26th Feb 2008 07:00
Kerry Group PLC26 February 2008 PRESS ANNOUNCEMENTTuesday 26 February 2008 Preliminary Statement of Resultsfor the year ended 31 December 2007 Kerry, the global ingredients & flavours and consumer foods group, reportspreliminary results for year ended 31 December 2007. Highlights • Good organic growth in all territories • Like-for-like Group sales revenue up 6.7% to €4.8 billion • EBITDA* a record €500m • Trading profit increased by 7.4% on a like-for-like basis to €401.1m • Trading margin up 10 basis points to 8.4% • Profit before tax up 35% to €298m • Adjusted EPS* up 7.4% to 143.8 cent • Final dividend per share up 11.2% to 13.9 cent • Free cash flow of €257m • R&D investment increased to €145m *before intangible amortisation and non-trading items Commenting on the results Kerry Group Chief Executive Stan McCarthy said; "Kerryachieved a good all round business performance and solid organic growth in 2007notwithstanding the inflationary input cost environment. Working closely withour customers we successfully managed this challenge through prudent pricingactions and business efficiency improvements. The Group has excellent prospectsfor business development by leveraging its industry leading technologies and itsstrong geographic market and customer positioning. By capitalising on suchopportunity and exploiting its strong financial and management resources, theGroup plans to grow from its current €5 billion base to €10 billion throughstrong organic growth and value enhancing acquisitions in the next five to sixyears. Kerry has made a good start to 2008 and expects to grow earnings for thefull year to a range of 151 cent to 155 cent per share." For further information please contact: Frank Hayes, Director of Corporate Affairs, Kerry Group plc. Tel no +353 66 7182304 Fax no +353 66 7182972 Kerry Web Site: www.kerrygroup.com CHAIRMAN'S STATEMENTFor the year ended 31 December 2007 Kerry recorded a solid group-wide performance and good organic growth in 2007, ayear when unprecedented raw material and energy related cost increases posedserious challenges for the global food and beverage industries. Working closelywith our customers, Kerry successfully managed the inflationary input costenvironment through prudent pricing actions and a range of supply chainefficiency improvements. Strong market trends towards all-natural healthier ingredients and productlabelling continue to create significant opportunities for Kerry's ingredientsand flavour technologies. In 2007 the Group focused critical attention onaligning its global infrastructure, comprising ingredients, flavours andbio-science technologies and application teams, to best serve our customers andKerry in growing their businesses. By leveraging the maximum synergies fromthis industry leading technological base, considerable progress has already beenachieved in American markets. Work programmes have also commenced in EMEA andAsia-Pacific markets to maximise value through effective application of allGroup technologies in a strategic approach to servicing customer needs andmarkets. In addition we have continued to invest in productivity advancementsand in facility consolidations. In the Group's selected consumer foods' categories in the UK and Irish markets,our brands have again performed very well - outperforming market growth rates inkey convenience and food-to-go sectors. Significant investment in our brandsand in product development has achieved good category positioning for Kerry andits customers. Group expenditure on research, development and applications increased to €145min 2007. A strong innovation pipeline continued to support the successfulcommercialisation of new product concepts, recipes and consumer food andbeverage offerings. RESULTS Total Group sales revenue increased to €4.8 billion in 2007. This reflectslike-for-like revenue growth of 6.7% when account is taken of acquisitions,business disposals and exchange rate effects. Despite the prevailing currency and inflationary input cost environment, tradingprofit increased from €383.7m in 2006 to €401.1m reflecting like-for-like growthof 7.4% year-on-year. Kerry's success in working closely with its customers tomanage the significant cost pressures and its focus on organisational change tomaximise business efficiencies resulted in a 10 basis point improvement in theGroup trading margin to 8.4%. Trading margins in the Group's ingredients andflavours businesses were held at 9.4% and margins in consumer foods advanced by10 basis points to 6.6%. Profit before tax increased by 35% to €298m. Group profit after taxation,finance charges and non-trading items increased by 38% to €246m. Adjustedearnings per share increased by 7.4% to 143.8 cent. The Board will recommend to the Annual General Meeting a final dividend of 13.9cent per share. This will bring the total dividend payment for the year to 20cent per share, an increase of 11.1% on the previous year. BUSINESS REVIEWS INGREDIENTS & FLAVOURS 2007 Like-for-like Growth Revenue €3,310m 7.8%Trading profit €310m 7.6% Kerry is a world leader in food ingredients and flavours serving the food andbeverage industry. In 2007 the division performed well in all regions deliveringsolid growth, offsetting the spike in raw material and energy related costincreases. Total sales revenue increased by 5.6% to €3,310m reflectinglike-for-like growth of 7.8% when adjusted for currency translation,acquisitions and business disposals impact. On a like-for-like basis tradingprofits grew 7.6% to €310m, maintaining a trading margin of 9.4% despite thedifficult cost environment. In American ingredients and flavours markets sales revenue in 2007 grew to€1,310m which represents 7% like-for-like growth on the prior year level.Considerable progress was achieved in broadening Kerry's 'go-to-market' strategyto include all the Group's food and beverage ingredients, bio-science andflavours businesses operating in American markets. Through this more strategicapproach to servicing customers and markets, significant opportunity exists toenhance development and growth through application of Kerry's unrivalled rangeof technologies. To-date this approach has contributed increased growth levelsat major customer accounts. The work programme to align technologies andbusiness infrastructure to facilitate enterprise wide selling will continue in2008. Demand for natural, healthy foods with great taste continues to provide stronggrowth opportunities for Kerry's innovative ingredient systems in theready-to-eat cereal and nutrition sectors. While growth in the nutritional barmarket plateaued, synergies through Kerry technologies led to satisfactorygrowth in the category. In the bakery sector, assisted by the Custom Industriesacquisition completed in 2006, Kerry grew market share through its sweetingredient technologies, emulsifiers, enzymes and natural high-fibreingredients. Sweet applications in the U.S. ice-cream market were adverselyimpacted by lower sectoral sales as a result of the significant increase indairy raw material prices. In November, the Group acquired Can Pan Candy Inc,located in Mississauga, Canada, a manufacturer of confectionery inclusions andtoppings. In December, the Group also acquired QA Products based in Elk GroveVillage, Chicago. Both acquisitions strengthen Kerry's range of sweetingredients technologies for the bakery and frozen desserts markets in NorthAmerica. Kerry's cheese and dairy, culinary and savoury flavours achieved good growththrough complete sauces particularly in the chilled / frozen premium meals andmeal components category. Successful market development has also been achievedin the soups and dressings segments. In savoury systems and coatings, despite the spike in grain prices in 2007,Kerry grew sales volumes satisfactorily due to its industry leading applicationexpertise, quality and customer service. Seasonings also achieved positivegrowth through application in new product launches and growth in foodservicechain accounts. In November, the Group acquired Presco Food Seasonings based inFlemington, New Jersey - a supplier of customised premium seasonings and flavourproducts to the meat and snack industries including the natural and organicsectors. Jet(R) smoothies and Da Vinci Gourmet coffee syrups achieved good growth throughspeciality coffee and club store channels. New coffee syrup lines and specialtybeverage mixes were successfully custom developed for leading coffee house andrestaurant chains. Golden Dipt(R) brand coatings faced significant marginchallenges due to the surge in wheat costs. In the nutritional beverage sector,the aseptic beverages facility in St. Claire, Quebec continued to achieve goodtop-line growth. Soy protein and infant nutrition applications also providedgood growth opportunities in 2007. The continuing trends towards healthier food and beverage products drove growthfor the Group's natural and organic flavour ranges, freeze dried fruitingredients and flavour modulation systems in American markets. Innovativefresh citrus flavour products developed at the SunPure Centre of Excellence inFlorida also achieved good results. In Latin American markets Group businesses were also re-aligned into onebusiness unit in 2007 to maximise business development opportunities throughglobal and regional customer accounts. Functional dairy replacement systemsachieved strong growth in South American markets due to the level of dairy rawmaterial price increases. The rapid expansion of regional foodservice markets,particularly speciality coffee-house chains, has generated good opportunitiesfor Kerry's beverage systems and technologies. Kerry's yeast technologies also delivered high double digit growth in the cellnutrition sector in American markets in 2007. The cell nutrition laboratoryfacilities in New York were significantly expanded to provide for sectoralgrowth opportunities. A number of new protein based product ranges weresuccessfully launched, including UltraPep Soy(R) - a unique technology advancein protein hydrolysates. Notwithstanding a substantial increase in raw material costs, strong growth wasachieved in the pharma sector through new product line introductions bySheffield(TM) Pharma Excipients and the commencement of a global sales andmarketing agreement. In American fragrance markets, Manheimer delivered good growth inhome-environmental and personal care applications. New business gains wereachieved through increased focus on development of natural and organicfragrances and creative perfumery. European ingredients and flavours delivered good growth and maintained tradingmargins in 2007 against a background of substantial raw material cost inflationand an intensely competitive trading environment. Sales revenue increased to€1,339m, which reflects like-for-like growth of 4.6%. Culinary applications again provided excellent growth opportunities for Kerry'srange of ingredient and flavour technologies as consumers increasingly demandimproved ingredient declarations and more authentic natural food tastes.Kerry's investment in culinary applications including natural stocks, bouillons,pastes and purees led to good market gains in the prepared foods, soups, pizza,sandwich and bakery sectors. Commercialisation of key R&D initiatives incoatings and savoury applications in chilled foods growth categories compensatedfor flat volumes in the frozen segment. Significant progress was achieved in 2007 in European savoury markets throughfurther supply chain initiatives and increased investment in production anddevelopment facilities to cater for market growth sectors. A new crumb line wascommissioned at the Blendecques facility in France to enable the business toservice customer requirements in France and the Benelux markets moreefficiently. To facilitate product enhancement through advanced manufacturing technologies, anew coatings line was also established at the Gainsborough plant in the UK andthe Broxburn facility in Scotland was closed. Phase 1 of an investmentprogramme at the Olesnica site in Poland was also completed, expandingapplications capabilities to meet growth requirements in Eastern Europeanmarkets. To assist market development in Russia, a new Representative Officeand applications facility was also established in Moscow. Kerry's performancein the European snack sector was satisfactory despite strong sectoral input costpressures. In the beverage sector, a new application facility was established in Almere,the Netherlands which, coupled with increased investment in research, hassignificantly strengthened Kerry's capability to support European customers inproviding effective solutions to meet rapidly changing market requirements.Strong double digit growth was achieved with notable success in expanding theproduct portfolio into the wine sector, augmenting continued growth in thebrewing industry. Production capacity at the Menstrie facility in Scotland wasagain increased to meet sectoral growth requirements. Mastertaste botanicalflavour systems also achieved good growth in European beverage markets, inparticular in the tea category. The growth in consumer demand for natural products and health ingredient linescontinues to provide favourable growth opportunities for the Group's enzymesfacility located in Ireland, through assisting food processors in salt, sugar,fat and allergen reduction. Raw material cost pressures restricted revenue andprofit growth through emulsifier applications in European markets in 2007.However successful product launches and good market development in the dairy andconfectionery markets have established good platforms for growth. The significant upturn in international dairy market conditions in 2007 led to asubstantial increase in returns to milk producers and a good recovery in dairyprocessor margins. Increased global demand for dairy products coupled with lowinventory levels contributed strongly to the market improvement and performanceof Kerry's Irish milk processing operations. Further progress has been made inthe development and commercialisation of dairy ingredients with specific flavourbenefits. Progress was achieved in nutritional growth sectors by combining andgaining synergies from Kerry's protein and nutrition technologies. Throughcollaboration with the Group's Nutrition Technical Centre in Almere, Kerry DairyIngredients expanded its direct linkages with leading Research Institutes andsuccessfully developed pre-clinical data and clinical studies to validateefficacy of ingredient systems. Kerry also recorded a considerable improvement in the performance of its sweetand fruit ingredients businesses in Europe. In chilled dairy markets goodgrowth was achieved through fruit preparations, sauces and sweet inclusions intogourmet desserts. Premium fruit fillings achieved good progress in theconfectionery and biscuit categories and also in confectionery and fruit saucefoodservice applications. Beverage applications including smoothies, flavouredsyrups and sauces continued to provide excellent growth opportunities,particularly through food-to-go and foodservice channels. In the fruitinclusions sector, a strong innovation pipeline saw encouraging growth throughdried infused fruit ranges for the ready-to-eat cereal and snack sectors.Strong organic growth was achieved in the European sweet ingredients markets,including the dairy and breakfast cereal markets where yoghurt coated cerealsand cluster ingredients performed well. The acquisition of Titusfield Limited,located in the UK, during the year further strengthens Kerry's position as aleading provider of cereal extrusion products, inclusions and coatings for dairyand confectionery markets. Kerry also continued to successfully develop its strategic partnerships withbio-pharma companies in Europe in 2007. This contributed to double digit growthin protein technologies for cell nutrition. An expanded product portfolio alsoassisted strong growth through excipient applications in European, MiddleEastern and African markets. In Asia-Pacific markets the Group again achieved excellent results and strongregional market development in 2007. Sales revenue increased by 17.1% to €425m,reflecting like-for-like growth of 17.3%. Asian markets continue to exhibit strong growth potential. In the healthy snacksector, Kerry technologies grew by 18% year-on-year outperforming market growthrates for functional ingredient systems. Culinary systems also provided goodgrowth in line with demand for convenient meal solutions. Cheese and dairyflavours delivered strong growth particularly through prepared sauces for QSRmarkets. In December, Kerry acquired Singapore based FountainheadManufacturing, a speciality liquid sauce manufacturer of western and ethnicsauces, dips and dressings for QSR and foodservice applications. Due to thebuoyancy of international dairy commodity markets in 2007, Kerry's technologicalstrengths in development of functional dairy blends delivered high double digitgrowth. The strength of regional bakery, confectionery and dairy markets alsoprovided good growth platforms for Kerry's emulsifier technologies. Expansionof the Esterol production facility is on-going to meet the regional growth indemand. As markets across the region continue to add value and adopt westernstyle trends, Kerry's coatings and seasonings technologies are assisting meatprocessors in development of value-added products such as microwaveable,pre-marinade meats and ready meals. China saw strong growth through customised solutions for the ice-cream industryand through snack offerings for the fast-growing QSR sector. Incorporatingspeciality dairy proteins developed in Ireland, Kerry also achieved good growthin the nutritional sector in China with the successful launch of finishedformulas. The Group's branded speciality beverage products again made excellentprogress in 2007 as the 'coffee culture' continues to develop in majorpopulation centres and global chains progress regional expansion strategies.Beverage applications grew strongly in Japan, Korea, Malaysia, the Philippinesand in China as the market continues its rapid development ahead of the BeijingOlympic Games in 2008. New product introductions in 2007 included a yoghurtfrappease base incorporating Kerry's dairy technologies and a range of fruitteas utilising Mastertaste's unique freeze dried flavour technology. KerryBio-Science also achieved good growth through new brewing concepts andtechnology introductions into target customers within the region. The globalapplications capability of the beverage business unit was further enhanced withestablishment of a new beverage application centre and expertise in Shanghai.In October, the Group also acquired Shanghai Vega Flavours and Fragrance toprovide flavour development and manufacturing support for Kerry's regional andglobal customers in the dairy, beverage and confectionery sectors. SheffieldPharma Ingredients also made good progress in Asia as leading globalpharmaceutical companies continue to establish regional manufacturing bases. In Australia and New Zealand, Kerry's total ingredients portfolio recordeddouble digit growth year-on-year. Beverage performed extremely well driven bycontinued expansion in distribution and penetration of Da Vinci branded syrupsand sauces in both the independent cafe sector and key chain accounts.Continued growth of the ice blended beverage category resulted in further stronggrowth of fruit and dairy bases for smoothie and frappe applications.Seasonings and coatings also achieved double digit growth in the poultry andindustrial food processing sectors. 2007 also saw the successful introductionof new technologies, including a range of cereal products targeted at thegrowing health and nutritional snack bar sectors and a composite range of wetculinary systems. In the Australian bakery sector Kerry Pinnacle continued to adapt well to marketchanges with growth in the franchise bakery and the fast growing lifestylebakery market. In July the Group acquired Melbourne based Sugar and Spice toassist in growing Kerry Pinnacle's market share in the lifestyle bakery segmentby bringing a full range of donuts, cakes, profiteroles and slices to its broadcustomer base including supermarkets and shop chains. CONSUMER FOODS 2007 Like-for-like Growth Revenue €1,819m 5.6%Trading profit €119m 6.4% Despite accelerating input cost inflation and a highly competitive UK and Irishmarket environment in 2007, the Group's consumer foods businesses delivered arobust performance, with strong brand and category growth year-on-year. Havingdivested primary meat processing operations at year-end 2006, sales revenue in2007 at €1,819m reflects like-for-like growth of 5.6%. Trading profitsincreased to €119m which represents like-for-like growth of 6.4% year-on-year.Health and nutrition considerations increasingly transcend all food categoriesas consumers pursue a holistic approach to diet, lifestyle and health issues.Kerry Foods' focus on innovation and premiumisation in its branded and selectedown label chilled growth categories contributed strongly to its successfulperformance in such a challenging environment in 2007. In Ireland the Denny brand, supported by the 'Home is where you make it' TVadvertising campaign, delivered a good overall performance. While there was aslight decline in sausage sales relative to strong year earlier comparatives,Denny rashers again outperformed category growth levels driven by a focus onsuperior quality. Denny Cooked Meats consolidated its category leadershipposition, with overall growth of 17% year-on-year and significant growth fromthe Denny Eat Healthy and Denny Carved ranges. The Ballyfree brand, supportedby a new advertising campaign, also outperformed white meat category growthrates for its cooked meats range. 2007 saw another year of strong growth in the food-to-go category in Ireland.Pre-packed and deli-made sandwich markets continued to grow, with significantinvestment by retailers in their deli offerings. Freshways continues to be theNo.1 pre-packed sandwich brand in Ireland, in a market which grew by 7%year-on-year. All Freshways brand measures showed significant improvement inresponse to a major brand investment and advertising programme. In response toconsumer demand for more variety and new flavours, a number of new LimitedEdition sandwiches and wraps were launched in addition to an expanded range ofpremium Gourmet sandwiches. Freshways furthered its offerings from a sandwichbrand to a food-to-go brand with the successful launches of its Heat 'n Eatrange (microwavable hot sandwiches) and Freshways Fruit Pots (portable, singleserve, fresh fruit to eat on the go). Kerryfresh, the foodservice business segment of Kerry Foods in Ireland, madetremendous progress in 2007 establishing itself as the leading supplier ofchilled foodservice ingredients and food-to-go concepts to delicatessens, coffeeshops and sandwich bars. Double digit growth was achieved in this dynamicsector which has sustained high levels of investment by symbol groups andindependent entrepreneurs. In the fast growing chilled juice market in Ireland, the key activity forKerry's Dawn brand was continued support and investment in Dawn Benefits - arange of functional juices launched in 2006. Supported by strong TV and Radiocampaigns, the Dawn share of the functional juices segment grew from 9.9% to19.2% year-on-year. 2007 also saw the launch of Dawn Smoothies in take home (1litre) format and the re-launch of its range of impulse smoothies. With the significant increase in dairy raw material pricing, the fresh milkproduct category in Ireland was extremely competitive. However supported by anew marketing campaign Dawn Omega Milk performed well. In the Irish bottled water market, the key highlights for 2007 include thelaunch of Kerry Spring XTRA, an award winning flavoured functional water forchildren. Kerry Spring maintained its position as the overall leader in theIrish flavoured water market despite increased competition in the sector. In the cheese and spreads categories of the Irish and UK markets, Kerry Foodsagain performed well in terms of brand growth and positioning - outperformingmarket growth rates in most segments. Due to the significant price increases indairy commodities and edible oils, cost recovery remains a key on-going focusfor the division. Kerry Foods saw strong growth in the cheese category withtotal brands achieving good volume growth. Low Low which has been Ireland'sfastest growing dairy brand in recent years, continued its successful growthprogramme - reaching the No.2 position in cheese for the first time.Charleville Cheese consolidated its position as Ireland's No.1 cheese brand withgood growth year-on-year. EasiSingles benefited from a significant brandrepositioning programme in the processed cheese slices category. In NorthernIreland the Coleraine brand also extended its market leadership position. While the UK cheese snacking sector declined slightly in 2007, Cheestringsperformed well - further re-enforcing its market positioning as a healthyconvenience snack offering. In France, Ficello which is now stocked by allmajor retailers continued to progress its market development. In the QSRsector, Kerry continued to develop its cheese and UHT offerings in 2007 withstrong double digit volume growth. Low Low and Kerrymaid continued to make good progress in the Irish spreadscategory. A new Omega line was added to the Low Low brand prior to year-end.Golden Cow performed strongly re-enforcing its position as the No.1 butter brandin Northern Ireland. In the UK private label spreads category, Kerry Foodsfurther consolidated its market leadership position with growth through premiumofferings and a strong emphasis on category management. UK chilled food category growth continued to reflect consumer preference formore premium offers and on-the-go eating. The fresh sausage market againrecorded strong value growth driven by continued trade up into more premiumadult variants. Richmond remains the clear No.1 brand in the market with strongyear-on-year growth in all formats. This performance was again assisted bysignificant brand investment and continuation of the highly effective 'Smileit's a Richmond' advertising campaign. Wall's remains the second largest brandin the UK where growth has been driven by double digit growth of Wall's Micro's.As the definitive brand choice for premium consumers, Porkinson again achievedstrong double digit annual growth. Against a background of continued decline inthe frozen sausage segment, Richmond frozen again achieved satisfactory salesgrowth. In 2007 Mattessons realised excellent growth through its major brand investmentareas Fridge Raiders and Smoked Sausage. Fridge Raiders responded well todistribution increases and the launch of a new 'Chinese Spare Rib' variant.Turkey Rashers also showed encouraging growth in 2007 but sliced meats continuedto be a very difficult UK market category. The decision by Mattessons towithdraw from unprofitable marketing activity and to focus its initiatives onthe convenience sector has put the business in a stronger position for 2008. Chilled ready meals saw another year of good growth in the UK market fuelled bya continued increase in the total number of households buying into the categoryand in frequency of purchase. Significant innovation also continues to broadeninterest in the category where 'Healthily Balanced', British and Premiumsegments are showing the strongest growth. Kerry Foods 'Champneys' and 'TheFood Doctor' healthy branded ranges entered their second year in the category,helping to drive the sectors' overall growth. The Bombay Brasserie Indianbranded offering celebrated its 25th Anniversary with an expansion of the rangeand launch of a new marketing support programme. While overall sales volumes in the UK frozen ready meals segment continued todecline year-on-year, the rate of decline slowed and the category achievedgreater market stability and improved product pricing prior to year-end. RyeValley Foods further consolidated its market leadership in the sector with theaddition of licensing agreements for sale and manufacture of well establishedbranded offerings. The savoury pastry market showed satisfactory growth year-on-year. Kerry Foodsoutperformed subcategory growth rates through increased marketing support andnew listings with key retailers. The new hot pie production line commissionedin March 2007 performed extremely well and was operating to full capacity byyear-end. Kerry Foods Direct to Store performed well in the UK convenience store sector.The business won important new customer listings and expanded its product rangesuccessfully in 2007. The Group's specialist foodservice business unit in theUK and Ireland also grew satisfactorily through distributor, pub, restaurant andcoffee chain accounts. GEOGRAPHIC MARKETS Total Group sales revenue throughout European markets in 2007 grew by 5.3% on alike-for-like basis to €3,054m. In American markets, the Group's ingredientsand flavours businesses increased sales revenue by 7% on a like-for-like basisto €1,310m. Sales revenue in Asia-Pacific markets increased by 17.3% on alike-for-like basis to €425m. FINANCE Earnings before finance costs, tax, non-trading items, depreciation andamortisation (EBITDA) increased to a record €500m. After allowing for anincrease in working capital of €38m, capital expenditure of €89m (net ofproceeds from asset disposals), finance payments of €79m and tax of €37m, freecash flow available to the Group was €257m. The consistent strong cashgeneration performance of the Group has delivered over €1.5 billion free cash inthe last six year period. Expenditure on Group acquisitions amounted to €79m (2006 : €113m). Net debt atyear-end amounted to €1,279m compared to €1,194m at the end of 2006. Net debtto EBITDA increased slightly to 2.6 times (2006 : 2.5 times). Finance costswere €79.1m compared to the 2006 level of €76.9m, with EBITDA to net interestcovered 6.1 times (2006 : 6.2 times). The Group used its share buy-backprogramme authorisation to purchase 10.8 million shares at a cost of €232m in2007. DIVIDEND The Board recommends a final dividend of 13.9 cent per share, an increase of11.2% on 2006. Together with the interim dividend of 6.1 cent per share, thisraises the total dividend for the year to 20 cent per share, an increase of11.1% on the previous year. The final dividend will be paid on 23 May 2008 toshareholders registered on the record date 18 April 2008. ANNUAL REPORT AND ANNUAL GENERAL MEETING The Group's Annual Report will be published in April and the Annual GeneralMeeting will be held in Tralee on 13 May 2008. BOARD AND MANAGEMENT CHANGES Mr Hugh Friel, who was Chief Executive of the Group since January 2002 and partof the leadership team of Kerry since the establishment of the organisation,retired as Chief Executive and Director of the Group on 31 December 2007. Chief Executive Designate Mr Stan McCarthy succeeded Mr Hugh Friel as ChiefExecutive on 1 January 2008. An Executive Director of the Group since 1999, MrMcCarthy was President and CEO of Kerry Ingredients Americas since 1996 havingjoined the organisation through its Graduate Recruitment Programme in Ireland in1976. Mr Denis Cregan, who was also part of the leadership team of Kerry since itsestablishment, will step down as Deputy Chief Executive of the Group and as anExecutive Director of the Company following the Annual General Meeting on 13 May2008. Mr Cregan will remain with the Company on a contractual basis until theend of 2009 to assist the Chief Executive in alignment of the Group's globalfood ingredients, bio-science and flavours businesses. FUTURE PROSPECTS Looking forward, our focused strategy, successful business model and strongmanagement resource gives us full confidence in the Group's ability to deliversustainable revenue and earnings growth in 2008 and beyond. Kerry holds anunrivalled position as a leading ingredients and flavours supplier to the foodand beverage industries globally and our consumer foods businesses in the UK andIreland have successfully attained leading brand positioning and consumerpreference. The Group has excellent prospects for business development by leveraging itscompetitive advantages through its industry leading technological, geographicaland customer positioning. Top line growth will be enhanced by globalimplementation of a programme, already well advanced in American markets, tore-align the Group's ingredients, bio-science and flavours businesses aroundcore technology platforms and application teams to best service customerrequirements. In Kerry's consumer foods businesses, continued investment in our brands andselected private label growth categories, coupled with active productdevelopment programmes, will continue to contribute good growth for the Groupand its retail customers. By capitalising on such opportunity and exploiting its strong financial andmanagement resources, the Group plans to grow from its current €5 billion baseto €10 billion through strong organic growth and value enhancing acquisitions inthe next five to six years. The Group has made a good start to 2008 and expectsto grow earnings for the full year to a range of 151 cent to 155 cent per share. RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007 Kerry Group plc Consolidated Income Statementfor the year ended 31 December 2007 Before Non-Trading Non-Trading Items Items Total 2007 2007 2007 2006 Notes •'000 •'000 •'000 •'000 Revenue 1 4,787,766 - 4,787,766 4,645,920 _________ _________ _________ __________ Trading profit 1 401,126 - 401,126 383,688 Intangible asset amortisation (12,669) - (12,669) (12,093)Non-trading items 2 - (11,113) (11,113) (73,425) _________ _________ _________ __________Operating profit 388,457 (11,113) 377,344 298,170Finance costs (79,055) - (79,055) (76,930) _________ _________ _________ __________Profit before taxation 309,402 (11,113) 298,289 221,240Income taxes (64,512) 12,341 (52,171) (43,491) _________ _________ _________ __________Profit after taxation and attributable to equity shareholders 244,890 1,228 246,118 177,749 _________ _________ _________ __________ Earnings per ordinary share (cent) - basic 3 137.4 95.6 - diluted 3 137.0 95.2 _________ __________ Kerry Group plc Consolidated Balance Sheetas at 31 December 2007 2007 2006 •'000 •'000Non-current assetsProperty, plant and equipment 990,747 1,010,343Intangible assets 1,646,186 1,684,756Financial asset investments 18,905 19,866Deferred tax assets 3,361 10,856 ___________ ___________ 2,659,199 2,725,821 ___________ ___________Current assetsInventories 526,364 495,313Trade and other receivables 591,166 597,073Cash and cash equivalents 185,669 188,844Financial assets 3,746 4,485Assets classified as held for sale 3,392 2,696 ___________ ___________ 1,310,337 1,288,411 ___________ ___________Total assets 3,969,536 4,014,232 ___________ ___________Current liabilitiesTrade and other payables 859,933 836,550Financial liabilities 10,309 27,261Tax liabilities 53,238 51,909Deferred income 2,727 2,726 ___________ ___________ 926,207 918,446 ___________ ___________Non-current liabilitiesFinancial liabilities 1,454,797 1,356,296Retirement benefits obligation 111,999 180,269Other non-current liabilities 92,042 87,368Deferred tax liabilities 137,527 131,252Deferred income 17,677 17,434 ___________ ___________ 1,814,042 1,772,619 ___________ ___________Total liabilities 2,740,249 2,691,065 ___________ ___________Net assets 1,229,287 1,323,167 ___________ ___________Capital and reservesShare capital 21,836 23,445Share premium account 391,316 383,341Other reserves (83,961) (32,089)Retained earnings - cancelled shares (280,292) - - retained earnings 1,180,388 948,470 ___________ ___________Shareholders' equity 1,229,287 1,323,167 ___________ ___________ Kerry Group plc Consolidated Statement of Recognised Income and Expensefor the year ended 31 December 2007 2007 2006 •'000 •'000 Fair value movements on available-for-sale investments (4,470) 7,424Fair value movements on cash flow hedges (20,934) (2,608)Exchange difference on translation of foreign operations (54,335) (13,389)Actuarial gains on defined benefit pension schemes 20,476 61,924Deferred tax on items taken directly to reserves (876) (12,251) ___________ ___________Net (expense)/income recognised directly in equity (60,139) 41,100 TransfersCash flow hedges to profit or loss from equity (8,534) 160Sale of available-for-sale investments (15,396) -Profit for the year after taxation 246,118 177,749 ___________ ____________Total recognised income and expense for the year attributable to equity shareholders 162,049 219,009 ___________ ___________ Consolidated Reconciliation of Changes in Shareholders' Equityfor the year ended 31 December 2007 2007 2006 •'000 •'000 At beginning of year 1,323,167 1,177,684Total recognised income and expense for the year 162,049 219,009Dividends paid (33,800) (30,757)Purchase of shares (231,850) (48,442)Long term incentive plan expense 1,650 1,265Shares issued during year 8,071 4,408 ___________ ____________At end of year 1,229,287 1,323,167 ___________ ___________ Kerry Group plc Consolidated Cash Flow Statementfor the year ended 31 December 2007 2007 2006 •'000 •'000Operating activitiesTrading profit 401,126 383,688Adjustments for:Depreciation (net) 99,003 102,923Change in working capital (35,368) (45,893)Exchange translation adjustment (2,506) (484) ___________ ___________Cash generated from operations 462,255 440,234 Income taxes paid (37,250) (35,056)Interest received 3,675 2,006Finance costs paid (82,849) (78,587) ___________ ___________Net cash from operating activities 345,831 328,597 ___________ ___________Investing activitiesPurchase of non-current assets (140,390) (103,066)Proceeds from the sale of non-current assets 48,443 13,886Capital grants received 3,379 1,687Purchase of subsidiary undertakings (78,958) (112,830)Proceeds from disposal of businesses 526 17,118Payment of deferred payables (3,592) (2,781)Expenditure on restructuring costs (39,519) (30,903)Consideration adjustment on previous acquisitions (64) (63) ___________ ___________Net cash used in investing activities (210,175) (216,952) ___________ ___________Financing activitiesDividends paid (33,800) (30,757)Purchase of shares (231,850) (48,442)Issue of share capital 8,071 4,408Net movement on bank borrowings 123,516 (4,958)Increase/(decrease) in bank overdrafts 5,943 (1,694) ___________ ___________Net cash used in financing activities (128,120) (81,443) ___________ ___________ Net increase in cash and cash equivalents 7,536 30,202Cash and cash equivalents at beginning of year 188,844 163,903Exchange translation adjustment on cash and cash equivalents (10,711) (5,261) ___________ ___________Cash and cash equivalents at end of year 185,669 188,844 ___________ ___________ Reconciliation of Net Cash Flow to Movement in Net Debtfor the year ended 31 December 2007 Net increase in cash and cash equivalents 7,536 30,202Cash (inflow)/outflow from debt financing (129,459) 6,652 ___________ ____________Changes in net debt resulting from cash flows (121,923) 36,854Fair value movement on interest rate swaps (29,016) (5,998)Exchange translation adjustment on net debt 66,316 50,146 ___________ ___________Movement in net debt in the year (84,623) 81,002Net debt at beginning of year (1,194,356) (1,275,358) ___________ ___________Net debt at end of year (1,278,979) (1,194,356) ___________ ___________ Kerry Group plc Notes to the Financial Statementsfor the year ended 31 December 2007 1. Analysis of results 2007 2006 Unallocated Unallocated By business Ingredients Consumer and Group Ingredients Consumer and Group segment: & Flavours Foods Eliminations Total & Flavours Foods Eliminations Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Revenue 3,309,629 1,819,295 (341,158) 4,787,766 3,134,288 1,818,733 (307,101) 4,645,920 _________ _________ _________ _________ _________ _________ _________ _________ Trading profit 310,416 119,314 (28,604) 401,126 293,131 117,528 (26,971) 383,688 Intangible asset amortisation (10,079) (1,512) (1,078) (12,669) (10,202) (1,045) (846) (12,093)Non-trading items (27,661) (6,672) 23,220 (11,113) (25,544) (47,881) - (73,425) _________ _________ _________ _________ _________ ________ _________ _________ Operating profit 272,676 111,130 (6,462) 377,344 257,385 68,602 (27,817) 298,170 _________ _________ _________ _________ ________ _________Finance costs (79,055) (76,930) ________ _________Profit before taxation 298,289 221,240 Income taxes (52,171) (43,491) ________ _________Profit after taxation andattributable to equityshareholders 246,118 177,749 ________ _________ Segment assetsand liabilitiesSegment assets 2,488,411 967,243 513,882 3,969,536 2,449,392 1,060,691 504,149 4,014,232Segment liabilities 566,701 393,208 1,780,340 2,740,249 564,118 452,173 1,674,774 2,691,065 _________ _________ ___________ _________ __________ ________ ___________ _________Net assets 1,921,710 574,035 (1,266,458) 1,229,287 1,885,274 608,518 (1,170,625) 1,323,167 _________ _________ ___________ _________ __________ ________ ___________ _________ Other segmentalinformationProperty, plant and equipmentadditions 100,648 21,298 - 121,946 75,009 22,891 - 97,900Intangible asset additions 2,692 811 1,555 5,058 1,872 - 1,279 3,151Depreciation (net) 66,006 32,412 585 99,003 69,345 33,018 560 102,923 _________ _________ _________ _________ _________ ________ _________ _________ 2007 2006 By geographic segment: Asia Asia Europe Americas Pacific Total Europe Americas Pacific Total •'000 •'000 •'000 •'000 •'000 •'000 •'000 •'000 Revenue by location of customers 3,053,603 1,309,609 424,554 4,787,766 3,007,511 1,275,879 362,530 4,645,920 Segment assets by location 2,712,630 1,031,350 225,556 3,969,536 2,718,778 1,102,707 192,747 4,014,232 Property, plant and equipment additions 57,188 50,868 13,890 121,946 70,222 20,917 6,761 97,900 Intangible asset additions 3,269 1,789 - 5,058 1,538 1,597 16 3,151 _________ _________ __________ _________ _________ _________ _________ _________ 2. Non-trading items 2007 2006 •'000 •'000 Profit on sale of non-current assets 35,585 11,477Loss on sale of businesses (2,197) (35,860)Acquisition, plant closure and other restructuring costs (44,501) (49,042) ________ ________ (11,113) (73,425) Tax credit on non-trading items 12,341 14,262 ________ ________ 1,228 (59,163) ________ ________ The profit on sale of non-current assets relates primarily to the sale ofinvestments and properties, plant and equipment. The loss on sale of businesses in 2007 relates primarily to the sale of a frozenvegetable business in the UK. The loss on sale of businesses in 2006 relates substantially to the sale of thepoultry businesses in Ireland and the UK, a chilled desserts business in the UKand small non-core Ingredients businesses in the US and Brazil. The acquisition, plant closure and other restructuring costs relate to therestructuring of manufacturing plants in Europe, Americas and Asia Pacific andthe integration of recent acquisitions. The costs are analysed as follows: 2007 2006 •'000 •'000 Plant closure and relocation 32,217 22,552Redundancies and contract compensation 5,615 7,534Plant and other assets impaired 4,982 18,139Other 1,687 817 _______ _______ 44,501 49,042 _______ _______ The non-trading items had a net cash inflow (after related tax) of €21,791,000(2006: €14,363,000) 3. Earnings per ordinary share EPS 2007 EPS 2006 Notes cent •'000 cent •'000Basic earnings per shareProfit after taxation and attributable to equity shareholders 137.4 246,118 95.6 177,749Intangible asset amortisation 7.1 12,669 6.5 12,093Non-trading items (net of related tax) 2 (0.7) (1,228) 31.8 59,163 _______ _______ ________ ________Adjusted earnings* 143.8 257,559 133.9 249,005 _______ _______ ________ ________Diluted earnings per shareProfit after taxation and attributable to equity shareholders 137.0 246,118 95.2 177,749Adjusted earnings* 143.4 257,559 133.4 249,005 _______ _______ ________ ________ * In addition to the basic and diluted earnings per share, an adjusted earningsper share is also provided as it is considered more reflective of the Group'sunderlying trading performance. Adjusted earnings is profit after taxationbefore intangible asset amortisation and non-trading items (net of related tax). Number Number of Shares of Shares 2007 2006 000's 000's Basic weighted average number of shares 179,073 185,949Impact of executive share options outstanding 545 715 _______ ________Diluted weighted average number of shares 179,618 186,664 _______ ________Actual number of shares in issue 174,690 184,762 _______ ________ 4. General information and accounting policies The financial information set out in this document does not constitute fullstatutory financial statements for the years ended 31 December 2007 or 2006 butis derived from same. The Group financial statements have been prepared inaccordance with International Financial Reporting Standards (IFRSs), applicableIrish law and the Listing Rules of the Irish and London Stock Exchanges. TheGroup financial statements have also been prepared in accordance with IFRSsadopted by the European Union and therefore the Group financial statementscomply with Article 4 of the EU IAS Regulation. The 2007 and 2006 financial statements have been audited and receivedunqualified audit reports. The 2007 financial statements were approved by theBoard of Directors on 25 February 2008. The consolidated financial statements have been prepared under the historicalcost convention, as modified by the revaluation of available-for-sale financialassets, financial asset investments and financial liabilities (includingderivative financial instruments), which are held at fair value. The Group'saccounting policies will be included in the Annual Report & Accounts to bepublished in April 2008. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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