise the Italian meals category, expand the WeightWatchers chilled meal franchise, launch Disney branded healthy children's meals and create new premium ethnic prepared meal ranges. The Board is pleased with this performance which represents the sixthconsecutive half-year period of operating profit growth. The consistentunderlying trajectory reflects a strong operational capability, driven by: * A relentless focus on TLC The culture of TLC in the Group has again driven operational cost improvements, totalling in excess of 2% of sales in the first half of FY07. More than 400 separate purchasing initiatives have helped offset some of the input price inflation and, in addition, the Group continues to deliver waste reduction and continuous improvement initiatives across all our categories. * Aggressive product innovation and mix management Just under half of our total product range has been introduced or refreshed in the last 12 months. The ability to execute this level of innovation is critical to delivering consumer excitement across our categories, while enhancing margin and driving strategy. * Well-invested food facilities The Group continues to make significant investment in our facilities to ensure their operational effectiveness and to provide a platform for growth. For example, in the first half of FY07, we invested in state-of-the-art bottle blow moulding and labelling equipment to enhance the capacity and efficiency of what is now the leading mineral water facility in Scotland. * Excellent customer service levels Average customer service levels across the division, as measured by 'right first time' delivery to customer order, have continued to exceed 99% during the period. Aligning this strong operational performance capability with a clear strategyhas been, and will continue to be, critical to delivering superior performanceand we continue to focus on the following areas: * Leadership of growing concentrated categories Greencore insists on attaining either No. 1 or No. 2 positions in all of the product categories where it competes. In this period, we made further progress with seven of our nine businesses delivering sales growth at or ahead of the market rate. We continue to look for opportunities to strengthen our leadership positions in each of our categories. For example, in Pickles, a sub-category within our Grocery business, we have consolidated our strong market position with the acquisition in February 2007 of Ross Pickles, a niche regional pickle business. * Broad channel exposure Sales to non-multiple customers accounted for 33% of the Group's turnover in the UK in the first half of FY07. This represents an increase of nearly 2 percentage points on the first half of FY06 and reflects delivery of some key new accounts in our Food-to-Go operation. * An increasing commitment to branded products The period has seen further development in the relationship with WeightWatchers, not only with chilled prepared meals now delivering annual retail sales of circa EUR 25m, but with the extension of the brand to our Chilled Sauces, Grocery and Quiche categories. The Group is actively seeking to leverage our strong market positions andoperational competencies to access new convenience food opportunities, bothwithin and beyond the UK. ** Source: TNS 2007 ------------------------------------------------------------------------------------------------------------------------INGREDIENTS, AGRIBUSINESS AND RELATED PROPERTY The Ingredients, Agribusiness and Related Property division has made a verystrong start to the year. Operating profits from continuing operations are up305% to EUR 8.2m, driven by turnover growth of 19.5% and much neededimprovements in margin performance. All our ingredient businesses havedelivered significant sales and operating profit growth. Malt accounts foralmost 60% of divisional turnover and the strong recovery of that business hasbeen central to the divisional performance in the first half of the year. Webelieve that the Group's property team has made considerable progress during thefirst six months of the year in adding value to our significant Related Propertysites. Malt Recovery The anticipated and much needed recovery in the malt industry cycle began toemerge in the late summer of 2006 and has continued into 2007. The drivers ofthis recovery are: * A better balance between industry capacity and demand Globally, the combination of robust beer consumption and a slowdown in the growth of malt capacity has led to a better balance between supply and demand in global malt markets. The restructuring of our Malt business in FY05 and FY06 played a significant part in delivering this balance within the UK and Ireland (markets where Greencore is the clear industry leader). * A more benign energy price environment Malt is an energy-intensive industry and energy inflation of more than 50% had a significant impact on industry performance in FY05 and FY06. Whilst energy prices remain high, the inflationary pressures of recent periods were not a factor in the period under review. * Concerns regarding barley quality and availability A catalyst for industry recovery was the reduction in availability of quality malting barley across global malt markets, a trend that became evident in late summer 2006. This barley scarcity was driven by a combination of reduced barley sowings (with farmers devoting more land to other uses) and poor harvests across the key barley markets. This drove up barley and malt prices as customers tried to secure the raw materials necessary for beer and whiskey production. Current indications are that concerns regarding the availability of quality barley across the key global markets may extend into 2008. Helped by restructuring investments in FY06, Greencore Malt's operationalefficiency and excellent performances across its three core geographies haveenabled the business to capitalise on these industry changes and to deliversignificant but necessary operating profit improvements in the first half ofFY07. Related Property Momentum Our Related Property business is managed by a specialist team and continues tofocus on maximising the value available to shareholders from all our propertyassets. In the first half of FY07, there was a modest contribution from RelatedProperty to the division's results. Strategically, the Group's propertybusiness continues to progress well across our principal Irish properties: * Carlow Gateway (333 acres) In November 2006, the Group submitted a comprehensive master plan, 'Carlow Gateway', to Carlow County Council and Laois County Council proposing a transformation of the former Irish Sugar site into an exciting mixed-use development for the town of Carlow. The timing for consideration of this submission is a matter for the respective county councils as part of their wider strategic plans for the area and we anticipate a decision by the end of the first half of FY08. * Mallow West (396 acres) In January 2007, the Group submitted its 'Mallow West' plan to Cork County Council as part of the Council's Mallow Special Local Area Plan ("SLAP"). If ultimately adopted, Mallow West will represent the largest integrated development in North Cork, comprising commercial, industrial, residential and leisure uses, including a hotel and a golf course. Cork County Council is expected to conclude its Mallow SLAP before September 2007. * Other Irish Sites (120 acres) We are working on a planning submission for 21 acres of a 40-acre site which was rezoned in FY06 and expect to make a formal planning application for commercial uses on this element of the site before the end of September 2007. In addition, we continue to make progress in adding value to a number of smaller Irish sites. Update on Sugar Exit The Group's exit from sugar is progressing, as envisaged in our RestructuringPlan. The judgement from the recent High Court judicial review of the Irishgovernment's decision on the allocation of EU aid is due to be issued on 14 June2007 and we remain confident regarding the Group's entitlement to EUrestructuring aid. ------------------------------------------------------------------------------------------------------------------------FINANCIAL REVIEW The results have been prepared in accordance with International FinancialReporting Standards (IFRS). Group operating profit (pre-exceptionals) of EUR 40.0m grew 24% compared withthe first half of last year. Strong profit before tax (pre-exceptionals) growthof 38% to EUR 35.4m also reflects a reduced net finance charge, driven by (i) anincrease in the net pension financing credit to EUR 5.1m (versus EUR 3.7m in thefirst half of FY06), (ii) a benefit of EUR 1.2m related to income arising on theincrease in the present value of EU aid receivable and (iii) a net gain of EUR3.6m (versus EUR 3.4m in the first half of FY06), resulting primarily from theimpact of marking-to-market our trading derivatives. Continuing adjusted EPSfor the first half of FY07 (stripping out exceptional items and the EUR 3.6mgain, primarily resulting from marking-to-market our trading derivatives) was12.1 cent versus 9.2 cent (stripping out discontinued Sugar and relatedactivities) in FY06. This is based on a weighted average number of ordinaryshares of 198.6m in the period (first half of FY06: 195.5m). Comparable net debt (excluding the impact of marking-to-market all derivativefinancial instruments and related debt) at 30 March 2007 was EUR 393.0m. Thisis a reduction of EUR 30.3m from March 2006, reflecting, in part, an improvedworking capital position following the Group's exit from sugar processing. Theunderlying focus on cash generation remains in place. Net interest costs oncomparable net debt were EUR 15.4m (first half of FY06: EUR 15.2m). The Group's tax charge on continuing operations (excluding associates) was EUR7.0m. The effective tax rate on continuing operations was 22.5%. The amount ofcash taxation continues to be well below the tax charge. In the period under review, the Group made an exceptional gain (net of tax) ofEUR 3.1m from the disposal of agri-businesses whose activities were closelyrelated to sugar processing. Significant capital investment was made in the period. Capital expenditureamounted to EUR 22.5m of which 85% was invested in Convenience Foods. The fair value of total plan assets relating to the Group's defined benefitpension schemes (excluding associates) increased to EUR 561.2m at March 2007from EUR 539.9m at September 2006. The present value of total pensionliabilities for these schemes increased to EUR 596.4m from EUR 591.5m over thesame period. This is reflected in a reduction in the net pension deficit(before related deferred tax) to EUR 35.2m at March 2007 (from EUR 51.6m atSeptember 2006). The primary Irish scheme, the Greencore Group Pension Scheme,had a surplus (before related deferred tax) of EUR 46.4m. E F Sullivan31 May 2007 ------------------------------------------------------------------------------------------------------------------------GROUP INCOME STATEMENTfor the half year ended 30 March 2007 Half year Half year Year ended ended ended 30 Mar 2007 31 Mar 2006 29 Sep 2006 (Unaudited) (Unaudited) (Audited) (Note 1) Pre - Except- Total Pre - Except- Total Pre - Excep- Total exceptional ional exceptional ional exceptional tional Notes Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000ContinuingoperationsRevenue 632,711 - 632,711 571,356 - 571,356 1,176,784 - 1,176,784Cost of sales (456,653) - (456,653) (406,263) (2,410)(408,673) (826,666) (181) (826,847) -------- -------- -------- -------- -------- -------- ---------- -------- ---------Gross profit 176,058 - 176,058 165,093 (2,410) 162,683 350,118 (181) 349,937Operating (136,012) - (136,012) (132,726) (562)(133,288) (275,508) 1,998 (273,510)costs, net -------- -------- -------- -------- -------- -------- ---------- -------- ---------Group 2 40,046 - 40,046 32,367 (2,972) 29,395 74,610 1,817 76,427operatingprofit/(loss)Finance income 6 21,227 - 21,227 18,062 - 18,062 35,929 - 35,929Finance costs 6 (26,672) - (26,672) (26,094) - (26,094) (54,002) - (54,002)Share of 823 - 823 1,387 - 1,387 2,848 - 2,848profit ofassociates(after tax) -------- -------- -------- -------- -------- -------- ---------- -------- ---------Profit/(loss) 35,424 - 35,424 25,722 (2,972) 22,750 59,385 1,817 61,202beforetaxationTaxation (6,976) - (6,976) (3,964) 1,190 (2,774) (11,447) 10 (11,437) -------- -------- -------- -------- -------- -------- ---------- -------- ---------Result for the 3 28,448 - 28,448 21,758 (1,782) 19,976 47,938 1,827 49,765period fromcontinuingoperations -------- -------- -------- -------- -------- -------- ---------- -------- ---------DiscontinuedoperationsProfit/(loss) 3 - 3,064 3,064 8,626 (43,753) (35,127) 19,398 (68,903) (49,505)fromdiscontinuedoperations -------- -------- -------- -------- -------- -------- ---------- -------- ---------Result for the 28,448 3,064 31,512 30,384 (45,535) (15,151) 67,336 (67,076) 260financialperiod -------- -------- -------- -------- -------- -------- ---------- -------- ---------Attributableto:Equity 27,571 3,064 30,635 29,966 (45,535) (15,569) 66,620 (67,076) (456)shareholdersMinority 877 - 877 418 - 418 716 - 716interests -------- -------- -------- -------- -------- -------- ---------- -------- --------- 28,448 3,064 31,512 30,384 (45,535) (15,151) 67,336 (67,076) 260 -------- -------- -------- -------- -------- -------- ---------- -------- ---------Earnings pershare for theperiod (cent) NotesContinuingoperationsBasic earnings 5 13.9 10.0 25.0per shareDiluted 5 13.9 10.0 24.9earnings pershare DiscontinuedoperationsBasic earnings 5 1.5 (18.0) (25.2)per shareDiluted 5 1.5 (17.9) (25.1)earnings pershare ------------------------------------------------------------------------------------------------------------------------GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSEfor the half year ended 30 March 2007 Half year Half year Year ended ended ended 30 Mar 2007 31 Mar 2006 29 Sep 2006 (Unaudited) (Unaudited) (Audited) (Note 1) EUR'000 EUR'000 EUR'000Items of income and expense taken directly within equityCurrency translation differences (884) 1,007 50Actuarial gain/(loss) on Group defined benefit pension schemes 7,617 47,018 11,187Deferred tax on Group defined benefit pension schemes 1,177 (8,581) (1,352)Share of actuarial gain/(loss) on defined benefit pension 894 1,399 490schemes of associates (net)Fair value of available for sale financial assets 82 (291) (406)Cash flow hedges: Gains taken to equity 58 (185) 389 Transferred to profit and loss for the period (246) (169) (169)Deferred tax on cash flow hedge 56 110 (66) ------------- ------------- -------------Net income/(expense) recognised directly within equity 8,754 40,308 10,123Group profit/(loss) for the period 31,512 (15,151) 260 ------------- ------------- -------------Total recognised income and expense for the period 40,266 25,157 10,383 ------------- ------------- ------------- Attributable to:Equity shareholders 39,389 24,739 9,667Minority interests 877 418 716 ------------- ------------- -------------Total recognised income and expense for the period 40,266 25,157 10,383 ------------- ------------- ------------- GROUP STATEMENT OF CHANGES IN EQUITYfor the half year ended 30 March 2007 Half year Half year Year ended ended ended 30 Mar 2007 31 Mar 2007 29 Sep 2006 (Unaudited) (Unaudited) (Audited) (Note 1) EUR'000 EUR'000 EUR'000 Total equity at beginning of the period 182,945 197,877 197,877Impact of adoption of IAS 32 & IAS 39 - (7,414) (7,414) ------------- ------------- -------------At beginning of the period, as adjusted 182,945 190,463 190,463Issue of share capital 4,389 2,810 8,352Employee share option expense 162 259 430Deferred tax on employee share option expense taken directly 33 - (283)within equityDividends (15,053) (14,853) (24,814)Movement in minority interests 778 271 (870)Total recognised income and expense for the period attributable 39,389 24,739 9,667to equity holders ------------- ------------- -------------Total equity at end of the period 212,643 203,689 182,945 ------------- ------------- ------------- ------------------------------------------------------------------------------------------------------------------------GROUP BALANCE SHEETas at 30 March 2007 30 Mar 2007 31 Mar 2006 29 Sep 2006 (Unaudited) (Unaudited) (Audited) (Note 1) EUR'000 EUR'000 EUR'000ASSETSNon-current assetsIntangible assets 355,543 352,989 353,897Property, plant and equipment 387,023 372,614 385,771Investment property 954 1,052 1,003Investments in associates 9,569 8,766 8,216Financial assets - 624 -Trade and other receivables - 123,699 56,508Retirement benefit assets 46,356 38,951 24,981Deferred tax assets 24,476 30,420 24,957 ------------- ------------- -------------Total non-current assets 823,921 929,115 855,333 ------------- ------------- ------------- Current assetsInventories 110,920 167,936 126,774Trade and other receivables 199,132 75,912 154,324Cash and cash equivalents 70,532 57,110 78,967Available for sale financial assets 612 - 530Derivative financial instruments 2,803 - 389 ------------- ------------- -------------Total current assets 383,999 300,958 360,984 ------------- ------------- -------------Total assets 1,207,920 1,230,073 1,216,317 ------------- ------------- ------------- EQUITYCapital and reserves attributable to equity holders of theCompanyShare capital 127,595 125,648 126,820Share premium 107,751 99,767 104,137Other reserves 1,800 3,075 2,572Retained earnings (28,853) (29,514) (54,156) ------------- ------------- ------------- 208,239 198,976 179,373Minority interest in equity 4,350 4,713 3,572 ------------- ------------- -------------Total equity 212,643 203,689 182,945 ------------- ------------- ------------- LIABILITIESNon-current liabilitiesBorrowings 426,069 460,998 433,657Derivative financial instruments 38,973 22,277 32,043Retirement benefit obligations 81,508 68,948 76,603Other payables 11,537 11,482 11,818Provisions for other liabilities and charges 13,937 16,990 14,422Deferred tax liabilities 42,114 49,243 42,202Government grants 1,121 1,439 1,182 ------------- ------------- -------------Total non-current liabilities 615,259 631,377 611,927 ------------- ------------- ------------- Current liabilitiesBorrowings 219 3 265Derivative financial instruments - 1,471 1,153Trade and other payables 323,945 326,397 362,285Provisions for other liabilities and charges 27,313 47,659 33,230Income taxes payable 28,541 19,477 24,512 ------------- ------------- -------------Total current liabilities 380,018 395,007 421,445 ------------- ------------- -------------Total liabilities 995,277 1,026,384 1,033,372 ------------- ------------- -------------Total equity and liabilities 1,207,920 1,230,073 1,216,317 ------------- ------------- ------------- ------------------------------------------------------------------------------------------------------------------------CONDENSED CONSOLIDATED CASH FLOW STATEMENTfor the half year ended 30 March 2007 Half year to Half year to Year end to 30 Mar 2007 31 Mar 2006 29 Sep 2006 (Unaudited) (Unaudited) (Audited) (Note 1) EUR'000 EUR'000 EUR'000 Cash flows from operating activitiesOperating profit (pre-exceptional) 40,046 32,367 74,610Profit on discontinued operations (pre-exceptional) - 9,728 21,991Depreciation (net of grants) 16,732 19,437 35,266Amortisation of intangibles 406 623 1,014Employee share option expense 162 259 430Difference between pension charge and cash contributions (3,143) 95 (3,692)(pre-exceptional)Changes in working capital (13,593) (43,173) (103)Other movements 217 37 (3,611) ------------- ------------- -------------Net cash inflow from operating activities before exceptional 40,827 19,373 125,905itemsNet cash outflow related to exceptional items (9,438) (3,449) (15,011)Interest paid (16,345) (16,055) (32,767)Taxes (paid)/received (251) 628 395 ------------- ------------- -------------Net cash inflow from operating activities 14,793 497 78,522 ------------- ------------- ------------- Cash flows from investing activitiesInterest received 755 895 2,139Dividends received from associates 537 59 1,205Business disposals 5,099 - -Cost of business acquired (1,036) - -Purchase of property, plant and equipment & intangibles, net of (22,456) (23,618) (47,951)grants ------------- ------------- -------------Net cash outflow from investing activities (17,101) (22,664) (44,607) ------------- ------------- ------------- Cash flows from financing activitiesProceeds from the issue of shares 133 175 1,183(Decrease) / increase in borrowings (348) 12,879 (9,527)Decrease in finance lease liabilities (53) (170) (1,944)Dividends paid to minority interests (99) (87) (1,586)Dividends paid to equity holders of the Company (5,687) (7,185) (17,470) ------------- ------------- -------------Net cash (outflow) / inflow from financing activities (6,054) 5,612 (29,344) ------------- ------------- ------------- Net (decrease) / increase in cash and cash equivalents (8,362) (16,555) 4,571Cash and cash equivalents at beginning of period 78,967 74,102 74,102Currency translation differences (73) (437) 294 ------------- ------------- -------------Cash and cash equivalents at end of period 70,532 57,110 78,967 ------------- ------------- ------------- ------------------------------------------------------------------------------------------------------------------------NOTESfor the half year ended 30 March 2007 1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS UNDER IFRS The financial information presented in this interim report has been prepared inaccordance with the Group's accounting policies under International FinancialReporting Standards (IFRS), as set out in the financial statements for the yearended 29 September 2006. The interim financial statements for the half year ended 30 March 2007 and thecomparative figures for the half year ended 31 March 2006 are unaudited. Thesummary financial statements for the year ended 29 September 2006 represent anabbreviated version of the Group's full accounts for that year, on which theAuditors issued an unqualified audit report and which have been filed with theRegistrar of Companies. In line with the requirements of IFRS, the income statement for the half yearended 31 March 2006 has been re-presented to show discontinued operations as aseparate line item. The remaining financial information for the half year ended31 March 2006, disclosed as comparative information in this interim report, hasbeen restated to facilitate consistent classification of items, consistent withthe classification of items in the interim statement for the half year ended 30March 2007 and the annual report for the year ended 29 September 2006. This interim statement for the half year ended 30 March 2007 is unaudited andwas approved by the board of directors on 30 May 2007. 2. SEGMENTAL REPORTING The Group's primary reporting segment, for which more detailed disclosures aremade, is by class of business. The Group has two primary reporting segments:(i) Convenience Foods and (ii) Ingredients, Agribusiness and Related Property. Revenue - half year Operating profit - half year 2007 2006 2007 2006 EUR '000 EUR '000 EUR '000 EUR '000ContinuingConvenience Foods 477,821 441,694 31,846 30,341Ingredients, Agri & Related Property 154,890 129,662 8,200 2,026DiscontinuedIngredients, Agri & Related Property - 86,696 - 9,728 ------------- ------------- ------------- -------------Total Group 632,711 658,052 40,046 42,095 ------------- ------------- ------------- ------------- 3. EXCEPTIONAL ITEMS The Group reports the following exceptional items (net of tax): Half year Half year 2007 2006 EUR '000 EUR '000 Gain on business disposals (a) 3,064 -Exit from sugar processing (b) - (43,753)Chilled Sauce business restructuring (c) - (2,069)Malt business restructuring (d) - (4,643)Malt legal settlement (e) - 4,930 ------------- ------------- 3,064 (45,535) ------------- ------------- (a) Gain on business disposals Exceptional gains of EUR 3.1m arose on the disposal of agribusinesses whoseactivities were closely related to sugar processing (a business which Greencoreexited during the year ended 29 September 2006). (b) Exit from sugar processing On 15 March 2006, Greencore announced its intention to exit sugar processing inIreland, renounce its quota and apply for the EU restructuring aid which isavailable under the Council Regulation (EC) No. 320/2006 (the Regulation). Thetotal EU restructuring aid available for the sugar quota renounced by Greencoreis EUR 145.5m. The Regulation states, inter alia, that at least 10% of therestructuring aid shall be reserved for sugar beet growers and machinerycontractors. The Regulation gives the Member State the responsibility todetermine if this percentage is to be increased but imposes on the Member Statethe requirement, using objective and non-discriminatory criteria, to ensure aneconomically sound balance between the elements of a restructuring plansubmitted by Greencore in accordance with the Regulation. In the half year ended 31 March 2006, the Board of Greencore, having takenindependent legal, economic and financial advice, determined that it wasentitled to 90% of the restructuring aid and recognised a receivable of EUR123.7m (the present value equivalent of EUR 130.9m - 90% of EUR 145.5m) in thefinancial statements. The exceptional loss (net of tax) of EUR 43.8mrepresented the estimate of the net cost (after taking account of theaforementioned restructuring aid) of the decision to exit sugar processing inIreland. On 12 July 2006, the Irish Government announced that it was allocating 67.6%(representing EUR 98.4m) to Greencore, with the balance of the EU aid to beallocated to sugar beet growers and machinery contractors. The Board ofGreencore rejected the basis of this allocation. That Government decision iscurrently subject to a judicial review in the Irish High Court. As a result ofthis contested Government decision, the Group regarded EUR 98.4m of therestructuring aid as virtually certain with the present value of that amount(being EUR 95.9m) included in the year ended September 2006 balance sheet as areceivable and netted against the related gross exceptional costs in the Groupincome statement. As at 29 September 2006, the net exceptional chargeassociated with the exit from sugar processing had been adjusted to EUR 68.9m. The balance of the Group's entitlement of EUR 32.5m cannot be regarded asvirtually certain and, therefore, is disclosed but not recognised as areceivable as at 29 September 2006 and 30 March 2007. The judgement from the abovementioned High Court judicial review is due to bereleased on 14 June 2007. (c) Chilled Sauces business restructuring Following a strategic review at Greencore Chilled Sauces, a decision was made toconsolidate all chilled sauce manufacturing at the Bristol facility and to closethe Chesterfield factory. The prior year exceptional loss represents the costsassociated with that decision (d) Malt business restructuring Greencore Malt closed three maltings during 2005 and continued restructuringthis business during 2006 with EUR 4.6m of exceptional costs incurred inrelation to that restructuring. (e) Malt legal settlement The Group settled an outstanding claim related to Greencore Malt at EUR 4.9m(net of costs). 4. DIVIDENDS An interim dividend of 5.05 cent (2006: 5.05 cent) per share is payable on 5October 2007 to the shareholders on the Register of Members as of 8 June 2007.The ordinary shares will be quoted ex-dividend from 6 June 2007. The dividendwill be subject to dividend withholding tax, although certain classes ofshareholders may qualify for exemption. The liability in respect of this interim dividend is not recognised in thebalance sheet of the Group for the half year ended 30 March 2007 because theinterim dividend had not been approved at this balance sheet date (but wassubsequently declared by the directors of the Company). 5. EARNINGS PER ORDINARY SHARE The calculation of the Group's basic earnings per ordinary share for continuingoperations is based on a profit of EUR 27.6m (H1 2006: profit of EUR 19.6m; fullyear 2006: profit of EUR 49.0m) and on 198.6m ordinary shares (H1 2006: 195.5m;full year 2006: 196.2m) being the weighted average number of ordinary shares inissue in the period. The calculation of basic earnings per ordinary share fromdiscontinued operations is based on a profit of EUR 3.1m (H1 2006: loss of EUR35.1m; full year 2006: loss of EUR 49.5m). Diluted earnings per ordinary share is calculated by adjusting the weightedaverage number of ordinary shares outstanding to assume conversion of allpotentially dilutive ordinary shares. The calculation of the diluted earningsper ordinary share for continuing operations is based on a profit of EUR 27.6m(H1 2006: profit of EUR 19.6m; full year 2006: profit of EUR 49.0m) and on199.1m ordinary shares (H1 2006: 196.2m; full year 2006: 196.9m) being theweighted average number of ordinary shares in issue assuming conversion of allpotentially dilutive ordinary shares. The calculation of diluted earnings perordinary share from discontinued operations is based on a profit of EUR 3.1m(H1 2006: loss of EUR 35.1m; full year 2006: loss of EUR 49.5m). The Group's adjusted earnings per share is after the elimination of theexceptional items reported in note 3, inter-company foreign exchange gains/(losses) and the movement in the fair value of derivative financial instrumentsand related debt adjustments. The Group separately presents adjusted earningsper share for continuing operations and discontinued operations. The calculation of adjusted earnings per ordinary share from continuingoperations is based on a pre-exceptional profit of EUR 27.6m (H1 2006: EUR21.3m; full year 2006 EUR 47.2m) adjusted for inter-company foreign exchange andthe fair value of derivative financial instruments and related debt totallingEUR 3.6m (H1 2006: EUR 3.4m; full year 2006: EUR 5.7m). The calculation ofadjusted earnings per ordinary share from discontinued operations is based on apre-exceptional profit of nil (H1 2006: EUR 8.6m; full year 2006 EUR 19.4m).The weighted average number of ordinary shares in issue during the period was198.6m (H1 2006: 195.5m; full year 2006: 196.2m). Half year Half year Full year 2007 2006 2006 cent cent centAdjusted EPS - continuing operations 12.1 9.2 21.2Adjusted EPS - discontinued operations - 4.4 9.9 ------------- ------------- -------------Adjusted EPS - total 12.1 13.6 31.1 ------------- ------------- ------------- 6. COMPONENTS OF NET DEBT AND FINANCING Half year Half year 2007 2006Net debt EUR '000 EUR '000Current assetsCash and cash equivalents 70,532 57,110Current liabilitiesBorrowings (219) (3)Non-current liabilitiesBorrowings before fair value adjustment (463,291) (480,420) ------------- -------------Comparable net debt (392,978) (423,313)Borrowings - fair value hedge adjustment (non-current liabilities) 37,222 19,422 ------------- -------------Group net debt (355,756) (403,891)Derivative financial instruments - fair value hedge (hedging instrumentsin non-current liabilities) (38,973) (20,341) ------------- ------------- (394,729) (424,232) ------------- ------------- Net finance costsNet finance costs on interest bearing cash and cash equivalents and (15,356) (15,202)borrowingsNet pension financing credit 5,077 3,749Change in fair value of derivatives, related debt adjustments and foreign 3,596 3,421exchange movements on inter-company balancesIncome arising on the increase in the present value of the EU receivable 1,238 - ------------- ------------- (5,445) (8,032) ------------- -------------Analysed as:Finance income 21,227 18,062Finance costs (26,672) (26,094) ------------- ------------- (5,445) (8,032) ------------- ------------- 7. 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:
Greencore