Interim Results
Glanbia PLC
28 August 2002
Glanbia plc
Interim Report
Half-Year Ended 29 June 2002
Highlights
Half-Year ended Half-Year Ended Change
29 June 2002 30 June 2001
Group Turnover Eur1,246.74m Eur1,288.67m -3.25%
Operating Profit* Eur45.45m Eur45.46m -----
Profit before Tax / Exceptional Eur35.63m Eur32.71m +8.9%
Items
Net Exceptional Charge Eur75.62m Eur0.49m
Adjusted Earnings per Share 8.50c 7.70c +10.4%
Dividend 1.96c 1.87c +5%
Net Borrowings Eur307.83m Eur390.0m -21.1%
Debt / Capital Employed** 99% 125%
------------------------------------------------------------------------------------------------------------------------
*Including share of operating profit of joint ventures & associates
**Excluding capital grants
'Glanbia has delivered a solid performance in the first half of 2002 in what
were extremely difficult international dairy markets,' said John Moloney, Group
Managing Director. 'Operational and marketing improvements in consumer foods
have delivered the anticipated strong profit growth in this division, offsetting
the impact of weak global dairy markets on our Irish food ingredients
operations. Continued rigorous focus on cash management has significantly
reduced borrowings and the lower interest costs have assisted growth in profit
before exceptional items and tax.
'We have also made good progress in the planned refocusing of Group operations,
including withdrawing from the UK consumer meats and food service distribution
businesses. The Group is pursuing growth opportunities in the cheese and
nutrition sectors in line with our chosen strategy.'
Results
The Board of Glanbia plc is pleased to announce its interim results for the
first half of 2002. The Group has maintained sales and operating profit
performance in line with the first half of 2001, despite the extremely difficult
international market conditions being experienced by the dairy sector globally.
Operating profit (including share of operating profit of joint ventures and
associates) was Eur45.45m (2001: Eur45.46m) on a slightly decreased turnover of
Eur1,246.74m (2001: Eur1,288.67m). The operating profit result reflects a strong
improvement in the performance of the consumer foods businesses, which offset
the significant impact of international dairy markets on Irish food ingredients
operations. The USA food ingredients business and the Irish agribusiness
division both performed satisfactorily. The operating margin was 3.6% (2001:
3.5%).
Profit before exceptional items and tax increased by 8.9% to Eur35.63m (2001:
Eur32.71m), reflecting the benefits of lower borrowings and interest costs.
A net exceptional charge for the period of Eur75.62m arises primarily from
continued refocusing of operations around group strategy. It includes the
closure of the UK consumer meats business and a provision for the sale of the UK
food service distribution operation, details of which were previously announced
to the market on 13 May 2002 and 22 July 2002 respectively. Of this, Eur49.53m
is a non-cash charge arising from the write-back through the profit and loss
account of goodwill previously written off against reserves. After net
exceptional items, the Group realised a loss before tax of Eur39.98m (2001
profit before tax: Eur32.23m).
Adjusted earnings per share increased by 10.4% to 8.50c (2001: 7.70c). The FRS3
loss per share was 17.39c (2001 FRS3 EPS: 7.50c).
An interim dividend of 1.96c is to be paid, an increase of 5% (2001: 1.87c).
Capital employed (excluding capital grants) was Eur311.21m (2001: Eur312.20m).
Net borrowings at 29 June 2002 were down relative to 30 June 2001 by Eur82.17m
(21%) to Eur307.84m. The interest charge declined by 23% to Eur9.81m (2001:
Eur12.74m), reflecting the lower borrowings and better cash management. Interest
cover was 4.6 times. Non-equity minority interest, which relates to Preferred
Securities and Preference Shares, was Eur6.56m (2000: Eur6.39m).
Review of Operations
Dairy Food Ingredients
Dairy Food Ingredients comprises the USA and Irish dairy ingredients operations,
which supply the international nutrition and food processing sectors. A
satisfactory performance was achieved in the USA in the period. However, Irish
operations were impacted by weak international dairy markets in the first half
of 2002, which contrasted sharply with the buoyant conditions experienced in the
sector in the first half of 2001. Overall, operating profit declined to
Eur19.28m (2001:Eur28.71m), while turnover declined to Eur465.36m (2001:
Eur488.89m).
Profitability in the Irish dairy ingredient operations was significantly
impacted as world markets for traded products fell to their lowest level for
over a decade, affecting all product categories. The business continued to have
excellent operational efficiencies during the first half of 2002.
In the USA the Group achieved a satisfactory performance principally due to
enhanced operational efficiencies and continuing growth in advanced technology
proteins and other fractionated products. Glanbia continues to consolidate its
position as a leading USA and world player in dairy nutritional products.
Additional capacity expansion for Bioferrin(R) and Provon(R) production will
be completed by year-end in response to market demand.
Consumer Foods
Consumer Foods consists of Glanbia's businesses which are engaged in the
production and marketing of dairy and meat products primarily through retail
channels in the UK and Ireland. This business group had a significant overall
improvement in performance in the first half of 2002, benefiting from enhanced
operational efficiencies and new product introductions. Significant progress in
refocusing businesses around the Group's growth strategy was achieved. Operating
profit advanced to Eur17.33m (2001: Eur7.15m). Turnover was Eur641.39m (2001:
Eur650.50m).
The Irish liquid milk and chilled foods businesses both made satisfactory
progress in a very competitive market environment. The Group's entry into the
growing functional foods sector with Yoplait 'Everybody' has progressed well and
further important new product introductions are planned in the coming months.
The UK retail cheese business had a good performance in difficult market
conditions where cheese prices have fallen significantly. Continued growth in
sales, product mix and plant efficiencies improved overall profitability. The
pizza cheese joint venture also delivered further volume growth and margins were
enhanced due to operating efficiencies and improved exchange rates. This
business is introducing a broadened product range based on recent investment in
new technologies and further expansion of capability and capacity is now
underway.
UK fresh pork operations had a satisfactory operating performance in a difficult
period for the UK meat sector. Irish pork operations performed satisfactorily
despite the significant disruption caused by the fire at the Rooskey pigmeat
plant on 8 May which caused extensive damage. This facility is fully insured.
A strategic review of the UK consumer meats business was undertaken following
the loss of significant volumes in the first half of 2002, as this business had
already endured ongoing challenging trading conditions in 2000 and 2001. This
review concluded that with ongoing difficult market conditions, sustainable
profitability going forward was not achievable. The Group closed this business
in early June. An exceptional loss on the closure of Eur64.34m was incurred, of
which Eur38m arose from the write-back through the profit and loss account of
goodwill previously written off against reserves.
A good improvement in the operating performance of Glanbia Food Service was
achieved in the first half of 2002 and this business returned to profitability
following a difficult period in 2000 and 2001. A strategic decision was taken by
the Group to exit food service distribution as part of a refocusing of
operations around core business and growth strategy. Subsequent to the period
end the Group completed the sale of this business to Peter's Food Service
Limited. Glanbia will continue to be a major food supplier to the UK foodservice
sector, particularly in cheese and other dairy products. A provision for a loss
of Eur24.68m on the transaction has been charged as an exceptional item in the
half-year financial statements. This arises due to a write-back through the
profit and loss account of goodwill previously written off against reserves,
together with fixed asset write-down.
Agribusiness
The Agribusiness Division had a satisfactory performance in the first half of
2002, taking into account the difficult conditions prevailing in farming.
Adverse weather conditions impacted the market for fertilisers but the business
benefited from further operating efficiencies. Turnover declined to Eur139.99m
(2001: Eur149.28m). Operating profit was Eur8.84m (2001: Eur9.60m).
Dividend
The Board has approved an interim dividend of 1.96c, an increase of 5% on the
2001 interim dividend of 1.87c. It will be paid on 2 October 2002 to
shareholders on the register on 6 September 2002.
Outlook
Glanbia is continuing to make progress to date in 2002 despite difficult
international dairy markets from which no immediate recovery is envisaged. The
Group has made progress in the refocusing of operations around its strategy for
growth, through the closure of the UK consumer meats business and the sale of
the UK food service distribution operation and are actively investing in our
strategy for growth.
Overall, as markets currently stand, Glanbia expects to achieve a satisfactory
full year trading performance.
Tom Corcoran
Chairman
ENDS
28 August 2002
For further information, contact:
Michael Patten, Director of Communications, Glanbia plc
Tel: 056-72200 or 087-2414502
Jim Milton, Murray Consultants
Tel: 01-6326400 or 086-2558400
Glanbia plc
Consolidated Profit and Loss Account
for the Half-Year ended 29 June 2002
Pre Pre Pre
Exceptional Exceptional Total Exceptional Exceptional Total Exceptional Exceptional Total
Half year ended 29 June 2002 Half year ended 30 June 2001 Year ended 29 December 2001
Notes Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000 Eur'000
Turnover 1,280,091 1,280,091 1,322,569 1,322,569 2,693,940 2,693,940
Less (33,349) (33,349) (33,901) (33,901) (68,532) (68,532)
share of turnover
of joint venture
--------- --------- --------- ---------- ---------- --------
Group 1 1,246,742 1,246,742 1,288,668 1,288,668 2,625,408 2,625,408
Turnover
--------- --------- --------- ---------- ---------- --------
Group 44,662 44,662 45,175 45,175 91,662 91,662
Operating Profit
Share of 785 785 280 280 1,568 1,568
operating
profit of joint
venture
& associates
--------- --------- --------- ---------- ---------- --------
Operating 1 45,447 45,447 45,455 45,455 93,230 93,230
profit
including
joint venture
& associates
Loss on 2 - (64,337) (64,337) - (489) (489) - (2,046) (2,046)
termination
of operations
Provision 3 - (24,677) (24,677) - - - - - -
for loss
on sale
of operation
Profit 4 - 13,396 13,396 - - - - (3,486) (3,486)
on sale
of investments/
fixed assets
Group (9,815) - (9,815) (12,741) - (12,741) (26,413) - (26,413)
Interest
Share of - - - - - - (218) - (218)
interest
of joint
venture and
associates
--------- --------- --------- --------- --------- ---------- ---------- ---------- ----------
Profit 35,632 (75,618) (39,986) 32,714 (489) 32,225 66,599 (5,532) 61,067
before taxation
Taxation (4,017) - (4,017) (3,635) - (3,635) (6,972) (449) (7,421)
--------- --------- --------- --------- --------- ---------- ---------- ---------- ----------
Profit 31,615 (75,618) (44,003) 29,079 (489) 28,590 59,627 (5,981) 53,646
after taxation
Equity (288) (276) (492)
minority interest
Non-equity (6,565) (6,387) (13,042)
minority interest
--------- ---------- --------
(Loss)/profit (50,856) 21,927 40,112
for the year
Dividends 5 (5,733) (5,460) (13,260)
--------- ---------- --------
(Loss (56,589) 16,467 26,852
absorbed)
/profit
retained
for the year
========= ========= =========
Earnings 6 (17.39) 7.50 13.71
per share
(cent)
Adjusted 6 8.50 7.70 15.85
earnings
per share
(cent)
Glanbia plc
Consolidated Balance Sheet
as at 29 June 2002
29 June 30 June 29 December
Notes 2002 2001 2001
Eur'000 Eur'000 Eur'000
Assets employed
Fixed assets
Tangible assets 422,993 530,616 511,720
Goodwill 4,600 5,021 5,042
Financial assets 33,546 35,108 33,023
---------------- ---------------- ----------------
461,139 570,745 549,785
---------------- ---------------- ----------------
Current assets
Stocks 218,052 240,152 218,032
Debtors 336,753 350,294 259,875
Cash and bank balances 7 15,204 69,664 123,396
---------------- ---------------- ----------------
570,009 660,110 601,303
---------------- ---------------- ----------------
Creditors 346,047 407,905 409,256
Borrowings 7 - - 1,006
---------------- ---------------- ----------------
346,047 407,905 410,262
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Net current assets 223,962 252,205 191,041
---------------- ---------------- ----------------
Total assets less current liabilities 685,101 822,950 740,826
---------------- ---------------- ----------------
Less non-current liabilities
Creditors 31,571 29,975 32,817
Borrowings 7 323,040 459,666 365,049
Capital grants 19,274 21,111 20,203
---------------- ---------------- ----------------
373,885 510,752 418,069
---------------- ---------------- ----------------
311,216 312,198 322,757
========= ========= =========
Capital and reserves
Called up equity share capital 17,551 17,551 17,551
Share premium account 80,005 80,005 80,005
Merger reserve 113,148 113,148 113,148
Revenue reserves 8 (45,899) (59,414) (44,977)
Capital reserves 2,825 2,825 2,825
---------------- ---------------- ----------------
Equity shareholders' funds 167,630 154,115 168,552
Equity minority interests 6,716 6,326 6,428
Non-equity minority interests 9 136,870 151,757 147,777
---------------- ---------------- ----------------
311,216 312,198 322,757
========= ========= =========
Glanbia plc
Summarised Cash Flow Statement
Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Net Cash Inflow from Operating
Activities:
Operating profit 44,662 45,175 91,662
Reorganisation and merger costs (413) (11,506) (10,244)
Profit on disposal of fixed assets (860) 114 644
Depreciation and amortisation 27,197 27,712 53,600
Changes in working capital (123,216) (89,617) 27,214
---------------------- ---------------------- ----------------------
(52,630) (28,122) 162,876
Returns on Investments and (16,058) (16,113) (35,751)
Servicing of Finance
Taxation (4,162) (818) (2,057)
Purchase of Fixed Assets (net of (17,485) (21,085) (40,439)
disposals/grants)
Disposal of Investments 13,396 - 1,763
Purchase of subsidiary - (24,242) (24,244)
undertakings
Disposal of subsidiary 3,174 10,124 7,799
undertakings
Equity Dividends Paid (7,800) (7,428) (12,887)
---------------------- ---------------------- ----------------------
Change in net debt resulting from (81,565) (87,684) 57,060
cash flows
Bank balances in disposed - - -
subsidiaries
Translation difference 16,388 (8,360) (5,761)
---------------------- ---------------------- ----------------------
Movement in net debt in the period (65,177) (96,044) 51,299
Net debt at beginning of period (242,659) (293,958) (293,958)
---------------------- ---------------------- ----------------------
Net debt at end of period (307,836) (390,002) (242,659)
============= ============= =============
Glanbia plc
Notes to the Financial Statements
Note 1: Segmental Analysis
Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Turnover by Business Class
Food Ingredients 465,360 488,892 1,025,541
Consumer Foods 641,387 650,501 1,358,049
Agribusiness 139,995 149,275 241,818
----------------- ----------------- -----------------
1,246,742 1,288,668 2,625,408
========== ========== ==========
Operating Profit by Business Class
Food Ingredients 19,281 28,708 59,415
Consumer Foods 17,328 7,150 20,390
Agribusiness 8,838 9,597 13,425
----------------- ----------------- -----------------
45,447 45,455 93,230
========== ========== ==========
Note 2: Loss on termination of operations
The loss arises primarily from the decision to close the Group's UK
Consumer Meats operation.
Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Loss arising on termination of operations (26,256) (489) (822)
Goodwill write back to profit and loss account on (38,081) - (1,224)
termination
----------------- ----------------- -----------------
(64,337) (489) (2,046)
========== ========== ==========
Note 3: Provision for loss on sale of operation
The provision arises from the sale by the Group of its UK Foodservice business
on 2nd August 2002.
Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Loss on disposal of asset after period end (13,225) - -
Write back of goodwill on asset disposed after (11,452) - -
period end
----------------- ----------------- -----------------
(24,677) - -
========== ========== ==========
Note 4: Profit on sale of investments/fixed
assets
Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Profit on disposal of quoted investments 13,396 - -
Loss on disposal of tangible assets 0 - (3,486)
----------------- ----------------- -----------------
13,396 - (3,486)
========== ========== ==========
Note 5: Dividends Half year ended Half year ended Year ended
29 June 30 June 29 December
2002 2001 2001
Dividends paid / proposed 1.96 1.87 4.53
per share (cent)
========== ========== ==========
Total dividend (Eur'000) 5,733 5,460 13,260
========== ========== ==========
Note 6: Earnings per Half year ended Half year ended Year ended
ordinary share 29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Profit after taxation and (50,856) 21,927 40,112
minority interest
========== ========== ==========
Weighted average number of ordinary
shares in issue (million) 292,514 292,514 292,514
========== ========== ==========
Earnings per share (cent) (17.39) 7.50 13.71
========== ========== ==========
Adjustments:
Goodwill amortisation 0.03 0.03 0.09
Loss / (Profit) on sale of 25.85 0.17 2.05
operations / investments
----------------- ----------------- -----------------
Adjusted Earnings per Share 8.50 7.70 15.85
========== ========== ==========
Note 7: Group Borrowings
29 June 30 June 29 December
2002 2001 2001
Eur'000 Eur'000 Eur'000
Borrowings due within one - - 1,006
year
Borrowings due after one 323,040 459,666 365,049
year
Less:
Cash and bank balances (15,204) (69,664) (123,396)
----------------- ----------------- -----------------
Net borrowings 307,836 390,002 242,659
========== ========== ==========
Note 8: Revenue Reserves Currency
Profit Translation Goodwill
Retained Reserve Reserve Total
Eur'000 Eur'000 Eur'000 Eur'000
At 29 December 2001 118,806 (35,617) (128,166) (44,977)
Profit retained (56,589) (56,589)
Goodwill on disposal 49,533 49,533
Currency translation
difference on
foreign currency net 3,826 2,308 6,134
investments
----------------- ----------------- ----------------- -----------------
At 29 June 2002 62,217 (31,791) (76,325) (45,899)
========== ========== ========== ==========
Note 9:
Non-equity minority interests include $100 million 7.99% cumulative preferred
securities issued by a subsidiary in 1996 and Eur38.2 million cumulative
redeemable preference shares issued by a subsidiary in 1993 and 1995, both net
of unamortised issue costs.
Note 10:
The figures for the half-years ended 29 June 2002 and 30 June 2001 are
unaudited. The figures for the full year ended 29 December 2001 represent an
abbreviated version of the Group's financial statements for the year, which
received an unqualified audit report and have been filed with the Registrar of
Companies.
Note 11: Rooskey Fire
Included in the financial statements is an insurance receivable equivalent to
the net book value of the pigmeat processing plant in Rooskey, Ireland, which
was destroyed by fire on 8th May 2002. No surplus of the recoverable amount
over the net book value has been recognised in respect of anticipated insurance
proceeds arising from the fire. This matter is being progressed with the
insurers and will be fully reflected in the financial statements when finalised.
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