Final Results
Glanbia PLC
05 March 2003
Glanbia plc
Preliminary Announcement of Results
Year Ended 4 January 2003
Glanbia plc, the international dairy, consumer foods and nutritional products
company, announces its preliminary results for the year ended 4 January 2003.
Highlights
Y/E 4 January Y/E 29 Dec Change
2003 2001
Euro Euro
Group Turnover 2,316.74m 2,625.41m -11.8%
Operating Profit* 91.54m 93.23m -1.8%
Operating Margin 3.9% 3.6%
Profit before Tax / 71.81m 66.60m +7.8%
Exceptional Items
Exceptional Charge 79.92m 5.53m
Adjusted EPS** 17.44c 15.85c +10.0%
FRS 3 EPS (10.06)c 13.71c
Net Borrowings 176.31m 242.66m -27.3%
Dividend 4.76c 4.53c +5.1%
Year end Net Debt / EBITDA*** 1.22 1.63
____________________________________________________________________
*Including share of operating profit of joint ventures & associates
**Before exceptional items and amortisation of goodwill
***Earnings before interest, tax, depreciation, amortisation of goodwill and
exceptional items
Summary
• Solid performance delivered in challenging operating environment
• Further growth in profits before tax and exceptional items - up 7.8%
• Strong operating profit growth in Consumer Foods
• Good progress achieved in development of international nutrition
activities
• Year-end Net Debt / EBITDA 1.22, interest cover up to 4.6 times
• Net free cash generated of €66.35m
• Glanbia well positioned for growth in nutritional ingredients and
consumer foods
• Exceptional costs mainly non-cash - linked to UK restructuring
'Commenting on the results, Group Managing Director, John Moloney said, 'Glanbia
has delivered on its promise to shareholders to strengthen Group operational and
financial performance during 2002.
'Continued profit growth in our consumer foods and nutritional ingredients
activities boosted operating margins. Our financial position also improved
significantly. Glanbia is better focused following restructuring and a
progressive exit from non-core businesses.
'Our 2003 priority is on delivering growth in particular in cheese, nutritional
ingredients and in consumer foods with a nutritional emphasis. The Board
believes that Glanbia will continue to make good progress in 2003.'
Results
(i) Profit and Loss Account
Glanbia's 2002 performance principally reflects enhanced profitability of
Consumer Foods and a satisfactory performance in USA operations and
Agribusiness, which substantially offset the impact of weak international dairy
markets on Irish dairy food ingredient operations. The results also reflect the
exit from UK consumer meats and foodservice distribution in July 2002.
Arising from these developments, Group turnover in 2002 was €2,316.74m (2001:
€2,625.41m). Operating margins improved to 3.9% (2001: 3.6%). Operating profit
(including share of operating profit of joint ventures & associates) decreased
marginally (-1.8%) to €91.54m (2001: €93.23m).
Profit before exceptional items and tax increased by 7.8% to €71.81m (2001:
€66.60m), as the Group continued to benefit from good cash management, which was
reflected in lower interest costs.
A net exceptional charge for the period of €79.92m arises primarily from
continued refocusing of operations around group strategy. It includes the
closure of the UK consumer meats business and the sale of the UK foodservice
distribution operation, details of which were previously announced to the market
on 13 May 2002 and 22 July 2002 respectively. Of this amount, €49.6m related to
the write-back through the profit and loss account of goodwill previously
written off against reserves, €44.07m principally related to the write-down of
assets, set off by profit realised on the sale of assets of €13.75m. After net
exceptional items, the Group realised a loss before tax of €8.11m (2001 profit
before tax €61.07m).
Adjusted earnings per share increased by 10.0% to 17.44c (2001: 15.85c). The
FRS3 loss per share was10.06c (2001 eps: 13.71c).
(ii) Cash Flow
Glanbia continues to benefit from strong cash flow. Net cash generated of
€66.35m (2001: €51.30m) gave rise to a 27.3% reduction in net borrowings.
Following a period of heavy investment in assets, capital expenditure declined
to €35.01m (2001: €43.72m). Depreciation in the period was €53.07m (2001:
€55.41m).
(iii) Financing
Glanbia's financial position has been further strengthened during the year, as
the Group benefited from improved operating performance and good cash flows.
As indicated, net bank borrowings declined to €176.31m (2001: €242.66m). The
ratio of year-end net borrowings to EBITDA (Earnings before interest, tax,
depreciation, amortisation of goodwill and exceptional items) is now 1.22 (2001:
1.63).
The interest charge for the year (including share of Joint Ventures &
associates) declined by 25.9% to €19.73m (2002: €26.63m) reflecting lower
overall borrowings and continued improvements in working capital utilisation.
Interest cover was 4.6 times compared to 3.5 times in 2001. Non equity minority
interest, which related to Preferred Securities and Preference Shares, amounted
to €12.62m (2001: €13.04m).
Equity shareholders' funds increased by 7.6% to €181.30m (2001: €168.55m),
despite the impact arising from the exit from non-core activities in 2002.
The Group has adopted FRS 19 - 'Deferred Tax' and the requirements of the
transitional provisions of FRS 17 - 'Retirement Benefits'. The Group has no
material impact from the implementation of the deferred tax accounting standard.
The adoption of FRS 17 has had no impact on the results of 2002 or prior years.
The disclosures required under FRS 17 show a net pension deficit of €73m as at
the Balance Sheet date, driven mainly by the continued decline in equity
investment performance. The Group is reviewing its options in relation to this
FRS 17 position.
(iv) Dividend
A final dividend of 2.80c per share is proposed (2001: 2.66c), giving a total
dividend for the year of 4.76c per share (2001: 4.53c), an increase of 5.1%.
Irish dividend withholding tax will be deducted at the standard rate where
applicable.
Review of Operations
Consumer Foods
Glanbia's Consumer Foods businesses hold key market positions principally
supplying valued-added products in the UK, Ireland and Continental Europe. This
division had a much-improved overall performance in 2002, benefiting from
enhanced operational efficiencies in key businesses, new nutritional product
introductions and the withdrawal during the year from certain under-performing
business activities. Operating profit improved significantly (+133.4%) to
€47.59m (2001:€20.39m) and operating margin also improved to 4.0% (2001: 1.5%).
Overall turnover declined to €1,175.11m (2001: €1,358.05m), as sales increases
in most business units were offset by the exit from UK consumer meats and
foodservice distribution activities as well as reduced Irish pork sales due to
the fire in the Roosky processing facility. Turnover in Ireland was €496.63m
(2001: €549.76m) and in the UK was €678.48m (2001: €808.28m).
In 2002 Consumer Foods accounted for 50.7% of the Group's turnover and 52.0% of
the Group's operating profit. The division is comprised of the following
businesses:
Glanbia Dairies is Ireland's leading supplier of branded and value-added liquid
milk products. This business had a satisfactory overall performance in a highly
competitive marketplace, benefiting from strong brand support, enhanced
operating efficiencies and continued focus on innovation and market development.
Plans are well advanced for the introduction of a new range of milk-based
nutritional and functional beverages in 2003, including Milk Plus, a new
probiotic milk drink, which was launched in February.
Glanbia Foods Ireland is the market-leading supplier of fresh dairy products,
cheeses, soups and spreads principally under the Yoplait, Avonmore and Kilmeaden
brands. This business had a strong performance during 2002 with good volume
growth and expansion into new value-added segments. This supported market share
gains in all core categories. The business is a key player in the development
and supply of functional foods to meet emerging consumer needs, including the
award-winning Yoplait Everybody probiotic yoghurt drink which performed strongly
in its launch year in a rapidly growing market segment. Further important new
nutritional product introductions are now underway.
Glanbia Foods UK is Britain's second largest producer of cheddar, stilton and
British territorial cheeses, supplying the retail and foodservice sectors. The
business performed satisfactorily in a highly competitive market, with strong
sales volumes and enhanced operating efficiencies.
Glanbia Cheese, the Group's pizza cheese joint venture with Leprino Foods, is
Europe's leading producer of mozzarella for the pizza sector, comprising quick
service restaurants and frozen pizza manufacturers. This business had a good
performance in 2002, significantly outperforming the market which expanded by
5%. It benefited from very strong volume growth and good operational
efficiencies associated with the introduction of new processing technologies and
capacity expansion. Further significant investment is underway in this business
in 2003.
UK fresh pork operations had a satisfactory operating performance in a difficult
period for the UK pigmeat sector due to declining pig numbers in Great Britain.
In Ireland, fresh pork operations had a good performance in the context of the
major fire in the Roosky facility in May.
As previously indicated, in July 2002, Glanbia closed its UK consumer meats
business following a strategic review and sold its UK foodservice distribution
operation. Glanbia continues to be a major food supplier to the UK foodservice
sector and has grown sales of cheese and other dairy products in the second half
of 2002.
Food Ingredients
The Food Ingredients Division enjoys strategic market positions as a major dairy
processor in Ireland and the USA, supplying cheese, nutritional products and
dairy-based ingredients to markets world-wide.
A strong volume performance was achieved and good progress continued to be made
in the development of the USA whey technology-based nutrition business, which
increased sales by 17%, and US cheese volumes also grew strongly. However, weak
international dairy markets throughout 2002, which contrasted sharply with the
buoyant market conditions experienced in 2001, significantly reduced the
profitability of Irish operations.
Arising from these conditions, divisional operating profit declined to €30.05m
(2001: €59.41m). The operating margin was 3.3% (2001: 5.8%). Turnover was
reduced to €910.08m compared to €1,025.54m in 2001. In the USA, while operating
margins were maintained, turnover was reduced to €466.34m (2001: €553.80m),
reflecting a significant reduction in cheese prices during 2002. Turnover in
Ireland was €443.74m (2001: €471.74m). Overall, the division accounted for 39.3%
of the Group's turnover and 32.8% of the Group's operating profit.
In Ireland, Glanbia Ingredients is the country's largest dairy processor,
utilising over 30% of the national manufacturing milk pool. Modern large-scale
facilities in three strategic locations produce a wide portfolio of cheese,
protein, butterfat-based and formulated products and export over 95% of output
to European, North and South American, African and Asian markets. This business
performed well in volume sales of protein products, cheese, formulated products
and cream base for Baileys. However, as stated, overall results were
significantly impacted by weak international market conditions and margin
pressure arising from an imbalance between raw material costs and market
returns. Weak market conditions are persisting into 2003.
In the USA, Glanbia is a leading producer of high value-added whey-based
nutritional ingredients for domestic, Asian and European markets. It is also one
of the top producers of American cheddar-type cheese, supplying the food
service, food processing and retail sectors. The business had a satisfactory
performance in 2002, maintaining margins and delivering solid volume growth in a
year when cheese prices weakened significantly.
Good progress was made in developing the nutritional ingredients business. In
addition to a 17% increase in product sales, the Group expanded its R&D
capability with the opening of a new research centre in Twin Falls, Idaho and
commenced clinical trials of important new product formulations. SalibraTM 200,
a new bioactive whey product containing immunoglobulins and lactoferrin, was
launched in 2002 into the intestinal health market. Further capacity was also
added to ProvonTM whey protein isolates and BioferrinTM lactoferrin production
during the year. Glanbia's international nutritional ingredients activities are
now being brought to market via a separate, focused business unit established at
the end of 2002, which will drive the Group's development activities in this
important growth sector. Further information is available at
www.glanbianutritionals.com.
Since year-end Glanbia has announced a strategic joint venture with Conaprole of
Uruguay to initially establish a sales and marketing company in Mexico, serving
Central and South American markets. The new JV company will develop
opportunities in the region for dairy ingredients manufactured by Glanbia in the
EU and USA and by Conaprole in Uruguay.
Agribusiness
The Agribusiness Division is one of Ireland's leading suppliers to the
agricultural sector and plays a key role in underpinning the quality and
traceability of Glanbia's Irish dairy products. It is engaged in milk assembly
and quality management, animal feed production, the supply of farm inputs via a
comprehensive branch network, grain assembly and marketing and pig production.
The division performed well overall in the context of the difficult conditions
prevailing in farming in Ireland in 2002. Feed sales improved compared to 2001
and fertiliser sales were also satisfactory in the context of poor weather
conditions during the year. Further progress was also achieved in enhancing
operating efficiencies in the division. While turnover declined somewhat to
€231.55m (2001: €241.82m), operating profit improved marginally to €13.89m
(2001: €13.43m). The operating margin was 6.0%. In 2002 the division accounted
for 10.0% of the Group's turnover and 15.2% of the Group's operating profit.
Outlook
In 2003 Glanbia will focus on achieving growth in line with corporate strategy,
particularly in cheese, nutritional ingredients and consumer foods. The Board
expects that Glanbia will continue to make satisfactory progress.
Annual Report / AGM / Dividends
The Annual Report and Financial Statements will be published in April. The
Annual General Meeting will take place in the Newpark Hotel, Kilkenny on 20 May
2003.
The final dividend, if approved, will be paid on 26 May 2003 to all shareholders
on the register on 25 April 2003.
Ends
5 March 2003
Enquiries to:
Ireland: Michael Patten, Director of Communications, Glanbia plc.
Tel: +353 (0)56-72200 or +353 (0)87-2414502 (m)
Jim Milton, Murray Consultants
Tel: +353 (0)1-6326400 or +353 (0)86-2558400 (m)
UK: John Olsen, Hogarth Partnership
Tel : 020 7357 9477 or 07770272082 (m)
Glanbia plc
Consolidated Profit and Loss Account
for the year ended 4 January 2003
Pre Pre
Exceptional Exceptional Total Exceptional Exceptional Total
2002 2002 2002 2001 2001 2001
Notes Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Turnover 2,386,437 2,386,437 2,693,940 2,693,940
Less share (69,699) (69,699) (68,532) (68,532)
of turnover
of joint
venture
-------------- -------------- -------------- ---------------
Group 1 2,316,738 2,316,738 2,625,408 2,625,408
Turnover
-------------- -------------- -------------- ---------------
Cost of (2,010,118) (2,010,118) (2,296,087) (2,296,087)
Sales
-------------- -------------- -------------- ---------------
Gross Profit 306,620 306,620 329,321 329,321
- -
Distribution (127,339) (127,339) (133,154) (133,154)
costs
Administrative (90,693) (90,693) (104,505) (104,505)
expenses
-------------- -------------- -------------- ---------------
Group 88,588 88,588 91,662 91,662
Operating
Profit
Share of 2,947 2,947 1,568 1,568
operating
profit of
joint
ventures &
associates
-------------- -------------- -------------- ---------------
Operating 1 91,535 91,535 93,230 93,230
profit
including
joint
ventures &
associates
(Loss) on 2 (25,610) (25,610) (2,046) (2,046)
sale of
operations
Profit / 3 13,754 13,754 (3,486) (3,486)
(Loss) on
sale of
fixed assets
Loss on 4 (68,064) (68,064) -
termination
of
operations
Group (19,206) - (19,206) (26,413) - (26,413)
Interest
Share of (521) - (521) (218) - (218)
interest of
joint
ventures and
associates
-------------- -------------- -------------- -------------- -------------- ---------------
Profit / 71,808 (79,920) (8,112) 66,599 (5,532) 61,067
(loss)
before
taxation
Taxation (7,939) - (7,939) (6,972) (449) (7,421)
-------------- -------------- -------------- -------------- -------------- ---------------
Profit / 63,869 (79,920) (16,051) 59,627 (5,981) 53,646
(loss) after
taxation
Equity (677) (492)
minority
interest
Non-equity (12,619) (13,042)
minority
interest
-------------- ---------------
(Loss) / (29,347) 40,112
Profit for
the year
Dividends 5 (13,833) (13,260)
-------------- ---------------
(Loss (43,180) 26,852
absorbed) /
Profit
retained for
the year
============== ===============
Earnings per 6 (10.06)c 13.71c
share
Adjusted 6 17.44c 15.85c
earnings per
share
Glanbia plc
Consolidated Balance Sheet as at 4 January 2003
2002 2001
Eur'000 Eur'000
Assets employed
Fixed assets
Tangible assets 416,826 511,720
Goodwill 4,420 5,042
Financial assets:
Investments in joint ventures:
Share of gross assets 30,527 26,638
Share of gross liabilities (17,426) (13,859)
--------------- ---------------
13,101 12,779
Investments in associates 9,101 8,439
Other investments 14,252 11,805
--------------- ---------------
36,454 33,023
--------------- ---------------
457,700 549,785
--------------- ---------------
Current assets
Stocks 180,022 218,032
Debtors 226,838 259,875
Cash and bank balances 90,953 123,396
--------------- ---------------
497,813 601,303
Creditors - amounts falling due within one year 317,442 410,262
--------------- ---------------
Net current assets 180,371 191,041
--------------- ---------------
Total assets less current liabilities 638,071 740,826
Less non-current liabilities
Creditors - amounts falling due after more than one year 275,407 376,757
Provision for liabilities and charges
Deferred taxation 23,723 21,109
Capital grants 18,505 20,203
--------------- ---------------
320,436 322,757
=============== ===============
Capital and reserves
Called up equity share capital 17,551 17,551
Share premium account 80,005 80,005
Merger reserve 113,148 113,148
Revenue reserves (32,232) (44,977)
Capital reserves 2,825 2,825
--------------- ---------------
Equity shareholders' funds 181,297 168,552
Equity minority interests 6,983 6,428
Non-equity minority interests 132,156 147,777
--------------- ---------------
320,436 322,757
=============== ===============
Glanbia plc
Summary Cash Flow Statement
for the year ended 4 January 2003
2002 2002 2001 2001
Eur'000 Eur'000 Eur'000 Eur'000
Group operating profit 88,588 91,662
Reorganisation and merger costs (775) (10,244)
(Profit) / loss on sale of (885) 644
fixed assets
Depreciation 53,072 55,409
Grants amortised (1,670) (2,081)
Working capital (increase) / ( 12,085) 27,214
decrease
Goodwill amortisation 313 272
--------------- ---------------
Net cash inflow from operating 126,558 162,876
activities
Returns on investments &
servicing of finance
Interest Paid (20,236) (23,474)
Dividends paid to minority (11,813) (32,049) (12,277) (35,751)
interest
--------------- ---------------
Taxation (4,990) (2,057)
Capital expenditure and
financial investment
Purchase of fixed assets (net (35,007) (43,722)
of grants received)
Disposal of fixed assets 6,377 3,283
Disposal of investments (net of 10,705 (17,925) 1,763 (38,676)
purchases)
--------------- ---------------
Acquisitions and disposals
Purchase of subsidiary (677) (24,244)
undertakings
Disposal of subsidiary 1,184 7,799
undertakings
Termination of operation (8,648) (8,141) - (16,445)
--------------- ---------------
Equity dividends paid (13,533) (12,887)
--------------- ---------------
Change in net debt resulting 49,920 57,060
from cash flows
Currency translation impact 16,431 (5,761)
--------------- ---------------
Decrease in net borrowings 66,351 51,299
=============== ===============
Glanbia plc
Notes to the Financial Statements
1. Segmental analysis
2002 2001
Eur'000 Eur'000
Analysis by class of business
Turnover
Consumer Foods 1,175,114 1,358,049
Food Ingredients 910,075 1,025,541
Agribusiness 231,549 241,818
--------------- ---------------
2,316,738 2,625,408
=============== ===============
Operating profit
(including share of profits of
joint venture and associates)
Consumer Foods 47,590 20,390
Food Ingredients 30,051 59,415
Agribusiness 13,894 13,425
--------------- ---------------
91,535 93,230
=============== ===============
GEOGRAPHICAL SEGMENTS
Turnover by market destination
Ireland 837,533 792,824
UK / rest of Europe 885,703 1,117,329
USA / other 593,502 715,255
--------------- ---------------
2,316,738 2,625,408
=============== ===============
2. Loss on sale of operations
Foodservice Farms Other Total
Eur'000 Eur'000 Eur'000 Eur'000
(Loss) / profit on disposal of net (13,874) (685) 862 (13,697)
assets
Goodwill write-back to profit and (10,614) (1,299) - (11,913)
loss account on disposal
--------------- --------------- --------------- ---------------
(24,488) (1,984) 862 (25,610)
=============== =============== =============== ===============
3. Profit / (Loss) on sale of fixed assets 2002 2001
Eur'000 Eur'000
On disposal of quoted investments 13,396 -
Profit / (Loss) on disposal of 358 (3,486)
tangible assets
--------------- ---------------
13,754 (3,486)
=============== ===============
4. Loss on termination of
operations
2002 2001
Eur'000 Eur'000
Loss arising on termination of (30,370) -
operations
Goodwill write-back to profit and (37,694) -
loss account on termination
--------------- ---------------
(68,064) -
=============== ===============
5. Dividends 2002 2001
Interim dividend paid per share (cent) 1.96 1.87
Final dividend proposed per share (cent) 2.80 2.66
--------------- ---------------
4.76 4.53
=============== ===============
Total dividend (EUR'000) 13,833 13,260
=============== ===============
6. Earnings per ordinary share 2002 2001
Eur'000 Eur'000
(Loss) / Profit after taxation and minority interest (29,347) 40,112
=============== ===============
Weighted average number of ordinary
shares in issue 291,702,675 292,514,184
=============== ===============
Weighted average number of ordinary shares in issue on the
conversion of the dilutive potential ordinary shares into
ordinary shares 292,210,407 292,514,184
=============== ===============
cent cent
Earnings per share (10.06) 13.71
=============== ===============
Adjustments:
Goodwill amortisation 0.11 0.09
Loss on sale of operations 8.78 0.86
(Profit) / Loss on sale of fixed assets (4.72) 1.19
Loss on termination of operations 23.33 -
--------------- ---------------
Adjusted earnings per share 17.44 15.85
=============== ===============
Fully diluted earnings per share (10.04) 13.71
=============== ===============
2002 2001
7. Group Borrowings Eur'000 Eur'000
Borrowings due with one year 1,117 1,006
Borrowings due after one year 266,144 365,049
Less:
Cash and bank balances (90,953) (123,396)
--------------- ---------------
Net borrowings 176,308 242,659
=============== ===============
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