Interim Management Statement

RNS Number : 1881N

Greencore Group PLC

12 February 2009

 

GREENCORE GROUP PLC

INTERIM MANAGEMENT STATEMENT AND CHAIRMAN'S ADDRESS TO THE ANNUAL GENERAL MEETING

Greencore Group plc ('Greencore' or the 'Group'), today issues the following Interim Management Statement in accordance with the reporting requirements of the Transparency Regulations, 2007. The Chairman, Ned Sullivan, will present this at the Annual General Meeting taking place in the Conrad Hotel, Earlsfort Terrace, Dublin 2, at 11.00 am today. 

Greencore performed solidly in 2008 with the advantages of the Group's diversified food portfolio highlighted in the year. The excellent performance in the Group's Ingredients activities significantly offset a decline in our Convenience Foods division.  The reported adjusted EPS of 24.1 * cent was ahead of FY07 by 1.2% on a constant currency basis. It was 2.0 cent, or 7.7%, behind the FY07 continuing adjusted EPS of 26.1 cent after the impact of a weaker EUR/GBP exchange rate on the translation of our results.  These comparisons reflect the restatement of FY07 for the results of our Mineral Water ('Water') business following the discovery in June 2008 of a deliberate concealment of costs.  This undoubtedly was a significant disappointment for all stake holders but the Board believes the business has responded to this resolutely and appropriately.  The Water business has now been stabilised and significant enhancements have now been implemented to the Group's control and operating environments.

* Before exceptional items, amortisation of intangibles, inter-company foreign exchange gains/losses and the movement in the fair value of all derivative financial instruments and related debt adjustments.

The Convenience Foods division (excluding Water) delivered a solid performance overall in FY08 despite testing market conditions. Sales were €863.9 million representing an increase of 8.3% on a constant currency basis, a 3.4% decrease after the impact of currency translation. A highlight of the year was our entry into the US convenience foods market with the first step being the acquisition in April 2008 of Home Made Brand Foods Inc. This was underpinned in August 2008 by the Group securing the Weight Watchers US licence for chilled foods. The early momentum in the US as reported previously has continued through the first four months of FY09 with sales increasing year on year by 31% (with the comparative representing a pre-acquisition period). The US chilled prepared foods market represents a significant growth opportunity for our Group over the coming years.

Conditions in the UK convenience foods market are as tough as we have seen with consumers under pressure which has translated into weakened demand for some of the Group's convenience food offerings, particularly in food-to-go.  Despite these pressures, we recorded constant currency sales growth of 5.1% in the first four months of FY09 in the Convenience Foods division.

The Ingredients & Related Property division had an excellent result in FY08 delivering an operating profit of €31.1m, an increase of 17% over the prior year. This was driven by a strong performance in Malt but also in the Group's other Ingredient businesses and by the contribution, albeit less than in the prior year, from the disposal of surplus property. The division has had a good start to FY09 with Malt, in particular, holding up on the previous year but with softer markets in our other agribusiness activities and property disposals proving difficult to complete in the current credit environment.  

As outlined previously, approximately 80% of total operating profit is expected to be delivered in sterling (with revenues and costs similarly denominated). The further depreciation of sterling versus the euro, since the start of the financial year, will impact the year on year translation of our results. If the EUR/GBP level were to continue in the 0.88 to 0.90 range for the rest of the current financial year, the translation effect year on year would reduce Group operating profit by c. EUR 8m, and profit before tax by c. EUR 6m.  A balance sheet benefit of c. EUR 17m representing a reduction in the sterling component of the Group's comparable net debt compared to September 2008 would also be recorded at the exchange rates referred to above. 

The Group has a well capitalised balance sheet which is sufficient to meet the operational and development needs of the business. At the end of September 2008 total equity was €244.1m and comparable net debt was €283.0m, a debt equity ratio of 1.16 times (September 2007: 1.18 times).

It is inevitable in the current economic environment that difficult decisions and choices need to be made. In recent weeks the Group has announced the closure of its frozen desserts facility at Crosshills in the UK and its exit from its Drummonds grain and agri-trading business in Ireland. These decisions are regrettable but in both cases the operating losses being incurred and the ongoing capital requirements were not sustainable. These restructuring initiatives will be modestly cash positive but will result in an accounting exceptional charge of c. €18.0m in FY09.

Overall, our portfolio continues to perform solidly in a difficult consumer environment. On a constant currency basis, Group operating profit in the first four months of FY09 was in line with the same period last year. In the absence of a further decline in consumer demand, this is the path we expect to remain on for the full year but with a more significant proportion of the full year result from the seasonally more important second half than in FY08.

E.F. Sullivan
Chairman

12 February 2009

FOR FURTHER INFORMATION, PLEASE CONTACT:

Geoff Doherty Chief Financial Officer	Tel: [phone]
Eoin Tonge Group Capital Markets Director	Tel: [phone]
Billy Murphy or Anne Marie Curran Drury Communications	Tel: [phone]
Elizabeth Rous or Rob Greening  Powerscourt	Tel: [phone]

Greencore Group

• A leading international producer of convenience food, as well as an established ingredients supplier with operations in Ireland, the UK, the US, The Netherlands and Belgium

• Strong market leadership positions in the UK convenience food market across sandwiches, chilled prepared meals, chilled soups and sauces, ambient sauces & pickles, cakes & desserts, mineral water and Yorkshire puddings

• Extending presence outside the UK with fast-growing convenience food businesses in the US, The Netherlands and Ireland

• The leading malt producer in Ireland, the UK and Belgium

• Significant property assets in Ireland and the UK

 

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