23rd Mar 2007 07:01
Fyffes PLC23 March 2007 Fyffes results in line with expectations Preliminary Results 2006 2005 • • Group Revenue - continuing - Fyffes 408m 386m - demerged - Total Produce 1,577m 1,356m Adjusted profit before tax* - Fyffes 22.3m 87.1m - Total Produce 36.1m 35.0m - combined operations 58.4m 122.2m Statutory profit before tax - Fyffes 19.1m 76.2m - Total Produce 18.9m 29.7m - combined operations 38.0m 105.8m Adjusted fully diluted earnings per share** - Fyffes 5.70 cent 20.38 cent - Total Produce 5.70 cent 4.76 cent - combined operations 11.40 cent 25.14 cent Earnings per share - combined operations - basic 8.38 cent 23.79 cent - fully diluted 8.29 cent 23.48 cent Final dividend per share 1.70 cent 5.20 cent * before exceptional items, share of tax of joint ventures/associates and amortisation of intangible assets ** before exceptional items and amortisation of intangible assets Commenting on the results David McCann, Chairman, said: "Fyffes faced a changed environment in 2006, in particular as a result of new EUbanana import regulations. Against this background, Fyffes created substantialincremental shareholder value as a result of the demerger of its PropertyUndertaking to Blackrock International Land plc and the demerger of its GeneralProduce and Distribution business to Total Produce plc. The trading results ofthe combined operations for the year were in line with market expectations.Fyffes continues to actively pursue its medium term growth strategy and plans todouble the size of its continuing business within five years, both organicallyand through further acquisitions and alliances." 23 March 2007 For further information, please view the 2006 results slide presentation atwww.fyffes.com or contact Brian Bell, Wilson Hartnell PR, Tel: +353-1-6690030. Fyffes' continuing operations Revenue Total revenue, including the share of revenue of its joint ventures andassociates, in Fyffes' continuing operations amounted to €555m in 2006, up 11.6%on the €498m in the previous year. Revenue excluding share of joint venturesand associates was €408m in the year, up 5.6% from €386m in 2005. The growth inrevenue reflects the impact of the acquisitions of Brazilian melon producerNolem in January 2006 and the full year impact of the acquisition of Turbana inNorth America in the final quarter of 2005. In addition, Fyffes grew its bananavolumes by 6% and its pineapple volumes by 25% during 2006. Operating profit Adjusted EBIT (which is operating profit, before exceptional items,amortisation, interest and tax, including the equivalent share of joint venturesoperating profit - the calculation of which is set out in note 2 of theaccompanying preliminary financial information) for Fyffes' continuingoperations, amounted to €19m in 2006, compared to €79.2m in the previous year.This reflects, in particular, the impact of the changes in the EU's bananaimport regulations on 1 January 2006, which cost Fyffes €40.9m in the year,mainly due to the significant increase in import duty. Fyffes also experiencedsignificant cost inflation in 2006, with fruit, shipping and fuel all moreexpensive, combined with less favourable average exchange rates and loweraverage banana selling prices in Continental Europe. The Group's winter melonjoint venture in Brazil, which was acquired towards the end of its 2005/06season, was loss making in the first year post acquisition, primarily reflectingthe impact of the appreciation of the local currency and lower than anticipatedyields. The Group's pineapple business delivered an improved result in 2006,mainly reflecting the increase in volumes in that category. Fyffes' 40% share offair value gains on investment property in Blackrock International Land plc ('Blackrock') is not included in adjusted EBIT, but rather is included inexceptional items. Statutory operating profit, after exceptional items,amortisation and the share of joint ventures and associates interest and taxamounted to €14.3m in 2006, compared to €67.5m in the previous year. Demerged General Produce and Distribution operations Revenue Fyffes completed the demerger of its General Produce and Distribution businessto Total Produce plc on 30 December 2006. The results of this division for 2006are reported as discontinued operations within Fyffes' result for the year.Total revenue in this division, including the share of revenue of its jointventures and associates, amounted to €1,861m in 2006, up 11% on the €1,676m inthe previous year. Revenue excluding share of joint ventures and associates was€1,577m, up 16.3% on the €1,356m in 2005. The increase in revenue reflects theimpact of the acquisition during the year of the second half of two of its jointventure operations, in Denmark and the UK, combined with strong organic growthin a number of key markets. Operating profit Adjusted EBIT (defined above and calculated in note 2 of the accompanyingpreliminary financial information) for the Group's demerged General Produce andDistribution division, amounted to €38.9m in 2006, compared to €37.8m in theprevious year. The 2006 result includes the first-time cost of rent payable toBlackrock from May to December, of €1.5m, in respect of properties previouslyowned by this division. Excluding this, the like-for-like increase in adjustedEBIT in this division amounted to 6.7%. This year-on-year increase reflects theimpact of the organic growth in certain key markets and the acquisitions notedabove, although these factors were partly offset by reduced profits in a numberof locations in Continental Europe. The statutory operating profit, afterexceptional items, amortisation and the share of ventures/associates interestand tax amounted to €21.8m in 2006, compared to €32.3m in the previous year,mainly reflecting the various exceptional charges outlined below. Combined operations Revenue Group revenue for the combined Tropical Produce and General Produce andDistribution businesses for the year ended 30 December 2006, amounted to€1,985m, up 13.9% on the previous year. Total revenue, including the Group'sshare of its joint ventures and associates, was €2,416m compared to €2,174m in2005, an increase of 11.1%. Operating profit Adjusted EBIT (defined above and calculated in note 2 of the accompanyingpreliminary financial information), for the Group's combined operations for theyear ended 30 December 2006 amounted to €58m, compared to €117.1m in theprevious year reflecting, in particular, the impact of the changes in the EU'sbanana import regulations and the significant cost inflation experienced in theGroup's Tropical Produce operations. Statutory operating profit for thecombined operations of the Group in 2006, prior to the demerger of its GeneralProduce and Distribution business, after exceptional items, amortisation and theshare of ventures and associates interest and tax, amounted to €36.2m, comparedto €99.9m in the previous year. Exceptional items During the year, the Group recognised impairment charges as a result of changesin a number of businesses and investments which were subsequently demerged toTotal Produce, giving rise to an aggregate non-cash charge in the incomestatement of €22.7m. This comprised a €6.3m reduction in the carrying value ofintangible assets, a €7.4m reduction in the carrying value of joint ventures anda €9.1m charge in relation to other equity investments, including the write-offthrough the income statement of a €1.4m fair value reserve recognised in theprevious year. The aggregate costs of the Total Produce demerger amounted to€6m, including professional and advisory fees of €4.1m. The costs of theBlackrock demerger amounted to €1.3m in 2006, in addition to the €0.4m incurredin the previous year. Fair value gains on investment property in the Group'ssubsidiaries amounted to €5.8m. The Group's share of similar fair values gainsin its joint ventures and associates, in particular Blackrock, amounted to €5.4mnet of deferred tax. Impairments of property, plant and equipment, mainlyrelating to plant and equipment in properties transferred to Blackrock, amountedto €2.8m. During the first half of the year, the Group settled its obligationsin respect of an onerous contract, with the unused provision of €3.1m beingcredited to the income statement. Towards the end of the year, the Groupdisposed of a leasehold interest on a property it occupies in Ireland givingrise to a gain of €3.4m. Aggregate exceptional items amounted to a net chargeof €15.1m, which is excluded from the calculation of adjusted EBIT and adjustedearnings per share. In addition, as explained below, the demerger of theGroup's General Produce and Distribution business gave rise to previouslyunrecognised gains of €108.1m which are recorded in the balance sheet ratherthan the income statement. Financial income Net financial income amounted to €1.8m in 2006 compared to €6m in the previousyear. This reduction largely reflects the impact of lower average cash balancesthroughout the year, as a result of the significant level of capital investmentoutlined below, and the impact of the change in the currency mix of the Group'snet funds. Net financial income in Fyffes' continuing operations amounted to€4.7m in 2006, compared to €8.6m in the previous year. The net financialexpense in the Group's demerged General Produce and Distribution business was€2.9m compared to €2.7m in 2005. These financial income and expense figures forthe Group's two divisions in 2006 should not be regarded as indicative of thefuture financial income and expense of Fyffes and Total Produce as it does notreflect the agreed initial capital structures of both businesses. Profit before tax As set out in note 2 of the attached preliminary financial information, adjustedprofit before tax for the combined Group in 2006, excluding exceptional items,the Group's share of the tax charge of its joint ventures and associates andamortisation charges, amounted to €58.4m compared to €122.2m in the previousyear. The adjusted profit before tax of Fyffes' continuing operations amountedto €22.3m in 2006, compared to €87.1m in the previous year. Adjusted profitbefore tax for the demerged General Produce and Distribution business amountedto €36.1m, compared to €35m in 2005. Statutory profit before tax for thecombined Group amounted to €38m compared to €105.8m in 2005. Taxation As set out in note 4 of the accompanying preliminary financial information,including the Group's share of the tax charge of its joint ventures andassociates, which is netted in operating profit under IFRS, the overall taxcharge for the combined Group in 2006 amounted to €4m, compared to €14.5m in theprevious year. The tax charge reflects the impact of certain once-off taxcredits, mainly relating to the demerger of the Group's property undertaking,amounting to €8.1m. Excluding the impact of these credits, the €4m tax chargeon exceptional items and tax credits related to the amortisation of intangibleassets of €3m, the underlying tax rate for 2006 for the combined Group was19.1%, compared to 17.3% in 2005. The tax charge in the calculation of adjustedearnings per share reflects this underlying rate, exclusive of the impact of theonce-off tax credits and the tax charge on exceptional items. Minority interest The minority interest share of the Group's profit after tax for the yearamounted to €7.2m compared to €12.1m last year. The minority share of profitsin respect of Fyffes' continuing operations amounted to €0.7m in 2006 comparedto €5.1m last year reflecting, in particular, the reduction in profits arisingfrom the changes in the EU's banana import regulations. The minority share ofprofits in the Group's demerged General Produce and Distribution divisionamounted to €6.5m in the year compared to €7m in 2005, reflecting slightly lowerprofits in certain non-wholly owned businesses in Continental Europe. Earnings per share Adjusted fully diluted earnings per share, excluding exceptional items,non-recurring tax credits, and the amortisation of intangible assets, as set outin note 5 of the accompanying preliminary financial information amounted to€11.40 cent for the combined Group in 2006, compared to €25.14 cent in theprevious year. Basic earnings per share for the year, before such adjustments,amounted to €8.38 cent, compared to €23.79 cent in 2005. Fully dilutedearnings per share, before such adjustments, amounted to €8.29 cent, compared to€23.48 cent in the previous year. The adjusted earnings per share for Fyffes'continuing operations amounted to €5.70 cent in 2006, compared to €20.38 cent inthe previous year. Adjusted earnings per share for the Group's demerged GeneralProduce and Distribution business amounted to €5.70 cent in the year, comparedto €4.76 cent in 2005. Dividend The Board is proposing to pay a final dividend for the year of €1.70 cent pershare. The final dividend, which will be subject to Irish withholding taxrules, will be paid on 14 June 2007 to shareholders on the register on 11 May2007. The total dividend in respect of 2006 will amount to €3.39 cent pershare, equivalent to a payout ratio of 30%, which is also the target payoutratio for 2007. Total dividends paid to shareholders during 2006 amounted to€44.1m, representing the special €20m second interim dividend for 2005 and the€18.2m final dividend for 2005, together with the interim dividend for 2006 of€5.9m. In accordance with Company Law and IFRS, the proposed final dividend for2006 has not been reflected in the Group's balance sheet at 30 December 2006. De-merger of Fyffes' Property Undertaking to Blackrock Following approval by shareholders at an EGM in May 2006, Fyffes completed thede-merger of its Property Undertaking to Blackrock, a new separately quotedproperty company listed on the Stock Exchanges' AIM market in London and the IEXmarket in Dublin. Fyffes' shareholders received one new share in Blackrock foreach Fyffes share owned. In addition, Fyffes subscribed €82.6m for new sharesin Blackrock, equivalent to a 40% stake. From the proceeds of the sharesubscription, Blackrock repaid €62.6m to Fyffes in respect of debt associatedwith the property undertaking, resulting in a net cash transfer to Blackrock of€20m. Under the de-merger arrangements, Fyffes transferred properties to Blackrockwith a market value of €195m together with its interest in a joint ventureproperty undertaking with a net asset value of €2.4m. Taking into account thenet debt related to these properties which Blackrock repaid and a €9.5mreduction in the Group's deferred tax liabilities as a result of the transfer ofthe properties, the de-merger resulted in an in-specie distribution to Fyffes'shareholders of €124.7m. In addition, 60% of the revaluation reserves relatedto the de-merged properties, amounting to €31m net of deferred tax, has beendeemed realised and transferred to profit and loss account reserves. Demerger of General Produce and Distribution business to Total Produce plc Following approval by shareholders at an EGM in December, Fyffes completed thedemerger of its General Produce and Distribution business to Total Produce plc,a new separately quoted company, listed on the AIM and IEX markets, on 30December 2006. Fyffes' shareholders received one new share in Total Produce foreach Fyffes share owned. The carrying value of the assets of the businessestransferred to Total Produce amounted to €147.4m, as set out in note 9 of theaccompanying financial information. The fair value of these businesses has beendetermined based on the average market capitalisation of Total Produce over thefive days post demerger, amounting to €255.5m, which represents the value of thein-specie distribution to Fyffes' shareholders. This gave rise to a fair valuegain not previously recognised in Fyffes of €108.1m. Revaluation reservesrelated to properties transferred to Total Produce, amounting to €11.7m net ofdeferred tax, have been deemed realised and transferred to profit and lossaccount reserves. Similarly, cumulative currency reserves related to thedemerged businesses of €2m have been deemed realised. Balance sheet Net funds Net funds, comprising cash plus short term bank deposits less debt, amounted to€79.7m at 30 December 2006, compared to €170.9m at the previous year end.Significant outflows in the year included €56.5m in respect of the acquisitions,covering the buyout of two joint venture businesses in the Group's demergedGeneral Produce and Distribution division, €18.8m in relation to the purchase ofand further investment in a number of joint ventures including Nolem, theBrazilian melon producer, the €20m net cash initially transferred to Blackrockand deferred consideration payments of €5.1m in respect of prior yearacquisitions. Dividend payments amounted to €44.1m, including the €20m specialinterim dividend paid in respect of 2005. Capital expenditure for the combinedGroup amounted to €35.6m, of which €30.3m related to the demerged GeneralProduce and Distribution business, including in particular new premises inEdinburgh and Belfast. Tax payments amounted to €21.8m. Shareholders' equity Shareholders' equity at 30 December 2006 amounted to €227m compared to €500.7mat the start of the year. This reduction reflects, in particular, the in-speciedistribution arising from the Blackrock demerger of €124.7m, the net impact ofthe Total Produce demerger of €147.4m and the €44.1m dividends paid in the year. Defined benefit pension schemes The Group's defined benefit pension schemes had an aggregate deficit (net ofdeferred tax) of €13.1m at 30 December 2006, compared to €22.2m at the end ofthe previous year. The reduction in the deficit reflects, in particular, a €10mactuarial gain, net of deferred tax, largely arising from the impact of theincrease in long term bond yields on the schemes' liabilities, combined with theincrease in asset values. As a consequence of the demerger of the Group'sGeneral Produce and Distribution business, separate defined benefit pensionschemes now exist for Fyffes and Total Produce employees. Subsequent to theyear end the net liability in the continuing Fyffes' schemes will be reduced bya cash payment of €11m into the UK scheme, in accordance with Section 75 of theUK Pensions Act, 1995. This represents payment on behalf of a number ofsubsidiaries which have been demerged to Total Produce and are no longer adheredto that scheme, in respect of pensioners and deferred pensioners who wereformerly employed in those subsidiaries. EU competition investigation The European Commission is currently undertaking an investigation into whetherthere have been infringements of Article 81 of the Treaty of Rome and Article 53of the European Economic Area (EEA) agreement by businesses involved in thesupply of bananas and pineapples within the EEA. In June 2005 the Commissioncarried out inspections at a number of companies operating in these markets,including Fyffes. At this time, it is not possible for the Group to determinethe final outcome of these investigations, including whether the EuropeanCommission may seek to impose any fines and, if so, the level of any such fines. Fyffes has received a number of requests for information from the Commissionand continues to co-operate with it in relation to this matter. Medium term strategy Fyffes' medium term strategy is to double the size of its continuing businesswithin five years, across its key product categories, through a combination oforganic growth and by applying its substantial capital resources and borrowingcapacity in further acquisitions and alliances. Target EBIT and current trading The key drivers of short term performance in Fyffes' continuing business are,primarily, average selling prices, the costs of fruit, shipping and bunker fuel,and exchange rates. Average banana selling prices in the year to date have beenlower than those in the same period last year, particularly in ContinentalEurope. Notwithstanding this, and assuming average selling prices for theremainder of this year are similar to last year and that average exchange ratesand bunker fuel costs remain at current levels, Fyffes continues to target anadjusted EBIT of €20m for 2007. David McCann, Chairman on behalf of the Board 23 March 2007 Copies of this announcement will be posted to shareholders and are alsoavailable from the company's registered office, 29 North Anne St., Dublin 7.Fyffes plc Summary Group Income Statement for the year ended 30 December 2006 Post Post Post Post Pre- exceptional exceptional Pre- exceptional exceptional exceptional Items Items exceptional Items Items Combined Exceptional Discontinued Continuing Combined Exceptional Discontinued Continuing Operations Items Operations Operations Operations Items Operations Operations 2006 2006 2006 2006 2005 2005 2005 2005 •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000Revenue includingGroup share ofjoint ventures andassociates 2,416,207 - 1,860,892 555,315 2,174,006 - 1,676,206 497,800Group revenue 1,984,773 - 1,577,056 407,717 1,741,936 - 1,355,973 385,963Cost of sales (1,710,966) 3,112 (1,353,820) (354,034) (1,446,428) (1,173,309) (273,119)Gross Profit 273,807 3,112 223,236 53,683 295,508 - 182,664 112,844 Other operating 7,134 9,200 12,685 3,649 3,796 9,958 4.222 9,532incomeDistribution (176,162) - (148,074) (28,088) (145,793) (2,396) (130,755) (17,434)expensesAdministration (51,466) (7,327) (42,784) (16,009) (58,307) (400) (26,167) (32,540)expensesOther operating (4,457) (25,530) (26,596) (3,391) (1,269) (17,290) (1,767) (16.792)expensesShare of profit of 2,439 5,434 3,381 4,492 15,055 996 4,152 11,899joint ventures andassociates (net oftax)Operating profit 51,295 (15,111) 21,848 14,336 108,990 (9,132) 32,349 67,509Net financial 1,794 - (2,932) 4,726 5,961 - (2,694) 8,655incomeProfit before tax 53,089 (15,111) 18,916 19,062 114,951 (9,132) 29,655 76,164Income tax (9,730) 8,232 (5,356) 3,858 (7,411) (3,266) (9,302) (1,375)expensesProfit for the 43,359 (6,879) 13,560 22,920 107,540 (12,398) 20,353 74,789yearDiscontinued 13,560 20,353operations aftertax andexceptional itemsProfit for the 36,480 95,142financial year Attributable asfollows:Equity 29,321 83,014shareholdersMinority interests 659 5,131- continuingoperationsMinority interests 6,500 6,997- discontinuedoperations 36,480 95,142 Earnings per share- centCombined GroupBasic 8.38 23.79Fully diluted 8.29 23.48Adjusted fully 11.40 25.14diluted ContinuingOperationsBasic 6.36 19.96Fully diluted 6.29 19.70Adjusted fully 5.70 20.38diluted Fyffes plc Summary Group Statement of Recognised Income and Expense for the year ended 30December 2006 2006 2005 •'000 •'000 Movement on translation of net equity investments 6,124 7,092Revaluation of property, plant and equipment - 18,077Deferred tax arising on revaluation of property, plant and equipment - (3,398)Revision to deferred tax provision on revaluation reserve (658) -Share of joint ventures revaluation of property, plant and equipment - 1,966Deferred tax on joint ventures revaluation of property, plant and equipment - (263)Fair value adjustment on investments 1,400 (1,400)Effective portion of cashflow hedges (6,304) 5,800Deferred tax on effective portion of cashflow hedges 780 (725)Actuarial gain/(loss) recognised on defined benefit pension schemes 15,412 (2,671)Deferred tax on actuarial gain/(loss) on defined benefit pension schemes (5,379) 498Share of actuarial gain/(loss) on join ventures defined benefit pension schemes 1,540 (4,287)Deferred tax on actuarial gain/loss on joint ventures defined benefit pension schemes (496) 1,287 Net income recognised directly in equity 12,419 21,976Profit for year 36,480 95,142 Total recognised income and expense 48,899 117,118 Attributable as follows:Equity shareholders 41,327 103,983Minority interest 7,572 13,135 48,899 117,118 Summary Statement of Movement in Shareholders' Equity Total Total Reserves Reserves 2006 2005 •'000 •'000 Total shareholders' equity at beginning of year 500,678 418,830Increase in share capital/premium 995 1,544Total recognised income and expense 41,327 103,983Movement in share option expense reserve 323 324In-specie distribution arising from demerger of property undertaking (124,749) -Fair value gains not previously recognised re Total Produce demerger 108,071 -In-specie distribution arising from demerger of general produce and distribution business (255,508) -Dividends paid to equity shareholders (44,115) (24,003) Total shareholders' equity at end of year 227,022 500,678 Fyffes plc Summary Group Balance Sheet as at 30 December 2006 2006 2005 •'000 •'000Non-current assetsProperty, plant and equipment 8,883 188,205Investment property - 94,965Intangible assets 4,636 82,594Other receivables - 1,116Investments in joint ventures and associates 150,390 98,444Employee benefits 644 -Equity investments 18 16,543Deferred tax assets 6,871 12,507Total non-current assets 171,442 494,374 Current assetsInventory 11,915 39,699Trade debtors and other receivables 66,297 203,107Derivative financial instruments - 4,403Corporation tax recoverable 3,918 -Short term bank deposits - 218,107Cash and cash equivalents 131,570 232,029Total current assets 213,700 697,345 Total assets 385,142 1,191,719 EquityCalled-up share capital 21,600 21,516Share premium 98,822 97,911Other reserves 88,148 131,766Retained earnings 18,452 249,485 Total shareholders' equity 227,022 500,678Minority interest 1,107 51,262 Total equity and minority 228,129 551,940 Non-current liabilitiesInterest-bearing loans and borrowings 26,136 142,732Employee benefits 15,734 30,104Other payables 6 2,801Provisions 4,073 33,575Corporation tax payable 17,280 26,165Deferred tax liabilities 1,935 28,955Total non-current liabilities 65,164 264,332 Current liabilitiesInterest-bearing borrowings 25,747 136,544Trade payables and other payables 56,273 214,386Provisions 7,626 15,886Derivative financial instruments 2,203 371Corporation tax payable - 8,260Total current liabilities 91,849 375,447 Total liabilities 157,013 639,779 Total liabilities and equity 385,142 1,191,719 Fyffes plc Summary Group Cash Flow Statement for the year ended 30 December 2006 2006 2005 •'000 •'000Cash flow from operating activities 45,931 86,598Cash flows from investing activities (84,134) (43,982)Cash flows from financing activities 20,483 (24,317) Net movement in cash and cash equivalents (17,720) 18,299Cash and cash equivalents, including bank overdrafts at start of year 226,881 204,705Cash in subsidiaries demerged to Total Produce plc (85,042) -Translation adjustment on cash and cash equivalents 3,600 3,877 Cash and cash equivalents, including bank overdrafts at end of year 127,719 226,881 Reconciliation of total net funds (Decrease)/increase in cash and cash equivalents (17,720) 18,299(Decrease)/increase in short term bank deposits (220,035) 41,219Net decrease/(increase) in debt 147,230 (48,350)Capital element of finance lease payments 1,098 1,213New finance leases (518) (165)Net funds in subsidiaries demerged to Total Produce plc (5,665) -Translation adjustment 4,437 6,563 Movement in net funds (91,173) 18,779Net funds at the beginning of the year 170,860 152,081 Net funds at the end of the year 79,687 170,860 Fyffes plc Notes to Preliminary Results for the year ended 30 December 2006 1. Basis of preparation This preliminary financial information has been derived from the Group'sconsolidated financial statements for the year ended 30 December 2006 which havebeen prepared in accordance with International Financial Reporting Standards(IFRS) as endorsed by the EU Commission and the accounting policies as set outin the Group's 2005 Annual Report. 2. Adjusted profit before tax and EBIT Continuing Discontinued Combined Continuing Discontinued Combined Operations Operations Operations Operations Operations Operations 2006 2006 2006 2005 2005 2005 •'000 €000 •'000 •'000 €000 •'000Profit before tax per Income Statement 19,062 18,916 37,978 76,164 29,655 105,819AdjustmentsExceptional items (see note 3 below) 281 13,199 13,480 9,074 58 9,132Group share of tax charge of jointventures and associates 1,638 894 2,532 1,660 2,186 3,846Amortisation of intangible incl share 1,303 3,063 4,366 250 3,110 3,360of joint ventures Adjusted profit before tax 22,284 36,072 58,356 87,148 35,009 122,157ExcludeFinancial (income)/expense - Group (4,726) 2,932 (1,794) (8,655) 2,694 (5,961)Financial (income)/expense - share ofjoint ventures and associates 1,479 (70) 1,409 756 151 907Adjusted EBIT 19,037 38,934 57,971 79,249 37,854 117,103 Fyffes believes that adjusted profit before tax and adjusted earnings per share(note 5 below) are the appropriate measures of the underlying performance of theGroup, excluding exceptional items and amortisation charges. Similarly, adjustedearnings before interest, tax, exceptional items and amortisation (AdjustedEBIT) is a more indicative reflection of the underlying operating performance ofboth businesses, particularly given the changes in their capital structuresfollowing the demerger of the Group's General Produce and Distribution divisionto Total Produce plc on 30 December 2006. 3. Exceptional items 2006 2005 •'000 •'000Impairment of businesses demerged to Total Produce plc (22,749) -Costs related to demerger of Total Produce plc (6,007) -Costs related to demerger of Blackrock International Land plc (1,320) (400)Gain on disposal of leasehold interest in property 3,430 -Settlement of onerous contract 3,112 -Fair value gain on investment properties 5,770 9,958Share of fair value gain on joint ventures/associates investment properties (net of tax) 5,434 996Impairment of property, plant and equipment and investment property (2,781) (2,396)Merchant Navy Officers Pension Fund (MNOPF) - (4,994)Costs of legal action against DCC plc and others - (4,796)Provision for defendants costs in DCC plc litigation - (7,500) Total exceptional items per income statement (15,111) (9,132)Add back: Share of joint ventures/associates tax on exceptional items 1,631 - Exceptional items per before tax (13,480) (9,132) Attributable to discontinued operations (13,199) (58) Attributable to continuing operations (281) (9,074) During the year, the Group recognised impairments in relation a number of thebusinesses which were subsequently demerged to Total Produce plc, giving rise toan aggregate non-cash charge in the income statement of €22.7m. This comprises a€6.3m reduction in the carrying value of intangible assets, a €7.4m reduction inthe carrying value of joint ventures and a €9.1m charge in relation to the valueof other equity investments including a €1.4m Fair Value reserve recognised inthe prior year but now written off in the income statement. The costs of theTotal Produce and Blackrock demergers amounted to €6m and €1.3m respectively,mainly comprising professional and advisory fees. Fair value gains oninvestment property in the Group's subsidiaries amounted to €5.8m. The Group'sshare of similar fair values gains in its joint ventures and associates, inparticular Blackrock, amounted to €5.4m net of deferred tax. Impairments ofproperty, plant and equipment, mainly relating to plant and equipment inproperties transferred to Blackrock, amounted to €2.8m. During the first halfof the year, the Group settled its obligations in respect of an onerous contractwith the unused provision of €3.1m being credited to the income statement.Towards the end of the year, the Group disposed of a leasehold interest on aproperty it occupies in Ireland giving rise to a gain of €3.4m. 4. Income Tax Continuing Discontinued Combined Continuing Discontinued Combined Operations Operations Operations Operations Operations Operations 2006 2006 2006 2005 2005 2005 •'000 €000 •'000 •'000 €000 •'000Tax (credit)/charge per Income (3,858) 5,356 1,498 1,375 9,302 10,677StatementGroup share of tax charge of its jointventures/associates netted in profitbefore tax 1,638 894 2,532 1,660 2,186 3,846 Total tax (credit)/charge (2,220) 6,250 4,030 3,035 11,488 14,523AdjustmentsDeferred tax on amortisation ofintangibles (including share of jointventures/associates) 518 2,500 3,018 250 469 719Tax impact of exceptional items (1,327) (2,688) (4,015) (2,511) (755) (3,266)Once-off tax credits arising ondemergers during the year 4,511 3,605 8,116 9,172 - 9,172 Tax charge on underlying activities 1,482 9,667 11,149 9,946 11,202 21,148 Including the combined Group's share of the tax charge of its joint ventures andassociates amounting to €2.5m (2005: €3.8m), which is netted in operating profitin accordance with IFRS, the total tax charge for the year amounted to €4.0m(2005: €14.5m). Excluding the impact of once-off tax credits, deferred tax credits related tothe amortisation of intangibles and the tax effect of exceptional items, theunderlying tax charge for the combined Group for the year was €11.1m (2005:€21.1m), equivalent to a rate of 19.1% (2005: 17.3%) when applied to the Group'sadjusted profit before tax. 5. Earnings per share Continuing Discontinued Combined Continuing Discontinued Combined Operations Operations Operations Operations Operations Operations 2006 2006 2006 2005 2005 2005 •'000 €000 •'000 •'000 €000 •'000Profit for financial year attributable toequity shareholders 22,261 7,060 29,321 69,658 13,356 83,014 '000 '000Issued ordinary shares at start of year 358,598 357,106Effect of own shares held (9,022) (9,022)Effect of shares issued 375 887 Weighted average number of shares forbasic earnings per share calculation 349,951 348,971Weighted average number of options with 3,857 4,541dilutive effect Weighted average number of shares forfully diluted earnings per sharecalculation 353,808 353,512 Basic earnings per share - • cent 6.36 2.02 8.38 19.96 3.83 23.79Diluted earnings per share - • cent 6.29 2.00 8.29 19.70 3.78 23.48 Continuing Discontinued Combined Continuing Discontinued Combined Operations Operations Operations Operations Operations Operations 2006 2006 2006 2006 2006 2006 •'000 €000 •'000 • cent • cent • centAdjusted fully diluted earnings per share Profit for financial year attributable to 22,261 7,060 29,321 6.36 2.02 8.38equity shareholdersAdjustments:Impairment of businesses transferred to - 22,749 22,749 - 6.50 6.50Total Produce plcCosts of demerger of General Produce andDistribution business 6,007 - 6,007 1.72 - 1.72Costs of demerger of Property undertaking 1,320 - 1,320 0.38 - 0.38Profit on disposal of leasehold interest - (3,430) (3,430) - (0.98) (0.98)Settlement of onerous contract (3,112) - (3,112) (0.89) - (0.89)Fair value movement on investment 350 (6,120) (5,770) 0.10 (1.75) (1.65)propertiesShare of joint ventures fair valuemovement on investment properties (5,434) - (5,434) (1.55) - (1.55)Impairment of property, plant andequipment and investment property 2,781 - 2,781 0.79 - 0.79Amortisation of intangible assets 1,303 3,063 4,366 0.37 0.88 1.25Tax effect of exceptional items and (5,333) (3,417) (8,750) (1.52) (0.98) (2.50)amortisation chargesMinority impact of exceptional items - 282 282 - 0.08 0.08Impact on earnings of dilutive share - - - (0.06) (0.07) (0.13)options Adjusted fully diluted earnings - 2006 20,143 20,187 40,330 5.70 5.70 11.40 2005 2005 2005 2005 2005 2005 •'000 •'000 •'000 • cent • cent • centProfit for financial year attributable to 69,658 13,356 83,014 19.96 3.83 23.79equity shareholdersAdjustments:Costs of Blackrock demerger 400 - 400 0.11 - 0.11Fair value movement on investment (8,822) (1,136) (9,958) (2.53) (0.32) (2.85)propertiesShare of joint ventures fair valuemovement on investment properties (308) (688) (996) (0.09) (0.20) (0.29)Impairment of property, plant and 2,080 316 2,396 0.60 0.09 0.69equipment(Profit)/loss on disposal of investmentproperty between divisions (1,566) 1,566 - (0.45) 0.45 -Merchant Navy Officers Pension Fund 4,994 - 4,994 1.43 - 1.43Costs of legal action against DCC plc and 4,796 - 4,796 1.37 - 1.37othersProvision for defendants costs in DCC 7,500 - 7,500 2.15 - 2.15litigationAmortisation of intangible assets 250 3,110 3,360 0.07 0.89 0.96Tax effect of exceptional items and 2,261 286 2,547 0.65 0.08 0.73amortisation chargesOnce-off tax credits (9,172) - (9,172) (2.63) - (2.63)Impact on earnings of dilutive share - - - (0.26) (0.06) (0.32)options Adjusted fully diluted earnings - 2005 72,071 16,810 88,881 20.38 4.76 25.14 Adjusted fully diluted earnings per share is calculated to adjust forexceptional items, intangible amortisation, related tax charges/credits,once-off tax credits and the impact of share options with a dilutive effect 6. Employee post employment benefits 2006 2005 •'000 •'000Deficit at beginning of year (30,104) (26,108)Current/past service cost less net finance income recognised in income statement (4,261) (4,357)Actuarial gain/(loss) recognised in statement of recognised gains and losses 15,412 (2,671)Contributions to schemes 4,032 3,690Impact of Total produce demerger 190 -Exchange movement (359) (658) Deficit at end of year (15,090) (30,104)Related deferred tax asset 2,023 7,897 Net deficit (13,067) (22,207) The table summarises the movements in the net deficit on the Group's variousdefined benefit pension schemes in Ireland, the UK and Continental Europe. The current/past service cost is charged in the Income Statement, net of thefinance income on scheme assets. The actuarial gain/(loss) is recognised in theStatement of Recognised Income and Expense, in accordance with the amendment toIAS 19 Actuarial Gains and Losses, Group Plans and Disclosures. The reductionin the scheme's deficit during the year arose mainly as a result of the increasein long term international bond rates. As a consequence of the demerger of the Group's General Produce and Distributionbusiness, separate defined benefit pension schemes now exist for Fyffes andTotal Produce employees. The demerger adjustment above reflects the pensionassets and liabilities in respect of those employees who have transferred toTotal Produce. Subsequent to the year end the net liability in the continuing Fyffes' schemeswill be reduced by a cash payment of €11m into the UK pension scheme, inaccordance with Section 75 of the UK Pensions Act, 1995. This representspayment on behalf of a number of subsidiaries which have been demerged to TotalProduce and are no longer adhered to that scheme, in respect of pensioners anddeferred pensioners who were formerly employed in those subsidiaries. 7. Dividends 2006 2005 •'000 •'000Dividends paid on ordinary €6 cent sharesFinal dividend for 2005 of €5.20 cent (2004 €5.20cent) 18,197 18,100Special second interim dividend for 2005 of €5.72 cent 20,003 -Interim dividend for 2006 of €1.69 cent (2005: €1.69 cent) 5,915 5,903 Total paid in the year 44,115 24,003 The directors have proposed a final dividend for 2006, subject to shareholderapproval at the AGM, of €1.70 cent per share (2005: €5.20 cent). In accordancewith IFRS this dividend has not been provided for in the balance sheet at 30December 2006. At 30 December 2006 and 2005, the company and subsidiary companies held9,021,610 Fyffes plc ordinary shares. The right to dividends on these shares hasbeen waived and they are excluded from the calculation of earnings per share. 8. Demerger of Group's Property undertaking to Blackrock International Land plc The following table summarises the elements of the 'in-specie' distribution toFyffes' shareholders arising from the demerger of its property undertaking toBlackrock International Land plc: Fair value of assets distributed to Blackrock International Land plc •'mInvestment property 195.0Investment in property joint venture 2.4Net current liabilities including inter-company debt repaid of €62.6m (63.2)Deferred tax liability (9.5) Aggregate fair value of assets distributed 124.7 In addition, 60% of the revaluation reserves related to the de-mergedproperties, amounting to €31m net of deferred tax, has been deemed to berealised and transferred to profit and loss account reserves. 9. Demerger of the Group's General Produce and Distribution business to TotalProduce plc The following table summarises the carrying value of net assets in thebusinesses which were transferred to Total Produce plc arising from the demergerof the Group's General Produce and Distribution business. Carrying value of assets transferred to Total Produce plc •'m Property, plant and equipment and investment property 121.0Investment in joint ventures and associates 26.9Other equity investments 11.0Net working capital 23.0Net funds 5.7Net amount due to Fyffes in connection with demerger (15.7)Corporation tax - current and non-current (10.4)Deferred tax liabilities (net) (10.5)Net liability on defined benefit pension schemes (0.2)Provisions - current and non-current (mainly deferred consideration) (50.8)Minority interests (48.5) Aggregate tangible net assets transferred 51.5Fyffes' goodwill and intangible assets on businesses demerged 95.9 Aggregate carrying value of assets transferred 147.4Fair value gains not previously recognised 108.1 Net in-specie distribution 255.5 The fair value of the businesses transferred has been determined based on theaverage market value of Total Produce plc over the five days immediately afterit listed on the Dublin and London Stock Exchanges. This gave rise to apreviously unrecognised gain in Fyffes amounting to €108.1m and represents thevalue of the in-specie distribution to Fyffes shareholders of €255.5m. In accordance with the terms of the demerger the agreed initial net debt ofTotal Produce plc, defined as cash and cash equivalents less current andnon-current bank debt and finance lease obligations, amounts to €10 million.Such net cash balances in the demerged businesses at 30 December 2006 amountedto €5.7m. Total Produce also has net amounts payable to Fyffes, other thantrade related balances, which arose in connection with the demerger amounting to€15.7m, which when settled will leave Total Produce with the agreed pro-forma€10 million initial net debt. Cumulative currency translation balances relating to the businesses demerged toTotal Produce plc amounting to €2m have been deemed to be realised. In addition,revaluation reserves related to properties transferred to Total Produce plc,amounting to €11.7m net of deferred tax, have been deemed to be realised andtransferred to profit and loss account reserves. 10.1 Cash generated from operations 2006 2005 •'000 •'000Profit for the year 36,480 95,142Taxation expense 1,498 10,677Tax paid (21,820) (14,258)Depreciation of property, plant and equipment 14,388 14,014Fair value movement on investment properties (5,770) (9,958)Impairment of businesses and investments on demerger to Total Produce plc 22,749 -Impairment of property, plant and equipment 2,781 2,396Settlement of onerous contract (3,112) 3,400Net gain on disposal of property, plant and equipment (758) (222)Defined benefit pension scheme expense 4,261 4,357Contributions paid to defined benefit pension schemes (4,032) (3,690)Amortisation of intangible assets 3,021 3,360Share of profits of joint ventures and associates (7,873) (16,051)Net interest income (1,191) (5,588)Interest received less interest paid 5,194 6,363Movement in working capital 715 (3,077)Other (600) (267) Cash generated from operating activities 45,931 86,598 10.2 Cash flows from investing activities Acquisition of subsidiary, net of cash acquired (12,631) (668)Investment in and advances to joint ventures (18,775) (9,784)Investment in Blackrock International land plc (net of debt repaid) (20,000) -Payments of deferred consideration (5,077) (2,701)Acquisition of property, plant and equipment and investment property (35,644) (42,580)Proceeds from disposal of property, plant and equipment and investment property 1,879 1,908Dividends received from joint ventures and associates 5,092 5,310Loans repaid by joint ventures 2,226 4,277Acquisition of other equity investments (1,991) -Other 787 256 Cash flows from investing activities (84,134) (43,982) 10.3 Cash flows from financing activities Proceeds from issue of shares (including premium) 995 1,544Net (reduction)/increase in borrowings (147,230) 48,350Decrease/ (increase) in short term bank deposits 220,035 (41,219)Capital element of lease payments (1,098) (1,213)Dividends paid to equity shareholders (44,115) (24,003)Capital contribution/(repayment) of investment to minority 116 (146)Dividends to minority interest (8,220) (7,630) Cash flows from financing activities 20,483 (24,317) 10.4 Analysis of movement in net funds in the year Total Produce Opening Cash Non-Cash Demerger Closing 2006 Flow Movement Translation •'000 2006 •'000 •'000 •'000 •'000 •'000Bank balances 41,735 12,832 - 827 (46,098) 9,296Call deposits 190,294 (28,744) - 2,535 (41,811) 122,274 Cash and cash equivalents perbalance sheet 232,029 (15,912) - 3,362 (87,909) 131,570Overdrafts (5,148) (1,808) - 238 2,867 (3,851) Cash and cash equivalents per cashflow statement 226,881 (17,720) - 3,600 (85,042) 127,719Short term bank deposits 218,107 (220,035) - 1,928 - -Bank loans - current (130,414) 90,679 - (485) 18,324 (21,896)Bank loans - non-current (141,325) 56,551 - (593) 59,231 (26,136)Finance leases (2,389) 1,098 (518) (13) 1,822 - Total net funds 170,860 (89,427) (518) 4,437 (5,665) 79,687 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
FFY.LTOT.L