Preliminary Statement
Kerry Group PLC
27 February 2007
Press Announcement
27 February, 2007
Kerry Group plc Annual Results 2006
Kerry, the global ingredients, flavours and consumer foods group, reports
preliminary results for the year ended 31 December 2006.
Financial Highlights
• Sales revenue increased by 4.9% to €4.65 billion
• EBITDA increased to €487m
• Trading profit increased to €384m
• Trading margin reduced to 8.3%
• Adjusted EPS* up 1.7% to 133.9 cent
• Final dividend per share up 13.6% to 12.5 cent
• Free cash flow of €241m
• R&D expenditure increased by 11.4% to €139m
*before intangible amortisation and non-trading items
Commenting on Kerry's results, Hugh Friel, Chief Executive, said 'While 2006 was
a challenging year for the Group, I am pleased by the improved trading
performance in the second half benefiting from successful innovation and
on-going business restructuring and cost saving programmes. The Group has made
a good start to 2007 and we are confident of an outcome for the full year in
line with 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
Kerry Group plc
Preliminary Statement
Results for the year ended 31 December 2006
In a difficult year for the global food industry, Kerry continued to
successfully develop its worldwide food ingredients businesses and its Irish and
UK consumer foods businesses. Benefiting from good top-line growth across food
and beverage ingredients markets, the Group increased trading profits despite
the surge in energy and energy related cost inflation in 2006. The performance
in the second half of the year was particularly encouraging across ingredients
markets - with trading margin improvement of 20 basis points in the period
offsetting the 20 basis points reduction in trading margin in the first six
months. This performance was assisted by the continued development of
nutritional and functional food and beverage ingredient systems, in addition to
cost recovery and savings programmes. In the UK and Irish consumer foods
sectors progress was adversely affected by the delay in recovering input cost
increases and market related difficulties in the poultry and frozen ready meals
sectors. However the food division's market leading brands and core business
segments performed well.
The programme to optimise operational efficiencies throughout the Group
announced at the half year results stage is well advanced. The full programme,
scheduled for completion by year-end 2007, will effect a €250m reduction in
revenue and a 25 basis points improvement in the Group trading margin in 2008.
The Group's focus on research, development and application led to a 10% increase
in roll-out of new product developments in 2006. Expenditure increased from
€125m in 2005 to €139m in the year under review.
Results
Total Group sales revenue in 2006 increased by 4.9% to €4.65 billion. On a
like-for-like basis this reflects revenue growth of 3.6% year-on-year.
Earnings before interest, tax, depreciation, amortisation and non-trading items
increased by 1% to €487m. The unprecedented surge in energy and energy related
cost inflation in 2006 limited trading profit growth to 1% to a level of €384m.
Despite good margin recovery in the second half of the year, the time-lag in
cost recovery particularly in European markets resulted in a Group trading
margin of 8.3%, 30 basis points below the prior year level. Trading margins in
ingredients businesses were held at 9.4% but margins in consumer foods,
exacerbated by the difficulties in the poultry and frozen ready meals sector,
declined from 7.1% to 6.5%.
Non-trading items (acquisition integration, business disposals, plant closures
and restructuring costs) for the year amounted to €73.4m which reduced profit
after taxation by €59.2m to €178m. Adjusted earnings per share increased by
1.7% to 133.9 cent. The Board will recommend to the Annual General Meeting a
final dividend of 12.5 cent per share. This will bring the total dividend
payment for the year to 18 cent per share, an increase of 12.5% on the previous
year.
Business Reviews
Food Ingredients
Overall Kerry's food ingredients businesses achieved a good performance in 2006
notwithstanding significant cost pressures. Total sales revenue increased by
3.7% to €3.13 billion, reflecting like-for-like growth of 4%. Trading profits
increased by 3.3% to €293m, maintaining a trading margin of 9.4% similar to the
level over the previous two years. Despite the time-lag in recovering cost
increases in particular in European markets, the trading margin in the second
half increased to 10.7% offsetting the 20 basis points reduction in the first
six months of 2006. This performance benefited from the on-going focus
throughout all Group ingredients operations on cost savings and on restructuring
programmes for optimum asset utilisation. Excellent results were also achieved
through the Kerry Ingredients, Mastertaste and Kerry Bio-Science innovation
programmes focused on customer requirements for enhanced health, natural,
convenient product solutions and improved delivery formats.
In American ingredients markets progress and development in 2006 accelerated,
with an improved growth and innovation performance relative to the prior year.
Sales revenue increased by 5.2% or 4.9% on a like-for-like basis to €1.28
billion. In North America, building on the ingredients business 'integrated
business unit' structure, a new Go-To-Market strategy was initiated in 2006.
The rapid expansion of Kerry's technology base in recent years necessitated a
realignment of business units around core technologies - providing
industry-leading customer service through applications and product solutions
developed across multi-technology platforms. Encouraging results have already
been achieved through this strategy and prospects are for higher growth rates as
a result in 2007.
In the U.S. food and beverage industry development continues to focus on
consumer demands for healthy 'good for you' products, convenient formats and the
continued expansion of organic lines. Good growth was achieved in meeting
market demands for new nutritional and functional food and beverage offerings,
assisted by Kerry's Proteins and Nutritionals range of dairy and soy
technologies. Successful product launches were achieved with innovative
ingredient systems including high protein crisps in nutrition bars and premium
inclusions in ready-to-eat cereals and ice cream categories. Progress in the
cereal and sweet ingredients sectors continues to meet growth expectations. In
2006, this led to the acquisition of Custom Industries and Nuvex Ingredients.
Complementing Kerry's existing facilities in the U.S. and Canada, both
acquisitions added valuable production capacity and proprietary technologies.
Nuvex Ingredients; operating from a modern organically certified production
facility located in Blue Earth, Minnesota; further strengthens Kerry's industry
leading extrusion technology and enhances its market positioning in the cereal
and nutritional sectors. In the sweet sector, Custom Industries; operating from
modern manufacturing facilities in St Genevieve, Missouri and Toronto, Canada;
significantly strengthens Kerry's portfolio of inclusion products in particular
into the bakery category.
In the speciality dairy sector Kerry's business restructuring programme
delivered good results. The Albert Lea, Minnesota facility was closed and
business operations were aligned to meet sector requirements. Reflecting
consumer preference for heat and serve products, new production lines were
introduced for frozen and chilled complete sauces and nutritional beverages.
Strong volume growth was achieved in the savoury ingredients sector in the
second half of 2006. The appetizer market, regional snack manufacturers and
foodservice chains provided good growth opportunities for Kerry's snack,
flavourings, meat seasonings and coatings technologies.
In the nutritional beverage sector, development of spray-dried pharma-grade
nutritional formulas produced at the Covington, Ohio facility and shelf-stable
liquid nutritional beverages produced at the St. Claire, Quebec facility
achieved strong market positioning.
In the U.S. foodservice sector, Kerry continued to record strong growth via
coffee house chains through beverage, coatings and sweet ingredient
applications. Growth trends in speciality beverages and indulgent frozen
desserts created good opportunities for beverage syrups and sweet inclusions as
restaurant chains continue to expand their menu offerings. The growing
popularity of speciality coffee and indulgent coffee based beverages continues
to drive coffee syrup and smoothie sales. Re-branding initiatives across the Da
Vinci and JetTea ranges achieved a good market response.
The strength and breadth of the Group's ingredients technologies were again to
the fore in delivering continued satisfactory business development in Latin
American and South American markets. Good growth was achieved in Central
American snack markets and in the Mexican beverage and bakery categories. The
foodservice sector in the region continued to grow providing good opportunity
for Kerry's range of savoury and sweet ingredient systems. The Group's Brazil
based facilities continued to achieve good market growth through seasonings and
food coatings in South American proteins markets and through sweet ingredients
in the Brazilian ice cream sector.
In American markets the Group's flavour division made good progress in the
growing natural and organics marketplace. While the demand for 'all natural'
clean label applications has grown across all food and beverage categories, the
Mastertaste natural flavours business was impacted by the pricing level of
grapefruit in the aftermath of the series of hurricanes in 2005. Mastertaste is
well positioned in the North American organics marketplace which grew by 24% in
2006. Its flavour modulation technology also achieved good growth as salt
reduction and sugar reduction programmes were progressively implemented across
food and beverage categories. Mastertaste savoury flavours expanded its
penetration of U.S. poultry markets due to growing demand for bolder taste
profiles, regional specific cuisine and ethnic flavours. Crystals(R)
all-natural freeze dried juice products continued to grow market share in the
health/wellness beverage sectors. Manheimer Fragrances significantly developed
its market presence in the U.S. home environmental, personal care and toiletries
categories, benefiting from the division's fragrance creativity combined with
natural products technology. Year 1 of the research programme at Monell
Chemical Senses Centre into 'human sensory adoption' and application of research
findings for flavour/fragrance development achieved good results and assisted
development of taste modulation.
The increased momentum towards natural, low salt, low sugar, low fat, allergen
free consumer products assisted the attainment of good top-line growth across
Kerry Bio-Science technologies in 2006. In American markets good growth was
achieved through fermented ingredients in culinary, cell nutrition and
distillery market segments. Emulsifiers performed satisfactorily with the
closure of the Brantford facility in Canada and transfer of production to the
Group's Malaysian facilities adjacent to the raw material supply base.
Hydrolysed proteins delivered good results in the pharma segment reflecting
Sheffield(TM) Pharma Ingredients position as a leading supplier of nutrients
into biotechnology derived pharmaceutical applications. Sheffield(TM)
excipients are inextricably linked with the physical performance and
manufacturing processes for new medications conferring beneficial functional
characteristics. However performance in the sector in 2006 was impacted by a
backlog in regulatory agency approvals and customer lifecycle phasing which
adversely affected lactose excipient sales. This exacerbated the time-lag in
recovering the significant input cost increases during the year. Sheffield(TM)
did achieve good sales growth through glyceride excipients and the project
pipeline was boosted through new product launches.
European ingredients had a challenging year due to cost pressures and sectoral
market issues in major consumer markets. Top-line growth in Kerry's European
ingredients businesses was below expectations with delays well into 2006 in
recovering the significant cost increases. Sales revenue increased by 2.3% to
€1.29 billion, which represents like-for-like growth of 3.2%. However profit
margins were maintained as good progress was made across the food ingredients,
bio-science and flavours businesses in maximising supply chain efficiencies and
reducing overheads.
The slowdown in growth in the prepared foods sector impacted sales and margin
performance in Kerry's seasonings and coatings businesses in the UK and France.
Germany continued to achieve good growth and returns from Eastern European meat
seasonings markets were similar to the prior year.
Excellent progress was reported through culinary systems and sauces in France
and the UK as demand grows for convenient 'clean label' authentic flavourings.
While conditions in the snacks seasonings sector remained highly competitive,
Kerry achieved continued growth through regional snack processors in the UK and
through further market development in Middle Eastern markets. The European
ingredients division's focus on supply chain efficiencies resulted in closure of
the Bicester and Birmingham plants in the UK and a seasonings facility in Milan,
Italy.
In dairy markets, returns were negatively impacted by the relatively weak market
conditions in the first nine months of 2006. As the EU transitions from direct
market supports through the processing sector to direct milk producer payments,
significant market fluctuations are possible dependant on supply/demand
balances. While considerable firming of international dairy markets occurred
prior to year-end, nevertheless processor returns for 2006 were well below the
previous year. With the increasing trend towards healthy lifestyles and greater
demand for wellness products, Kerry Dairy Ingredients has made significant
progress through the development of milk proteins with specific nutritional and
functional benefits. Further investment in dairy flavour technology has led to
innovative developments in culinary and savoury bakery markets, working in
partnership with the Group's global ingredients businesses.
Kerry's European fruit and sweet ingredients business achieved a good overall
business performance in 2006. While chilled and frozen dairy product markets
remained intensely competitive, fruit preparations achieved satisfactory growth
through range extensions and product mix improvements. Growth was also achieved
through fruit beverages and flavoured syrup applications. Ravifruit purees and
decoration fruits saw continued growth in Eastern Europe, the Middle East and
Asian Markets. Positive growth was also achieved in the European confectionery
and fruit sauce markets. Kerry's sweet ingredients business in Europe
experienced strong organic growth through coated products in the breakfast
cereal and fresh dairy product sectors, benefiting from the successful launch of
innovative lines of low sugar and health fruit cereal clusters.
Kerry Bio-Science continued to make good progress in European markets. Its
'DuraFresh' range of shelf-life extender products recorded good growth in the
cheese, yoghurt and flavoured milk sectors. The division's full line of
products, including emulsifiers, stabilizers, speciality proteins and enzymes
made encouraging progress in the dairy sector as processors seek product
differentiation through innovative health offerings. Cost recovery programmes
increased margins in functional proteins markets and innovative whipping
proteins achieved growth through aerated confectionery products. Following the
expansion programme at the Menstrie facility in Scotland in 2005, good growth
was achieved through yeast extracts in culinary, cell nutrition and distillery
markets in Europe. Despite significant cost pressures, profitable growth was
also achieved through Kerry Bio-Science enzymes throughout global beverage and
confectionery markets.
Mastertaste flavours recorded slightly lower sales in Europe in 2006 but
profitability was improved due to successful flavour development and withdrawal
from lower margin activity. The combined skills of the division's UK and
Italian development teams led to successful new savoury flavour launches. 'Chef
Style' clean label flavours made encouraging progress. Benefiting from its
SunPure fruit expertise, good progress was achieved in fruit juice fortification
and through botanical extracts for the fast growing flavoured beverages
category.
In Asia Pacific markets, the Group again made excellent progress with further
margin improvement and good growth in all territories. Sales revenue increased
by 9.2% to €363m, reflecting like-for-like growth of 10.1% year on year.
Kerry's nutrition technologies recorded strong double digit growth in Asia in
2006. The range of San-A-Creme(TM) nutritional lipids including co-dried milk
proteins with unique fatty acid profiles of linoleic and linolenic acid (AA and
DHA) fuelled growth in this fast growing nutritional category. Specialty
beverages also continue to exhibit exceptionally strong growth rates. With the
continued expansion of speciality coffee chains across the region, Kerry's Da
Vinci branded range of flavoured beverage products achieved 32% growth
year-on-year with strong growth in Korea, Japan and Hong Kong and encouraging
market development in China. The successful launch of a range of frappe and
fruit smoothie products in the dynamic ice-blended products sector has
positioned Kerry as 'one-stop-supplier' to the speciality beverage foodservice
sector.
Asian consumer markets are increasingly demanding convenient savoury offerings
which has led to good growth opportunities for the Group's meat seasonings and
marinades. The health snack and biscuit sectors are also exhibiting
encouraging growth where Kerry has pioneered the introduction of trans-fat free
systems in Asian markets. Growth in the savoury biscuit sector has outperformed
sales in the sweet sector due to the growth of health/functional lines.
Kerry Bio-Science and Mastertaste flavours and fragrance divisions also
continued to successfully develop their respective positions in Asian markets in
2006. Prior to year-end, a state-of-the-art technical, applications and
administration facility was established in Shanghai to spearhead development of
both divisions in the region. Bio-Science saw satisfactory growth through
fermentation products and enzymes. The Esterol emulsifiers facility achieved
double digit growth year-on-year with strong revenue growth in the bakery
segment. The investment programme to expand production capacity at the
Malaysian based facility is progressing as planned.
Kerry Ingredients achieved good organic sales growth in the Australian food
processor markets in 2006. New meat marinade offerings fuelled growth in the
added value poultry sector and through custom-branded products for major
supermarket groups. Beverage syrups and sauces continued to achieve strong
growth in the speciality beverage/coffee chain market segments. Progress in the
snack and food processor segments in New Zealand was similar to the prior year.
The Group's Pinnacle range of speciality bakery products continues to
consolidate its leading market positions in the Australian market with growth in
the franchise bakery and specialist contract manufacturers market segments
offsetting changes in supermarket in-store bakery business models. Pinnacle
Australia was named 'National Supplier of the Year' by a major national multiple
retail chain in 2006. Pinnacle also successfully established the in-store brand
offering in Thailand and prior to year-end in Malaysia.
Consumer Foods
Kerry's core consumer foods categories including chilled ready meals, pre-packed
cooked meats, sausage, cheese and spreads all grew satisfactorily in 2006.
However difficulties in the primary poultry and frozen foods categories
adversely impacted performance and trading profits of the foods division. While
sales revenue increased by 5.4% to €1.82 billion (reflecting like-for-like
growth of 1.5%) trading profits declined by 4.5% to €118m. The significant
reduction in profitability in the poultry and frozen ready meals categories
meant that the overall trading margin in the foods division was reduced from
7.1% in 2005 to 6.5% in the year under review. Having divested the primary
poultry processing operations prior to year-end, management is confident that
the division's strong branded category leadership, its focus on chilled growth
categories and innovation across health/wellness sectors, combined with its
quality asset and strong customer base, positions Kerry Foods for good
profitability in 2007.
In the UK sausage category, fresh offerings continue to grow at the expense of
frozen. Kerry's market leading Richmond and Wall's brands benefited strongly
from the 4.6% year-on-year increase in fresh sausage sales as consumers trade-up
in the main quality segments of the market. Both brands continue to benefit
from strong brand investment on TV and through press marketing support. Wall's
Favourite Recipe range, the most recent brand development in the premium
category, continues to perform well. The Porkinson brand has also enjoyed
increased popularity as consumers seek more authentic, superior quality
offerings. Despite the sales decline in the frozen sausage sector, the Richmond
frozen range saw growth year-on-year. Wall's expanded its brand development and
distribution in the pre-pack rasher category.
In 2006, Mattessons commenced a major brand investment programme and this
considerable financial investment is expected to achieve strong results in the
year ahead. Smoked Pork Sausage has already shown a good response to the
increased level of marketing activity and to brand extension to new Hot & Spicy
variants. Mattessons Fridge Raiders again achieved excellent results as new
customers entered the growing meat snacking sectors.
In the home-baking category, Green's had a difficult year due to the poor
performance of the 'kids' sector. The brand has been repositioned to
re-establish its presence in the small and large cake mix sectors. Classic
Desserts and time saver mixes including Pancake Mix recorded good sales growth.
A major marketing programme will mark the 100th year of Green's brand in 2007.
In the homebaking flour sector, Homepride continues to outperform the market
across the retail landscape.
The second half of 2006 saw renewed growth in the UK chilled ready meals market.
Overall the category grew by 4.2% year-on-year, with a significant increase
in households buying into the sector and an increasing momentum towards '
healthily balanced' and premium offerings. Kerry Foods consolidated its
position as the second largest producer of chilled ready meals in the UK market.
While its sales in the oriental category declined slightly year-on-year,
Indian recipes performed well and new generations of premium meals were
successfully launched during the second half of the year. In the premium
health sector, 'The Food Doctor' innovative range was introduced using a
combination of raw and cooked ingredients that can be quickly steam cooked in
the microwave. The 'Champneys' wellbeing brand of multi-cuisine meals was also
successfully launched. To maximise operational efficiencies, the Hartlepool
processing facility was closed. Good value growth was achieved in the
ready-to-cook meals category with the launch of premium offerings. Savoury
pastry products also saw a satisfactory level of value growth in 2006 through
continued premiumisation of the category.
The UK frozen ready meals market declined by 12% year-on-year but by year-end
the rate of decline had slowed to 9%. Against this background, Rye Valley Foods
achieved a satisfactory sales performance - consolidating its position as the
leading European producer in the sector. However despite its lowest cost
producer status, Rye Valley's trading profits were lower due to the intense
competition in a declining market.
Due to the relatively poor profitability of the primary poultry processing
sector, Kerry Foods divested its Redgrave operation in the UK and its Smithboro
operation in Ireland prior to year-end. The chilled patisserie business in
Birmingham, UK was also sold in 2006, as was the St. Brendan's Irish Cream
Liqueur business in Derry.
The specialist foodservice business unit established in Kerry Foods in late 2005
achieved good results. Sourcing products from over twenty Kerry sites in the
UK, Ireland and France, the new foodservice unit supplies over 800 products in
ambient, chilled and frozen formats.
Kerry Foods Direct to Store continued to develop its market leadership position
in the UK convenience store sector. Whilst overall sales were maintained in a
challenging marketplace, profitability was slightly lower than in 2005 due to
the impact of energy prices on distribution costs.
In the UK and Irish cheese categories, Kerry had an excellent year with good
growth across all branded segments. The Charleville and Coleraine brands
continue to grow their leading market share positions and the extension of the
Low Low brand into cheese was the market's star performer with 40% year-on-year
growth. In the processed cheese sector, EasiSingles brand share declined
slightly as private label captured an increased market share. The brand will
benefit from new packaging formats and increased marketing support in 2007 to
support growth in the snacking sector.
While the UK cheese snacks sector continues to have bright prospects for long
term growth, sales growth slowed relative to the previous year. Cheestrings
maintained its market share and reinforced its strong nutritional/health
attributes through an extensive advertising campaign emphasising its 100%
natural cheese value. Ficello continues to build its market positioning in
France and Brunchettas has made encouraging progress in developing the new adult
cheese snacks sector in Ireland and the UK.
In the dairy and low-fat spreads category in Ireland, Kerry again delivered good
volume growth through its Low Low, Kerrymaid, Golden Cow and Golden Olive
brands. With an on-going focus on more healthy options, the premium lower
cholesterol offering under the Low Low brand achieved a strong market
performance. In the UK market Kerry Foods consolidated its position as the
leading producer of own-label spreads through its investment in category
management and responsiveness to market trends such as the growing influence of
Omega 3 & 6 enriched products.
Denny again recorded a strong performance in the Irish market. Slightly reduced
sales in the standard sausage segment was offset by the continued development of
Denny Select in the premium sector. Denny rashers had a strong performance with
volume and value growth driven by its focus on superior quality and
premiumisation. Cooked meats also had an excellent performance growing by 16%
year-on-year. Differentiation and innovation across the Denny range in the
premium category contributed strongly to this growth while Ballyfree as brand
leader in the white meat segment continues to outperform category growth rates.
The Ballyfree brand was relaunched in September 2006, with a new identity
exuding 'country freshness' and new packaging formats optimising the brand
promise of 'Real Food for Modern Living'.
In 2006, Freshways continued to make considerable progress towards its vision of
being the number one fresh prepack food-to-go brand in Ireland. Strong growth
in value and volume terms was delivered through Freshways innovation platform
including the successful launch of the 'Healthy Ways' range of sandwiches, new '
Limited Edition' offerings, the re-launch of Freshways salads, new sandwich
recipes and a 'Gourmet' range of sandwiches. Kerryfresh also advanced its
market position as one of Ireland's leading suppliers of fresh food-to-go
ingredients and menu concepts for delicatessens, sandwich bars, coffee shops,
pubs, restaurants and workplace caterers.
Dawn Juice achieved satisfactory volume and value growth in Ireland but margins
in the sector were impacted by higher raw material prices. Dawn Benefits was
first to market in Ireland with three new health juice offerings - Dawn Orange
Juice with Omega-3, Dawn Orange Juice with Probiotic and Dawn Orange Juice with
Multivitamins and Calcium. Dawn Flavoured Milks were re-launched in mid-2006
leading to increased sales and Dawn Omega Milk also continued to achieve good
market development. Kerry Spring achieved good growth in both the non-flavoured
and flavoured market segments in Ireland.
Geographic Markets
Total Group sales revenue throughout European markets in 2006 grew by 4.2% to €3
billion. In American markets, the Group's ingredients and flavours businesses
increased sales revenue by 5.2% to €1.3 billion. Sales revenue in Asia Pacific
markets increased by 9.2% to €363m.
Finance
Earnings before finance costs, tax, non-trading items, depreciation and
amortisation (EBITDA) increased by 1% to €487m. After allowing for an increase
in working capital of €46m, capital expenditure of €88m (net of proceeds from
asset disposals of €14m), finance payments of €77m and tax of €35m, free cash
flow available to the Group was €241m. The consistent strong cash generation
performance of the Group has delivered €1.26 billion free cash in the last five
year period.
Expenditure on Group acquisitions amounted to €113m (2005: €234m). Net debt at
year-end amounted to €1,194m compared to €1,275m at the end of 2005. Net debt
to EBITDA reduced to 2.5 times (2005: 2.6 times). Finance costs were €76.9m
compared to the 2005 level of €68.4m, with EBITDA to net interest covered 6.2
times (2005 : 8 times). The Group used its share buy-back programme
authorisation to purchase 2.8 million shares at a cost of €48.4m in 2006.
Dividend
The Board recommends a final dividend of 12.5 cent per share, an increase of
13.6% on 2005. Together with the interim dividend of 5.5 cent per share, this
raises the total dividend for the year to 18 cent per share, an increase of
12.5% on the previous year. The final dividend will be paid on 25 May 2007 to
shareholders registered on the record date 27 April 2007.
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 18 May 2007.
Future Prospects
The Group has made a good start to 2007. The ingredients, bio-science and
flavours businesses are well positioned to meet customer requirements for
convenient, nutritional product innovations throughout the global marketplace.
Having divested non-core low margin activities in the Group's consumer foods
division in Ireland and the UK; Kerry Foods' focus on premium chilled growth
categories, allied to its well-invested market-leading brands and strong
customer base, augurs well for the future profitable growth of the division.
The restructuring programme to optimise asset utilisation and enhance supply
chain efficiencies is well advanced and will be completed by year-end. With the
forecast more benign energy cost environment, the Group's on-going focus on cost
recovery in some markets and on cost savings throughout all operations, coupled
with good top-line growth will deliver margin expansion in 2007. The Group has
a strong balance sheet and is well positioned to avail of business growth
opportunities. We are confident of an outcome for the full year in line with
market expectations.
Results for the year ended 31 December 2006
Kerry Group plc
Consolidated Income Statement
for the year ended 31 December 2006
Before
Non-Trading Non-Trading
Items Items Total
2006 2006 2006 2005
Notes €'000 €'000 €'000 €'000
Revenue 1 4,645,920 - 4,645,920 4,429,777
___________ ___________ ___________ ___________
Trading profit 1 383,688 - 383,688 380,213
Intangible asset amortisation (12,093) - (12,093) (10,331)
Non-trading items 2 - (73,425) (73,425) (3,623)
___________ ___________ ___________ ___________
Operating profit 371,595 (73,425) 298,170 366,259
Finance costs (76,930) - (76,930) (68,353)
___________ ___________ ___________ ___________
Profit before taxation 294,665 (73,425) 221,240 297,906
Income taxes (57,753) 14,262 (43,491) (62,030)
___________ ___________ ___________ ___________
Profit after taxation and attributable to 236,912 (59,163) 177,749 235,876
equity shareholders
___________ ___________ ___________ ___________
Earnings per ordinary share (cent)
- basic 3 95.6 126.1
- fully diluted 3 95.2 125.5
The financial statements were approved by the Board of Directors on 26 February 2007 and signed on its behalf by:
Denis Buckley, Chairman
Hugh Friel, Chief Executive
Kerry Group plc
Consolidated Balance Sheet
as at 31 December 2006 2006 2005
€'000 €'000
Non-current assets
Property, plant and equipment 1,010,343 1,066,931
Intangible assets 1,684,756 1,633,367
Financial asset investments 19,866 12,442
Deferred tax assets 10,856 12,115
___________ ____________
2,725,821 2,724,855
___________ ____________
Current assets
Inventories 495,313 544,438
Trade and other receivables 597,073 558,831
Cash and cash equivalents 188,844 163,903
Financial assets 4,485 1,862
Assets classified as held for sale 2,696 10,415
___________ ____________
1,288,411 1,279,449
___________ ____________
Total assets 4,014,232 4,004,304
___________ ____________
Current liabilities
Trade and other payables 836,550 845,285
Financial liabilities 27,261 143,854
Tax liabilities 51,909 44,659
Deferred income 2,726 3,078
Liabilities classified as held for sale - 1,899
___________ ____________
918,446 1,038,775
___________ ____________
Non-current liabilities
Financial liabilities 1,356,296 1,297,210
Retirement benefits obligation 180,269 249,103
Other non-current liabilities 87,368 107,297
Deferred tax liabilities 131,252 112,276
Deferred income 17,434 21,959
___________ ____________
1,772,619 1,787,845
___________ ____________
Total liabilities 2,691,065 2,826,620
___________ ____________
Net assets 1,323,167 1,177,684
___________ ____________
Capital and reserves
Share capital 23,445 23,399
Share premium account 383,341 378,979
Other reserves (32,089) 23,501
Retained earnings 948,470 751,805
___________ ____________
Shareholders' equity 1,323,167 1,177,684
___________ ____________
The financial statements were approved by the Board of Directors on 26 February 2007 and signed on its behalf by:
Denis Buckley, Chairman
Hugh Friel, Chief Executive
Kerry Group plc
Consolidated Statement of Recognised Income and Expense
for the year ended 31 December 2006
2006 2005
€'000 €'000
Fair value movements on available-for-sale investments 7,424 12,209
Fair value movements on cash flow hedges (2,608) (3,383)
Exchange difference on translation of foreign operations (13,389) 17,747
Actuarial gains/(losses) on defined benefit pension schemes 61,924 (50,387)
Deferred tax on items taken directly to reserves (12,251) 16,412
___________ ____________
Net income/(expense) recognised directly in equity 41,100 (7,402)
Transfers
Cash flow hedges to profit or loss from equity 160 857
Sale of available-for-sale investments - (6,218)
Profit for the year after taxation 177,749 235,876
___________ ____________
Total recognised income and expense for the year attributable to equity 219,009 223,113
shareholders
___________ ____________
Kerry Group plc
Consolidated Reconciliation of Changes in Shareholders' Equity
for the year ended 31 December 2006
2006 2005
€'000 €'000
At beginning of year 1,177,684 968,160
Impact of adoption of IAS 32 and IAS 39 - 9,550
___________ ____________
At beginning of year as adjusted 1,177,684 977,710
Total recognised income and expense for the year 219,009 223,113
Dividends paid (30,757) (27,129)
Purchase of treasury shares (48,442) -
Long term incentive plan expense 1,265 -
Shares issued during the year 4,408 4,014
Share issue costs - (24)
___________ ____________
At end of year 1,323,167 1,177,684
___________ ____________
Kerry Group plc
Consolidated Cash Flow Statement
for the year ended 31 December 2006
2006 2005
€'000 €'000
Operating activities
Trading profit 383,688 380,213
Adjustments for:
Depreciation (net) 102,923 101,643
Change in working capital (45,893) 260
Exchange translation adjustment (484) 494
____________ ____________
Cash generated from operations 440,234 482,610
Income taxes paid (35,056) (50,656)
Interest received 2,006 1,752
Finance costs paid (78,587) (66,066)
___________ ___________
Net cash from operating activities 328,597 367,640
____________ ____________
Investing activities
Purchase of non-current assets (103,066) (149,262)
Proceeds from the sale of non-current assets 13,886 28,928
Capital grants received 1,687 446
Purchase of subsidiary undertakings (112,830) (233,688)
Proceeds from disposal of businesses 17,118 2,759
Payment of deferred payables (2,781) (11,353)
Expenditure on non-trading items (30,903) (15,236)
Consideration adjustment on previous acquisitions (63) (18)
___________ ___________
Net cash used in investing activities (216,952) (377,424)
____________ ____________
Financing activities
Dividends paid (30,757) (27,129)
Purchase of treasury shares (48,442) -
Issue of share capital 4,408 3,990
Net movement on bank borrowings (4,958) 199,349
Decrease in bank overdrafts (1,694) (72,853)
___________ ____________
Net cash (used in)/from financing activities (81,443) 103,357
___________ ____________
Net increase in cash and cash equivalents 30,202 93,573
Cash and cash equivalents at beginning of year 163,903 65,328
Exchange translation adjustment on cash and cash equivalents (5,261) 5,002
___________ ____________
Cash and cash equivalents at end of year 188,844 163,903
___________ ____________
Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended 31 December 2006
Net increase in cash and cash equivalents 30,202 93,573
Cash outflow/(inflow) from debt financing 6,652 (126,496)
___________ ____________
Changes in net debt resulting from cash flows 36,854 (32,923)
Fair value movement on interest rate swaps (5,998) -
Exchange translation adjustment on net debt 50,146 (104,997)
___________ ____________
Movement in net debt in the year 81,002 (137,920)
Net debt at beginning of year (1,275,358) (1,137,438)
____________ ____________
Net debt at end of year (1,194,356) (1,275,358)
___________ ____________
Kerry Group plc
Notes to the Financial Statements
for the year ended 31 December 2006
1. Analysis of results
2006 2005
Unallocated Unallocated
Ingredients Consumer and Group Total Ingredients Consumer and Group Total
By business segment: Foods Eliminations Foods Eliminations
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Revenue 3,134,288 1,818,733 (307,101) 4,645,920 3,021,944 1,725,839 (318,006) 4,429,777
________ ________ ________ ________ ________ ________ ________ ________
Trading profit 293,131 117,528 (26,971) 383,688 283,816 123,018 (26,621) 380,213
Intangible asset
amortisation (10,202) (1,045) (846) (12,093) (9,263) (477) (591) (10,331)
Non-trading items (25,544) (47,881) - (73,425) (12,127) 2,227 6,277 (3,623)
________ ________ ________ ________ ________ ________ ________ ________
Operating profit 257,385 68,602 (27,817) 298,170 262,426 124,768 (20,935) 366,259
________ ________ ________ ________ ________ ________
Finance costs (76,930) (68,353)
________ ________
Profit before taxation 221,240 297,906
Income taxes (43,491) (62,030)
________ ________
Profit after taxation and
attributable to equity
shareholders 177,749 235,876
________ ________
Segment assets and
liabilities
Segment assets 2,449,392 1,060,691 504,149 4,014,232 2,485,988 1,067,629 450,687 4,004,304
Segment liabilities 564,118 452,173 1,674,774 2,691,065 591,435 478,155 1,757,030 2,826,620
________ ________ __________ ________ ________ ________ __________ ________
Net assets 1,885,274 608,518 (1,170,625) 1,323,167 1,894,553 589,474 (1,306,343) 1,177,684
________ ________ __________ ________ ________ ________ __________ ________
Other segmental information
Property, plant and
equipment additions 75,009 22,891 - 97,900 86,266 53,368 4,124 143,758
Intangible asset additions 1,872 - 1,279 3,151 2,061 141 1,274 3,476
Depreciation (net) 69,345 33,018 560 102,923 65,431 35,671 541 101,643
________ ________ __________ ________ ________ ________ __________ ________
2006 2005
Europe Americas Asia Total Europe Americas Asia Total
Pacific Pacific
By destination: €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Revenue by location of
customers 3,007,511 1,275,879 362,530 4,645,920 2,885,039 1,212,877 331,861 4,429,777
Segment assets by location 2,718,778 1,102,707 192,747 4,014,232 2,707,101 1,112,956 184,247 4,004,304
Property, plant and equipment
additions 70,222 20,917 6,761 97,900 108,815 29,239 5,704 143,758
Intangible asset additions 1,538 1,597 16 3,151 1,817 1,659 - 3,476
________ ________ __________ ________ ________ ________ __________ ________
2. Non-trading items
2006 2005
€'000 €'000
Profit on sale of non-current assets 11,477 14,702
Loss on sale of businesses (35,860) (13,363)
Acquisitions, plant closures and other restructuring costs (49,042) (4,962)
________ ________
(73,425) (3,623)
Tax credit on non-trading items 14,262 3,665
________ ________
(59,163) 42
________ ________
The profit on sale of non-current assets primarily relates to the sale of
properties, plant and equipment.
The loss on sale of businesses in 2006 relates substantially to the sale of the
poultry businesses in Ireland and the UK, the chilled desserts business in the
UK and small non-core Ingredients businesses in the USA and Brazil.
The acquisitions, plant closures 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:
2006 2005
€'000 €'000
Plant closure and relocation 22,552 4,061
Redundancies and contract compensation 7,534 -
Plant and other assets impaired 18,139 901
Other 817 -
________ ________
49,042 4,962
________ ________
In 2006, the non-trading items had a positive net cash effect (after related
tax) of €14,363,000.
3. Earnings per ordinary share
EPS 2006 EPS 2005
Notes cent €'000 cent €'000
Basic earnings per share
Profit after taxation and attributable to equity shareholders 95.6 177,749 126.1 235,876
Intangible asset amortisation 6.5 12,093 5.5 10,331
Non-trading items (net of related tax) 2 31.8 59,163 - (42)
________ ________ _____ ________
Adjusted earnings * 133.9 249,005 131.6 246,165
________ ________ _____ ________
Diluted earnings per share
Profit after taxation and attributable to equity shareholders 95.2 177,749 125.5 235,876
Adjusted earnings* 133.4 249,005 131.0 246,165
_________ ________ _____ ________
* 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 related tax).
Number Number
of Shares of Shares
2006 2005
000's 000's
Basic weighted average number of shares 185,949 187,051
Impact of executive share options outstanding 715 879
_________ ________
Diluted weighted average number of shares 186,664 187,930
_________ _________
Actual number of shares in issue** 184,762 187,196
_________ _________
** Excludes 2,800,000 shares held as treasury shares.
4. General information and accounting policies
The financial information set out in this document does not constitute full
statutory accounts for the years ended 31 December 2006 or 2005 but is derived
from same. The Group financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union and
their interpretations as issued by the International Accounting Standards Board
and the International Financial Reporting Interpretations Committee, applicable
Irish law and the Listing Rules of the Irish and London Stock Exchanges.
The 2006 and 2005 accounts have been audited and received unqualified audit
reports. The 2006 financial statements were approved by the Board of Directors
on 26 February 2007.
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 to be published in
April 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
Tuesday, 4th June 2024
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