Preliminary Results
Kerry Group PLC
26 February 2008
PRESS ANNOUNCEMENT
Tuesday 26 February 2008
Preliminary Statement of Results
for the year ended 31 December 2007
Kerry, the global ingredients & flavours and consumer foods group, reports
preliminary results for year ended 31 December 2007.
Highlights
• Good organic growth in all territories
• Like-for-like Group sales revenue up 6.7% to €4.8 billion
• EBITDA* a record €500m
• Trading profit increased by 7.4% on a like-for-like basis to €401.1m
• Trading margin up 10 basis points to 8.4%
• Profit before tax up 35% to €298m
• Adjusted EPS* up 7.4% to 143.8 cent
• Final dividend per share up 11.2% to 13.9 cent
• Free cash flow of €257m
• R&D investment increased to €145m
*before intangible amortisation and non-trading items
Commenting on the results Kerry Group Chief Executive Stan McCarthy said; 'Kerry
achieved a good all round business performance and solid organic growth in 2007
notwithstanding the inflationary input cost environment. Working closely with
our customers we successfully managed this challenge through prudent pricing
actions and business efficiency improvements. The Group has excellent prospects
for business development by leveraging its industry leading technologies and its
strong geographic market and customer positioning. By capitalising on such
opportunity and exploiting its strong financial and management resources, the
Group plans to grow from its current €5 billion base to €10 billion through
strong organic growth and value enhancing acquisitions in the next five to six
years. Kerry has made a good start to 2008 and expects to grow earnings for the
full year to a range of 151 cent to 155 cent per share.'
For further information please contact:
Frank Hayes, Director of Corporate Affairs, Kerry Group plc.
Tel no +353 66 7182304
Fax no +353 66 7182972 Kerry Web Site: www.kerrygroup.com
CHAIRMAN'S STATEMENT
For the year ended 31 December 2007
Kerry recorded a solid group-wide performance and good organic growth in 2007, a
year when unprecedented raw material and energy related cost increases posed
serious challenges for the global food and beverage industries. Working closely
with our customers, Kerry successfully managed the inflationary input cost
environment through prudent pricing actions and a range of supply chain
efficiency improvements.
Strong market trends towards all-natural healthier ingredients and product
labelling continue to create significant opportunities for Kerry's ingredients
and flavour technologies. In 2007 the Group focused critical attention on
aligning its global infrastructure, comprising ingredients, flavours and
bio-science technologies and application teams, to best serve our customers and
Kerry in growing their businesses. By leveraging the maximum synergies from
this industry leading technological base, considerable progress has already been
achieved in American markets. Work programmes have also commenced in EMEA and
Asia-Pacific markets to maximise value through effective application of all
Group technologies in a strategic approach to servicing customer needs and
markets. In addition we have continued to invest in productivity advancements
and in facility consolidations.
In the Group's selected consumer foods' categories in the UK and Irish markets,
our brands have again performed very well - outperforming market growth rates in
key convenience and food-to-go sectors. Significant investment in our brands
and in product development has achieved good category positioning for Kerry and
its customers.
Group expenditure on research, development and applications increased to €145m
in 2007. A strong innovation pipeline continued to support the successful
commercialisation of new product concepts, recipes and consumer food and
beverage offerings.
RESULTS
Total Group sales revenue increased to €4.8 billion in 2007. This reflects
like-for-like revenue growth of 6.7% when account is taken of acquisitions,
business disposals and exchange rate effects.
Despite the prevailing currency and inflationary input cost environment, trading
profit increased from €383.7m in 2006 to €401.1m reflecting like-for-like growth
of 7.4% year-on-year. Kerry's success in working closely with its customers to
manage the significant cost pressures and its focus on organisational change to
maximise business efficiencies resulted in a 10 basis point improvement in the
Group trading margin to 8.4%. Trading margins in the Group's ingredients and
flavours businesses were held at 9.4% and margins in consumer foods advanced by
10 basis points to 6.6%.
Profit before tax increased by 35% to €298m. Group profit after taxation,
finance charges and non-trading items increased by 38% to €246m. Adjusted
earnings per share increased by 7.4% to 143.8 cent.
The Board will recommend to the Annual General Meeting a final dividend of 13.9
cent per share. This will bring the total dividend payment for the year to 20
cent per share, an increase of 11.1% on the previous year.
BUSINESS REVIEWS
INGREDIENTS & FLAVOURS
2007 Like-for-like Growth
Revenue €3,310m 7.8%
Trading profit €310m 7.6%
Kerry is a world leader in food ingredients and flavours serving the food and
beverage industry. In 2007 the division performed well in all regions delivering
solid growth, offsetting the spike in raw material and energy related cost
increases. Total sales revenue increased by 5.6% to €3,310m reflecting
like-for-like growth of 7.8% when adjusted for currency translation,
acquisitions and business disposals impact. On a like-for-like basis trading
profits grew 7.6% to €310m, maintaining a trading margin of 9.4% despite the
difficult cost environment.
In American ingredients and flavours markets sales revenue in 2007 grew to
€1,310m which represents 7% like-for-like growth on the prior year level.
Considerable progress was achieved in broadening Kerry's 'go-to-market' strategy
to include all the Group's food and beverage ingredients, bio-science and
flavours businesses operating in American markets. Through this more strategic
approach to servicing customers and markets, significant opportunity exists to
enhance development and growth through application of Kerry's unrivalled range
of technologies. To-date this approach has contributed increased growth levels
at major customer accounts. The work programme to align technologies and
business infrastructure to facilitate enterprise wide selling will continue in
2008.
Demand for natural, healthy foods with great taste continues to provide strong
growth opportunities for Kerry's innovative ingredient systems in the
ready-to-eat cereal and nutrition sectors. While growth in the nutritional bar
market plateaued, synergies through Kerry technologies led to satisfactory
growth in the category. In the bakery sector, assisted by the Custom Industries
acquisition completed in 2006, Kerry grew market share through its sweet
ingredient technologies, emulsifiers, enzymes and natural high-fibre
ingredients. Sweet applications in the U.S. ice-cream market were adversely
impacted by lower sectoral sales as a result of the significant increase in
dairy raw material prices. In November, the Group acquired Can Pan Candy Inc,
located in Mississauga, Canada, a manufacturer of confectionery inclusions and
toppings. In December, the Group also acquired QA Products based in Elk Grove
Village, Chicago. Both acquisitions strengthen Kerry's range of sweet
ingredients technologies for the bakery and frozen desserts markets in North
America.
Kerry's cheese and dairy, culinary and savoury flavours achieved good growth
through complete sauces particularly in the chilled / frozen premium meals and
meal components category. Successful market development has also been achieved
in the soups and dressings segments.
In savoury systems and coatings, despite the spike in grain prices in 2007,
Kerry grew sales volumes satisfactorily due to its industry leading application
expertise, quality and customer service. Seasonings also achieved positive
growth through application in new product launches and growth in foodservice
chain accounts. In November, the Group acquired Presco Food Seasonings based in
Flemington, New Jersey - a supplier of customised premium seasonings and flavour
products to the meat and snack industries including the natural and organic
sectors.
Jet(R) smoothies and Da Vinci Gourmet coffee syrups achieved good growth through
speciality coffee and club store channels. New coffee syrup lines and specialty
beverage mixes were successfully custom developed for leading coffee house and
restaurant chains. Golden Dipt(R) brand coatings faced significant margin
challenges due to the surge in wheat costs. In the nutritional beverage sector,
the aseptic beverages facility in St. Claire, Quebec continued to achieve good
top-line growth. Soy protein and infant nutrition applications also provided
good growth opportunities in 2007.
The continuing trends towards healthier food and beverage products drove growth
for the Group's natural and organic flavour ranges, freeze dried fruit
ingredients and flavour modulation systems in American markets. Innovative
fresh citrus flavour products developed at the SunPure Centre of Excellence in
Florida also achieved good results.
In Latin American markets Group businesses were also re-aligned into one
business unit in 2007 to maximise business development opportunities through
global and regional customer accounts. Functional dairy replacement systems
achieved strong growth in South American markets due to the level of dairy raw
material price increases. The rapid expansion of regional foodservice markets,
particularly speciality coffee-house chains, has generated good opportunities
for Kerry's beverage systems and technologies.
Kerry's yeast technologies also delivered high double digit growth in the cell
nutrition sector in American markets in 2007. The cell nutrition laboratory
facilities in New York were significantly expanded to provide for sectoral
growth opportunities. A number of new protein based product ranges were
successfully launched, including UltraPep Soy(R) - a unique technology advance
in protein hydrolysates.
Notwithstanding a substantial increase in raw material costs, strong growth was
achieved in the pharma sector through new product line introductions by
Sheffield(TM) Pharma Excipients and the commencement of a global sales and
marketing agreement.
In American fragrance markets, Manheimer delivered good growth in
home-environmental and personal care applications. New business gains were
achieved through increased focus on development of natural and organic
fragrances and creative perfumery.
European ingredients and flavours delivered good growth and maintained trading
margins in 2007 against a background of substantial raw material cost inflation
and an intensely competitive trading environment. Sales revenue increased to
€1,339m, which reflects like-for-like growth of 4.6%.
Culinary applications again provided excellent growth opportunities for Kerry's
range of ingredient and flavour technologies as consumers increasingly demand
improved ingredient declarations and more authentic natural food tastes.
Kerry's investment in culinary applications including natural stocks, bouillons,
pastes and purees led to good market gains in the prepared foods, soups, pizza,
sandwich and bakery sectors. Commercialisation of key R&D initiatives in
coatings and savoury applications in chilled foods growth categories compensated
for flat volumes in the frozen segment.
Significant progress was achieved in 2007 in European savoury markets through
further supply chain initiatives and increased investment in production and
development facilities to cater for market growth sectors. A new crumb line was
commissioned at the Blendecques facility in France to enable the business to
service customer requirements in France and the Benelux markets more
efficiently.
To facilitate product enhancement through advanced manufacturing technologies, a
new coatings line was also established at the Gainsborough plant in the UK and
the Broxburn facility in Scotland was closed. Phase 1 of an investment
programme at the Olesnica site in Poland was also completed, expanding
applications capabilities to meet growth requirements in Eastern European
markets. To assist market development in Russia, a new Representative Office
and applications facility was also established in Moscow. Kerry's performance
in the European snack sector was satisfactory despite strong sectoral input cost
pressures.
In the beverage sector, a new application facility was established in Almere,
the Netherlands which, coupled with increased investment in research, has
significantly strengthened Kerry's capability to support European customers in
providing effective solutions to meet rapidly changing market requirements.
Strong double digit growth was achieved with notable success in expanding the
product portfolio into the wine sector, augmenting continued growth in the
brewing industry. Production capacity at the Menstrie facility in Scotland was
again increased to meet sectoral growth requirements. Mastertaste botanical
flavour systems also achieved good growth in European beverage markets, in
particular in the tea category.
The growth in consumer demand for natural products and health ingredient lines
continues to provide favourable growth opportunities for the Group's enzymes
facility located in Ireland, through assisting food processors in salt, sugar,
fat and allergen reduction. Raw material cost pressures restricted revenue and
profit growth through emulsifier applications in European markets in 2007.
However successful product launches and good market development in the dairy and
confectionery markets have established good platforms for growth.
The significant upturn in international dairy market conditions in 2007 led to a
substantial increase in returns to milk producers and a good recovery in dairy
processor margins. Increased global demand for dairy products coupled with low
inventory levels contributed strongly to the market improvement and performance
of Kerry's Irish milk processing operations. Further progress has been made in
the development and commercialisation of dairy ingredients with specific flavour
benefits. Progress was achieved in nutritional growth sectors by combining and
gaining synergies from Kerry's protein and nutrition technologies. Through
collaboration with the Group's Nutrition Technical Centre in Almere, Kerry Dairy
Ingredients expanded its direct linkages with leading Research Institutes and
successfully developed pre-clinical data and clinical studies to validate
efficacy of ingredient systems.
Kerry also recorded a considerable improvement in the performance of its sweet
and fruit ingredients businesses in Europe. In chilled dairy markets good
growth was achieved through fruit preparations, sauces and sweet inclusions into
gourmet desserts. Premium fruit fillings achieved good progress in the
confectionery and biscuit categories and also in confectionery and fruit sauce
foodservice applications. Beverage applications including smoothies, flavoured
syrups and sauces continued to provide excellent growth opportunities,
particularly through food-to-go and foodservice channels. In the fruit
inclusions sector, a strong innovation pipeline saw encouraging growth through
dried infused fruit ranges for the ready-to-eat cereal and snack sectors.
Strong organic growth was achieved in the European sweet ingredients markets,
including the dairy and breakfast cereal markets where yoghurt coated cereals
and cluster ingredients performed well. The acquisition of Titusfield Limited,
located in the UK, during the year further strengthens Kerry's position as a
leading provider of cereal extrusion products, inclusions and coatings for dairy
and confectionery markets.
Kerry also continued to successfully develop its strategic partnerships with
bio-pharma companies in Europe in 2007. This contributed to double digit growth
in protein technologies for cell nutrition. An expanded product portfolio also
assisted strong growth through excipient applications in European, Middle
Eastern and African markets.
In Asia-Pacific markets the Group again achieved excellent results and strong
regional market development in 2007. Sales revenue increased by 17.1% to €425m,
reflecting like-for-like growth of 17.3%.
Asian markets continue to exhibit strong growth potential. In the healthy snack
sector, Kerry technologies grew by 18% year-on-year outperforming market growth
rates for functional ingredient systems. Culinary systems also provided good
growth in line with demand for convenient meal solutions. Cheese and dairy
flavours delivered strong growth particularly through prepared sauces for QSR
markets. In December, Kerry acquired Singapore based Fountainhead
Manufacturing, a speciality liquid sauce manufacturer of western and ethnic
sauces, dips and dressings for QSR and foodservice applications. Due to the
buoyancy of international dairy commodity markets in 2007, Kerry's technological
strengths in development of functional dairy blends delivered high double digit
growth. The strength of regional bakery, confectionery and dairy markets also
provided good growth platforms for Kerry's emulsifier technologies. Expansion
of the Esterol production facility is on-going to meet the regional growth in
demand. As markets across the region continue to add value and adopt western
style trends, Kerry's coatings and seasonings technologies are assisting meat
processors in development of value-added products such as microwaveable,
pre-marinade meats and ready meals.
China saw strong growth through customised solutions for the ice-cream industry
and through snack offerings for the fast-growing QSR sector. Incorporating
speciality dairy proteins developed in Ireland, Kerry also achieved good growth
in the nutritional sector in China with the successful launch of finished
formulas. The Group's branded speciality beverage products again made excellent
progress in 2007 as the 'coffee culture' continues to develop in major
population centres and global chains progress regional expansion strategies.
Beverage applications grew strongly in Japan, Korea, Malaysia, the Philippines
and in China as the market continues its rapid development ahead of the Beijing
Olympic Games in 2008. New product introductions in 2007 included a yoghurt
frappease base incorporating Kerry's dairy technologies and a range of fruit
teas utilising Mastertaste's unique freeze dried flavour technology. Kerry
Bio-Science also achieved good growth through new brewing concepts and
technology introductions into target customers within the region. The global
applications capability of the beverage business unit was further enhanced with
establishment of a new beverage application centre and expertise in Shanghai.
In October, the Group also acquired Shanghai Vega Flavours and Fragrance to
provide flavour development and manufacturing support for Kerry's regional and
global customers in the dairy, beverage and confectionery sectors. Sheffield
Pharma Ingredients also made good progress in Asia as leading global
pharmaceutical companies continue to establish regional manufacturing bases.
In Australia and New Zealand, Kerry's total ingredients portfolio recorded
double digit growth year-on-year. Beverage performed extremely well driven by
continued expansion in distribution and penetration of Da Vinci branded syrups
and sauces in both the independent cafe sector and key chain accounts.
Continued growth of the ice blended beverage category resulted in further strong
growth of fruit and dairy bases for smoothie and frappe applications.
Seasonings and coatings also achieved double digit growth in the poultry and
industrial food processing sectors. 2007 also saw the successful introduction
of new technologies, including a range of cereal products targeted at the
growing health and nutritional snack bar sectors and a composite range of wet
culinary systems.
In the Australian bakery sector Kerry Pinnacle continued to adapt well to market
changes with growth in the franchise bakery and the fast growing lifestyle
bakery market. In July the Group acquired Melbourne based Sugar and Spice to
assist in growing Kerry Pinnacle's market share in the lifestyle bakery segment
by bringing a full range of donuts, cakes, profiteroles and slices to its broad
customer base including supermarkets and shop chains.
CONSUMER FOODS
2007 Like-for-like Growth
Revenue €1,819m 5.6%
Trading profit €119m 6.4%
Despite accelerating input cost inflation and a highly competitive UK and Irish
market environment in 2007, the Group's consumer foods businesses delivered a
robust performance, with strong brand and category growth year-on-year. Having
divested primary meat processing operations at year-end 2006, sales revenue in
2007 at €1,819m reflects like-for-like growth of 5.6%. Trading profits
increased to €119m which represents like-for-like growth of 6.4% year-on-year.
Health and nutrition considerations increasingly transcend all food categories
as consumers pursue a holistic approach to diet, lifestyle and health issues.
Kerry Foods' focus on innovation and premiumisation in its branded and selected
own label chilled growth categories contributed strongly to its successful
performance in such a challenging environment in 2007.
In Ireland the Denny brand, supported by the 'Home is where you make it' TV
advertising campaign, delivered a good overall performance. While there was a
slight decline in sausage sales relative to strong year earlier comparatives,
Denny rashers again outperformed category growth levels driven by a focus on
superior quality. Denny Cooked Meats consolidated its category leadership
position, with overall growth of 17% year-on-year and significant growth from
the Denny Eat Healthy and Denny Carved ranges. The Ballyfree brand, supported
by a new advertising campaign, also outperformed white meat category growth
rates for its cooked meats range.
2007 saw another year of strong growth in the food-to-go category in Ireland.
Pre-packed and deli-made sandwich markets continued to grow, with significant
investment by retailers in their deli offerings. Freshways continues to be the
No.1 pre-packed sandwich brand in Ireland, in a market which grew by 7%
year-on-year. All Freshways brand measures showed significant improvement in
response to a major brand investment and advertising programme. In response to
consumer demand for more variety and new flavours, a number of new Limited
Edition sandwiches and wraps were launched in addition to an expanded range of
premium Gourmet sandwiches. Freshways furthered its offerings from a sandwich
brand to a food-to-go brand with the successful launches of its Heat 'n Eat
range (microwavable hot sandwiches) and Freshways Fruit Pots (portable, single
serve, fresh fruit to eat on the go).
Kerryfresh, the foodservice business segment of Kerry Foods in Ireland, made
tremendous progress in 2007 establishing itself as the leading supplier of
chilled foodservice ingredients and food-to-go concepts to delicatessens, coffee
shops and sandwich bars. Double digit growth was achieved in this dynamic
sector which has sustained high levels of investment by symbol groups and
independent entrepreneurs.
In the fast growing chilled juice market in Ireland, the key activity for
Kerry's Dawn brand was continued support and investment in Dawn Benefits - a
range of functional juices launched in 2006. Supported by strong TV and Radio
campaigns, the Dawn share of the functional juices segment grew from 9.9% to
19.2% year-on-year. 2007 also saw the launch of Dawn Smoothies in take home (1
litre) format and the re-launch of its range of impulse smoothies.
With the significant increase in dairy raw material pricing, the fresh milk
product category in Ireland was extremely competitive. However supported by a
new marketing campaign Dawn Omega Milk performed well.
In the Irish bottled water market, the key highlights for 2007 include the
launch of Kerry Spring XTRA, an award winning flavoured functional water for
children. Kerry Spring maintained its position as the overall leader in the
Irish flavoured water market despite increased competition in the sector.
In the cheese and spreads categories of the Irish and UK markets, Kerry Foods
again performed well in terms of brand growth and positioning - outperforming
market growth rates in most segments. Due to the significant price increases in
dairy commodities and edible oils, cost recovery remains a key on-going focus
for the division. Kerry Foods saw strong growth in the cheese category with
total brands achieving good volume growth. Low Low which has been Ireland's
fastest growing dairy brand in recent years, continued its successful growth
programme - reaching the No.2 position in cheese for the first time.
Charleville Cheese consolidated its position as Ireland's No.1 cheese brand with
good growth year-on-year. EasiSingles benefited from a significant brand
repositioning programme in the processed cheese slices category. In Northern
Ireland the Coleraine brand also extended its market leadership position.
While the UK cheese snacking sector declined slightly in 2007, Cheestrings
performed well - further re-enforcing its market positioning as a healthy
convenience snack offering. In France, Ficello which is now stocked by all
major retailers continued to progress its market development. In the QSR
sector, Kerry continued to develop its cheese and UHT offerings in 2007 with
strong double digit volume growth.
Low Low and Kerrymaid continued to make good progress in the Irish spreads
category. A new Omega line was added to the Low Low brand prior to year-end.
Golden Cow performed strongly re-enforcing its position as the No.1 butter brand
in Northern Ireland. In the UK private label spreads category, Kerry Foods
further consolidated its market leadership position with growth through premium
offerings and a strong emphasis on category management.
UK chilled food category growth continued to reflect consumer preference for
more premium offers and on-the-go eating. The fresh sausage market again
recorded strong value growth driven by continued trade up into more premium
adult variants. Richmond remains the clear No.1 brand in the market with strong
year-on-year growth in all formats. This performance was again assisted by
significant brand investment and continuation of the highly effective 'Smile
it's a Richmond' advertising campaign. Wall's remains the second largest brand
in the UK where growth has been driven by double digit growth of Wall's Micro's.
As the definitive brand choice for premium consumers, Porkinson again achieved
strong double digit annual growth. Against a background of continued decline in
the frozen sausage segment, Richmond frozen again achieved satisfactory sales
growth.
In 2007 Mattessons realised excellent growth through its major brand investment
areas Fridge Raiders and Smoked Sausage. Fridge Raiders responded well to
distribution increases and the launch of a new 'Chinese Spare Rib' variant.
Turkey Rashers also showed encouraging growth in 2007 but sliced meats continued
to be a very difficult UK market category. The decision by Mattessons to
withdraw from unprofitable marketing activity and to focus its initiatives on
the convenience sector has put the business in a stronger position for 2008.
Chilled ready meals saw another year of good growth in the UK market fuelled by
a continued increase in the total number of households buying into the category
and in frequency of purchase. Significant innovation also continues to broaden
interest in the category where 'Healthily Balanced', British and Premium
segments are showing the strongest growth. Kerry Foods 'Champneys' and 'The
Food Doctor' healthy branded ranges entered their second year in the category,
helping to drive the sectors' overall growth. The Bombay Brasserie Indian
branded offering celebrated its 25th Anniversary with an expansion of the range
and launch of a new marketing support programme.
While overall sales volumes in the UK frozen ready meals segment continued to
decline year-on-year, the rate of decline slowed and the category achieved
greater market stability and improved product pricing prior to year-end. Rye
Valley Foods further consolidated its market leadership in the sector with the
addition of licensing agreements for sale and manufacture of well established
branded offerings.
The savoury pastry market showed satisfactory growth year-on-year. Kerry Foods
outperformed subcategory growth rates through increased marketing support and
new listings with key retailers. The new hot pie production line commissioned
in March 2007 performed extremely well and was operating to full capacity by
year-end.
Kerry Foods Direct to Store performed well in the UK convenience store sector.
The business won important new customer listings and expanded its product range
successfully in 2007. The Group's specialist foodservice business unit in the
UK and Ireland also grew satisfactorily through distributor, pub, restaurant and
coffee chain accounts.
GEOGRAPHIC MARKETS
Total Group sales revenue throughout European markets in 2007 grew by 5.3% on a
like-for-like basis to €3,054m. In American markets, the Group's ingredients
and flavours businesses increased sales revenue by 7% on a like-for-like basis
to €1,310m. Sales revenue in Asia-Pacific markets increased by 17.3% on a
like-for-like basis to €425m.
FINANCE
Earnings before finance costs, tax, non-trading items, depreciation and
amortisation (EBITDA) increased to a record €500m. After allowing for an
increase in working capital of €38m, capital expenditure of €89m (net of
proceeds from asset disposals), finance payments of €79m and tax of €37m, free
cash flow available to the Group was €257m. The consistent strong cash
generation performance of the Group has delivered over €1.5 billion free cash in
the last six year period.
Expenditure on Group acquisitions amounted to €79m (2006 : €113m). Net debt at
year-end amounted to €1,279m compared to €1,194m at the end of 2006. Net debt
to EBITDA increased slightly to 2.6 times (2006 : 2.5 times). Finance costs
were €79.1m compared to the 2006 level of €76.9m, with EBITDA to net interest
covered 6.1 times (2006 : 6.2 times). The Group used its share buy-back
programme authorisation to purchase 10.8 million shares at a cost of €232m in
2007.
DIVIDEND
The Board recommends a final dividend of 13.9 cent per share, an increase of
11.2% on 2006. Together with the interim dividend of 6.1 cent per share, this
raises the total dividend for the year to 20 cent per share, an increase of
11.1% on the previous year. The final dividend will be paid on 23 May 2008 to
shareholders registered on the record date 18 April 2008.
ANNUAL REPORT AND ANNUAL GENERAL MEETING
The Group's Annual Report will be published in April and the Annual General
Meeting will be held in Tralee on 13 May 2008.
BOARD AND MANAGEMENT CHANGES
Mr Hugh Friel, who was Chief Executive of the Group since January 2002 and part
of the leadership team of Kerry since the establishment of the organisation,
retired as Chief Executive and Director of the Group on 31 December 2007.
Chief Executive Designate Mr Stan McCarthy succeeded Mr Hugh Friel as Chief
Executive on 1 January 2008. An Executive Director of the Group since 1999, Mr
McCarthy was President and CEO of Kerry Ingredients Americas since 1996 having
joined the organisation through its Graduate Recruitment Programme in Ireland in
1976.
Mr Denis Cregan, who was also part of the leadership team of Kerry since its
establishment, will step down as Deputy Chief Executive of the Group and as an
Executive Director of the Company following the Annual General Meeting on 13 May
2008. Mr Cregan will remain with the Company on a contractual basis until the
end of 2009 to assist the Chief Executive in alignment of the Group's global
food ingredients, bio-science and flavours businesses.
FUTURE PROSPECTS
Looking forward, our focused strategy, successful business model and strong
management resource gives us full confidence in the Group's ability to deliver
sustainable revenue and earnings growth in 2008 and beyond. Kerry holds an
unrivalled position as a leading ingredients and flavours supplier to the food
and beverage industries globally and our consumer foods businesses in the UK and
Ireland have successfully attained leading brand positioning and consumer
preference.
The Group has excellent prospects for business development by leveraging its
competitive advantages through its industry leading technological, geographical
and customer positioning. Top line growth will be enhanced by global
implementation of a programme, already well advanced in American markets, to
re-align the Group's ingredients, bio-science and flavours businesses around
core technology platforms and application teams to best service customer
requirements.
In Kerry's consumer foods businesses, continued investment in our brands and
selected private label growth categories, coupled with active product
development programmes, will continue to contribute good growth for the Group
and its retail customers.
By capitalising on such opportunity and exploiting its strong financial and
management resources, the Group plans to grow from its current €5 billion base
to €10 billion through strong organic growth and value enhancing acquisitions in
the next five to six years. The Group has made a good start to 2008 and expects
to grow earnings for the full year to a range of 151 cent to 155 cent per share.
RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Kerry Group plc
Consolidated Income Statement
for the year ended 31 December 2007
Before
Non-Trading Non-Trading
Items Items Total
2007 2007 2007 2006
Notes €'000 €'000 €'000 €'000
Revenue 1 4,787,766 - 4,787,766 4,645,920
_________ _________ _________ __________
Trading profit 1 401,126 - 401,126 383,688
Intangible asset amortisation (12,669) - (12,669) (12,093)
Non-trading items 2 - (11,113) (11,113) (73,425)
_________ _________ _________ __________
Operating profit 388,457 (11,113) 377,344 298,170
Finance costs (79,055) - (79,055) (76,930)
_________ _________ _________ __________
Profit before taxation 309,402 (11,113) 298,289 221,240
Income taxes (64,512) 12,341 (52,171) (43,491)
_________ _________ _________ __________
Profit after taxation and attributable to
equity shareholders 244,890 1,228 246,118 177,749
_________ _________ _________ __________
Earnings per ordinary share (cent)
- basic 3 137.4 95.6
- diluted 3 137.0 95.2
_________ __________
Kerry Group plc
Consolidated Balance Sheet
as at 31 December 2007 2007 2006
€'000 €'000
Non-current assets
Property, plant and equipment 990,747 1,010,343
Intangible assets 1,646,186 1,684,756
Financial asset investments 18,905 19,866
Deferred tax assets 3,361 10,856
___________ ___________
2,659,199 2,725,821
___________ ___________
Current assets
Inventories 526,364 495,313
Trade and other receivables 591,166 597,073
Cash and cash equivalents 185,669 188,844
Financial assets 3,746 4,485
Assets classified as held for sale 3,392 2,696
___________ ___________
1,310,337 1,288,411
___________ ___________
Total assets 3,969,536 4,014,232
___________ ___________
Current liabilities
Trade and other payables 859,933 836,550
Financial liabilities 10,309 27,261
Tax liabilities 53,238 51,909
Deferred income 2,727 2,726
___________ ___________
926,207 918,446
___________ ___________
Non-current liabilities
Financial liabilities 1,454,797 1,356,296
Retirement benefits obligation 111,999 180,269
Other non-current liabilities 92,042 87,368
Deferred tax liabilities 137,527 131,252
Deferred income 17,677 17,434
___________ ___________
1,814,042 1,772,619
___________ ___________
Total liabilities 2,740,249 2,691,065
___________ ___________
Net assets 1,229,287 1,323,167
___________ ___________
Capital and reserves
Share capital 21,836 23,445
Share premium account 391,316 383,341
Other reserves (83,961) (32,089)
Retained earnings - cancelled shares (280,292) -
- retained earnings 1,180,388 948,470
___________ ___________
Shareholders' equity 1,229,287 1,323,167
___________ ___________
Kerry Group plc
Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2007
2007 2006
€'000 €'000
Fair value movements on available-for-sale investments (4,470) 7,424
Fair value movements on cash flow hedges (20,934) (2,608)
Exchange difference on translation of foreign operations (54,335) (13,389)
Actuarial gains on defined benefit pension schemes 20,476 61,924
Deferred tax on items taken directly to reserves (876) (12,251)
___________ ___________
Net (expense)/income recognised directly in equity (60,139) 41,100
Transfers
Cash flow hedges to profit or loss from equity (8,534) 160
Sale of available-for-sale investments (15,396) -
Profit for the year after taxation 246,118 177,749
___________ ____________
Total recognised income and expense for the year attributable
to equity shareholders 162,049 219,009
___________ ___________
Consolidated Reconciliation of Changes in Shareholders' Equity
for the year ended 31 December 2007
2007 2006
€'000 €'000
At beginning of year 1,323,167 1,177,684
Total recognised income and expense for the year 162,049 219,009
Dividends paid (33,800) (30,757)
Purchase of shares (231,850) (48,442)
Long term incentive plan expense 1,650 1,265
Shares issued during year 8,071 4,408
___________ ____________
At end of year 1,229,287 1,323,167
___________ ___________
Kerry Group plc
Consolidated Cash Flow Statement
for the year ended 31 December 2007
2007 2006
€'000 €'000
Operating activities
Trading profit 401,126 383,688
Adjustments for:
Depreciation (net) 99,003 102,923
Change in working capital (35,368) (45,893)
Exchange translation adjustment (2,506) (484)
___________ ___________
Cash generated from operations 462,255 440,234
Income taxes paid (37,250) (35,056)
Interest received 3,675 2,006
Finance costs paid (82,849) (78,587)
___________ ___________
Net cash from operating activities 345,831 328,597
___________ ___________
Investing activities
Purchase of non-current assets (140,390) (103,066)
Proceeds from the sale of non-current assets 48,443 13,886
Capital grants received 3,379 1,687
Purchase of subsidiary undertakings (78,958) (112,830)
Proceeds from disposal of businesses 526 17,118
Payment of deferred payables (3,592) (2,781)
Expenditure on restructuring costs (39,519) (30,903)
Consideration adjustment on previous acquisitions (64) (63)
___________ ___________
Net cash used in investing activities (210,175) (216,952)
___________ ___________
Financing activities
Dividends paid (33,800) (30,757)
Purchase of shares (231,850) (48,442)
Issue of share capital 8,071 4,408
Net movement on bank borrowings 123,516 (4,958)
Increase/(decrease) in bank overdrafts 5,943 (1,694)
___________ ___________
Net cash used in financing activities (128,120) (81,443)
___________ ___________
Net increase in cash and cash equivalents 7,536 30,202
Cash and cash equivalents at beginning of year 188,844 163,903
Exchange translation adjustment on cash and cash equivalents (10,711) (5,261)
___________ ___________
Cash and cash equivalents at end of year 185,669 188,844
___________ ___________
Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended 31 December 2007
Net increase in cash and cash equivalents 7,536 30,202
Cash (inflow)/outflow from debt financing (129,459) 6,652
___________ ____________
Changes in net debt resulting from cash flows (121,923) 36,854
Fair value movement on interest rate swaps (29,016) (5,998)
Exchange translation adjustment on net debt 66,316 50,146
___________ ___________
Movement in net debt in the year (84,623) 81,002
Net debt at beginning of year (1,194,356) (1,275,358)
___________ ___________
Net debt at end of year (1,278,979) (1,194,356)
___________ ___________
Kerry Group plc
Notes to the Financial Statements
for the year ended 31 December 2007
1. Analysis of results
2007 2006
Unallocated Unallocated
By business Ingredients Consumer and Group Ingredients Consumer and Group
segment: & Flavours Foods Eliminations Total & Flavours Foods Eliminations Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Revenue 3,309,629 1,819,295 (341,158) 4,787,766 3,134,288 1,818,733 (307,101) 4,645,920
_________ _________ _________ _________ _________ _________ _________ _________
Trading profit 310,416 119,314 (28,604) 401,126 293,131 117,528 (26,971) 383,688
Intangible asset
amortisation (10,079) (1,512) (1,078) (12,669) (10,202) (1,045) (846) (12,093)
Non-trading
items (27,661) (6,672) 23,220 (11,113) (25,544) (47,881) - (73,425)
_________ _________ _________ _________ _________ ________ _________ _________
Operating profit 272,676 111,130 (6,462) 377,344 257,385 68,602 (27,817) 298,170
_________ _________ _________ _________ ________ _________
Finance costs (79,055) (76,930)
________ _________
Profit before
taxation 298,289 221,240
Income taxes (52,171) (43,491)
________ _________
Profit after
taxation and
attributable to
equity
shareholders 246,118 177,749
________ _________
Segment assets
and liabilities
Segment assets 2,488,411 967,243 513,882 3,969,536 2,449,392 1,060,691 504,149 4,014,232
Segment
liabilities 566,701 393,208 1,780,340 2,740,249 564,118 452,173 1,674,774 2,691,065
_________ _________ ___________ _________ __________ ________ ___________ _________
Net assets 1,921,710 574,035 (1,266,458) 1,229,287 1,885,274 608,518 (1,170,625) 1,323,167
_________ _________ ___________ _________ __________ ________ ___________ _________
Other segmental
information
Property, plant
and equipment
additions 100,648 21,298 - 121,946 75,009 22,891 - 97,900
Intangible asset
additions 2,692 811 1,555 5,058 1,872 - 1,279 3,151
Depreciation
(net) 66,006 32,412 585 99,003 69,345 33,018 560 102,923
_________ _________ _________ _________ _________ ________ _________ _________
2007 2006
By geographic segment: Asia Asia
Europe Americas Pacific Total Europe Americas Pacific Total
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Revenue by location of
customers 3,053,603 1,309,609 424,554 4,787,766 3,007,511 1,275,879 362,530 4,645,920
Segment assets by location 2,712,630 1,031,350 225,556 3,969,536 2,718,778 1,102,707 192,747 4,014,232
Property, plant and
equipment additions 57,188 50,868 13,890 121,946 70,222 20,917 6,761 97,900
Intangible asset additions 3,269 1,789 - 5,058 1,538 1,597 16 3,151
_________ _________ __________ _________ _________ _________ _________ _________
2. Non-trading items
2007 2006
€'000 €'000
Profit on sale of non-current assets 35,585 11,477
Loss on sale of businesses (2,197) (35,860)
Acquisition, plant closure and other restructuring costs (44,501) (49,042)
________ ________
(11,113) (73,425)
Tax credit on non-trading items 12,341 14,262
________ ________
1,228 (59,163)
________ ________
The profit on sale of non-current assets relates primarily to the sale of
investments and properties, plant and equipment.
The loss on sale of businesses in 2007 relates primarily to the sale of a frozen
vegetable business in the UK.
The loss on sale of businesses in 2006 relates substantially to the sale of the
poultry businesses in Ireland and the UK, a chilled desserts business in the UK
and small non-core Ingredients businesses in the US and Brazil.
The acquisition, plant closure and other restructuring costs relate to the
restructuring of manufacturing plants in Europe, Americas and Asia Pacific and
the integration of recent acquisitions. The costs are analysed as follows:
2007 2006
€'000 €'000
Plant closure and relocation 32,217 22,552
Redundancies and contract compensation 5,615 7,534
Plant and other assets impaired 4,982 18,139
Other 1,687 817
_______ _______
44,501 49,042
_______ _______
The non-trading items had a net cash inflow (after related tax) of €21,791,000
(2006: €14,363,000)
3. Earnings per ordinary share
EPS 2007 EPS 2006
Notes cent €'000 cent €'000
Basic earnings per share
Profit after taxation and attributable to equity shareholders 137.4 246,118 95.6 177,749
Intangible asset amortisation 7.1 12,669 6.5 12,093
Non-trading items (net of related tax) 2 (0.7) (1,228) 31.8 59,163
_______ _______ ________ ________
Adjusted earnings* 143.8 257,559 133.9 249,005
_______ _______ ________ ________
Diluted earnings per share
Profit after taxation and attributable to equity shareholders 137.0 246,118 95.2 177,749
Adjusted earnings* 143.4 257,559 133.4 249,005
_______ _______ ________ ________
* 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 related tax).
Number Number
of Shares of Shares
2007 2006
000's 000's
Basic weighted average number of shares 179,073 185,949
Impact of executive share options outstanding 545 715
_______ ________
Diluted weighted average number of shares 179,618 186,664
_______ ________
Actual number of shares in issue 174,690 184,762
_______ ________
4. General information and accounting policies
The financial information set out in this document does not constitute full
statutory financial statements for the years ended 31 December 2007 or 2006 but
is derived from same. The Group financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs), applicable
Irish law and the Listing Rules of the Irish and London Stock Exchanges. The
Group financial statements have also been prepared in accordance with IFRSs
adopted by the European Union and therefore the Group financial statements
comply with Article 4 of the EU IAS Regulation.
The 2007 and 2006 financial statements have been audited and received
unqualified audit reports. The 2007 financial statements were approved by the
Board of Directors on 25 February 2008.
The consolidated financial statements have been prepared under the historical
cost convention, as modified by the revaluation of available-for-sale financial
assets, financial asset investments and financial liabilities (including
derivative financial instruments), which are held at fair value. The Group's
accounting policies will be included in the Annual Report & Accounts to be
published in April 2008.
This information is provided by RNS
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