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