31st Aug 2005 07:01
Glanbia PLC31 August 2005 NEWS RELEASE Glanbia plcCorporate Communications Glanbia HouseTelephone + 353 56 7772200 Kilkenny IrelandFacsimile + 353 56 7750834www.glanbia.com 2005 Interim Results For further information contact Glanbia plc Hogarth Partnership UK+353 56 777 2200 +44 207 357 9477Geoff Meagher, John Olsen Deputy Group Managing Director/Group Finance Director Geraldine Kearney, Corporate Communications + 353 87 231 9430 GLANBIA FIRST HALF EARNINGS BROADLY IN LINE WITH 2004 STRATEGIC INITIATIVES PROGRESSING WELL 31 August 2005 - Glanbia plc, an international Consumer Foods, Food Ingredientsand Nutritionals Group, announces its interim results for the half-year ended 2July 2005. These interim results are prepared under International FinancialReporting Standards (IFRS), which the Group expects to be effective at 31December 2005 and all comparisons are based on a restatement of 2004 financialinformation. The impact on the key financial data for the year 2004 issummarised on page 15 of these results and a detailed IFRS restatement documentwas released simultaneously, and is available on the Group's website atwww.glanbia.com. Interim Results Analysis (1)Profit after tax at the half year was broadly similar to the first half of 2004.A good performance in the US Food Ingredients business and satisfactory progressin other areas of operation was offset by a difficult first half in theAgribusiness division and the chilled foods segment of the Consumer Foodsdivision, where challenging market conditions and further rationalisation toimprove competitiveness affected results. Strategic investments in Nigeria andNew Mexico are on schedule and to plan, and the evolving Nutritionals businessdelivered solid organic growth. 2 July 2 July 3 July 2005 2005 2004 Pre Exceptional Total (2) Pre exceptional exceptional •'000 •'000 •'000 •'000Turnover up€45.7m 926,127 926,127 880,412-------------------------------------------------------------------------------Operating profitpre exceptionaldown €3.1m 38,328 (2,431) 35,897 41,390 • Exceptional includes €6.3 million rationalisation costs at the Consumer Foods division, offset by a foreign exchange credit of €3.9 million, arising from the implementation of IFRS.-------------------------------------------------------------------------------Total financing costs pre exceptional down€2.0m (3)Group interest (7,725) (5,304) (13,029) (4,073)Non-equity minority interest (5,602) • Total financing costs pre exceptional down €2.0m to €7.7m in H1 2005, compared with €9.7m in H1 2004. • Exceptional is the cancellation cost of $100m preferred securities, which were prepaid in June 2005 as part of an overall refinancing of the Group.-------------------------------------------------------------------------------Profit before tax (4) pre exceptional, on a comparablebasis (5) down €0.8m 30,641 (7,735) 22,906 31,466-------------------------------------------------------------------------------Taxation (3,947) 7,454 3,507 (5,037) • Exceptional is a tax credit relating to a prior business disposal.-------------------------------------------------------------------------------Profit after tax (5) on acomparable basis 26,694 (281) 26,413 26,429===============================================================================(1) Continuing operations.(2) Profit after tax and exceptional on a comparable basis for the period ended 3 July 2004 amounted to €26.5 million.(3) Due to the timing of the implementation of the relevant IFRS standards, interest on preferred securities and preference shares is shown in the income statement as part of group interest in H1 2005 and as non-equity minority interest in H1 2004.(4) Including share of profit of joint ventures and associates (H1 2005: €38,000 profit and H1 2004: €249,000 loss).(5) After total financing costs (group interest plus non-equity minority interest) of €7.7m in H1 2005 and €9.7m in H1 2004. Interim Results Analysis (1) continued 2 July 3 July 2004 2005 Operating margin pre exceptional 4.1% 4.7% • Margin erosion is primarily as a consequence of the decline in operating margin in Agribusiness and the chilled foods segment of the Consumer Foods division.-------------------------------------------------------------------------------Earnings per share 9.01c 9.03c-------------------------------------------------------------------------------Adjusted earnings per share 9.10c 8.99c-------------------------------------------------------------------------------Interim dividend up 5% 2.27c 2.16c------------------------------------------------------------------------------- John Moloney, Group Managing Director, said today:"The Group's performance at the half year was broadly in line with the firsthalf of 2004. A good performance in the US cheese business and satisfactoryprogress in other areas of operation were offset by a difficult first half inthe Agribusiness division and the chilled foods segment of the Consumer Foodsdivision. This arose from the ongoing effects of the implementation of MTR onfarming and the dairy sector, a competitive market environment in Ireland andadditional rationalisation to improve cost effectiveness and productivity. The strategic developments in Nigeria, New Mexico and Europe, and the evolvingNutritionals business, are all progressing well. The trading environment in Ireland is expected to remain challenging for theremainder of this year. We have taken strong proactive measures on costs,productivity and market positioning and the benefits of these initiatives willflow through during the next year. Given the current difficult tradingenvironment we expect earnings for 2005 to be broadly in line with 2004. Glanbiacontinues to make solid underlying strategic and operational progress and we areconfident of the Group's future prospects. " 31 August 2005 ABOUT GLANBIA Glanbia plc has operations in Ireland, Europe, the US and Nigeria. Businessunits are structured around developing the Group's strategic focus on theConsumer Foods, Food Ingredients and Nutritionals markets. There are three operational divisions of Glanbia: • Agribusiness Division - the key linkage between Glanbia and its Irish raw materials supply base of 5,700 farmer suppliers. This business is engaged primarily in feed milling, milk assembly and the marketing of a range of farm inputs, including fertilisers, feed and grain through a retail branch network. • Consumer Foods - includes liquid milk, chilled foods and pork processing. In Ireland Glanbia is the leading supplier of branded and value-added liquid milk, mineral water, fresh dairy, cheeses, soups and spreads in the retail market. Glanbia Meats is the leading Irish fresh pork and bacon processor selling to Irish and International markets. • Food Ingredients - comprising the US and Irish dairy ingredients operations and the Group's developing Nutritionals business. Glanbia processes a range of milk, cheese and whey protein ingredients at facilities in Ireland and the US for sale on international markets. Glanbia Nutritionals supplies the global nutrition industry with a range of solutions designed to address specific health and wellness benefits. 2005 INTERIM STATEMENTResults for the six months ended 2 July, 2005 Income Statement In the first half, turnover grew €45.7 million to €926.1 million (H1 2004:€880.4 million). Operating profit pre exceptional was down €3.1 million to €38.3million (H1 2004: €41.4 million), as a result of the challenges experienced bythe Irish Agribusiness and chilled foods segment of the Consumer Foods division,which impacted overall performance. The operating margin declined 60 basispoints to 4.1% (H1 2004: 4.7%) due to the margin decline suffered in thesebusinesses. At the operating profit level an exceptional charge of €2.4 million is made upprimarily of €6.3 million rationalisation costs to enhance efficiency inIreland, which was offset by a non-cash credit of €3.9 million pertaining toforeign currency retranslation under IFRS. Of the €6.3 million rationalisationcosts, €4.9 million relates to an agreement, reached in May, with employees atthe fresh dairy products facility in Inch, which involves voluntary redundanciesand new work practices and the remaining €1.4 million relates to the closure oftwo liquid milk distribution depots in Dublin. The Group's share of joint ventures and associates amounted to €38,000 profitfor the first half of 2005, compared with a loss of €249,000 in the first halfof 2004. This reflects an improvement in Glanbia Cheese, the joint venture inthe UK with Leprino Foods. Total financing costs, which includes Group interest and non-equity minorityinterest for preferred securities and preference shares, reduced by €2.0 millionto €7.7 million (H1 2004: €9.7 million), as the Group continues to benefit froma changing mix of debt and a lower interest rate environment. Due to the timingof the implementation of IAS 32 and 39, interest on preferred securities andpreference shares is shown in the income statement as part of Group interest inH1 2005 and as non-equity minority interest in H1 2004. The exceptional of €5.3 million in Group interest for the first half of 2005 isthe cancellation cost of the early payment of US$100 million preferredsecurities, which were prepaid on 15 June 2005. This prepayment forms part ofthe Group's refinancing, which was undertaken in the first half in the contextof the current favourable interest rate environment. The Group has renewedfinancing facilities of over €400 million to July 2010 with core bankingrelationships. Profit before tax pre exceptional, and including share of joint ventures andassociates, on a comparable basis was down €0.9 million to €30.6 million (H12004: €31.5 million). The comparable basis is after total financing costs, whichare outlined above.Taxation amounted to a credit of €3.5 million. This is as a consequence of anexceptional credit of €7.5 million, which is a tax credit relating to a priordisposal of assets in the US. Profit after tax pre exceptional, on a comparable basis, was up marginally by€0.3 million to €26.7 million (H1 2004: €26.4 million). Profit after tax wasbroadly in line with 2004 at €26.4 million (H1 2004: €26.5 million). Balance Sheet and Cash FlowTotal financing on a comparable basis increased €25.7 million to €286.6 millioncompared to €260.9 million at the end of 2004 and declined €6.2 million whencompared to €292.8 million at the half year 2004. This first half increaserelates primarily to further investment by the Group in development initiativessuch as the agreement with Dairygold Co-operative Society Limited to take on theCMP brand portfolio and investment in the Nigerian joint venture with PZ Cussonsplc. In addition, the Group has put in place initiatives to reduce its ongoinginvestment in seasonal working capital. DividendsThe Board is recommending an Interim dividend of 2.27 cent per share (H1 2004:2.16 cent per share), representing an increase of 5%. Dividends will be paid on5 October 2005 to shareholders on the register as at 9 September 2005, therecord date. Irish dividend withholding tax will be deducted at the standardrate, where appropriate. Operations ReviewGlanbia is organised into three operating divisions - Agribusiness, ConsumerFoods and Food Ingredients, which includes the evolving Nutritionals business. AGRIBUSINESSThe Agribusiness division had a difficult first half. As expected the effects ofthe implementation by the EU of the Mid Term Review (MTR) of the CommonAgricultural Policy impacted farm purchasing power. Whilst overall turnover wassimilar at €142.3 million (H1 2004: €143.8 million), reduced volumes and acompetitive pricing environment resulted in a decline in performance and marginerosion. Operating profit declined €1.6 million to €7.7 million (H1 2004: €9.3million) and the operating margin was down 110 basis points to 5.4% (H1 2004:6.5%). Agribusiness is the key linkage with the Group's farmer supply base. Farming isgoing through a period of significant change and as a result the Group currentlyanticipates further performance pressure in this division. Additional costreduction initiatives, which form part of an ongoing rationalisation programmefor this division, are planned in the second half to continue to minimise theimpacts of this changing market environment. CONSUMER FOODSTurnover was up €19.5 million to €242.5 million (H1 2004: 223.0 million).Operating profit pre exceptional declined €2.2 million to €8.5 million (H1 2004:€10.7), whilst the operating margin was down 130 basis points to 3.5% (H1 2004:4.8%). The decline in profitability was substantially driven by the significantmarket pressures and competitive challenges faced by the chilled foods segmentof this division during the first half. The performance of the chilled foodsbusiness in the second half of the year is expected to show an improvement onthe first half, benefiting from stronger marketing and cost efficiencies. Liquid Milk and Chilled FoodsThe liquid milk segment of the Consumer Foods business performed satisfactorilyin a competitive environment, with increasing imports from Northern Ireland andthe growth of own brand milk in food retailing. An exceptional rationalisationcost of €1.4 million was incurred in this segment of the Consumer Foods divisionas two distribution depots in Dublin were closed. In February 2005 Glanbiaconcluded an agreement with Dairygold Co-operative Society Limited to take onthe CMP liquid milk, cream and juice brands for a consideration of €10 million.This business operates primarily in Cork City and County in the South of Irelandand its successful integration has extended the national coverage of theAvonmore brand and will help to strengthen the Group's position further in thebeverage market. The chilled foods segment of the Consumer Foods division had a tough first halfin competitive markets. Performance was further impacted by rationalisationinitiatives and additional marketing spend during the period. The process ofrealigning the high cost base at the Inch manufacturing facility commenced inthe first half. A new site agreement was reached, at an exceptional cost of €4.9million, which will significantly increase the competitiveness and productivityof this business. There was also an increase in marketing spend on promoting keybrands and new products in the first half. The Group expects the full market andperformance benefits of these initiatives to be delivered during the next year. Fresh PorkGlanbia Meats improved its performance in the first half, after the severedownturn experienced in the pigmeat industry in 2004, however markets recoveredmore slowly than expected. This business has a good market position andefficient plants and will continue to benefit as the market environmentimproves. FOOD INGREDIENTSThe Food Ingredients division achieved a solid performance with an improvementin turnover of €27.8 million to €541.3 million (H1 2004: €513.5 million) andoperating profit increased €0.8 million to €22.1 million (H1 2004: €21.3million). The operating margin at 4.1% was similar to the 2004 level, as marginpressure in the Food Ingredients business in Ireland was offset by a goodperformance from the US and steady organic growth in the Nutritionals business. Food Ingredients IrelandFood Ingredients Ireland delivered a satisfactory result against a backdrop ofsubstantial and ongoing change in dairy markets. These changes arise from theimplementation of a reduction in EU dairy market supports, resulting from MTR,and are expected to further impact performance in the second half of the year.The focus for this business continues to be the effective management of theimpact of these changes whilst maintaining profitability through productivitygains, product mix and cost efficiencies. A number of initiatives were completedin the first half including contract manufacturing agreements on milk processingand an agreement on a new joint venture to manufacture and market dairy spreadsand butterfat products. Food Ingredients USAFood Ingredients USA had a good first half benefiting from strong market demand,increased output and high capacity utilisation. Increased capacity for cheese,whey and protein isolates were all commissioned at the Idaho facilities in thelast year. Market demand remains positive and milk production is expected to bestrong for the remainder of the year. NutritionalsThe evolving Nutritionals business made steady progress. Further organic growthwas achieved in the first half and Kortus Food Ingredient Services GmbH - aGerman based nutrient delivery systems business acquired in the second half oflast year - performed well, with sales ahead of expectations. In addition theGroup continued to invest in enhancing the human resource capability to driveforward the development of this business. This is part of a programme ofinvestment including research and technology to build the product pipeline,customer relationships and market relevance. Development StrategyGlanbia's development strategy is to build international relevance in cheese,nutritional ingredients and selected consumer foods. In the first half goodprogress was made including: • The commissioning in June of the new US$25 million facility in Nigeria. This joint venture with PZ Cussons plc currently packs fat filled milk powder which is sourced in Ireland, in consumer formats for the local market. Early sales and market developments are very encouraging and a further manufacturing plant for condensed milk will begin commissioning shortly. • The construction of the new US$190 million cheese and whey products facility in New Mexico is also on track to begin commissioning in October 2005. This is a joint venture with Dairy Farmers of America and Select Milk Producers Inc. which, when completed, will make Glanbia the number one producer of American cheese. • The successful integration of the Kortus nutritionals business in Germany, acquired in December 2004 was completed and this acquisition is performing ahead of expectations. • The newly opened Group Innovation Centre in Kilkenny, Ireland, is operating well and a Phase II expansion, adding additional personnel and lab facilities is scheduled for completion in October. OutlookThe trading environment in Ireland is expected to remain challenging for the remainder of this year. We have taken strong proactive measures on costs, productivity and market positioning and the benefits of these initiatives will flow through during the next year. Given the current difficult trading environment we expect earnings for 2005 to be broadly in line with 2004. Glanbiacontinues to make solid underlying strategic and operational progress and the Board and management are confident of the Group's future prospects. Glanbia plc Consolidated Income Statementfor half year ended 2 July 2005 Half year ended 2 July 2005 Half year ended 3 July 2004 Year ended 1 January 2005 Pre- Pre- Pre- excep- Excep- excep- Excep- excep- Excep- tional tional Total tional tional Total tional tional Total Note •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Turnover 2 926,127 - 926,127 880,412 - 880,412 1,753,645 - 1,753,645 ========================= ============================ ============================== Operating profitbeforeexceptional 2 38,328 - 38,328 41,390 - 41,390 86,257 - 86,257itemsExceptionalitems 3 - (2,431) (2,431) - (325) (325) - 2,895 2,895 ------------------------- ------------------------------ ----------------------------Operatingprofit 38,328 (2,431) 35,897 41,390 (325) 41,065 86,257 2,895 89,152Group interest(see note 4 (7,725) (5,304)(13,029) (4,073) - (4,073) (5,723) - (5,723)below)Share of profits/(losses) of jointventures andassociates 38 - 38 (249) - (249) (1,523) - (1,523) ------------------------- ---------------------------- -------------------------------Profit beforetax (see note 30,641 (7,735) 22,906 37,068 (325) 36,743 79,011 2,895 81,906below)Taxation 5 (3,947) 7,454 3,507 (5,037) - (5,037) (8,386) - (8,386) ------------------------- ---------------------------- -----------------------------Profit after tax(see note 26,694 (281) 26,413 32,031 (325) 31,706 70,625 2,895 73,520below)Discontinuedoperations 6 - - - - 429 429 - (1,601) (1,601) ------------------------- ---------------------------- -----------------------------Profit for theperiod (see 26,694 (281) 26,413 32,031 104 32,135 70,625 1,294 71,919note below) ========================= ============================ =============================Attributable to:Equity holders of 26,200 26,218 61,119the parentNon-equityminority interest 4 - 5,602 10,387Equityminorityinterest 213 315 413 ---------- ---------- --------- 26,413 32,135 71,919 ========== ========== =========Earnings pershare (cent) 7 9.01 9.03 21.03Dilutedearnings pershare (cent) 7 8.95 8.97 20.92 Note:The comparative numbers for the half year ended 3 July 2004 and year ended 1January 2005 have been restated on an IFRS basis, with the exception of IAS 32and IAS 39, which were implemented from 2 January 2005. Accordingly, interest onpreferred securities and preference shares is shown in the Income Statement aspart of Group interest charge in the half year ended 2 July 2005, and as Non-equity minority interest in the 2004 comparative numbers. On a comparable basisthe profit after tax, pre-exceptional items, for the half year ended 2 July 2005was €26.7m compared to €26.4m at 3 July 2004. Glanbia plc Consolidated Statement of Total Recognised Income and Expensefor the half year ended 2 July 2005 Half year ended Half year ended Year ended 2 July 3 July 1 January 2005 2004 2005 •'000 •'000 •'000 Items of income and expenserecognised directly in equity: Actuarial loss on definedbenefit pension schemes (25,020) (2,746) (40,260)Actuarial loss on jointventure defined benefitpension scheme - - (436)Exchange differences ontranslation of foreignoperations (9,494) (3,851) (755)Fair value adjustment onfinancial derivatives andrelated hedged items (533) - -Fair value adjustment onavailable for saleinvestments 264 - -Dividend paid (8,989) (8,535) (14,813) ---------------------------------------Net expense recogniseddirectly in equity (43,772) (15,132) (56,264)Profit for the period 26,200 26,218 61,119 ---------------------------------------Total recognised income andexpense for the period (17,572) 11,086 4,855 --------------------------------------- Glanbia plc Consolidated Balance Sheetas at 2 July 2005 Notes 2 July 3 July 1 January 2005 2004 2005ASSETS •'000 •'000 •'000Non-current assetsProperty, plant and equipment 322,055 295,795 302,057Intangible assets 44,790 22,181 36,698Investments in associates and jointventures 61,685 36,174 59,199Available-for-sale investments 32,762 22,342 28,672Receivables 55,886 52,239 51,942Deferred tax assets 12,299 7,775 12,299 --------------------------------- 529,477 436,506 490,867Current assetsInventories 141,572 121,009 133,419Receivables and prepayments 249,526 303,073 172,622Cash and cash equivalents (see notebelow) 8 30,438 38,364 51,625 --------------------------------- 421,536 462,446 357,666 ---------------------------------Total assets 951,013 898,952 848,533 ================================= SHAREHOLDERS' EQUITY AND LIABILITIES Share capital 17,559 17,559 17,559Share premium 80,212 80,212 80,212Own shares (2,563) (3,235) (2,563)Fair value and currency translationreserves 9 (5,368) (4,902) 43Merger reserve 113,148 113,148 113,148Capital reserve 3,346 3,263 3,223Revenue reserves - retained profits 10 (18,254) 4,492 (4,836)Revenue reserves - goodwill 10 (94,296) (94,299) (92,961) ---------------------------------Equity share capital and reserves 93,784 116,238 113,825Equity minority interest 6,298 5,986 6,085Non-equity minority interest (see notebelow) - 119,302 110,384 --------------------------------- 100,082 241,526 230,294 ---------------------------------Non-current liabilitiesBorrowings (see note below) 8 316,724 211,388 198,682Deferred tax liabilities 33,007 31,143 30,375Retirement benefit obligations 151,696 88,515 126,676Capital grants 14,459 15,732 15,276Other liabilities 6,389 7,187 5,348 --------------------------------- 522,275 353,965 376,357Current liabilitiesTrade and other payables 328,332 302,934 238,373Borrowings (see note below) 8 324 527 3,509 --------------------------------- 328,656 303,461 241,882 --------------------------------- Total liabilities 850,931 657,426 618,239 ---------------------------------Total shareholders' equity andliabilities 951,013 898,952 848,533 ================================= Note:The comparative numbers as at 3 July 2004 and 1 January 2005 have been restatedon an IFRS basis, with the exception of IAS 32 and IAS 39 which were implementedfrom 2 January 2005. This impacts the comparison of net financing which on acomparable basis was €286.6m at 2 July 2005, €292.8m at 3 July 2004 and €260.9mat 1 January 2005.Glanbia plc Summarised Cash Flow Statement Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005Net cash inflow fromoperating activities: •'000 •'000 •'000 Operating profit(pre exceptional items) 38,328 41,390 86,257Profit on disposalof fixed assets (915) (57) (920)Depreciation and amortisation 13,769 17,115 28,130Changes in working capital (61) (90,415) (33,713) ----------------------------------------------- 51,121 (31,967) 79,754 Exceptional items (5,304) - 3,693Returns on investments andservicing of finance (10,097) (11,397) (20,540)Taxation 292 (1,100) (4,955)Purchase of fixed assets (netof disposals/grants) (21,769) (24,006) (59,537)Purchase of investments (5,081) (24,336) (55,211)Purchase of subsidiary undertakings (10,050) - (10,157)Disposal of subsidiaryundertakings - 90,642 83,277Share capital issued - 215 215Equity dividends paid (8,989) (8,535) (14,813)Repayment of preferred securities (see note below) (82,233) - - -----------------------------------------------Change in net debtresulting from cash flows (92,110) (10,484) 1,726 Translation difference (6,145) (9,270) 1,505 -----------------------------------------------Movement in net debtin the period (98,255) (19,754) 3,231Net debt atbeginning of period (150,566) (153,797) (153,797)Preference shares reclassifiedon implementation of IAS 32 andIAS 39 (see note below) (37,789) - - -----------------------------------------------Net debt at end of period (286,610) (173,551) (150,566) =============================================== Note:The comparative numbers as at 3 July 2004 and 1 January 2005 have been restatedon an IFRS basis, with the exception of IAS 32 and IAS 39 which were implementedfrom 2 January 2005. This impacts the comparison of net financing which on acomparable basis was €286.6m at 2 July 2005, €292.8m at 3 July 2004 and €260.9mat 1 January 2005. Glanbia plc 1. Basis of preparation The Group's date of transition to IFRS is 4 January 2004. The Group's financialstatements for the year ended 31 December 2005 will be prepared in accordancewith IFRS and the comparatives for those periods will be restated to reflectIFRS, except where otherwise required or permitted by IFRS 1 First Time Adoptionof International Financial Reporting Standards. IFRS 1 requires an entity to comply with each IFRS effective at the reportingdate for its first IFRS financial statements. As a general principle, IFRS 1requires the standards effective at the reporting date to be appliedretrospectively. However, retrospective application is prohibited in some areas,particularly where retrospective application would require judgements bymanagement about past conditions after the outcome of the particular transactionis already known. A number of optional exemptions from full retrospectiveapplication of IFRS's are granted where the cost of compliance is deemed toexceed the benefits to users of the financial statements. The financial information in this document has been prepared in accordance withIFRS's, which the Group expects to be effective at 31 December 2005. Thestandards currently in issue are subject to ongoing review and endorsement bythe EU, while the application of the standards continue to be subject tointerpretation by the International Financial Reporting InterpretationsCommittee ("IFRIC"). The EU has yet to approve the amendment to IAS 19, whichthe group has implemented. In addition, the EU has endorsed a revised version ofIAS 39 rather than the version published by the International AccountingStandards Board. Further standards may be issued that could be applicable for financial yearsbeginning on or after 2 January 2005, or are applicable to later periods, butwith the option for companies to adopt for earlier periods. As a result,additional adjustments could therefore be required to the 2004 financialinformation prior to its inclusion as comparative figures in the 2005 finalfinancial statements. A separate document has been issued at the same time as this Interim Reportdetailing the impact of IFRS on Glanbia's financial statements for the 26 weeksended 3 July 2004 and the year ended 1 January 2005. That restatement documentprovides reconciliations of the IFRS comparatives used within these financialstatements to the results reported under the previous accounting standards("Irish GAAP"). The consolidated financial statements have been prepared under the historicalcost convention as modified from 2005 by the revaluation of available-for-salesecurities, and financial assets and financial liabilities (including derivativeinstruments) at fair value through the income statement. 2. Segment reporting Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000Turnover by businessclass: Consumer Foods 242,523 223,042 451,124Food Ingredients 541,321 513,542 1,075,153Agribusiness 142,283 143,828 227,368 ------------------------------------------- 926,127 880,412 1,753,645 =========================================== Pre-exceptional operating profit by businessclass: Consumer Foods 8,481 10,728 27,906Food Ingredients 22,094 21,316 46,440Agribusiness 7,753 9,346 11,911 ------------------------------------------- 38,328 41,390 86,257 =========================================== 3. Exceptional items Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000 Foreign currency retranslation (i) 3,907 (325) (798)Loss on sale of operation (ii) (81)Profit on sale of fixed assets(iii) 929Profit on termination of operations (iv) 2,445Restructuring cost (v) (6,338) 400 ------------------------------------------- (2,431) (325) 2,895 =========================================== (i) The foreign currency retranslation gain arises on the repayment of loans between fellow subsidiaries. Under IFRS, loans between fellow subsidiaries do not qualify as part of the net investment and therefore any gains or losses on these loans are to be recognised in the Income Statement. (ii) The loss on sale of operation in 2004 refers to additional costs relating to prior period disposals.(iii)The 2004 profit on sale of fixed assets arises from the sale of a site in the Consumer Foods business.(iv) The profit on termination of operations arises from the sale by the Group of its UK Fresh Meats and UK Consumer Meats plants at Drongan, Gainsborough and Milton Keynes during 2004.(v) The restructuring cost in 2005 relates to rationalisation costs in the Consumer Foods division in Ireland. In 2004 the restructuring credit arise from the release of provisions no longer required. 4. Group interest Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000Group interest - pre exceptionalitemLoans and overdrafts Repayable within five years (4,944) (1,760) (4,211) Repayable after five years - (2,241) (3,779) Senior notes - (929) (917)Finance leases (34) (110) (90)Interest receivable (i) 2,042 872 3,033Net finance income re pension scheme 102 95 241Subordinated debt costs (4,891) - - ------------------------------------------Net Interest pre exceptional item (7,725) (4,073) (5,723) Financing cost of preferredsecurities and preference shares - (5,602) (10,387) ------------------------------------------Total financing costs - preexceptionals (ii) (7,725) (9,675) (16,110) ========================================== Group interest - exceptionalCancellation of preferredsecurities (iii) (5,304) - - ========================================== (i) Interest receivable mainly consists of interest on a Stg£35m subordinated secured loan note granted by The Cheese Company Holdings Limited in 2004, representing part proceeds on the sale by the Group of a 75% interest in its UK hard cheese business. (ii) The comparative numbers for the half year ended 3 July 2004 and year ended 1 January 2005 have been restated on an IFRS basis, with the exception of IAS 32 and IAS 39, which were implemented from 1 January 2005. As a result, interest on preferred securities and preference shares is shown as an interest charge in the half year ended 2 July 2005, and as Non-equity minority interest in the 2004 comparative numbers. On a comparable basis the total financing costs, pre exceptional item, for the half year ended 2 July 2005 was €7.7m compared to €9.7m at 3 July 2004. (iii) On 15 June the Group prepaid the US$100m 7.99% cumulative preferred securities, giving rise to a cost of €5.3m, which has been disclosed as an exceptional item. 5. Taxation A tax benefit arising from the disposal of certain US operations in prior yearswhich previously had not been recognised in the financial statements, has nowbeen finalised, and separately disclosed as an exceptional item. 6. Discontinued operations Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000 Profit / (loss) on disposal ofdiscontinued operation - 429 (1,601) ========================================== The discontinued operation represents the Group's disposal of 75% of itsinterest in the UK hard cheese business on 7 April 2004. 7. Earnings per ordinary share Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000 Profit after taxation andminority interest 26,200 26,218 61,119 ----------------------------------------- Weighted average number ofordinary shares in issue (Million) 290.912 290.477 290.617 ----------------------------------------- Earnings per share (cent) 9.01 9.03 21.03 ----------------------------------------- Adjustments:Exceptional items 0.09 (0.04) (0.44) -----------------------------------------Adjusted earnings per share 9.10 8.99 20.59 ----------------------------------------- Diluted earnings per share 8.95 8.97 20.92 ----------------------------------------- 8. Group borrowings Half year ended Half year ended Year ended 2 July 2005 3 July 2004 1 January 2005 •'000 •'000 •'000 Borrowings duewithin one year 324 527 3,509Borrowings due afterone year 316,724 211,388 198,682Less:Cash and bank balances (30,438) (38,364) (51,625) -------------------------------------------------- 286,610 173,551 150,566 ================================================== Note:The comparative numbers as at 3 July 2004 and 1 January 2005 have been restatedon an IFRS basis, with the exception of IAS 32 and IAS 39 which were implementedfrom 2 January 2005. This impacts the comparison of Group net financing which ona comparable basis was €286.6m at 2 July 2005, €292.8m at 3 July 2004 and€260.9m at 1 January 2005. 9. Fair value and currency translation reserves Currency Fair value translation reserve reserve Total •'000 •'000 •'000 Balance 1 January 2005 - 43 43Implementation of IAS 32 and IAS 39 3,017 - 3,017Increase in fair value of financial assets 264 - 264Reduction in fair value of financialderivatives (533) - (533)Translation difference on foreigncurrencynet investments - (9,494) (9,494)Transfer from goodwill reserve - 1,335 1,335 ------------------------------------------------- 2,748 (8,116) (5,368) ------------------------------------------------- 10. Revenue reserves Retained Goodwill profits reserve Total •'000 •'000 •'000 Balance 1 January 2005 (4,836) (92,961) (97,797)Implementation of IAS 32 and IAS 39 (5,609) - (5,609)Profit retained for period 26,200 - 26,200Actuarial loss on defined benefitpension schemes (25,020) - (25,020)Dividend paid (8,989) - (8,989)Transfer to currency translationreserve - (1,335) (1,335) ------------------------------------------------- (18,254) (94,296) (112,550) ------------------------------------------------- 11. Dividends On 31 August 2005, the directors approved the payment of an interim dividend for2005 of 2.27 cent per share (2004 interim dividend 2.16 cent per share). 12. Other The figures for the half-years ended 2 July 2005 and 3 July 2004 are unaudited.The figures for the full year ended 1 January 2005 represent an abbreviatedversion of the Group's financial statements for the year, which received anunqualified audit report. RESTATEMENT OF 2004 RESULTS UNDER IFRS Glanbia plc today announces the impact of the transition to InternationalFinancial Reporting Standards (IFRS) on the Group's 2004 results, previouslyprepared in accordance with accounting standards generally accepted in Ireland(Irish GAAP). This one page summary provides an overview of the impact of theadoptions of IFRS on Glanbia's financial statements. The full restatementdocument is available on the Group's website at www.glanbia.com. The adoption ofIFRS represents a change in the basis of preparation of financial statements anddoes not affect the operations or cash flows of the Group. Impact of IFRS on 2004 at a Glance Irish IFRS Change Principal reason for change GAAP •'000 •'000 •'000 Turnover 1,846,045 1,753,645 (92,400) Discontinued operations excluded -€92.4m-------------------------------------------------------------------------------Operating profit preexceptional 84,422 86,257 1,835 Discontinued operations excluded -€0.9m Credit re pension charge +€2.6m-------------------------------------------------------------------------------Operatingprofit postexceptional 84,822 89,152 4,330 As above and also including: Reclassification of exceptional +€3.3m Foreign currency loss -€0.8m-------------------------------------------------------------------------------Profit beforetax and preexceptional 77,742 79,011 1,269 As above and also including: Tax on joint ventures and associates included in PBT-€0.7m===============================================================================Equity sharecapital andreserves 221,401 113,825 (107,576) Employee benefits (pension) -€113.7m Timing of dividend recognition +€9.0m=============================================================================== cent cent Change centEarnings pershare (EPS) 20.41 21.03 0.62-------------------------------------------------------------------------------Adjustedearnings pershare (1) 20.10 20.59 0.49=============================================================================== (1) Adjusted EPS is based on profits pre exceptional A detailed reconciliation of all changes is provided in the full IFRSrestatement document in the schedules on pages 12 to 17 therein. This documentis available on www.glanbia.com. END This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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