Interim Results
Kerry Group PLC
05 September 2006
Press Announcement
Tuesday 5 September 2006
Interim Report
Half Year Ended 30 June 2006
Kerry, the global ingredients, flavours, and consumer foods group, reports
interim results for the half year ended 30 June 2006.
Financial Highlights
• Sales revenue growth of 7% to €2,265m
• Like-for-like revenue growth of 3.5%
• EBITDA up 1.9% to €216m
• Trading profit growth of 1.5% to €162m
• Adjusted earnings per share* up 2% to 54.9 cent
• Interim dividend per share up 10% to 5.5 cent
*before intangible amortisation and non-trading items
Kerry Group Chief Executive, Hugh Friel said; 'As previously signalled, the
first six months of 2006 have proved extremely challenging. The delay in
recovering the significant energy related cost increases slowed growth during
the period. However, we have full confidence in our growth strategies and our
longer term growth performance will benefit from critical attention to on-going
cost recovery programmes, supply chain efficiencies, increased investment in
product innovation and asset optimisation - including elimination of non-core
activities. Earnings for the full year are expected to be in line with current
market expectations'.
For further information please contact:
Frank Hayes
Director of Corporate Affairs Tel no + 353 66 7182304
Fax no + 353 66 7182972
Kerry Web Site: www.kerrygroup.com
Chairman's Statement
For the half year ended 30 June 2006
As signalled in our Annual General Meeting Statement, the first six months of
2006 have proved extremely challenging. The delay in recovering the significant
energy related cost increases slowed growth during the period. In the face of
further raw material price fluctuations, this meant that the results for the
period, while marginally ahead of the first half of 2005, are reported in line
with our revised expectations.
The Group continues to have full confidence in its business model and strategies
to achieve our growth objectives. In the aftermath of a long series of
predominantly bolt-on acquisitions in recent years, our focus on supply chain
initiatives and in optimising processing and business support structures while
eliminating non-core activities is achieving good operational results. Our
focus on new product developments and on further cost recovery initiatives to
maintain Kerry's business operating growth model will continue to be
aggressively pursued. Delivery of enhanced health, wellness and nutritional
values now extends across all food and beverage categories and Kerry businesses
are to the fore in leading product developments in association with our key
customers. Group trading since the end of the period continues in line with
market expectations.
Results
Total Group revenue in the period grew by 7% to €2,265m, reflecting
like-for-like growth of 3.5% relative to the same period of last year. Whilst
cost recovery programmes proved successful in most territories, the
unprecedented impact of energy related cost increases (180 basis points on
margin or €40m) limited trading profit growth to 1.5% to a level of €162m in the
period. This resulted in a Group trading margin of 7.2%, 40 basis points below
the same period of 2005.
Profit after taxation was maintained at €101m with earnings before intangible
asset amortisation and non-trading items increased by 2.3% to €103m. Adjusted
earnings per share increased by 2% to 54.9 cent. The interim dividend of 5.5
cent per share reflects an increase of 10% over the 2005 interim dividend.
While Group businesses had budgeted for significant cost inflation during the
period, the impact and scale of energy and energy related cost increases
adversely impacted the performance of individual Kerry business units and the
performances of their respective customers. Crude oil prices, having grown on
average by 42% in 2005, increased by a further 32% in the period.
The adverse impact of energy related and raw material cost inflation has
continued into the second half of the current year and the Group continues to
focus critical attention through its long-term customer relationships and
partnerships on necessary cost recovery programmes.
Business Reviews
Food Ingredients
Despite the prevailing market difficulties, Kerry's food ingredients businesses
recorded successful results in the period delivering a satisfactory
like-for-like revenue growth rate of 5% (total growth adjusted for acquisitions,
disposals and currency translation). Total sales revenue increased by 6.5% to
€1,548m. Trading profits grew by 4% to €123m. The 20 basis points reduction
in the trading margin to 8% reflects the time lag in recovery of cost increases
particularly in European markets. In the face of significant pressures, the
Group's performance throughout food and beverage ingredients markets reflects
the resilience of Kerry's ingredients, flavours and bio-science businesses
operationally and technically.
In American ingredients markets the Group's strong nutritional focus,
leveraging its broad technological base delivered 5.5% like-for-like revenue
growth with encouraging roll-out of new product developments and line extensions
through major accounts. Total revenue in the region during the period grew by
10.9% to €635m.
In the USA, Kerry's ingredients businesses have been successfully re-organised
into Integrated Business Units to better meet market needs for healthy
convenient food and beverage offerings and to support growth through integrated
platforms for delivery of added-value solutions. Demand for nutritional
functional foods and specialty food and beverage products continues to grow at
encouraging levels, providing good opportunities for Kerry's breadth of
technology-based ingredients and integrated solutions.
In the sweet sector strong progress has been recorded in 2006 in the cereal,
ice-cream, confectionery and nutritional categories. During the period, the
Group's technical capabilities in nutritional and wellness food categories was
further advanced through the acquisition of Custom Industries and Nuvex
Ingredients. Both acquisitions complement our existing facilities in the U.S.
and Canada, adding new proprietary technologies and valuable production capacity
to meet Kerry's growth plans. Custom Industries is a leading manufacturer of
particulates for bakery and ready-to-eat cereal applications and confectionery
ingredients for sweet goods. Operating from two modern manufacturing facilities
located in St. Genevieve, Missouri and Toronto, Canada; Custom has experienced
strong growth through leading food manufacturers, foodservice channels and
regional bakeries. Nuvex Ingredients operates from a state-of-the-art,
organically certified, production facility located in Blue Earth, Minnesota.
Specialising in customised high-protein and fibre nutritional lines, the
business has well-established core supplier relationships with leading
manufacturers of breakfast cereals, functional foods and nutritional snacks.
Progress was also achieved in the savoury ingredients sector, in particular
through regional snack processors and added-value meat processors. Market
conditions in the speciality dairy sector remained challenging but development
initiatives in functional nutritional lines and proprietary liquid formats are
achieving encouraging results. A new Proteins and Nutritionals business unit
was established to support development through soy systems, dairy proteins,
hydrolysed proteins and nutritional/fortified beverage systems across
nutritional categories including the medical and infant nutrition sectors.
Kerry's dedicated food and beverage business unit again reported good growth in
the U.S. market through restaurant chain accounts and coffee house chains.
Re-branding programmes and new product introductions in the Da Vinci, Oregon
Chai and JetTea range proved successful.
Good progress continues in Mexico, Central American and South American markets.
In Mexico and Central America strong top-line growth was accomplished in snack
and convenience categories whilst food and beverage applications in the
foodservice sector are making good headway. In Brazil, market development
progress was maintained through meat seasonings into the growing added-value
meat sectors and sweet ingredients into the ice-cream sectors.
Kerry Bio-Science delivered good top-line growth in the first half of 2006. In
American markets, good revenue growth was achieved in fermented ingredients
through cultures and natural shelf life extender products in the culinary, meat
and dairy sectors. Following a review of Kerry's emulsifier manufacturing
capability and the need to optimise supply chain management and customer service
in the sector, the Group has confirmed that the Brantford facility in Canada
will close by year-end and production will transfer to Malaysia and the
Netherlands. Enzymes and beverage ingredients recorded satisfactory growth in
American markets in the period. Proteins showed strong growth year-on-year
particularly in the pharma segment. Progress in cell nutrition through proteins
and yeast extracts was again very encouraging in biopharmaceutical applications.
Good sales growth in Sheffield(TM) Pharma excipients continued, but margins were
reduced due to the time lag in recovery of raw material and energy related cost
increases.
Energy related cost increases and raw material supply issues due to citrus crop
damage arising from the hurricanes of '05 impacted performance in the American
flavours industry in the period under review. Nevertheless, Mastertaste grew in
line with market trends and the division has a promising project pipeline with
major accounts. Following successful trials, it's unique anti-microbial flavour
technology is expected to yield good results in added-value meat applications
and personal care products.
In Asia Pacific markets, Kerry's market development programme continues to
record good results. Sales revenue grew by 9.1% to €174m reflecting
like-for-like growth of 9.4%. Nutritional bases and speciality lipids achieved
good growth in the hot and cold beverage sectors in Asian markets. Progress
through savoury systems continued in the snack products category in North Asia.
Seasonings and marinades achieved good growth in the added-value fish and meat
industries. The Group's branded beverage applications continued to grow in the
fast growing foodservice sector in the region and were successfully introduced
to the Chinese market. Mastertaste flavours is also making good progress in
establishing a robust business platform in the region. Equally Kerry
Bio-Science is successfully complementing other Group businesses in the region
through application of its technologies in the beverage, meat, dairy,
confectionery and bakery sectors. A $10m programme to significantly expand
production at the Esterol emulsifier plant in Malaysia was commenced during the
period which will establish a 'Centre of Excellence' for the division's global
emulsifier business.
Despite the slowdown in industry development in the Australian and New Zealand
markets, Kerry businesses performed well. Coffee house chains and specialist
foodservice outlets provided good opportunity for Kerry's flavoured beverage
applications. Pinnacle again recorded excellent growth in Australian multiple
retail chains and specialist bakery groups through its branded offerings of
convenience bakery products.
European Ingredients markets endured a challenging trading environment due to
the well reported difficulties in many food industry categories particularly in
the UK market. Sales revenue growth across Kerry's European based ingredients
businesses slowed to 2.8% to a level of €631m. However this reflects
like-for-like revenue growth of 4.2% relative to the same period of 2005 when
account is taken of business disposals. Against such industry pressures, raw
material pricing issues and energy related cost inflation; ingredients providers
have not achieved adequate cost recovery in the marketplace. The slowdown in
growth in the prepared foods sector impacted margins in the seasonings and
coating sectors. However, Kerry continued to achieve good progress through
seasonings, culinary systems and sauces in premium growth sectors. Snack
seasonings performed well in regional customer accounts throughout European
markets including Eastern Europe. A major focus on cost cutting and operational
efficiencies is yielding good results particularly in Italy, France and Germany.
Two manufacturing facilities were closed in the UK and one in Italy during the
period.
Kerry's sweet and fruit ingredients businesses in the UK performed well with new
listings in the growing health and nutritional sectors. However conditions in
the fruit preparations market in France remained very difficult.
Dairy markets in Europe continued to weaken during the first half of 2006. The
transition in EU Institutional support for dairying over the past three years,
from processor/market supports to direct dairy farmer payments, has had a
continuing negative impact on market returns. This impacted significantly on
Kerry's Irish based dairy processing and dairy ingredients operations which,
while accounting for a relatively small percentage of total Group activity,
remain an important constituent of our portfolio of businesses. The effect of
such market support issues will continue to adversely impact returns at
processor and primary producer level in the near term - until global supply/
demand levels come into balance as consumption progressively increases. Kerry
Group remains confident with respect to the long-term outlook for dairy products
and dairy ingredients.
Improved manufacturing efficiencies at the Kerry Bio-Science plant in Menstrie,
Scotland contributed to a good performance through yeast extracts in European
culinary markets, notwithstanding significant raw material and energy costs.
This resulted from the major investment programme completed in late 2005.
Enzymes saw greater development in the brewing sector. Development of Kerry
Bio-Science functional systems yielded good results in the bakery and ice-cream
sectors. The Group's heightened focus on meeting customer demands for enhanced
nutritional offerings was significantly boosted by the new Kerry Group Nutrition
Technical Centre established in Almere, the Netherlands.
Mastertaste flavours grew in line with industry trends in European markets with
good growth recorded in savoury and beverage applications.
Consumer Foods
Against a background of significant cost pressures, a weak performance in
poultry markets and losses connected with the Hartlepool operation, Kerry Foods'
consumer food businesses in the UK and Irish markets performed robustly in the
first half of 2006. Divisional revenue grew by 6.6% to €875m reflecting static
overall like-for-like growth as a result of sectoral price deflation. The
difficult market conditions restricted cost recovery programmes to offset the
significant energy, packaging and distribution cost increases incurred during
the period. The cost/price squeeze together with the aforementioned operational
issues resulted in a 4.6% reduction in trading profits to €52m.
The performance of Kerry's consumer foods business in such difficult market
conditions is testament to its brand positioning and investment, and to a
continuing focus on health/wellness offerings and nutritional improvements, new
product development, category premiumisation and lowest cost production
systems.
In Ireland, Kerry Foods' category leading brands all grew market share in the
first half of 2006. Denny achieved excellent growth in sausage, rasher and
pre-packed sliced meats benefiting from its new brand identity and marketing
programmes. Similarly, Ballyfree also benefited from the positive nutritional
profile and food values of its range. In the convenience food-to-go sector
strong market development continued through the Freshways, Dawn, Kerry Spring
and Kerryfresh offerings. Double digit growth was achieved in the Freshways
sandwich range, assisted by the re-launch of the Freshways 'Healthy Ways' line.
Three new health juice offerings were introduced in the Dawn range; Dawn
Benefits - with Multi-vitamins and Calcium, Probiotic and Omega-3 - supported by
national TV and press campaigns.
The Irish and UK poultry markets remained highly competitive during the period,
with further cost pressures significantly impacting profitability of the sector.
Cheese and spreads had a good performance across both markets, with continued
progress through Charleville and Low Low in Ireland. Cheestrings continued to
grow successfully during the period assisted by new TV advertising campaigns
emphasising its natural nutritional values. In the adult healthy snack market,
Brunchettas has continued to achieve strong double digit growth as the market
progressively develops.
In the chilled ready meals sector the slowdown in overall market growth
continued into the first half of 2006, but by the end of the period the rate of
growth again accelerated - driven primarily by premium categories. Kerry Foods'
chilled ready meals business continued to achieve satisfactory growth due to its
positioning in premium sectors. The Hartlepool facility was closed so as to
maximise production efficiencies. Noon Group acquired in August 2005 continued
to perform well. A focus on consumer requirements for more significant natural,
nutritionally balanced recipes using premium quality healthy ingredients has led
Kerry Foods to introduce significant new product innovations in the sector in
conjunction with major UK retail groups. 'The Food Doctor' innovative range of
ready meals has been successfully launched within the premium health sector
using a combination of raw and cooked ingredients that can be steamed in the
microwave in seconds to give great tasting meals. Kerry Foods will also launch
its 'Champneys' wellbeing brand of multi-cuisine meals in the second half of
2006.
The rate of decline in the frozen ready meals sector slowed during the period.
Rye Valley Foods achieved good volume growth due to its quality asset base and
lowest cost producer status. However intense competition in a declining market
and energy related cost increases adversely impacted profitability relative to
the same period of last year.
Richmond continued to achieve a strong performance, growing its market share in
both the fresh and frozen segments of the UK sausage market. Wall's saw revenue
values decline in the standard segment but enjoyed good growth in the parchment
sector and through Wall's Micro Sausages. Porkinsons also recorded good volume
and value growth year-on-year. The growth of meat snacking continues at
encouraging levels and Mattessons Fridge Raiders has captured a major share of
this growing category.
Kerry Foods recorded good volume growth in the UK pastry sector but cost
recovery proved difficult in a highly competitive marketplace. As well as
maximising processing efficiencies through closure of facilities in Sligo,
Limerick, Mitcham and Hartlepool, the consumer foods division also sold the St.
Brendan's Irish Cream Liqueur business based in Derry.
Geographic Markets
Total Group sales revenue throughout European markets in the first half of 2006
grew by 5.2% to €1.5 billion. In American markets, the Group's ingredients and
flavours businesses increased sales revenue by 10.9% to €635m. Sales revenue
in Asia Pacific markets grew by 9.1% to €174m.
Finance
Like-for-like revenue growth of 3.5% and a 40 basis point reduction in trading
margin reflects an overall robust trading performance in difficult market
conditions. The latter in particular was impacted by the significant increase
in the market price of energy (up 32% in the period) and the related impact on
packaging and certain soft commodities. This increase of approximately €40m (or
180 basis points on the margin) was partially recovered during the period
through ongoing pricing, procurement and supply chain initiatives.
Free cash flow for the period at €20m (H1 2005: €24m) reflects the increased
seasonal investment in working capital of €100m. Earnings before interest, tax,
non-trading items, depreciation and amortisation (EBITDA) increased by 1.9% to
€216m. The return on shareholders' equity was 14.7% for the period.
Expenditure on Group acquisitions during the period amounted to €86m net of
disposals. Net debt at the end of the half year increased to €1,338m compared to
€1,265m at the end of the first half of 2005. The ratio of net debt to EBITDA
remained at 2.8 times. Finance costs were €35m, compared to €30m in the same
period of 2005 (reflecting an increase in interest rates) with EBITDA to net
interest covered 7.0 times (H1 2005: 8.6 times).
Share Buy Back Programme
At the 2006 Annual General Meeting shareholders approved the repurchase of up to
5% of the issued share capital of the Company. In June 2.8m shares (1.5%) were
purchased and are now held as treasury shares pending their reissue to meet
obligations arising from the Company's share option schemes and long term
incentive plan. As a result the total number of shares in issue at 30 June 2006
reduced to 184,560,310 compared to 187,092,180 at the end of June 2005. The
Board may utilise this authority up to the remaining balance of 6.5m shares over
the course of the period for which the authority is valid (the 2007 Annual
General Meeting).
The Group continues to pursue acquisition opportunities and should such
opportunities not materialise in significant quantum in any given period, the
Board may, if it is in the best interest of shareholders, use it's cash to
invest in Share Buy Back Programmes.
Dividend
The Board has declared an interim dividend of 5.5 cent per share, an increase of
10% on the 2005 interim dividend of 5 cent per share. The interim dividend will
be paid on 24 November 2006 to shareholders registered on the record date 20
October 2006.
Current Trading and Outlook
Despite the current competitive trading environment and difficulties in
recovering the unprecedented level of cost increases in some territories, Kerry
Group is well positioned across global growth markets and its strong technology
platforms will continue to lead innovation and category growth. In global
ingredients markets Kerry is satisfied that its strong organic growth rates are
achievable into the future. In consumer food categories the underlying strength
of Kerry Foods' brands, their focus on health and wellness product innovations
and positioning in convenience growth categories, will ensure that the division
continues to outperform category growth rates.
The recent competitive pressures in the food industry will inevitably increase
the pace of industry consolidation. Kerry is well positioned to actively pursue
strategic opportunities arising from such consolidation which will contribute
further supply chain efficiencies for the Group and support top-line and
earnings growth into the future. The Group is currently exploring a busy
pipeline of bolt-on acquisition opportunities.
We continue to focus on operational efficiency improvements. During the past
year eight manufacturing facilities were closed and a further four were sold
with the associated non-core businesses. In the near term, it is planned to
sell or close a further ten manufacturing facilities across Group operations.
The benefits of this action programme on completion will contribute an
improvement of 25 basis points per annum in the Group trading margin.
We continue to focus on necessary cost recovery programmes to overcome the
current cost pressures in our industry segments. Earnings for the full year
are expected to be in line with current market expectations.
Results for the half year ended 30 June 2006
Kerry Group plc
Consolidated Income Statement
for the half year ended 30 June 2006
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
Notes €'000 €'000 €'000
Revenue 1 2,265,336 2,117,238 4,429,777
___________ ___________ ___________
Trading profit 162,249 159,876 380,213
Intangible asset amortisation (5,433) (4,820) (10,331)
Non-trading items 2 3,223 6,254 (3,623)
___________ ___________ ___________
Operating profit 160,039 161,310 366,259
Finance costs (34,772) (30,409) (68,353)
___________ ___________ ___________
Profit before taxation 125,267 130,901 297,906
Income taxes (24,534) (30,335) (62,030)
___________ ___________ ___________
Profit after taxation and attributable to equity
shareholders 100,733 100,566 235,876
___________ ___________ ___________
Earnings per ordinary share (cent)
- basic 3 53.8 53.8 126.1
- fully diluted 3 53.6 53.5 125.5
Kerry Group plc
Consolidated Balance Sheet
as at 30 June 2006 30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Non-current assets
Property, plant and equipment 1,061,266 1,015,943 1,066,931
Intangible assets 1,679,400 1,453,991 1,633,367
Financial asset investments 14,131 6,113 12,442
Deferred tax assets 4,168 15,314 12,115
___________ ___________ ____________
2,758,965 2,491,361 2,724,855
___________ ___________ ____________
Current assets
Inventories 573,469 568,988 544,438
Trade and other receivables 623,276 642,352 558,831
Cash and cash equivalents 101,235 97,701 163,903
Financial assets 7,378 - 1,862
Assets classified as held for sale - 4,616 10,415
___________ ___________ ____________
1,305,358 1,313,657 1,279,449
___________ ___________ ____________
Total assets 4,064,323 3,805,018 4,004,304
___________ ___________ ____________
Current liabilities
Trade and other payables 886,117 854,869 845,285
Financial liabilities 205,185 211,344 143,854
Tax liabilities 50,501 49,793 44,659
Provisions - 6,302 -
Deferred income 4,226 3,860 3,078
Liabilities classified as held for sale - - 1,899
___________ ___________ ____________
1,146,029 1,126,168 1,038,775
___________ ___________ ____________
Non-current liabilities
Financial liabilities 1,233,889 1,153,001 1,297,210
Retirement benefit obligation 178,561 267,115 249,103
Other non-current liabilities 103,767 93,837 107,297
Deferred tax liabilities 126,721 103,261 112,276
Deferred income 19,147 22,537 21,959
___________ ___________ ____________
1,662,085 1,639,751 1,787,845
___________ ___________ ____________
Total liabilities 2,808,114 2,765,919 2,826,620
___________ ___________ ____________
Net assets 1,256,209 1,039,099 1,177,684
___________ ___________ ____________
Capital and reserves
Share capital 23,419 23,386 23,399
Share premium account 381,022 377,844 378,979
Other reserves (31,826) 23,438 23,501
Retained earnings 883,594 614,431 751,805
___________ ___________ ____________
Shareholders' equity 1,256,209 1,039,099 1,177,684
___________ ___________ ____________
Kerry Group plc
Consolidated Statement of Recognised Income and Expense
for the half year ended 30 June 2006
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Fair value movements on available-for-sale
investments 1,689 (338) 12,209
Fair value movements on cash flow hedges 7,248 (3,652) (3,383)
Exchange difference on translation of foreign
operations (15,258) 25,261 17,747
Actuarial gains / (losses) on defined benefit
pension schemes 64,640 (59,166) (50,387)
Deferred tax on items taken directly to reserves (12,987) 15,193 16,412
___________ ___________ ____________
Net income / (expense) recognised directly in
equity 45,332 (22,702) (7,402)
Transfers
Cash flow hedges to profit or loss from equity (564) (122) 857
Sale of available-for-sale investments - - (6,218)
Profit for the period after taxation 100,733 100,566 235,876
___________ ___________ ____________
Total recognised income and expense for the
period attributable to equity shareholders 145,501 77,742 223,113
___________ ___________ ____________
Kerry Group plc
Consolidated Reconciliation of Changes in Shareholders' Equity
for the half year ended 30 June 2006
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
Notes €'000 €'000 €'000
At beginning of period 1,177,684 968,160 968,160
Impact of adoption of IAS 32 and IAS 39 - 8,131 9,550
Total recognised income and expense for the
period 145,501 77,742 223,113
Dividends paid 4 (20,597) (17,776) (27,129)
Purchase of treasury shares 3 (48,442) - -
Shares issued during the period 2,063 2,858 4,014
Share issue costs - (16) (24)
___________ ___________ ____________
At end of period 1,256,209 1,039,099 1,177,684
___________ ___________ ____________
Kerry Group plc
Consolidated Cash Flow Statement
for the half year ended 30 June 2006 Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Operating activities
Trading profit 162,249 159,876 380,213
Adjustments for:
Depreciation (net) 53,450 51,877 101,643
Change in working capital (98,909) (78,144) 260
Exchange translation adjustment (615) 1,270 494
___________ ___________ ____________
Cash generated from operations 116,175 134,879 482,610
Income taxes paid (13,466) (22,831) (50,656)
Finance costs paid (net) (35,015) (29,122) (64,314)
___________ ___________ ____________
Net cash from operating activities 67,694 82,926 367,640
___________ ___________ ____________
Investing activities
Purchase of non-current assets (56,450) (70,993) (149,262)
Proceeds from the sale of non-current assets 7,937 11,895 28,928
Capital grants received 974 336 446
Net expenditure on acquisitions and disposals of
businesses (86,435) (38,698) (230,929)
Payment of deferred payables (1,253) (7,797) (11,353)
Expenditure on non-trading items (3,457) (6,359) (15,236)
Consideration adjustment on previous acquisitions - (1,345) (18)
___________ ___________ ____________
Net cash used in investing activities (138,684) (112,961) (377,424)
___________ ___________ ____________
Financing activities
Dividends paid (20,597) (17,776) (27,129)
Purchase of treasury shares (4,314) - -
Issue of share capital 2,063 2,842 3,990
Net proceeds from bank borrowings 89,967 100,785 199,349
Decrease in bank overdrafts (55,336) (23,443) (72,853)
___________ ___________ ____________
Net cash from financing activities 11,783 62,408 103,357
___________ ___________ ____________
Net (decrease) / increase in cash and cash equivalents (59,207) 32,373 93,573
Cash and cash equivalents at beginning of period 163,903 65,328 65,328
Exchange translation adjustment on cash and cash
equivalents (3,461) - 5,002
___________ ___________ ____________
Cash and cash equivalents at end of period 101,235 97,701 163,903
___________ ___________ ____________
Reconciliation of Net Cash Flow to Movement in Net Debt
for the half year ended 30 June 2006
Net (decrease) / increase in cash and cash equivalents (59,207) 32,373 93,573
Cash inflow from debt financing (34,631) (77,342) (126,496)
___________ ___________ ____________
Changes in net debt resulting from cash flows (93,838) (44,969) (32,923)
Exchange translation adjustment on net debt 31,642 (80,801) (104,997)
___________ ___________ ____________
Movement in net debt in the period (62,196) (125,770) (137,920)
Net debt at beginning of period (1,275,358) (1,137,438) (1,137,438)
Impact of adoption of IAS 32 and IAS 39 - (1,419) -
___________ ___________ ____________
Net debt at end of period (1,337,554) (1,264,627) (1,275,358)
___________ ___________ ____________
Kerry Group plc
Notes to the Interim Report
for the half year ended 30 June 2006
1. Analysis of results
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
Segment Segment Segment Segment Segment Segment
Revenue Result Revenue Result Revenue Result
€'000 €'000 €'000 €'000 €'000 €'000
By business segment:
Ingredients 1,547,769 123,206 1,453,161 118,450 3,021,944 283,816
Consumer foods 874,768 52,075 820,301 54,605 1,725,839 123,018
Unallocated and Group eliminations (157,201) (13,032) (156,224) (13,179) (318,006) (26,621)
_________ ________ _________ ________ _________ ________
2,265,336 162,249 2,117,238 159,876 4,429,777 380,213
_________ _________ _________
Intangible asset amortisation (5,433) (4,820) (10,331)
Non-trading items 3,223 6,254 (3,623)
________ ________ ________
Operating profit 160,039 161,310 366,259
________ ________ ________
Segment Segment Segment
Revenue Revenue Revenue
€'000 €'000 €'000
By destination:
Europe 1,455,739 1,384,352 2,885,039
Americas 635,480 573,254 1,212,877
Asia Pacific 174,117 159,632 331,861
_________ _________ _________
2,265,336 2,117,238 4,429,777
_________ _________ _________
2. Non-trading items
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Profit on sale of non-current assets 6,898 9,015 14,702
Loss on sale of businesses and plant closures (3,675) (2,761) (18,325)
_________ ________ ________
3,223 6,254 (3,623)
Tax credit / (charge) on non-trading items 119 (1,417) 3,665
_________ ________ ________
3,342 4,837 42
_________ ________ ________
The 2006 profit on sale of non-current assets primarily relates to the sale of
properties.
The loss on sale of businesses and plant closures in 2006 relates to the closure
of plants including Bingham and Hartlepool in the UK and Platters in Ireland.
The 2005 profit on sale of non-current assets primarily relates to the sale of
Irish properties, plant and equipment and the disposal of available-for-sale
investments.
The loss on sale of businesses and plant closures in 2005 relates to the sale of
non-core businesses and the closure of plants.
3. Earnings per ordinary share
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
EPS EPS EPS
Notes cent €'000 cent €'000 cent €'000
Basic earnings per share
Profit after taxation and attributable to
equity shareholders 53.8 100,733 53.8 100,566 126.1 235,876
Intangible asset amortisation 2.9 5,433 2.6 4,820 5.5 10,331
Non-trading items (net of tax) 2 (1.8) (3,342) (2.6) (4,837) - (42)
_____ _______ _____ ________ _____ ________
Adjusted earnings* 54.9 102,824 53.8 100,549 131.6 246,165
_____ _______ _____ ________ _____ ________
Diluted earnings per share
Profit after taxation and attributable to
equity shareholders 53.6 100,733 53.5 100,566 125.5 235,876
Adjusted earnings* 54.7 102,824 53.5 100,549 131.0 246,165
*In addition to the basic and diluted earnings per share, an adjusted earnings
per share is also provided as it is considered more reflective of the Group's
underlying trading performance. Adjusted earnings is profit after taxation
before intangible asset amortisation and non-trading items (net of tax).
Number of Number of Number of
Shares Shares Shares
000's 000's 000's
30 June 30 June 31 Dec.
2006 2005 2005
Basic weighted average number of shares 187,271 186,949 187,051
Impact of executive share options outstanding 760 905 879
_________ _________ ________
Diluted weighted average number of shares 188,031 187,854 187,930
_________ _________ _________
Actual number of shares in issue 184,560 187,092 187,196
_________ _________ _________
On 26 June 2006 the Company commenced a share buy back programme of up to
2,800,000 A ordinary shares, representing approximately 1.5% of the issued share
capital of the Company. By 30 June 2006, these shares had been repurchased at a
total cost of €48 million.
All repurchases conducted under the programme were in accordance with the
Company's general authority to repurchase securities as approved at the 2006
Annual General Meeting of the Company and in accordance with the Listing Rules
of the Irish Stock Exchange, the Listing Rules of the UK Listing Authority, the
Market Abuse Directive and any other applicable legislation and
regulatory requirements.
4. Dividends
Half year ended Half year ended Year ended
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Amounts recognised as distributions to equity shareholders
in the period:
Final 2005 dividend of 11.00 cent per A ordinary share paid
26 May 2006 (2004: 9.50 cent per A ordinary share paid 27
May 2005) 20,597 17,776 17,776
Interim 2006 dividend of 5.50 cent per A ordinary share
payable 24 November 2006 (2005: 5.00 cent per A ordinary
share paid 25 November 2005) - - 9,353
______________ _____________ ___________
20,597 17,776 27,129
______________ _____________ ___________
Since the end of the period, the Board has declared an interim dividend of 5.50
cent per share. The interim dividend will be paid on 24 November 2006 to
shareholders registered on the record date 20 October 2006. These consolidated
interim financial statements do not reflect this dividend payable.
5. Retirement benefits
The Group's defined benefit pension schemes' deficit which has been recognised
in full in the Consolidated Balance Sheet in non-current liabilities, was as
follows:
30 June 2006 30 June 2005 31 Dec. 2005
Unaudited Unaudited Audited
€'000 €'000 €'000
Deficit in plans before deferred tax at end of period (178,561) (267,115) (249,103)
Related deferred tax asset 57,386 67,485 70,462
______________ _____________ ___________
Deficit in plans after deferred tax at end of period (121,175) (199,630) (178,641)
______________ _____________ ___________
6. Businesses acquired
During the period the Group completed the acquisition of a number of businesses,
all of which were 100% acquired. The total consideration for acquisitions
amounted to €96 million.
The acquisition method of accounting has been used to consolidate the businesses
acquired. The accounting for business acquisitions is provisional. Other than
the valuation of intangible assets there are no material differences arising
between the fair value of the assets and liabilities acquired and the acquiree's
carrying value at the acquisition date. If however any fair values need to be
adjusted they will be reflected in the acquisition accounting within one year of
the acquisition date.
The principal acquisitions completed in the period are summarised as follows:
In April 2006, the Group acquired Nuvex Ingredients. Based in the USA the
company specialises in customised high-protein and fibre nutritional lines.
The Group also acquired Custom Industries in March 2006. Located in the USA and
Canada, the company is a leading manufacturer of particulates for bakery and
ready-to-eat cereal applications and confectionery ingredients for sweet goods.
7. Events after the balance sheet date
Other than the approval of the interim dividend (see note 4 above) there have
been no significant events, outside the ordinary course of business, affecting
the Group since 30 June 2006.
8. Accounting policies and general information
These unaudited consolidated interim accounts for the six months ended 30 June
2006 have been prepared in accordance with the accounting policies detailed in
the 2005 Annual Report.
These accounts are not full accounts and except where indicated are unaudited.
Full consolidated financial statements to 31 December 2005 which received an
unqualified audit report, have been filed with the Registrar of Companies.
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